Impacts of Chinese Economic and Political Influence on South America and US National Security Published July 8, 2024 By LtCol Jennifer Raymond, USMCR Wild Blue Yonder--Maxwell AFB -- The 2022 National Security Strategy (NSS) states that “no region impacts the United States (US) more directly than the Western Hemisphere.”[1] The NSS also acknowledges that partnerships across Latin America have atrophied and calls on the US to revitalize these. China is capitalizing on an opportunity to fill this void, and these relationships are creating key security issues for the US across South America. China is the dominant external actor in South America and seeks to shape the region to its advantage primarily through economic and political means.[2] Economically and politically, China has emerged as the regional leader in trade, loans, and infrastructure projects and as a strategic partner to authoritarian regimes, creating an unbalanced reliance on Chinese resources. Its economic and political approaches are closely tied and aligned with its revisionist aspirations to change the current world order and diminish US influence in South America. This asymmetric dependence threatens the sovereignty of countries who have become deeply entwined with long-term economic and political arrangements with China, to the detriment of their own interests and the security of the United States. Background of Chinese Economic and Political Involvement in South America Asymmetric Trade Favoring China South America’s recently cultivated economic relationship with China is decreasing its trade with long-standing partners and increasing its trade specialization and deindustrialization, creating an asymmetric economic dependency. Concurrently, strong political connections between the Chinese Communist Party (CCP) and South American political elites contribute to economic policy decisions favoring China. Both are detrimental to South America’s ability to grow and diversify its economy in a sustainable way that supports regional stability. In 2000, less than 2 percent of South America’s exports were traded to China, but today, China ranks as the top trading partner in South America and accounts for 25% of total trade.[3] In contrast, the US accounts for 15% and the European Union 14%.[4] Venezuela and Chile have experienced increasing trade specialization due largely to Chinese import demands. Venezuela’s over-reliance on oil revenue has been exacerbated by its extensive partnership with China and led to an economic crisis affecting all sectors. Chile’s trade relationship has become dependent on China and is focused on its single most important natural resource – copper.[5] China’s increased demand for commodities primarily benefits the region in the short and medium term, but this asymmetric dependence on China diminishes long-term economic stability. Political ties between the CCP and regional political elites bolster China’s dominance of the export trade space that Latin American manufacturers should fill. Chinese exploitation of these political connections actively diminishes the region’s ability to compete in this market and disproportionately benefit powerful economic groups and political leaders, while harming the citizens of those countries and escalating financial instability. Deliberate lack of investment in global value chain-based economies that leverage natural and agricultural resources stymie many regional economies.[6] This negatively impacts the region’s ability to invest in value-added production to turn its various commodities into more profitable products and expand technological development. Both are necessary for long-term economic growth and maximum benefit to the population and without these, the region’s stability is at risk.[7] The US faces significant threats to its security interests resulting from China’s unanswered rise as South America’s dominant trade partner. These include geopolitical implications that threaten to reshape the regional balance of power traditionally held by the US, erosion of democratic governance, increasing alignment with a competing world order, and increased migration. In the long term, China’s trade agreements could threaten to unseat the US as the preferred partner, challenging its status as a regional power. Economic and political alignment between the CCP and regional political elites across the region could threaten democratic values and entice countries to work outside of the current world order with detrimental consequences to the population. Finally, trade agreements favoring the export and import demands of China undermine the economic diversity and resilience of the region and collapse could easily be triggered, accelerating existing destabilizing migration patterns. Coercive, Predatory Loans China is also establishing itself as the leading source of loans for the region, and these are notoriously beneficial to China and debilitating to the borrowing countries, further exacerbating asymmetric economic dependence.[8] These loans contain coercive measures that align with Chinese political aims – they extract concessions from borrowing countries while constraining their political autonomy.[9] Between 2005 and 2021, Chinese loans to the region approximated $138 billion, but in 2022, loans jumped another $813 million in a single year, and far surpassed the combined amounts of Western-led financial institutions.