Americas

Is it too Late to Counter the Slow Creep of Chinese Expansion in Central America?


China’s influence continues to spread closer to America’s borders, having now reached Central America. If the United States is not vigilant, it risks losing decades of democratic progress and carefully cultivated strategic relationships. China’s ambitions reach much further than common media narratives suggest, with a rapidly expanding international development agenda looking well beyond the South China Sea. This  agenda seeks to counterbalance pressures on China’s economy stemming from slow internal economic growth, and a growing trade war is intensifying China’s efforts to control valuable minerals and commodities in developing areas such as Africa and Central America.

Image courtesy of Yan Jingfeng, © 2016. Altered with permission, https://www.istockphoto.com/gb

China invested nearly $86 billon in Africa from 2000-2014 and has since shifted focus to the Western Hemisphere. Development assistance bolsters China’s economy and advances the Chinese agenda in the Global South through increased access to valuable natural resources and an increased access to important commodities. China wants to leverage large development loans with a “no strings attached” policy into increased political influence – and a boost for its flagging economy. Unlike U.S. assistance, China requires no guarantees of transparency, anti-corruption, or environmental protection. This policy threatens U.S. influence regionally and poses a very real and growing threat to American interests.

China recently surpassed the European Union as the second largest trading partner with Latin American countries with particular attention paid to the Northern Triangle countries of El Salvador, Honduras, and Guatemala. Chinese investment in this region is informed by a low barrier for entry and significant need for economic support. Civil wars in the 1980s resulted in weak central institutions, corruption and gang violence. The region was left devastated, desperate for outside money. The United States has long been the primary source of this external funding, but now China has quietly crept into the picture. Not only do the United States and China directly compete for investments in the region, but their respective strategies have vastly different long-term ramifications.

U.S. strategy in the region historically has focused on increasing institutional capacity, via checks and balances, with a long-term goal of empowering Central America to police itself. This strategy has featured organizations like the U.S. Agency for International Development (USAID). USAID offers aid to meet these shared goals by providing support to groups focused on youth education, creating entry-level jobs, growing community ownership and assisting local law enforcement. Primary targets are small, local and de-centralized organizations which can more easily be tracked and assessed than direct investments in government bodies.  Under this template, recipient governments find it more difficult to abuse these funds.

China’s strategy in the region focuses on commodities with a growing Chinese middle class in mind. These commodity investments quickly grow local economies but ultimately make recipient countries dependent on continued demand. This dependence gives China leverage. Implicit threats to “turn off” its demand pressures recipient countries to appease China’s future economic and political demands. This dependence is exactly what China is using to gain a foothold in Central America–all under the guise of economic development.

The current trajectory is not promising for the United States. China remains willing to provide investments in the region with few stipulations and little oversight. These “no strings attached” investments are more appealing than U.S. aid to Central American governments that seek significant investments quickly.  Worse, the United States is disengaging from Latin America even as Chinese attention intensifies. President Trump has proposed cutting assistance for the Central American Regional Security Initiative (CARSI) from $700 to $460 million in 2018. Even more important is the changing rhetoric used by the White House that seems to prioritize short-term programs to lower migration over long-term economic growth and stability.

If unchecked, Chinese investment in the region could also upset already fragile democratic institutions and prove costly for the United States in unanticipated ways. The spike in irregular migration to the United States in 2014 came primarily from Northern Triangle countries. This migration is attributed to many different factors, most notably economic hardship, lack of opportunity and gang violence. These factors are generally considered to be direct results of the weak institutions and corruption that have long hampered the region. If Chinese yuan continue to replace U.S. dollars in the region, it would halt U.S. progress in strengthening these weak institutions, thus exacerbating migration from the region. This will ultimately lead to an even larger humanitarian crisis with more Central Americans opting to take their chances on the long, dangerous journey to the United States.

U.S. inaction in its own backyard risks allowing Chinese investments to permanently supplant U.S. investments and influence in the region. The U.S. cannot afford to lose the valuable progress and partnerships that have been slowly cultivated in Central America. The U.S. should broaden its perspective on Chinese global influence beyond Chinese naval modernization, territory expansion into the Pacific, and the U.S.-China trade deficit, and include increased support to developing Central American countries in a comprehensive strategy to combat Chinese expansion.

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