The United States has historically had very close political, economic, and commercial relations with Latin America. Today, the United States has standing Free Trade Agreements (FTA) with the region, including with Mexico, through NAFTA; with Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and the Dominican Republic, through CAFTA-DR; with Panama; with Colombia; with Peru; and with Chile.

Asian and North American Trade with Latin America

Meanwhile, in recent decades, a rising and revisionist People’s Republic of China has intensified its political and economic activities in Latin America as it looks for new allies and markets on the world stage. Beijing’s first challenge throughout the region was securing political and diplomatic recognition given that, for most of the 20th century, the majority of Latin America recognized the government in Taipei and the Republic of China in Taiwan as the legitimate government of China. To this day, a handful of Latin American governments still recognize Taipei at Beijing’s expense. However, the People’s Republic of China has made significant advances in Latin America, having become the region’s second largest trade partner and having FTAs with Chile, Costa Rica, and Peru. Likewise, China is actively engaged in economic and financial activities in Latin America, such as granting development aid and loans, which compete with the traditional multinational organizations that are the World Bank and the Inter-American Development Bank (IADB). Nevertheless, unlike its western counterparts, Chinese lending institutions do not bind borrowing countries into implementing financial and government reforms. However, Chinese financing and aid does have political costs for borrowing governments; not publicly criticizing Beijing’s political agenda nor supporting the nationalist authorities of Taiwan or Tibet, which China views as rogue regions.

In 2014, Beijing and the Community of Latin American and Caribbean States (CELAC) created the China-CELAC Forum to continue strengthening multilateral relations. Furthermore, within this context, China articulated its 1+3+6 policy approach for Latin America: one overall program, three driving forces (trade, investment, and financial cooperation), and six priority sectors (energy and resources, infrastructure, agriculture, manufacturing, scientific innovation, and information technology). Thus far, one of the key drivers of Chinese investment and financing in Latin America has been fossil fuels. Nevertheless, the popularity of the petroleum-backed loans granted by China throughout Latin America has decreased, given the dip in global commodity prices, which has made it harder and more costly for regional governments to repay their debt in the form of crude oil.

(Read more about Vertical Integration, Foreign Investment & Global Supply)

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