COVID-19 opens the door to further Chinese influence in Latin America

This appeared in The Millennial Source

In news that could lead to increased relations between China and Latin America, Pan American Health Organization head Dr. Carissa Etienne has labeled Latin America the new “epicenter” of the COVID-19 pandemic.

Coronavirus in Latin America

Though Latin America largely escaped the early wave of the coronavirus outbreak, the region now faces a huge health and economic crisis as the number of cases and deaths has risen dramatically. The region has seen some five million confirmed cases with 200,000 deaths and Brazil is the second-most affected nation in the world with 94,000 deaths and nearly three million confirmed cases.

The health crisis in Latin America has been particularly damaging due to the region’s widespread inequality and the living conditions of its informal workers, many of whom lack access to health care as they have no work or income. Political mismanagement of the crisis in many Latin American countries, Brazil in particular, has further exacerbated the crisis.

As a whole, Latin America faces a drop in its gross domestic product of some 5.2% in 2020.

Medical diplomacy

A number of experts have argued that the failure of the United States to get the pandemic under control within its own borders has put American diplomatic and goodwill efforts on hold in Latin America, precisely as the pandemic has worsened there over the past two months.

Eric Farnsworth, the vice president of the Americas Society and Council of the Americas, wrote in a recent piece that as the US has turned inward to focus on its own rapidly deteriorating situation regarding the coronavirus, China has engaged in “medical diplomacy,” the symbolism of which “didn’t go unnoticed in Latin America … where some might be forgiven for wondering who really is the [region’s] preferred partner.”

Likewise, Ted Piccone of the Brookings Institution has observed that “in the COVID-19 response, China seems to have done a better job in rushing medical supplies to more states in showy displays of solidarity and friendship,” particularly in Latin America.

In April, the Trump administration halted exports of PPE (Personal Protective Equipment) to Canada and Latin America, prompting concerns that the US was depriving other nations of crucial supplies needed to fight the virus.

This was followed in July by Chinese Foreign Minister Wang Yi announcement of a US$1 billion loan to Latin America and the Caribbean for access to a Chinese-produced COVID-19 vaccine, a move that prompted Mexican President Andrés Manuel López Obrador to state that his government was “very grateful to China” for its assistance during the pandemic.

Data from the Wilson Center on aid to Latin America during the COVID-19 crisis also shows that Chinese aid has been widespread and has taken the form of crucial PPE and ventilator equipment, whereas American aid has been more constrained and taken the form of aid money and doses of some medicines believed to assist in treating coronavirus, such as hydroxychloroquine.

China’s position in Latin America

Although China has primarily sought to exploit through “medical diplomacy” what Democratic presidential nominee Joe Biden has called the “absence of American leadership” in the region, China’s interest in Latin America is an attempt by the country to extend its influence throughout the world, secure new markets for its goods and challenge the US closer to home, according to the Brookings Institution.

Following the 2008 financial crisis, China provided significant investment to Latin American economies, with demand for Latin American raw materials nearly doubling from 2009–2011.

Far from just supplying medical equipment and access to a potential vaccine, the aftermath of the coronavirus pandemic could be fertile ground for “distressed dealmaking,” according to one Peruvian Mergers & Acquisitions lawyer. Such an arrangement could see Chinese investors acquiring key Latin American corporations that are floundering as a result of economic contraction, establishing a stronger Chinese foothold within the region.

The poor economic conditions in post-coronavirus Latin America may open the door to a similar form of “debt trap diplomacy” as evidenced by China’s investment in Africa, which saw many African countries accept large Chinese loans and investments only to now be facing difficulty making repayments.

Though Chinese investment in the region has slowed as a result of COVID-19 — with the first three months of 2020 witnessing only US$163 million Chinese investment in the region compared to US$8.9 billion for the whole of 2019 — Latin American countries will almost certainly be seeking foreign investments in the aftermath of the crisis as economic growth in the region slows.

Although the US enjoys the benefit of its historical ties and geographic proximity to Latin America, experts believe a more proactive course must be taken — regardless of who is in the White House following the November election — to prevent China from capitalizing off the pandemic in the region.

“The crisis brought by the coronavirus will pass in time, but the competition for influence and ideological supremacy in the Western Hemisphere will only intensify,” says Farnsworth.

In the wake of Chinese goodwill, investment and potential acquisitions in the region, the US should chart a more active course in helping the region toward recovery.

Originally published at https://themilsource.com on August 4, 2020.

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