In Latin America, China steps in where US has stepped out

To a large extent, China’s rise to economic dominance and deepening political influence in Latin America has been a quiet affair.

Even the United States – first preoccupied with wars in the Middle East and then turning inward to the tune of “America First” – seemed to hardly notice over the past two decades as its chief economic competitor and geopolitical rival dethroned Uncle Sam as top trading partner and go-to investor in much of his own backyard. At least until recently.

But for Miriam Arce Pinta, China’s arrival in her picturesque fishing village on Peru’s Pacific coast has been anything but tranquil. 

More like a bang.

“The frequent construction blasts rattle our houses, leave cracks in the walls, and put everyone on edge,” says Ms. Arce, a lifelong Chancay resident and artist who has become the face of local opposition to China’s local megaport project.

When completed, the mammoth installation will transform the quaint fishing harbor and resort town, with its key resting spot for migrating bird species, into a bustling beachhead. It will become a hub for exporting the region’s prized raw materials and food back to China and importing Chinese products into South America.

It will certainly change the view from Ms. Arce’s hillside home, which might have inspired Monet or Matisse: Close-knit houses on slopes cascade down to a beach where an armada of pastel-hued skiffs jostles for space with food carts shaded by umbrellas. Two old piers with whitewashed railings carry tourists out over the placid bay, while amateur anglers cast lines into the surf. 

The adjacent commercial fishing pier is mostly quiet, many of the local boat captains having accepted buyouts from the port builders or cash incentives to move elsewhere. Already, construction has put extensive tracts of the sea off-limits to Chancay’s fishing fleets. 

“As if the explosions at all hours weren’t enough, the big trucks transporting earth to the new roads and beachfront they are constructing operate around the clock in day and night shifts,” Ms. Arce says. “It’s constant noise, and the trucks leave an inescapable dust in what before was refreshing sea air.”    

She and the band of unhappy residents, environmentalists, and local merchants she has galvanized to oppose the megaport have become a minor nuisance to Cosco Shipping, the Chinese state-owned company behind the project.

But even Ms. Arce acknowledges that the prospects for halting the operation are dim. The Peruvian government is keen to see the megaport completed, and such trade infrastructure is considered crucial to Beijing.

“The Chancay port is a prime example of how China seeks to secure, from end to end, the supply chains that underpin its economic growth and its aspirations to upgrade its economy,” says Margaret Myers, director of the Asia & Latin America Program at the Inter-American Dialogue in Washington.

At the same time, if China is hearing any cries from Latin America, it’s much more the entreaties of governments and companies from São Paulo to Panama City that all want the Asian colossus to come in: They’re eager to have Beijing assist the region in modernizing its infrastructure and diversifying its economy. 

And just as it has done in Africa and Central and Southeast Asia, China has been eager to fill a void left in Latin America by the hemisphere’s declining and distracted superpower to the north.

In a matter of a few years, China has supplanted the U.S. as the top trading partner for all of South America except Colombia, Ecuador, and Paraguay – and trends suggest those countries could soon follow. A similar pattern is emerging in Central America and the Caribbean, except for Mexico. 

Twenty countries have joined Beijing’s Belt and Road Initiative, underscoring China’s rising challenge to the U.S. as Latin America’s No. 1 source of foreign investment. And in recent months, one new president after the other has taken office pledging to prioritize economic and even political relations with China – sometimes as a pointed rebuff to the U.S.

In February Argentine President Alberto Fernández raised eyebrows in Washington when he was one of the few world leaders – along with Ecuador’s Guillermo Lasso – to travel to Beijing for the Olympic Games. 

Mr. Fernández used the occasion to sign up Argentina for the Belt and Road Initiative and to deepen China’s involvement in Argentina’s electrical power industry – including nuclear plants. Accords were penned strengthening Argentina’s place as an exporter of food products, from soybeans to beef, to China.