[10] While larger loans with fewer conditions appear favorable for the region, the terms are opaque and misleading. The most concerning include lower environmental, quality, and labor standards, a job market for Chinese nationalists rather than locals, unmanageable debt, and non-transparent contracts.[11] For example, Ecuador has defaulted on its loans and will repay an estimated 42% of its $5 billion in debt to China with oil, further weakening its economic position.[12] Venezuela’s more than $60 billion in defaulted loans now give China access to its oil that will be sold and used for China’s benefit.[13] China’s loan approach deliberately targets mutually beneficial political relationships that empower authoritarian regimes and influence domestic and international policies across all political spectrums. China has played a significant role in keeping Venezuela’s authoritarian dictator, Nicholas Maduro, in power despite an overwhelming lack of popular support. Its partnership with Bolivia’s hybrid authoritarian regime has re-introduced oppressive and exploitative practices that undermined years of hard-won labor protections. Loans distributed under the Belt and Road Initiative (BRI) impose a high cost of reduced diplomatic freedom on borrowers. As of 2022, nine out of 10 South American countries denounced diplomatic relations with Taiwan as a direct result of loan clauses imposed by China.[14] Unmanageable loans with fewer stipulations push economically unstable countries into debt traps, support like-minded authoritarian political and economic leaders, and, when combined with rigid diplomatic agreements favorable to China, directly threaten US security.[15] This includes loss of control of critical commodities and erosion of democratic governance. South American countries now face the likelihood of default, and loan terms require the forfeiture of a significant percentage of valuable natural resources to China. This primes a tenuous South American economic landscape for collapse and threatens US access to critical natural resources. Even more consequential to US security is the erosion of democratic governance and values across the region due to loans that leverage coercive diplomacy, create undue political influence through debt traps, and uphold oppressive regimes through rampant corruption. Infrastructure Projects – Dual Use Civilian-Military and Majority Chinese-Owned Chinese infrastructure plans in South America fall under the scope of BRI, which seeks to develop the world’s most important economic activity through China to grow its economic and political power.[16] BRI infrastructure serves China’s larger geopolitical goal of developing “dual-use” (civilian and Chinese military) critical infrastructure, including ports, airports, highways, and railways.[17] These contracts are binding, non-transparent and impose significant risks on host nations.[18] In a potential global conflict, China could leverage its access to strategic ports in the region to restrict US naval and commercial ship access.[19] Two of the most concerning developments in this category are the development of port facilities that could be accessed in the future by the People’s Liberation Army Navy (PLAN) and those built at key strategic choke points.[20] The Panama Canal is a strategic bottleneck where China has increasing control, and it is positioning itself for potential control of the Strait of Magellan and Drake Passage if it can fund a polar logistics facility in Argentina.[21] These key passageways are critical to the economic strength of the region, and China’s lack of accountability and degree of control presents a significant security concern. Politically, BRI strengthens China’s influence in the Western Hemisphere by isolating the region from its longstanding partners, weakening South America’s ability to develop sustainable prosperity, and leveraging bribes to local governments while sustaining corruption. China's growing control over key critical and technological infrastructure, such as energy grids and digital networks, creates vulnerabilities to malign influence operations. In Chile, Chinese companies control 57% of electricity distribution, and China is its top digital trade partner.[22] Governments face an increased risk of coercive threats from China, given the significant dependency on this infrastructure. As Huawei expands its 5G infrastructure in the region, it is mandated by law to share data with the Chinese government, posing a significant vulnerability to exploitation.[23] Huawei’s equipment also has built-in control and surveillance features and has a strong potential to undermine stability in a region whose democratic principles clash strongly with China’s authoritarian rule.[24] Using high-tech methods similar to CCP suppression of the Uighur people, in Venezuela, President Maduro has leveraged a Chinese telecom firm, ZTE, to monitor citizens through the ominous mechanism of a mobile payment/voter identification called the “fatherland card,” allowing him to tie allocation of scarce resources to exclusive political loyalty.