The U.S. wants to dominate Latin America but China remains strong economically

The new conservative governments are seeking closer ties with Washington without severing relations with Beijing. For Europe, this opens up new opportunities as a trade and investment partner.

 by Alexander Busch, Latin America correspondent for Handelsblatt and NZZ

Late last year, the U.S. government announced its new security doctrine for the “Western Hemisphere.” Under this doctrine, Latin America is to come under stronger control from Washington once again. Cooperation with the region is to be intensified politically, economically, and militarily.

So far, this increased influence has been felt primarily in the political and military spheres. With the arrest of Nicolás Maduro in Venezuela, the U.S. military intervened massively in the domestic politics of a Latin American nation – as it last did several decades ago. With a $20 billion swap line and direct peso purchases, Washington propped up the Argentine currency ahead of the midterm elections a year ago. This was a key factor in President Javier Milei’s surprisingly decisive victory.

At first glance, it seems easier for the U.S. government to work more closely with governments in Latin America: In elections across the region over the past two years, candidates politically aligned with Trump have prevailed almost everywhere.

This now also directly affects Europe’s economic interests. For example, the U.S. has concluded an agreement with Argentina that partially mirrors the Mercosur treaty with the EU but grants the U.S. significantly more privileges regarding market access and intellectual property protection in South America. It is reasonable to assume that Washington would also like to conclude such agreements with other Latin American countries.

Nevertheless, one thing is clear: While the new conservative governments in Latin America are seeking strategic alignment with Washington on security policy and the war on drugs, economically they do not want to choose between the U.S. and China.

Secretary of State Marco Rubio recently experienced this firsthand: He visited Colombia, Ecuador, and Peru on a three-day trip. Yet although the three heads of state are politically aligned with the U.S. government, none of them wanted to restrict Chinese investment or trade with the People’s Republic.

This is particularly true of Peru, where Chinese state-owned enterprises have a strong presence in mining, energy supply, and, above all, the major port of Chancay. China’s influence on the country’s politics and economy has long been a thorn in the side of the U.S.

New President Keiko Fujimori signaled to Rubio that a closer relationship with the U.S. would not mean a break with China. She also pointed to Peru’s membership in the Asia-Pacific Economic Cooperation (APEC), of which both China and the U.S. are members.

Colombia takes a similar stance. Abelardo de la Espriella wants to make the country the U.S.’s closest security partner in South America once again and is said to have promised Washington that he would withdraw from China’s Belt and Road Initiative (“New Silk Road”). However, his government does not plan to sever economic ties with Beijing. “China has a very strong presence. Relations are assessed from a purely pragmatic standpoint,” said Foreign Minister Omar Bula.

And in Ecuador, President Daniel Noboa went a long way toward accommodating the U.S. Secretary of State on security cooperation. But on the subject of China, he remained tight-lipped. No wonder: Noboa has just completed a week-long state visit to China. During that visit, several cooperation agreements were signed, including ones on trade, green industry, and the digital economy.

Even Argentine President Milei recently praised cooperation with China as “very pleasant” in an interview with The Economist, citing the extension of the $19 billion currency swap with Beijing.

This shows that no government in Latin America can afford to sever its economic and political ties with China. Investment from China and trade with the Asian economic powerhouse are far too important for the countries in the region.

But the growing economic interdependence with China also has a downside for Latin America: the region’s industries are often unable to withstand the onslaught of Chinese competition. This applies not only to the automotive industry, where Chinese companies have captured one-fifth of the market in three years. Chinese companies are also rapidly gaining market share in mechanical engineering, pharmaceuticals, and medical technology. In the mass consumer goods sector, platforms such as Shein, Shopee, and AliExpress are capturing retail market share through online imports.

Washington can politically re-establish closer ties with Latin America, but it cannot economically displace China. Europe’s opportunity lies somewhere in between: as an investment and trade partner for a region that wants to limit its dependence on both powers.