China Is Expanding Its Footprint in Latin America and the Caribbean

The recent China-Peru joint inauguration of the Chancay Port is the latest example of the People’s Republic of China (PRC)’s growing influence in Latin America and the Caribbean (LAC). Beijing’s interests in the region are multi-faceted, encompassing political, economic, and military dimensions. China’s growing presence in the region, historically known as “America’s backyard,” is a direct threat to U.S. interests and security. 

There is every indication that the global competition between the United States and the PRC will intensify. In addition, Beijing will continue to seek new sources of materials and new markets to fuel its economic ambitions. In this context, Pamir assesses that China is highly likely to accelerate the expansion of its footprint in the LAC. American companies in the region should expect increasing competition from Chinese entities. They should also be prepared for governments in the region to adopt more measures that favor Chinese interests and entities.

Chancay Port

On November 14, PRC President XI Jinping and Peruvian President Dina Boluarte jointly inaugurated a massive deep-water port in Chancay, 48 miles north of the Peruvian capital of Lima. The port’s construction began in 2021. It is projected to be fully operational in May 2025. Upon its completion, the port is expected to have 15 berths with the capacity to host the world’s largest cargo ships. 

The port is a joint venture between the PRC’s state-owned COSCO SHIPPING Ports and the Peruvian publicly owned Volcan Compania Minera mining company. COSCO SHIPPING Ports is a subsidiary of COSCO Shipping corporation, China’s largest state-owned shipping company. Under the agreement, COSCO SHIPPING Ports owns 60% of the Chancay Port and is granted the exclusive right to operate it for 30 years. COSCO SHIPPING Ports has invested $1.3 billion in the project’s first phase. The entire project is expected to cost $3.5 billion. 

The PRC claims that the Chancay Port can reduce shipping time between Asia and Latin America from the current 35 days to 25 days, thereby cutting shipping costs by 20%. In addition, the port is expected to create 8,000 local jobs and generate $4.5 billion in annual revenue, accounting for 1.8% of Peru’s current GDP.

The Chancay Port will support China’s significant mining interests in the LAC in general and Peru in particular. According to the AidData Research Lab at the College of William & Mary, the PRC has provided loans worth $16 billion since 2010 to acquire, develop, and export Peru’s extensive mineral resources, including copper, silver, and zinc. The Chancay Port is also expected to receive imports of electronics, textiles, and other consumer goods from Asia to be distributed across the LAC. 

Chancay Port’s completion will be a major example of the successful implementation of China’s Belt and Road Initiative (BRI) in the LAC. To date, 22 LAC countries have joined the BRI. According to AidData, China has invested $286.1 billion in the region. AidData has also identified 10 port projects, including the Chancay Port, in the region that are financed by Chinese entities.

PRC’s Interests in Latin America and the Caribbean

Beijing wants to achieve political, economic, and military objectives through its presence in the LAC. Politically, the region is an important source of support for the PRC’s global competition with the United States. For this reason, the leadership in Beijing has been focusing on strengthening ties with countries in the region. Xi, for instance, has visited the region six times since 2013. 

One manifestation of Beijing’s political influence among LAC countries is these countries’ voting records in international organizations. In recent years, most LAC countries have consistently supported Beijing’s agenda. Another example is Beijing’s success in poaching Taiwan’s allies in the region. In 2018, Taiwan had 11 diplomatic allies in the region. Today, only seven maintain diplomatic ties with Taiwan. Beijing’s political influence is also manifested in the ties between the Chinese Communist Party (CCP) and political parties in the region. In July 2021, 115 political parties representing 28 of the 33 LAC countries sent delegations to Beijing to mark the centennial of the CCP’s founding.

The PRC also sees the LAC as an important market and source of raw materials. According to PRC government data, China’s trade with the region has increased an average of 7.1% each year over the past decade. In addition, the trade volume between China and the region has grown dramatically from $261.2 billion in 2012 to $489 billion in 2023. To date, China has concluded free-trade agreements with five LAC countries. 

Meanwhile, China’s investment in the region has also increased significantly. According to PRC government data, China had invested $596.15 billion in Latin America as of the end of 2022, accounting for 21.6% of China’s total overseas investment. Chinese investments have focused on mining, information technology, financial services, infrastructure, wholesale and retail goods, and e-commerce.  

With respect to infrastructure, Chinese entities have undertaken more than 200 projects that aim to link the entire region into a network to support China’s economic ambitions. For example, the Chancay Port’s construction is only a part of China’s larger infrastructure plan that includes a 6,500-kilometer rail link between Peru and Brazil, thereby connecting the Atlantic and Pacific coasts of the South American continent.  Once completed, the rail link will bypass the Panama Canal and the Strait of Magellan, thereby facilitating the export of South American mineral and agricultural goods to Asia, particularly to China. The initial estimate for the project is $80 billion. The Brazilian government recently announced that it would allocate $776 million in 2025 to improve Brazil’s infrastructure in preparation for connection to the rail link. 

Furthermore, the LAC has served as a platform to promote the internationalization of the Chinese renminbi (RMB). China has concluded currency swap agreements with several major countries in the region, including Brazil, Argentina, and Chile. In 2022, the RMB replaced Euro as Brazil’s second largest foreign reserve currency. 

Aside from political and economic interests, Beijing has established defense ties with nearly all PRC diplomatic allies in the region. The most significant defense ties are China’s aerospace and defense industry partnerships with Argentina, Brazil, and Chile. To a lesser extent, the PRC has provided military and law enforcement equipment to Guyana, where the state-owned China National Offshore Oil Corporation (CNOOC) has a major stake in the country’s growing petroleum industry. PRC-controlled non-military assets in the region can also be employed for military purposes. For example, China’s satellite tracking stations in the LAC, although ostensibly to serve civilian scientific missions, have dual-use potential. Similarly, General Laura Richardson, former Commander of the U.S. Southern Command, has warned that the Chancay Port could service Chinese naval vessels and be used for intelligence gathering. 

Looking to the Future

The PRC’s growing presence in the region has met with some local opposition and criticisms for its disregard for environmental, labor, and indigenous cultural interests. In addition, a growing concern for many countries in the region is the influx of cheap Chinese products that outcompete local businesses. In April 2024, Mexico imposed tariffs up to 50% tariffs on 544 types of Chinese imports. In October 2024, Brazil imposed a 35% tariff on Chinese optical cable and electric cable imports and a 25% tariff on Chinese steel imports. 

Nonetheless, the PRC is expected to accelerate its inroads into the region, historically known as “America’s backyard.” Most recently, China concluded more than 30 economic agreements with Brazil during Xi’s visit on November 20. Six days later, Bolivia and China signed a $1 billion lithium production agreement. Argentinian President Javier Milei, who famously declared in 2023 that Argentina would not “make deals with the communists” in China, is reportedly planning a visit to Beijing in January 2025. Many other leaders in the region are also planning visits to China. As tension between the United States and China increases, Beijing can be expected to intensify its effort to expand political and economic influence in the region.