[25] Chinese control of critical infrastructure in South America threatens wide-ranging US security interests within the Western Hemisphere. Top concerns include domestic intelligence collection, control of strategic chokepoints, and erosion of democratic governance. Dual-use infrastructure agreements lack transparency and are known to be significantly more favorable to China than the host nations. Access in areas with waning interest or active opposition toward the US threatens nefarious activities such as active surveillance of the US and PLAN port control and access. Chinese control of strategic geographic bottlenecks and critical infrastructure threatens to restrict future US military access while providing key positioning for the PLAN in both locations. The breadth of power-grid control and Chinese-based digital infrastructure have already proven destabilizing in African countries and have the potential to undermine stability and democratic governance across the region, creating even more complex security threats to the US. Recommendations The US must prioritize actions that sustain and strengthen its position as the region’s dominant power in the face of China’s expanding influence and control. Political and economic actions focused on this end state must be built on the US recognizing South America’s agency and autonomy.[26] Success also relies on acknowledging South American perceptions of a distant, historically fraught, sometimes neglected relationship with the US, while grappling with the region’s rising corruption, slow growth, and the emergence of illiberal democracies.[27] The US must, in haste, demonstrate deeper political and economic engagement, greater business investment, and protection of South American citizens and their sovereignty. The foundation for re-establishing US hegemony and diminishing China’s influence relies on close partnerships among the US and its European and Indo-Pacific allies to demonstrate a viable and strong commitment to opportunities that have been neglected. Together, they can help South American countries build strong, inclusive, anti-corrupt, debt-sustainable, transparent institutions that provide checks and balances on any nefarious effects of Chinese investments. They can offer attractive and affordable alternatives for regional economic development to carefully counter Chinese investments in sensitive national security areas.[28] This method counters the malign institutions that China has leveraged to gain favor and influence in the region while promoting the region’s ability to exercise its autonomy while pursuing economic goals. The US can also rally its allies and partners in Europe and the Indo-Pacific to diversify economic partnerships that will dissolve China’s asymmetric control of South American imports and exports. While many South American countries actively seek non-alignment amongst the great powers, no other trade partner has challenged China’s trade dominance, leaving the region with few options. Improving the balance is critical to reducing China’s growing influence in the region and threat to US security. The US must press for market access and fair and reciprocal trade for US-based companies. This can be accomplished by focusing on value-added trade investment in infrastructure and technology, expansion of manufacturing capabilities, cooperation to protect the region’s rich biodiversity, and facilitating its transition to clean energy and a green economy.[29] Finally, the US can counter China’s malign influence in South America through renewed regional commitments to the sustainment and growth of democracy. Most of the region's population lives in a democracy, and support remains high.[30] The US can leverage overlapping priorities and interests of governments and populations to counter authoritarian influence.[31] In democratic countries such as Chile, the U.S. can work to reduce the polarization of social and political elites by supporting broad discussion of methods to make the countries’ development accessible to more citizens, and sustainable long-term, with an emphasis on sidestepping the elite belief that any deviation from their current grip on power would lead to a “leftist Venezuelan nightmare.”[32] This could include cultivating alternative development models for the country that address social inequalities and align with social, institutional, and environmental sustainability. Above all, it must continue to serve as the bedrock for democratic values in a region with populations swinging to further political extremes to meet social, political, and economic demands. Conclusion China’s rising economic and political influence in South America creates an asymmetric dependence that threatens the region’s collective sovereignty. China’s power projection hinges on dominating regional trade, predatory loan agreements, and binding infrastructure contracts that strengthen its presence and control in the Western Hemisphere. These collectively threaten the security interests and outlook of the US as the regional hegemon. If the US does not counter with a strong, appealing solution, China’s expansion will continue, as will its revisionist aims to upend the current world order. This will continue to contribute to a regional security environment hostile to US values and interests while threatening democratic governance. The US and its global allies must aggressively act to counter China’s initiative to work outside of the current world order to gain control and strategic presence in the Western Hemisphere while there is still time and momentum. LtCol Jennifer Raymond currently serves as the Assistant Chief of Staff, G-1, 4th Marine Division, New Orleans, LA. Her service spans twenty years across active and reserve components. She holds a Masters of Strategic Studies from Air War College and is a graduate of the United States Naval