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U.S. loses clout as rival China makes inroads with investments

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Hopes that the United States could seize on the Summit of the Americas this week to counter China’s growing influence and investment clout in Latin America appear to be falling flat, and the Biden administration may have itself to blame.

In speeches at the summit, neither President Biden nor Vice President Kamala Harris made a single direct mention of China or the tsunami of trade and infrastructure lending deals companies linked to the communist regime have struck with governments across the region over the past decade.

The official State Department schedule for the Los Angeles gathering of heads of state from across the Western Hemisphere also made no mention of China, despite a chorus of regional analysts who say expanding Chinese influence risks turning Latin America into a strategic liability for Washington.

China’s state-controlled press has noticed the lack of action. Several articles in recent days have touted the billions of dollars in investments and contracts that Chinese companies have won compared with their American rivals.

Song Junying, director of the Latin America and Caribbean Department at the China Institute of International Studies, told the Communist Party-controlled Global Times that U.S. companies have little expertise in massive overseas infrastructure projects and the U.S. government lacks the “financial power” to match Chinese rivals. Efforts to scare or coerce Central and South American firms to reject Chinese projects will fail, he said.

“The political climate between China and Latin American countries, as well as highly complementary economic structures, means that Latin American countries won’t choose sides or join some exclusive clubs the U.S. sets up to single out China,” the analyst said.

White House officials have suggested that the decision to avoid direct mention of China was calculated. Asked at a background briefing ahead of Biden’s speech whether the president planned to emphasize rising trade flows between Latin America and China, a senior administration official responded: “I don’t expect that to be a large feature of this.

“I think, frankly, the best antidote to China’s inroads in the region is to ensure that we are forging our own affirmative vision for the region economically,” the official said. “That’s why it’s so important that we do lay down a really ambitious, regionally comprehensive, updated vision for the kind of economic partnership we want to have and lead in our hemisphere, and use the summit to do that.”

Biden offered vague words during his speech in Los Angeles on Wednesday about how “democracy is under assault around the world” and must be not only “the defining feature of American histories but the essential ingredient to Americas’ futures.”

Despite a diplomatic brouhaha over the Biden administration’s decision not to invite the authoritarian leaders of Cuba, Nicaragua and Venezuela to the summit, Biden made no direct allusion to those governments’ political and economic ties to Russia and China.

The president did roll out an initiative — the Americas Partnership for Economic Prosperity — that administration officials say will help expand the economies of Latin American and Caribbean countries. A White House fact sheet broadly states that the partnership will draw “private investment” into the region and work toward multiple goals, including “creating clean energy jobs.”

Neither the fact sheet nor Biden’s speech mentioned any specific goals for private investment that might counter the tens of billions of dollars flowing into the region from Chinese government-connected sources.

“Over the past decade, China has sharpened its focus on countries considered to be in the U.S. zone of influence,” according to a recent op-ed written by Orit Frenkel, CEO of the American Leadership Initiative, a Washington-based think tank advocating for more robust U.S. competition with China.

“China’s trade with Central and Latin America has skyrocketed from $18 billion in 2002 to $449 billion in 2021, making it the second largest overall trading partner in the region and the largest trading partner with Brazil, Peru, Uruguay and Chile,” Frenkel wrote in the piece, which Real Clear Politics published in May. “Its investment in the region has also grown dramatically with its Belt and Road initiative now in 20 countries in the region and over $140 billion of investment.”

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Jorge Heine, a former Chilean ambassador to China who now teaches at Boston University’s Pardee School of Global Studies, told Politico’s China Watcher online newsletter that China is “the elephant in the room” at the summit. “The U.S. is competing with China for influence in Latin America, but it has little to offer to put on the table.”

Countering Belt and Road

Officials in the Trump administration regularly warned that the Belt and Road lending program, a pet project of Chinese President Xi Jinping, was predatory. They said it was designed to burden economically weaker nations with debt that might later be relieved in exchange for Chinese government access to natural resources and other forms of influence.

Although Biden and his team are notably less confrontational in their rhetoric toward China, they have sought to uphold Western-aligned alternative lending mechanisms to counter the Belt and Road program.

Last year, the Group of Seven leading industrial nations — the U.S., Canada, France, Germany, Italy, Japan and the United Kingdom — announced the “Build Back Better World” (B3W) initiative to try to inspire private investment from wealthy democratic countries toward infrastructure and other needs in the developing world.

Administration officials have avoided framing the initiative as an effort to contain China. It remains to be seen whether Biden has the geopolitical capital to steer the initiative toward tangible results.

The Trump administration was more outspoken about rising Chinese influence in general but did not use hemispheric gatherings to counter Chinese inroads in the region.

Former Secretary of State Mike Pompeo did not mention China in his January 2020 remarks to the Organization of American States, which oversees the Summit of the Americas. The event is held roughly every three years in different countries in the hemisphere.

Many analysts say China’s rising power represents Washington’s foremost challenge in Latin America and that a more clear-eyed focus on U.S. relationships and economic investments would strengthen Washington’s hand in addressing the challenge.

Alternatively, allowing China a free hand in Latin America could undermine Biden’s goals, said Ryan Berg, a senior fellow in the Americas Program at the Center for Strategic and International Studies.

“It’s always been difficult for Latin America to get its due,” Berg told The Associated Press in an interview ahead of this week’s summit. “But we’re pretty close to being in a geopolitical situation where Latin America moves from a strategic asset for us to a strategic liability.”

Michael Shifter, a senior fellow with the Inter-American Dialogue, suggested that the U.S. faces an uphill battle countering Chinese investment in the region, particularly when it comes to alternatives to “huge infrastructure projects that China is supporting.”

“A lot of Latin Americans are basically pragmatic and will take advantage of opportunities that emerge — whether from China or the United States — if it means growing economically,” Shifter said in an interview ahead of this week’s summit. “I don’t think the very strong anti-China discourse coming from both parties in Washington really resonates with Latin Americans, who feel the U.S. is not really offering something more attractive economically.

“It’s not that the Latin Americans embrace the Chinese model; it’s just pragmatic necessity,” he said. “Latin Americans are seeing that China is very active and has a clear strategy and that the U.S. is not as present and committed as it claims that it is in the region. That’s a credibility issue.”