South America between the USA and China

South America between the USA and China
Peter Kopa, Prague, 7.3.2025

To situate ourselves in the context of the geopolitics that is developing between these two world superpowers, I recommend listening to Jeffrey Sachs, the highest authority in the USA and in the world on this subject, whose moral authority and sincerity are impressive:  https://www.youtube.com/watch?v=Blt_i8NdhvQ Sudamérica, una potencia mundial?

South America, a world power?

For a few years, the large part of the world that stretches from Mexico to Tierra del Fuego has been somewhat sidelined, overshadowed by the major geopolitical movements of the world powers in relation to the war in Ukraine. However, the Spanish-American countries and Brazil are now at an unprecedented crossroads. If they do not manage to unite and integrate under their own South American flag, they will be divided by the great interests that the USA and China have in this part of the world. And these forces have already been in action for many years. We deal with this in our 2019 article:  https://thinktanklatam.org/latin-america-between-usa-and-china-is-marking

This area offers ideal conditions for integration, with each country maintaining its sovereignty: a common language, as well as the heritage of the Christian faith and the cultural heritage of Spain. This America can no longer be seen as an area of influence belonging only to the USA, but as a region which, due to its size and demography, is destined to be a world power, on a par with the USA, China and Russia. And the ideal manager for this integration would have to be Spain, which is considered the mother country. Any other manager of their union would be motivated more by petty interests.

Furthermore, Spain would act as a bridge to the whole of Europe, where South America is much loved and admired, even more so now, when the elements that make up European identity are fading under the impact of materialism. The major problems that arise from this explain why so many thousands are emigrating to this land of promise that is South America.

An important step for Spain would be, in this sense, to offer higher education to those interested in pursuing a political career on this continent. Here, emphasis should be placed on moral qualities, so that it is then possible to combat corruption, which unfortunately destroys public morale and produces discontent that is fatal for a healthy democracy. But there are reasons to be very hopeful, looking at Chile, Paraguay, Brazil, El Salvador and, above all, Argentina, which is showing the way for a new dawn in South America and demonstrating that the management of the common good is a question of following the principles of good technocracy:  https://www.theepochtimes.com/epochtv/why-paraguay-can-lead-the-way-in-latin-america-foreign-minister-ruben-ramirez-lezcano-
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Data on investments from the USA and China

China’s rise in Latin America is impressive. Its trade with the continent has grown from just $12 billion in 2000 to $450 billion in 2023. This is equivalent to 37 more. According to experts, trade could increase to 700 billion dollars by 2035. China is now the continent’s second most important trading partner, after the United States. This growth took a big leap in 2017 with Panama, where China had made large investments in the Panama Canal infrastructure. The same happened a year later in the case of El Salvador. In 2021 Nicaragua followed, ruled by the dictator Daniel Ortega, who for a long time had paid his loyalty to Taipei with loans and development projects. But in the end China had the deeper pockets, which Taiwan found annoying. Moreover, bilateral plans for the construction of a canal to compete with the one in Panama were already underway in 2013.

Honduras followed in 2023, after Taiwan rejected the doubling of the annual financial aid of 50 million dollars demanded by President Xiomara Castro and the renegotiation of the debt. “We need investment, cooperation, pragmatism and not ideology,” Honduras justified at the time. Of the direct investment of Chinese companies in Latin America, 58% went to Brazil between 2005 and 2020, followed by Peru (18%), Chile (11%) and Argentina (4%).

Expectations dashed in the Caribbean

The five countries that switched to China hoped that cooperation with this country would provide them with urgently needed investment in their precarious infrastructure. However, not even their entry into the group of countries supporting the Chinese Belt and Road Initiative (BRI), or the New Silk Road, led to a significant increase in Chinese investment. They continued to represent only 0.3% of all foreign investment in Central America.

However, relations with China have brought with them growing trade deficits. El Salvador currently imports 33 times more from China than it exports to that country. In the case of Panama, the ratio is 3 to 1. In Honduras, there is already talk of broken dreams in the face of a trade deficit of more than 2 billion dollars in 2024.

Nicaragua, which has had a free trade agreement with China for a year, recorded a deficit of around one billion dollars in 2024. Costa Rica, which has had a free trade agreement with China for thirteen years, imports 8.5 times more from China than it exports to the country. The deficit in 2023 was around 3 billion dollars.
However, Guatemala, which continues to recognize Taiwan, has an even bigger deficit with China. At 4 billion, the ratio of imports to exports is 50 to 1. Even without formal recognition, trade with China is much more important for the country than trade with Taiwan, which raises the question of how long it will continue to maintain its relationship with Taiwan.

Panama abandons the Silk Road project

On the contrary, China suffered a diplomatic setback in Panama. In early February, President José Raúl Mulino announced Panama’s withdrawal from the Chinese Silk Road project. He was trying to appease Donald Trump, who is demanding the return of the Panama Canal to the US.

Furthermore, the days of China financing mega infrastructure projects may be over. Instead, China is focusing its attention on strategic sectors such as cloud computing, 5G technology, renewable energy, artificial intelligence and electric mobility. For China, countries that can contribute to this are now more interesting, such as Chile with its lithium deposits or Mexico and Brazil as traditional headquarters of the global automotive industry.
Still strong ties with the USA

In contrast, Central America has little to offer China as a production site or supplier of raw materials. Instead, the countries are buyers of Chinese products, especially in the low-price segment due to the poverty of the population, which leads to ever-increasing trade deficits.
However, although China’s presence in Central America has increased considerably in recent decades, the United States is still the point of reference for Central Americans due to its cultural and geographical proximity, says economist Dussel Peters. An example of this is the National Library of El Salvador. Although it was built with Chinese money, it is mainly American culture that can be found there, from Marvel comic book heroes to Star Wars books.