Beijing is also zeroing in on South America’s reserves of rare earth and other minerals required for high-tech industries – including the “white gold” of the future, lithium. China is increasingly active in the “Lithium Triangle” made up of Argentina, Bolivia, and above all, Chile.

All of this economic activity has inevitably led to closer political and even security ties, with China enticing Latin America’s growing number of leftist-led governments with talk of mutually beneficial “south-south relations.”

One result: A region that was once one of the world’s friendliest toward Taiwan has shifted toward Beijing. Several countries have recently decided to recognize the People’s Republic of China, instead of Taiwan, as Nicaragua did in December.  

For some experts on Latin America, it is no coincidence that the Biden administration has invited the hemisphere’s democracies to the Summit of the Americas in Los Angeles June 6-10 – only the second time the U.S. is hosting the event since the inaugural summit in Miami in 1994.

But if Washington has any thoughts of using the gathering to slow China’s rise in the region, some Latin America specialists have a message: Don’t bother. It’s too late. 

“Many countries – including Brazil, Chile, Argentina, and Uruguay – now export more to China than to the U.S. and the European Union combined, while economic relations in many cases have matured beyond natural resource exports to infrastructure development and other investment,” says Jorge Heine, a former Chilean ambassador to Beijing who is now a research professor specializing in the international politics of the Global South at Boston University. “These are countries that need the trade. They need modern infrastructure. They don’t see the U.S. very active in these roles, so they’re not about to push the Chinese back.”

Across Chile’s Atacama Desert, where vast salt flats hug the base of the Andes Mountains, checkerboards of electric yellow, aquamarine, and lizard green salt ponds garishly announce the presence of Chile’s lithium mining operations.

Surrounded by a vast moonscape that at first seems lifeless – the sudden movement of a pair of guanacos off in the salt flats suggests otherwise – the lakes offer an astounding scene: It could be a science fiction setting of futuristic farms on some distant planet producing psychedelic-hued liquid nutrition for humans back on Earth.

Yet while Chile’s lithium ponds may indeed be about future energy sources, their origins are in distant geological epochs. Countless millennia of Andes erosion have left vast deposits of lithium in the soupy brines deep below the salt flats. The viscous matter is pumped up and spread across the ponds to evaporate in the intense desert sun. This concentrates the salts that contain potassium for producing fertilizers – and lithium. 

There are no phalanxes of headlamp-clad miners at these operations. Instead, workers in protective gear tend the ponds and gauge the brines for the right concentration of elements. When a worker launches a rowboat out into a lemon-colored lake to take depth measurements, the scene is reminiscent of the Beatles song “Lucy in the Sky With Diamonds”: The only things missing are tangerine trees and marmalade skies.  

The workers process the salts and extract the lithium for export – mostly to China and South Korea, where it is an essential component in the batteries that power everything from cellphones to electric cars. Chile is the world’s second-largest exporter of lithium after Australia, and its deposits make it a prime investment target for China.

In 2018, the Chinese company Tianqi bought a 24% stake in the Santiago-based SQM mining and fertilizer corporation, Chile’s second-largest producer of lithium after the American company Albemarle. In January, the Chinese electric vehicle company BYD won a contract to produce 80,000 metric tons of lithium over 20 years, despite the objections of then-President-elect Gabriel Boric.

The socialist Mr. Boric, who took office in April, had called on the outgoing conservative government to suspend awarding new lithium and other mining contracts to allow his government to develop new resource extraction policies. Mr. Boric wants to promote more domestic uses of the country’s mineral wealth – something past governments have attempted, with little success.

Yet despite cries of “China, hands off our lithium!” from leftist voices in Santiago and some Indigenous groups in Atacama, China’s growing role in Chile’s industry seems to raise few alarms.

“I haven’t seen any pressure from our Chinese investors to lower our standards or change our focus on sustainability, but it’s negligible the influence Tianqi could have in that way even if they wanted to,” says Alejandro Bucher, vice president for community relations at SQM’s Atacama operations.

