China's Growing Involvement in Latin America Carries 'Significant Negative Consequences' for U.S.

WASHINGTON – A research professor at the U.S. Army War College warned lawmakers that China’s increasing involvement in Latin American affairs is undermining the strategic position of the United States within the Western Hemisphere.

Testifying before a combined hearing of two House Foreign Affairs subcommittees, R. Evan Ellis acknowledged that Chinese engagement is primarily economic and could conceivably advance “the development, prosperity, and even security of the region.”

But Ellis, an expert on Latin American affairs, also expressed concern that growing Chinese involvement carries “significant negative consequences” for the U.S. While the Far Eastern giant’s loans to poor nations, product purchases and sales within Latin America “benefit a limited number of sectors and economic interests,” they also “indirectly contribute to inequality, corruption, violence, and environmental problems, while undermining democracy and the rule of law in the region.”

China is employing a playbook seen elsewhere. It is securing reliable access to primary products in Latin America, such as petroleum and minerals necessary to sustain its industrial production. It also is hunting for reliable sources of agricultural goods, particularly animal feed to produce the food required to meet the needs of China’s 1.35 billion residents. And it desires accessible markets, as Chinese companies expand their capabilities in strategic, high-value-added sectors like motor vehicles, electronics and telecommunications.

“In general, the PRC (People’s Republic of China) has adopted a pragmatic, materialistic, politically agnostic approach in pursuit of its objectives in the region,” Ellis said. “It has focused on bilateral engagements built around loans and investment projects by Chinese companies, complemented by trade agreements, memorandums of understanding, or administrative certifications which grant access to the Chinese market for select categories of merchandise, frequently agricultural goods.”

China’s physical presence on the ground in Latin America has provided Chinese companies and their government “a vastly expanded stake in the internal dynamics of the countries where they operate,” he said.

China’s purchases in Latin America are generally for cheaper, lower-end goods -- soybeans rather than soil oil, iron ore rather than steel or cars, and crude petroleum rather than refined products. Conversely, China is marketing higher-end products in Latin America, Ellis said, “competing with and adversely affecting similar industries in Latin America and the Caribbean in both domestic markets, as well as in third markets such as the United States.”

Expanding business transactions open up new avenues for trans-Pacific criminal activities like money laundering. Reports are spreading, Ellis said, that the Brazilian gang First Capital Command and other Latin American criminal organizations are using Chinese banks and businesses for their operations.

“Trans-Pacific criminal ties are an emerging threat which are likely to expand in coming years with emerging PRC-Latin America commerce, particularly since overwhelmed Latin American and Caribbean police forces lack the language skills and technical contacts in the PRC to effectively investigate cases and combat groups with trans-Pacific ties,” Ellis said.

China’s engagement is also, Ellis said, “undermining democracy and good governance” through loans, investments and commodity purchases “that sustain the lives of populist regimes and with them their questionable adherence to norms of democracy, respect for private property and the rule of law, as well as their efforts -- in conjunction with regional powers such as Brazil -- to replace the inter-American system” with structures that “exclude the US and Canada from a voice in the hemisphere.”

Ellis told the panel that the U.S. can’t afford to “turn a blind eye” toward growing Chinese activity in Latin America and its impact on America’s strategic position therein, “even if short-term PRC intentions appear mostly benign.”

“The security of the United States is bound to Latin America and the Caribbean through ties of geography, commerce and family,” he said. “As such, I respectfully submit that we have a responsibility to our citizens, and to our partners in the hemisphere, to ensure that the region’s engagement with extra-hemispheric actors such as the PRC is consistent with U.S. objectives of democracy, development and good governance there, and of course, the security of the U.S. homeland.”

Ellis said the U.S. should assist Latin American nations in obtaining the maximum possible benefit from their engagement with China while avoiding potential pitfalls and negative consequences. And Congress, he said, should approve the Trans Pacific Partnership, a proposed trade agreement involving the U.S. and several Pacific Rim countries that could be used to introduce them to Latin American markets.

Rep. Matt Salmon (R-Ariz.), chairman of the House Subcommittee on Asia and the Pacific, one of the two panels conducting the hearing, characterized China’s involvement in Latin America as an “understudied, yet strategically important, trend,” noting that China’s bilateral trade with the hemisphere grew from $15 billion in 2001 to $288.9 billion in 2013.

“While China’s presence in Latin America and the Caribbean has been largely limited to trade and investment, there is a movement towards greater military relationships,” Salmon said. “Nuclear cooperation, shared space assets and arms sales not only provide China with economic and military leverage in the region, but may also expand China’s ability to mitigate one of our major advantages: our relative geographic isolation.”

China, he said, likely will continue to maintain that it has no foreign bases.

“But China’s not-explicitly-military partnerships with countries in strategic geographic locations like Brazil to share space and satellite assets for earth observation, may raise some eyebrows,” Salmon said. “No foreign bases does not mean no foreign presence, and we should be wary of any potential military implications of Chinese presence in our neighborhood.”

By lending billions of dollars to service legitimate needs in developing countries in the Western Hemisphere, Salmon said, China has secured not only lucrative contracts but also diplomatic support.

“China’s growing economic, trade, military, and diplomatic relationships with countries in Latin America and the Caribbean certainly have implications for U.S. foreign engagement in the region,” he said. “We welcome China’s presence in the region and hope that they will yield mutual benefits for all countries involved. However, we hope that this does not come at the expense of the rule of law and good governance and further entrenching inequality, corruption, illicit commerce, and violence. As the United States continues to look eastward toward Asia, a vital part of our economic and strategic future, we must not forget the relationships with our closest neighbors.”