On May 14, China scored a major coup in its effort to increase Chinese influence in Latin America. President Gustavo Petro of Colombia signed a joint cooperation plan with the Chinese, formally adding the key Latin American country to China’s Belt and Road Initiative (BRI). Colombia is the first country to join the BRI since Jordan signed onto the project in December of 2023, and its accession is a sharp pivot in Colombian foreign policy, which has traditionally been strongly aligned with the U.S. The agreement came after Petro travelled to Beijing to attend the fourth ministerial meeting of the China-CELAC Forum, an organization created by China in 2015 as part of their efforts to integrate Latin America into the Chinese economy and sphere of influence.
As part of this year’s China-CELAC Forum, Xi Jinping announced that China would be distributing $9.2 billion in yuan-denominated financing to participants in the forum. After a decline in Chinese investment in the region that began in the late 2010s, China has been making a distinct push to reassert its influence in Latin America, as it hopes to seize on potential conflicts with the United States caused by the new Trump administration. The imposition of tariffs, in particular, will disrupt U.S. economic integration with Latin American markets, a rupture China is eager to take advantage of.
The deal with Colombia was one manifestation of such tensions: Early in President Donald Trump’s second term, Petro attempted to reject a repatriation flight of Colombian deportees from the U.S., arguing that their human rights and dignity as Colombian citizens were being violated. Trump responded with overwhelming force, suspending visa issuance for Colombians and threatening massive tariffs on the country if it refused to accept the flight. Confronted with such a debilitating response, Petro had to back down—but he did not forget the humiliation.
Colombia’s move to join the BRI is a sharp break in the country’s normally pro-American foreign policy, but far from an anomaly in Latin America. In fact, nearly all of Colombia’s neighbors joined the pact years ago—Panama in 2017, Venezuela in 2018, Ecuador and Peru in 2019. Altogether, 22 countries in Latin America and the Caribbean are members of the BRI, including every country in South America except Brazil and Panama (and France).
The benefits of Chinese partnership with Latin American countries are significant. Geopolitically, increased Chinese influence and market integration reduces Latin America’s reliance on the U.S., making the option particularly attractive for countries with an adversarial relationship to the U.S. like Nicaragua and Venezuela. Another major attraction is the offer of substantial Chinese financing on easy (if not necessarily generous) terms for infrastructure and energy projects. Many Latin American countries are still infrastructure-poor, making the offer of ports, railways, and dams particularly appealing.
For China, expanding markets in Latin America fits naturally into its economic and geopolitical strategy. Major construction projects provide a convenient place to offload its massive surpluses of concrete and steel production, while Latin American markets, which principally produce raw materials for export, slot easily into its own manufacturing-oriented economy, which has a massive demand for raw materials and energy to convert into cheap goods for abroad. The result has been a massive expansion of Chinese trade with the region, reaching well over $500 billion in 2024.
Much of the trade has been fueled by Chinese investment: Chinese mines in Bolivia extract lithium, zinc, and other metals from the earth, and Chinese railways in Chile transport them to the coast, where they are shipped to Asia from Chinese ports in Peru. In return, Latin American countries (like everywhere else in the world) purchase affordable Chinese manufactured goods by the bucketload.
But China’s expansion in Latin America has not been without costs. Massive energy and infrastructure projects are vulnerable to a number of high-profile problems. Take the Coca Codo Sinclair Dam in Ecuador. The massive, $3.4 billion hydroelectric project was intended to be the centerpiece of Ecuador’s power grid. At full capacity, the dam was designed to provide a quarter of the country’s electricity. Instead, the project has been marred by continual scandal—shoddy construction has led to extensive cracking in the pipe system, poor planning has created massive erosion problems around the dam, and corruption charges have been filed against Chinese corporate sponsors and Ecuadorian government officials. Billions of dollars have been expended on a dam that functions at less than 50 percent capacity. Rather than serving as its most important power source, the project has contributed to the rolling blackouts that have plagued Ecuador and may be at risk of complete failure in the coming years.
