China’s Engagement with Latin America and the Caribbean

China’s Engagement with Latin America and the Caribbean

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Updated June 23, 2023
China’s Engagement with Latin America and the Caribbean
Relations between the People’s Republic of China (PRC, or
information and communications technologies (ICT) sector;
China) and the countries of Latin America and the
and partnering with LAC firms to access and jointly
Caribbean (LAC) have grown substantially over the past 20
develop technology. China also has sought opportunities in
years. This growing engagement, which remains primarily
LAC for PRC infrastructure firms as a way for these firms
economic and diplomatic, has led some U.S. policymakers
both to internationalize and offload excess capacity.
to consider the potential implications of strengthening PRC-
LAC ties for U.S. interests.
Data published by the General Administration of Customs
of the PRC estimated the total value of China-LAC trade at
Diplomacy
$482.6 billion in 2022. That year China’s imports from
Beijing’s diplomatic initiatives in LAC have helped
LAC amounted to $231.1 billion, consisting primarily of
advance China’s economic priorities, institutionalize its
ores (32%), oil seeds (18%), and mineral fuels and oils
engagement in the region, and garner support in
(12%). China’s exports to the region meanwhile totaled
international fora. Some analysts assess that the PRC’s
$251.5 billion, with major exports including electrical
activities in LAC do not appear to be aimed at challenging
machinery and equipment (23%), machinery and
the United States directly or militarily, yet reflect a global
mechanical appliances (14%), and motor vehicles and parts
strategy to counter U.S. influence. China’s diplomatic
(8%). China is the largest trading partner of Brazil, Chile,
efforts include being an observer at the Organization of
Peru, and Uruguay and the second-largest trading partner
American States, a member of the Inter-American
for many other countries. China has free-trade agreements
Development Bank and the Caribbean Development Bank,
with Chile, Costa Rica, Peru and, as of May 2023, Ecuador.
and a participant in the Asia Pacific Economic Cooperation
China’s projected slower economic growth in the near term
(APEC) forum.
may result in weaker PRC demand for LAC exports and
reduced PRC capital flows to the region.
Since 2014, China has sought to engage with the region
through the Community of Latin American and Caribbean
According to the American Enterprise Institute’s China
States (CELAC), a region-wide organization that excludes
Global Investment Tracker, Chinese entities invested
the United States and Canada. During the Third Ministers’
$148.9 billion in LAC countries between 2005 and 2022,
Meeting of the China-CELAC Forum in December 2021,
with Brazil accounting for $66 billion (44%) and Peru
the parties adopted a China-CELAC Joint Action Plan
$25.5 billion (17%). Energy projects accounted for 62% of
(2022-2024) to guide cooperation in areas including politics
investments and metals/mining accounted for 21%. The
and security, economy, and infrastructure. In his most
database also shows that PRC construction projects in LAC
recent address to the grouping in January 2023, China’s
over the same period were valued at $68.6 billion, mainly in
leader Xi Jinping expressed China’s support for LAC
the energy (50%) and transportation (30%) sectors.
regional integration and characterized CELAC as China’s
“key partner in enhancing solidarity among developing
Figure 1. China: Financing to LAC, 2005-2022
countries and furthering South-South cooperation.”
One of Beijing’s goals in the region appears to be to isolate
Taiwan by incentivizing LAC countries to end formal
diplomatic ties with the self-governing democracy, over
which the PRC claims sovereignty, and which officially
calls itself the “Republic of China.” Currently, seven
governments in LAC (out of 13 governments worldwide)
maintain formal diplomatic relations with Taiwan. The
remaining 26 maintain formal diplomatic relations with the
PRC. Since 2017, five LAC governments have established

formal diplomatic relations with the PRC, ending their
Source: Created by CRS with data from Kevin P. Gal agher and
formal recognition of Taiwan; the country to do this most
Margaret Myers, “China-Latin America Finance Database,” Inter-
recently was Honduras in March 2023.
American Dialogue, 2023, at https://www.thedialogue.org/map_list.
Economic Relations

China’s state-owned policy banks (i.e., China Development
China’s economic priorities in LAC include securing access
Bank and the Export-Import Bank of China) have made
to raw materials and agricultural goods (e.g., petroleum,
numerous loan commitments to the region over the past 20
soybeans, and minerals including lithium); fostering
years (see Figure 1). According to the Inter-American
markets for Chinese goods and services, including in the
Dialogue, from 2005 to 2022, LAC countries borrowed a
https://crsreports.congress.gov