Academy. This research was originally done as part of the Air War College Regional Security Seminar and Field Study [1] The White House, “National Security Strategy, October 2022,” November 8, 2022, pg. 40. [2] Luciana Talamas, “Authoritarian Alliances: Chinese Influence in Latin America” (Human Rights Foundation, May 12, 2023), . [3] Diana Roy, “China’s Growing Influence in Latin America” (Council on Foreign Relations, June 15, 2023). [4] Raza Werner and Grohs Hannes, “Trade Aspects of China’s Presence in Latin America and the Caribbean” Briefing Requested by the INTA Committee, European Parliament (Policy Department for External Relations, November 2022), 1.. [5] Pamela Aróstica Fernández, "Chile's Once-Pioneering Relationship with China is Turning into Dependency," in Beyond Blocs: Global Views on China and US-China Relations ((Mercator Institute for China Studies, August 18, 2022). As of 2023, China was Chile’s largest source of imports (accounting for 29.2% of the total). China was also the main buyer of Chilean exports (accounting for 38.5% of total exports). This trade agreement is nominally favorable to Chile but largely dependent on minerals, and Chile’s exports are much less diversified than China’s (mining makes up 84.4% of Chile’s exports to China). [6] Global value chains refer to international production sharing, a phenomenon where production is broken into activities and tasks carried out in different countries. Operations in GVC are spread across national borders and include the full range of activities from design to support to the final consumer. Werner and Hannes, “Trade Aspects of China’s Presence in Latin America and the Caribbean,” 10. [7] Value added is an economic term used to express the difference between the value of goods and the cost of materials or supplies that are used in producing them. Werner and Hannes, 10. [8] Werner and Hannes, 8. [9] Ryan C. Berg, “Combating Chinese Dual-Use Infrastructure” (Center for Strategic and International Studies, December 9, 2022), [10] Roy, “China’s Growing Influence in Latin America.” [11] An example of built in collateral mechanisms built into Chinese loans is the $1 billion oil-backed loan granted in 2010 by the China Development Bank to Ecuador. This loan contract contained policy change clauses that allowed CHINA to cancel a loan if the debtor country undertakes policy changes unfavorable to any [Chinese} entity in the borrowing country. This constrains Ecuador’s ability to adopt domestic policies that could negatively impact Chinese interests. Roy. [12] “China Regional Snapshot: South America” (House Foreign Affairs Committee, 2022), [13] Roy, “China’s Growing Influence in Latin America.” [14] “China Regional Snapshot: South America" (House Foreign Affairs Committee, 2022). [15] Roy, “China’s Growing Influence in Latin America.” [16] BRI projects have significantly increased across South America since 2021, and prior to that, grew steadily since 2005. BRI is China’s effort to develop an expanded, interdependent market that creates conditions favorable to building a high-technology economy. Dr. Yu Jie and Jon Wallace, “What Is China’s Belt and Road Initiative (BRI)?” (Chatham House, September 13, 2021). [17] Roy, “China’s Growing Influence in Latin America.” [18] Maj Gen Evan L Pettus, “The Expanding Leverage of the People’s Republic of China in Latin America: Implications for US National Security and Global Order,” Journal of Indo-Pacific Affairs, October 5, 2023. [19] General Laura J Richardson, “SOUTHCOM Posture Statement before the 118th Congress” (SOUTHCOM, 12 March 2024), 4. [20] CHINA has demonstrated mission creep outside of South America in port construction around the globe. In UAE, CHINA is accused of attempting to build a clandestine military facility at an existing port. Berg, “Combating Chinese Dual-Use Infrastructure.” [21] Berg, "Combating Chinese Dual-Use Infrastructure." [22] Fernandez, “Chile’s Once-Pioneering Relationship with China Is Turning into Dependency.” [23] Pettus, “The Expanding Leverage of the People’s Republic of China in Latin America: Implications for US National Security and Global Order.” [24] Fernandez, “Chile’s Once-Pioneering Relationship with China Is Turning into Dependency.” [25] Kimberly Brier, Assistant Secretary, Bureau of Western Hemisphere Affairs, “China’s New Road in the Americas: Beyond Silk and Silver” (U.S. Embassy in Chile, April 26, 2019). [26] Nicolas Devia-Valbuena and General Alberto Mejia, “How Should the U.S. Respond to China’s Influence in Latin America?” (United States Institute of Peace, August 28, 2023), [27] P. Michael McKinley, “Inflection Point: The Challenges Facing Latin America and US Policy in the Region,” Center for Strategic and International Studies, September 7, 2023. [28] Matthew Kroenig, Jason Marczak, and Jeffrey Cimmino, “A Strategy to Counter Malign Chinese and Russian Influence in Latin America and the Caribbean” The Atlantic Council (February 13, 2024). [29] Brier, “China’s New Road in the Americas: Beyond Silk and Silver” [30] Kroenig, Marczak, and Cimmino,“A Strategy to Counter Malign Chinese and Russian Influence in Latin America and the Caribbean.” [31] Kroenig, Marczak, and Cimmino. [32] Juan Pablo Luna, “Divisive Politics and Democratic Dangers in Latin America,” in Divisive Politics and Democratic Dangers in Latin America, ed. Thomas Carothers and Andreas E. Feldman (Carnegie Endowment for International Peace, February 17, 2021), pg. 17.