SQM was hampered in the past with a less-than-stellar reputation for maintaining environmental standards and working with local communities, Mr. Bucher acknowledges. But he says the company has done a turnabout in recent years, now implementing environmental standards above those required by the Chilean government and working closely with local Indigenous communities on water, housing, and employment issues.

“Our Chinese investors came in after we set our new course, so it seems they are on board with the shift to sustainability and transparency,” he says. 

For many countries, the common description of the region’s big new player is that of an economic giant pursuing its own interests, a partner that is more pragmatic than ideological. They depict China as less interventionist in national affairs than the U.S. was when it dominated the region.

“The idea we are hearing more now – that China poses more risks to us than other big powers – is not convincing to me,” says Andrés Rebolledo, a Chilean trade diplomat who helped negotiate free trade accords with both the U.S. and China. “My perspective is that as such a small part of the global economy, a country like Chile has to trade with everyone while understanding that the big economic powers are all going to defend their interests and act like the bigger partner.”

“My advice for Chile and Latin America is the same,” Ambassador Rebolledo says. “Be the sweethearts of everybody, but married to no one.”      

Still, as China’s influence grows, that harmless portrait is being challenged.

A recent “China in the World” study released by Chile’s Instituto Desafíos de la Democracia and the Taiwan-based Doublethink Lab finds that China is becoming more assertive in regional affairs. Moreover, the report places Chile among the world’s top 15 countries most influenced by China – not just economically but also politically. 

A debate is brewing in academic and diplomatic circles about Beijing’s deepening footprint, too. “What I’m seeing are two groups that interpret the growing influence of China from two different and increasingly distinct perspectives: one group that says China’s only interest is our natural resources and not our development, and which is growing more suspicious and distrustful of China; and another group that responds to China’s rising influence with a ‘So what?’ and says if we want value-added economies, that’s our job and not China’s responsibility,” says Dorotea López Giral, director of the University of Chile’s Institute of International Studies.         

Perhaps not surprisingly, Dr. López says, the first group is more attached to the U.S., is more likely to invoke values of democracy and free markets and human rights in discussions of China, and is more often from the old guard of Chilean academia and diplomacy. The second group, she says, is more pragmatic, prefers a foreign policy “autonomous” from any great power, and is generally younger.

And she believes the second group is prevailing. “It used to be that the young rising academics all sought scholarships to the U.S., but we don’t even have a U.S. studies center anymore. We had to close it,” says Dr. López, noting that a China studies program was established two years ago.

“Now the Chinese are offering 20,000 scholarships ... and everyone wants to go to China,” she adds. “For China we are the cool friend, and Chilean students are responding to that.” 

When China announced plans to build a series of megafarms for pigs in Argentina’s northern Chaco region, the provincial governor heralded the project. He saw it as an opportunity for an impoverished Chaco to dip into the enticing and growing pool of Chinese investments in Argentina and Latin America.

After all, Argentina had already been supplying China with agricultural goods – soybeans beginning in the 1990s, then beef for a growing middle class, and even wines for diversifying Chinese palates. Shipping pork to China would be no different. 

If anything, the pig farms offered even greater promise, officials argued. The operations would bring value-added industries to underdeveloped Chaco in the form of skilled butchering and state-of-the-art packaging, freezing, and transport.

But not everyone shares the governor’s enthusiasm. A coalition of opponents quickly formed among environmentalists, critics of neoliberal economics, and Indigenous groups. Questioning the safety and long-term viability of such intensive farming, critics note that if China is looking to produce pork far from home, it is because of a 2018-19 African swine fever outbreak that forced the country to destroy half of its national pig herd and turn to expensive imports. Critics contend the megafarms risk repeating such public health disasters in Chaco.

Beyond that, opponents say it is no mere coincidence that China chose Chaco – a marginalized region hungry for economic development – for the farms.    

