Will 2024 go down in South America’s history as the year of China?
At present, China could significantly expand its political influence in South America. There are a number of important events coming up in the second half of the year.
by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung
In South America, people have become accustomed to companies from China dominating entire sectors and regions. For example, Chinese state-owned companies control the electricity supply in the state of São Paulo, by far the largest economic center in South America, as well as in the Peruvian capital Lima.
The Chilean capital Santiago has the largest urban e-bus fleet outside of China. Hardly a single road in the Andes is being built today without Chinese involvement or financing. Chinese companies have long been gaining ground in the region’s mining industry.
Trade between China and Latin America has also increased rapidly. In 2023, goods worth almost USD 500 billion were exchanged between China and Latin America, compared to just USD 18 billion around two decades ago (2002).
China’s demand for products such as soy, copper, iron ore, oil and lithium will continue to rise. Almost 90 percent of trade is conducted via Brazil, Mexico, Chile, Peru and Colombia.
The USA is still the leader in investment and trade with Latin America. However, this is mainly due to Mexico, which is closely linked to the USA and Canada via a free trade agreement (USMCA). Europe has also invested more in Latin America than China.
In South America, on the other hand, China clearly dominates as a trading partner. There are a number of events coming up in the next few months that could also significantly strengthen China’s political dominance in the region.
In November, Chinese President Xi Jinping will inaugurate the new overseas port of Chancay in Peru. It will be by far the largest deep-sea port on the Pacific side of South America. It was built and financed under the leadership of the Chinese port operator Cosco. The container port will shorten the journey time between South America and China by ten days.
The port is the flagship project of China’s Belt and Road Initiative (BRI) in Latin America. Beijing is thus rebuilding the global infrastructure for trade in line with its interests. In Latin America, 22 out of 33 countries have signed a BRI agreement with China.
Beijing is now urging Brazil in particular to also sign such an agreement. At the G20 summit in Brasília in November, President Xi wants to present such an agreement as the latest foreign trade triumph to mark the 50th anniversary of Sino-Brazilian relations.
The Lula government is still hesitant. What could an agreement do to improve the good relations between the two countries, they ask themselves in Brasília – and shy away from a demonstrative rapprochement with China in light of the geopolitical tensions between the USA and China. The agreement would be interpreted in the same way in the USA and Europe. However, important representatives of Lula’s Workers’ Party have been pushing for Brazil to join the BRT initiative for some time.
In Uruguay, negotiations on a free trade zone with China are stagnating after both governments signed a memorandum of understanding. Such an agreement would mean the end of Mercosur in its current form. This is because Uruguay is a member and would then have to leave. In Montevideo, it depends on the elections in November whether the China-friendly policy of the current government will be continued.
The BRICS alliance, which is increasingly dominated by China, could also announce the admission of new members from South America at its meeting in Russia at the end of October. Venezuela and Bolivia in particular are keen to join.
There is every indication that China will be able to make significant political progress in South America this year. Europe in particular will feel this as a political and economic headwind.
