Wakeup call: U.S. risking the loss of Latin America to China

When U.S. officials are asked about China, the discussion usually defaults to Taiwan or tariffs. But another threat from Beijing has been growing for years, and it can be found much closer to home—in Latin America. Case in point: the deep-sea mega-port that just opened in Chancay, Peru.

A port opening hardly looks like something that should worry the United States. But this port is 60 percent-owned by the Chinese state-owned giant COSCO Shipping, which has exclusive operating rights.

Chancay Port is a huge win for Beijing. It’s expected to slash roughly 10 days off the time it takes to ship goods between China and South America, making it easier and more cost-effective for Beijing to exploit the continent’s resources and flood the region with its exports, from solar panels to electric vehicles. These benefits will further multiply after a planned rail link connects Chancay to Brazil, China’s biggest South American trading partner.

Peru’s government hopes the new port will enable it to capitalize on China’s increasing trade with the region and become, in the words of one Peruvian official, “the Singapore of Latin America.”

However, this gamble carries risks. Some in Peru fear their government gave China too much leverage. It’s unclear how COSCO managed to get exclusive operating rights in violation of Peru’s National Port System Law. Earlier this year, the law was amended to legalize the arrangement after Lima’s attempts to annul the exclusivity clause resulted in COSCO threatening to pull out of the nearly-completed project.

This isn’t good for Peru or for the United States, which is hemorrhaging influence in its own backyard. But it’s not like Washington gave Lima a better alternative. Peruvian officials reportedly spent years trying to procure financing for Chancay Port before a consortium of Chinese banks agreed to help in 2019.

It’s easy to dismiss Beijing’s infrastructure development under the Belt and Road Initiative as “debt-trap diplomacy.” COSCO’s exclusivity clause lends credence to this view. However, the initiative is an effective diplomatic tool, because it delivers what developing countries need. Governments are under pressure to close infrastructure gaps and deliver economic opportunities to their citizens. They often distrust China and would rather engage with American counterparts, but the U.S. isn’t fulfilling their needs, and China is all too eager to fill the vacuum.

A recent estimate by AidData identified over $286 billion worth of Chinese infrastructure projects in Latin America, ranging from metro lines to hydroelectric dams. This figure is rapidly approaching the value of the country’s investments in Africa.

U.S. defense analysts fear China could exploit this infrastructure to collect intelligence and, in the case of the Chancay Port, host Chinese naval vessels.

These fears are not misplaced, but equally concerning is the leverage and influence these projects give Beijing in America’s backyard. China is in a struggle to win hearts and minds as it seeks to delegitimize U.S. global leadership. It’s gaining considerable goodwill among governments desperate for economic development and political backing on the international stage, neither of which Washington has been eager to provide.

Latin America may not rank as high as China’s Indo-Pacific neighbors on its list of priorities, but the region’s unmet demand for infrastructure makes it ripe for the picking, and its proximity to the U.S. gives it strategic value Beijing would love to exploit.

If China amasses enough influence in the region to create serious threats America must grapple with in its own backyard, it will have greater freedom to pursue its ambitions in Asia, to the detriment of U.S. economic and security interests.

Threats posed by extra-regional powers led the U.S. to adopt the Monroe Doctrine in 1823. With China’s meddling now increasing, Washington would be wise to resurrect the spirit of that doctrine by engaging more effectively in the Western Hemisphere.

Washington can’t compete with Beijing by continuing to lecture Latin American countries about “diversity, equity, and inclusion” ideologies that do nothing to feed or employ local residents. Nor will it suffice to simply harangue them about the dangers of doing business with China or try to force them to choose sides. America needs to revamp its economic engagement with the region to meet the needs that are causing countries to reluctantly turn to Beijing in the first place.

This is not a call for charity—China doesn’t give handouts, and neither should the U.S. The U.S. is already the largest source of foreign investment into Latin America. It just needs to channel more of this investment into infrastructure and other areas that will help advance the region’s economic and social development.

Washington can’t direct private investment to the extent China can. But U.S. policy played a significant role in encouraging firms to flock to China in the 1990s and 2000s, and no similar effort appears to be underway in this hemisphere.

To be sure, Latin America is not an easy place to do business, but neither was China when multinationals started moving there. Now, as firms seek to decouple from China and calls for “nearshoring” and “friendshoring” supply chains proliferate, the region seems poised to play a major role. China apparently thinks so, and some of its companies, like electric vehicle manufacturer BYD, are already building plants in the region.

Washington cannot afford to sit on its hands and watch Beijing gradually take control of its traditional sphere of influence. Though the U.S. lacks the capacity to compete one-on-one in infrastructure development, by integrating its approach with allies and partners throughout the world, it can do what is needed to reassert its leadership over this critical region. But it must start acting now.

Michael Cunningham is a research fellow in the Heritage Foundation’s Asian Studies Center.