“Argentina is in a very deep economic crisis – so already at a national level, any promise of jobs and dollars, they will go with it,” says Enrique Viale, a prominent environmental lawyer in Buenos Aires. “Chaco is even more desperate for investment, with the added advantage for some investors of being outside the national spotlight where it might be easier to try cutting corners on standards.”

Indeed, for some experts, it’s the economic fragility of so many Latin American countries that partially explains China’s growing presence in the region.

“In Argentina, it’s the country’s weakness that leads to China being the increasingly important partner,” says Juan Luis Bour, chief economist at the Foundation for Latin American Economic Research in Buenos Aires. “Argentina needs loans to build dams and roads and other infrastructure, but after decades of financial crises it has no international credit. So it turns to the only lender out there, China, even if it has to accept terms that are substantially in the lender’s interest.”

This imbalance can leave a country like Argentina with little leverage. One example Professor Bour cites is a Chinese satellite-
tracking station built in a remote part of Patagonia under favorable terms to China. Some worry that Beijing could be using the facility for spying and surveillance activities.

“The real problem is the combination of the Chinese state and Chinese companies makes their style very predatory,” says Evan Ellis, Latin America research professor at the U.S. Army War College’s Strategic Studies Institute in Carlisle, Pennsylvania. “You can benefit from a predatory partner, but you have to be on top of your game, and that’s much harder if you’re the much weaker partner.”

At the Qom Indigenous reserve in Espinillo, a small outpost on the edge of Chaco’s Impenetrable region – a thick, semiarid forest of spiny trees and prickly bushes – most residents have heard the rumors about Chinese investments in their lands. Many don’t like it.

“The worst part is that we started hearing about big pig farms and we saw the picture of the town administrator with visiting Chinese people, but we could never get a straight story,” says Angel Meza, a Qom leader who favors jobs for local youth but is dubious of big projects on Indigenous lands. “We have held assemblies to discuss these rumors about the Chinese coming here, but we have no solid information.”

Outside town, Horacio Garcia sits in the shade on his family’s 120-acre plot and explains why he worries about talk of Chinese investment in the area.

“I never thought too much about the pig farms, but then we heard the Chinese might put in big citrus groves, and that worried me because my neighbors say they would favor that kind of thing,” he says. “It would be hard to stand up to big investors like the Chinese.”

In Resistencia, Chaco’s capital, provincial officials believe concerns over the proposed pig farms have been overblown. They insist opposition to Chinese investment is primarily from local forces who would be against any change.

“We are no longer talking about megafarms, but smaller operations with 600 or 1,000 sows, a very safe and sanitary option,” says Sebastián Bravo, undersecretary for livestock affairs. Noting Chaco has the technical know-how and local feed production to develop the farms and create thousands of jobs, he adds, “The fact it’s the Chinese behind the project makes no difference. It could be Europeans or anyone else, and we would insist on the same high standards to go forward.”

Just outside town at the 370-acre La Felicidad farm, Eduardo Corcia shows off his 250-mother-pig operation. He has a big personality and pivots easily from the micro of the proposed Chaco pig farms to the macro of China’s investment in Latin America.

“[People] talk of local pork producers teaming up with these new farms, but I’m not sure it makes much sense to me,” he says. “I’d be afraid I’d be left with a lot of excess production capacity once the Chinese get their domestic production back on track.”

Despite that, Mr. Corcia says he understands the need for significant foreign investment in infrastructure and value-added enterprises if Chaco, Argentina, and even Latin America are to boost prosperity. 

“I like the idea of foreign business partners, why not?” says the doctor-turned-farmer, who is expanding his operation to include on-site butchering and a refrigeration plant. “But would I want to go in with the Chinese? I don’t know; they have their ways that are different.”

Mr. Corcia says he’d be more comfortable working with Americans, and he senses that’s probably true of many Argentines. “The problem we face in Argentina is that the Americans aren’t around, but the Chinese are,” he says. 

And as it goes in much of life, he adds, you dance with those who show up at your party.