Written by Diego Leiva.

On January 2015 the first meeting of the China – CELAC (Community of Latin American and Caribbean states) forum was held in Beijing. It was a symbolic milestone for Sino – Latin American relations. China was able to talk to the 33 countries of Latin America and the Caribbean without the United States and Canada in the same room. Xi Jinping chose this platform to present his ambitious “China-Latin American and Caribbean Countries Cooperation Plan (2015–2019),” announcing that China intended to double the volume of trade and investment in the region within ten years.

One year later, China published its second White Paper on Beijing’s policy towards Latin America. Giving more details regarding the proposed “1+3+6” framework of “pragmatic cooperation”, the policy promotes the comprehensive development of cooperation (trade, investment and financial cooperation) in six fields (energy and resources, infrastructure construction, agriculture, manufacturing, scientific and technological innovation, and information technologies).

Xi Jinping’s government is prone to making ambitious announcements in the form of broad and ambiguous initiatives such as the Chinese Dream and the One Belt One Road. In this sense, the new Sino – Latin American cooperation plan has yet to convince many analysts and pundits. China is not growing as fast as the beginning of the century, and Latin America and the Caribbean is also experiencing a slow cycle of growth. On top of that, the region is going through a very unstable political period.

However, as far as trade and investment is concerned, in the near future Xi Jinping may be able to achieve more than expected.

Trump’s hostile approach to the region is one factor that explains Xi Jinping’s window of opportunity. The US disinterest in Latin America will force countries to get closer to China, looking for alternatives in trade, investment and funding sources.

Xi’s Window of Opportunity in Latin America

China currently enjoys a unique window of opportunity to expand its economic engagement with Latin America and the Caribbean. First, under Xi Jinping’s government, Sino–Latin American relations are going through their most comprehensive phase in recent history, with strong economic exchanges and a favourable political environment. Beijing is already the second trading partner of the region (and the first for the individual countries of Brazil, Peru and Chile), and has signed three Free Trade Agreements in the region (namely; Chile, Peru and Costa Rica). It has recently established two banks in Santiago (known as the China Construction Bank and the Bank of China), and although investment in the region has slowed down, it continues to grow at a robust pace. On top of this, Beijing seems to be willing to move beyond the extractive sector to more upstream and downstream investment, although it is too soon to tell what developments this could bring.

The China – CELAC forum has been very active in the areas of trade and investment cooperation, organising meetings such as the China-Latin America and the Caribbean Agricultural Ministers Forum in 2015, the 8^th International Infrastructure Investment and Construction Forum and the 11th China-LAC Business Summit in 2017, and the China-CELAC Economic and Trade Cooperation Forum in 2018. Despite having diminished in the last few years, the economic exchanges between China and Latin America are stronger than ever.

In sharp contrast, the recent Summit of the Americas reaffirmed the idea that US – Latin American relations are experiencing their worse phase in decades. Trump’s hostile approach to the region is the second factor that explains Xi Jinping’s window of opportunity. The US disinterest in Latin America will allow (and probably force) countries to get closer to China, looking for alternatives in trade, investment and funding sources. As Margaret Myers suggested, “the U.S. is forcing countries in the region to choose between the U.S. and China […] putting Latin American countries in a very challenging position while at the same time not offering a particularly attractive policy”.

This leads us to the third factor, the effect of the Odebrecht scandal. Latin America is in desperate need of infrastructure, with a long-lasting development gap that remains open due to a lack of political will and financial support. The Brazilian multinational Odebrecht was one of the biggest actors in the field until recently. Its abrupt fall after the revelation of its massive corruption network in Latin America has given Chinese construction companies a significant opportunity to invest in the region, considering that Odebrecht was their main competitor.

Xi Jinping has a window of opportunity in Latin America to increase trade and investment in the near future, but it will not be easy. Several upcoming presidential elections could significantly modify the foreign policy behaviour of major countries such as Mexico and Brazil, and the unstable situation of others such as Venezuela and Argentina could add more complexity to the ambitious goals proposed by Xi Jinping. Finally, several failed or stalled major infrastructure projects recently led by China (i.e. Venezuela’s high-speed train and the Nicaraguan Canal) suggest that Beijing is still struggling to understand how to invest in the region. Despite recent developments in Sino – Latin American trade, Chinese investment in Latin America is yet to reach its full potential.

Diego Leiva is a PhD Candidate at the School of Government and International Relations, Griffith University. His research focuses on Sino–Latin American relations in the twenty-first century. Find him on Twitter @Diegoleivavdm. Image Credit: CC by Michael Temer/Flickr.