China’s Engagement with Latin America and the Caribbean
cumulative $136.5 billion, most of which was directed at
and activists have drawn attention to corruption, poor labor
the energy (66%) and infrastructure (19%) sectors. These
standards, and environmental damage linked to PRC-
loans typically lack the policy conditionalities and
backed projects, sparking local opposition. They have also
environmental safeguards associated with major
drawn attention to alleged political influence operations.
international financial institutions; often contain a mix of
concessional and commercial terms; and include strict
Illicit Fentanyl
confidentiality clauses. Nonetheless, lending has decreased
in recent years due to factors including lower LAC demand
Some Members of Congress have expressed concern about
for PRC financing; changes in the way the PRC manages its
China’s role in the production of il icit fentanyl, a synthetic
foreign exchange reserves, which the PRC uses to make
opioid roughly fifty times more potent than heroin. Currently,
loans; and greater risk aversion of PRC lenders.
most U.S.-destined il icit fentanyl comes from Mexico, using
chemical precursors sourced from the PRC. In the 118th
Currently, 22 countries in LAC have signed memoranda
Congress, S. 1689 has been introduced in the Senate to
related to the Belt and Road Initiative (BRI)—a
prioritize efforts to combat international trafficking in
multifaceted foreign economic policy initiative that aims to
precursor chemicals and covered synthetic drugs with the
expand China’s global economic reach and influence by
Government of Mexico, and to provide for the imposition of
developing China-centered and -controlled global
sanctions PRC individuals and entities contributing to
infrastructure, transportation, trade, and production
international proliferation and production of il icit drugs. (For
networks.
more on China’s role in the il icit fentanyl trade, see CRS In
U.S. Policy Concerns
Focus IF10890, China Primer: Illicit Fentanyl and China’s Role.)
The Biden Administration’s National Security Strategy

describes China as a strategic competitor but maintains that
Issues for Congress
the Administration will refrain from seeing the world
The United States has sought to reinvigorate U.S.-LAC ties
“solely through the prism of strategic competition.” It states
as China’s presence and influence in the region has
that because the Western Hemisphere impacts the United
continued to grow. Issues that Congress may face include:
States more than any other region, the Administration will
further deepen partnerships in LAC to advance economic
Strategic Competition. In December 2022, the 117th
resilience, democratic stability, and citizen security. It also
Congress enacted the James M. Inhofe National Defense
vows to help protect LAC from “external interference or
Authorization Act for Fiscal Year 2023 (P.L. 117-263),
coercion, including from the PRC.”
which requires reports on activities undertaken by China
and Russia intended to increase their influence in LAC;
The U.S. Southern Command (SOUTHCOM) has voiced
PRC port infrastructure purchases and investments globally
concerns in recent years about China’s activities in LAC. Its
critical to U.S. interests and national security; and Chinese
2023 posture statement asserted that the PRC has “the
financing of port infrastructure globally. Some versions of
capability and intent to eschew international norms,
(H.R. 4521), the America COMPETES Act, also introduced
advance its brand of authoritarianism, and amass power and
in the 117th Congress, contained provisions that did not
influence at the expense of the existing and emerging
become law but may be raised again in the 118th Congress.
democracies in our hemisphere.” According to
These include, for example, provisions that would have
SOUTHCOM, the PRC is investing in critical
required a strategy to strengthen U.S. economic
infrastructure, including deep-water ports, cyber, and space
competitiveness and promote good governance, human
facilities which “can have a potential dual use for malign
rights, and the rule of law in LAC; required a report
commercial and military activities.”
assessing the PRC’s engagement in regional organizations
and the defense sector in LAC; and supported U.S. defense
U.S. warnings about China have been met with some
cooperation in LAC.
skepticism in LAC and among some regional experts. Some
analysts contend that China’s primary interests and
Economic Prosperity. Congress may seek to reduce the
influence in the region remain largely economic and
region’s reliance on China by designing a positive agenda
diplomatic and that the probability of the PRC creating a
to promote economic prosperity in the hemisphere. Bills
military sphere of influence in LAC remains small. Others
have been introduced during the 118th Congress, such as the
argue that China’s appeal is limited due to deep political,
Western Hemisphere Nearshoring Act (H.R. 772), which
social, and cultural differences, and language barriers.
would provide incentives for companies to move operations
from the PRC to LAC. Bills introduced during the 117th
Nevertheless, some analysts have expressed concerns about
Congress contained provisions that did not become law but
the potential harmful effects of China’s economic
that could be introduced again in the 118th Congress. These
engagement on LAC’s development and claim that Chinese
include, for example, provisions in H.R. 7726 introduced
companies do not adhere to international environmental,
during the 117th Congress that would have directed the
labor, and safety standards. China also has exported
President to support a general capital increase for the Inter-
surveillance technologies that some observers fear could be
American Development Bank, the region’s primary
used to violate privacy or other rights.
multilateral lending institution.
Some argue that PRC support extends a lifeline to leaders
Ricardo Barrios, Analyst in Asian Affairs
with poor governance records and exacerbates corruption.
Karla I. Rios, Analyst in Latin American Affairs
In some LAC countries, civil society groups, journalists,
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China’s Engagement with Latin America and the Caribbean

IF10982

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https://crsreports.congress.gov | IF10982 · VERSION 19 · UPDATED