Failures like Coca Codo are of little help for their host countries, which are left saddled with large debt burdens for faulty projects. To meet its debt obligations, Ecuador has had to sell vast amounts of its domestic oil production to China at steep discounts. But these projects are also a gamble for the Chinese government, which runs the risk of sinking vast quantities of funds into projects that make no or even negative returns. The failure of high-profile projects, and the risks of default on China’s generous credit, have become major stressors on the country’s efforts to expand its economy and influence overseas, including in Latin America.
In order to address the risks of big-budget, high-profile projects and questionable loans, China has since the mid-2010s begun retooling its foreign aid strategy, including in Latin America. The massive infrastructure projects accompanied by buckets of easy credit are now mostly a thing of the past. According to AidData’s November 2023 report on Chinese development finance, the percentage of Chinese lending commitments dedicated to infrastructure projects “fell from 65% in 2014, to 50% in 2017, 49% in 2018, and 31% in 2021.”
Instead of large, high-profile projects like Coca Codo, China today spreads its investment out across many more, much smaller projects. This is one of the major reasons China has begun focusing on the installation of green energy like wind and solar; these projects can be done on a much smaller scale than railroads and hydroelectric dams. Chinese investment in manufacturing and technology has also increased as China’s domestic manufacturing sector has grown; these investments are especially useful for China’s international influence, as host countries benefit from Chinese manufacturing expertise to increase their own industrial production. But the system also benefits Chinese manufacturers, as China has rolled up the manufacturing value chain and domestic labor has become more costly.
Likewise, China has significantly scaled down lending from its traditional credit apparatuses, the Chinese Export-Import Bank and China Development Bank, and replaced it with loans from other Chinese banks and with syndicated loans in collaborative arrangements, including many with Western banks and development organizations. These loans, distributed across more but smaller projects, are less risky and more likely to provide a return to fuel further expansion of China’s international development arm. Much of the rest of China’s credit apparatus has, in turn, been devoted to emergency lending: extending funds to countries in debt distress, especially countries that already carry heavy loads of Chinese debt. In this way, China is essentially acting to backstop its own investments by shoring up the balance sheets of its debtors and preventing defaults on its loans.
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This new Belt and Road strategy, less flashy in form but more sustainable, is what China will be offering Latin America as it seeks to exploit the potential frictions caused by the United States’ newly vigorous engagement with Latin America. The Trump administration’s renewed interest in the region has had some successes over the Chinese, as with Panama’s decision to withdraw from the BRI in February after Secretary of State Marco Rubio warned the country that the U.S. would take action if it did not feel certain that the Panama Canal was free of potentially hostile Chinese influence. But American intervention will inevitably be distasteful to many countries, who would prefer their politics to remain free from the influence of the superpower to the north.
While for Latin American countries the allure of turning to China is strong, the U.S. has cards of its own to play in response. Latin American leaders are not ignorant of the potential pitfalls of Chinese investment in their countries. A survey of regional political leaders found that they preferred working with the U.S. to working with China for every category of international development except energy and infrastructure. Chinese projects are far more likely to face allegations of corruption and environmental damage than projects backed by Western nations. Historically, China’s reputation for easy credit and its historical willingness to finance the kind of public works projects prioritized by developing countries has been its major selling point. But with China’s new development model, easy credit and giant infrastructure projects will be more difficult to come by.
While the U.S. does not have the massive carrot of China’s international development finance program to dangle in front of countries as an enticement, its private sector remains the largest source of foreign direct investment in Latin America, and the American system of government has a much better reputation than the Chinese Communist Party. As the U.S. reasserts itself in Latin America and confronts China’s foreign influence machine, it will have to learn how to leverage its attractions, as well as the threats of tariffs and other coercive measures, in order to build a sphere of influence in the Western hemisphere conducive to its continued security and prosperity.
