China uses hard cash loans to surpass U.S. trade ties with Latin America

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By John J. Metzler

UNITED NATIONS — Prospecting for new trading partners, pressing for political influence in a vast region increasingly ignored by the United States, and possessed by a near unquenchable thirst for natural resources,the People’s Republic of China is forging closer ties with Latin America.

The links goes well beyond Beijing’s traditional comradely relations with communist Cuba and extend to strong commercial ties to powerful resource-rich countries such as Brazil, Argentina, and Venezuela.

Contemporary China is not exporting Marxism but promoting markets in a region which retains vast raw materials as well as potential customers. Agricultural products, Mining, and Petroleum are among the abundant resources Latin American producers have for a still strong Chinese market.

Argentina's Cristina Fernandez Kirchner in Beijing.
Argentina’s Cristina Fernandez Kirchner in Beijing.

In January Beijing hosted a high level forum between China and the Community of Latin American and Caribbean states (CELAC) where the Chinese government pledged to boost Latin American trade to $500 billion in the next decade.

PRC President Xi Jinping pledged to invest $250 billion in Latin America over the next five years.

Loans by Chinese state owned banks to the region rose to $22 billion n 2014 up from $13 billion the previous year.

One country particularly close to China is Venezuela, an increasingly authoritarian regime who now is facing drastic economic downturn from both an under- productive socialist economy and plunging petroleum prices. While high oil prices had once buoyed massive social spending during the Hugo Chavez era, Venezuela’s current ruler Nicolas Maduro recently visited Beijing, hat in hand, and claimed to get $20 billion.

Just a few years earlier, Chavez, savored a cozy relationship with Mainland China, basically bartering Venezuelan oil for Chinese loans and investment. Since 2007, Venezuela has received $56 billion from the People’s Republic.

According to the Inter-American Dialogue, a Washington-based think tank, PRC loans and investment in Latin America exceed $119 billion since 2005. Significantly Chinese aid exceeds either the World Bank and the Inter American Development Bank. Many diplomats concede that Beijing’s aid comes with “far fewer strings” attached than do other more transparent international loan packages.

Brazil, as a resource-rich and emerging economy equally has been granted considerable Chinese loans; $8.6 billion last year. Brazil’s emerging middle class and export oriented policies have allowed this South American giant to become one of Beijing’s closest trading partners. Importantly Chinese loans to Brazil have focused on the energy infrastructure and financial sector.

Argentina, despite its amazing agricultural and natural resources has long suffered from bad government. Here too, China is opening new commercial doors with loans of $7 billion in 2014. In Argentina, loans are focused on revitalization of rail transport and transportation infrastructure.

Yet Beijing’s loans are not only focused on the big countries. Medium sized Ecuador, an oil producer with an increasingly authoritarian government, received over $800 million last year.

China’s aggressive trade and commercial policies have outdistanced the USA in much of the region, long presumed to be as “America’s backyard.” By 2009, People’s China surpassed the USA in trade with Brazil. U.S. two way trade with Brazil reached $72 billion last year.

Argentina’s leftwing president Cristina Fernandez Kirchner on a recent visit to Beijing called the relationship with China as an “integral strategic alliance.” Last year trade with China surpassed Argentina’s trade with the United States.

More troubling is a recent space station deal between Beijing and Buenos Aires. The Argentine Congress has approved a satellite tracking facility in the Neuquen region of Patagonia which will serve as part of China’s planned 2020 Moon launch program. China is expected to invest $300 million for the space tracking base.

The United States which has increasingly taken Latin America for granted is now challenged by China’s soft power diplomacy through hard cash loans. Washington needs to take an overdue and proactive view towards this region too long seen as a political afterthought for the past generation. Revitalizing and modernizing John F. Kennedy’s long-forgotten “Alliance for Progress” initiative may be a wise step.

John J. Metzler is a U.N. correspondent covering diplomatic and defense issues. He writes weekly for He is the author of “Divided Dynamism The Diplomacy of Separated Nations; Germany; Korea, China”, 2014

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