To this day, there are still a handful of Latin American governments that solely recognize Taipei (Taiwan) at the expense of Beijing. However, the People’s Republic of China has made significant progress in term of diplomatic recognition throughout Latin America. Currently, China is the region’s second trading partner (after the United States) and has established FTAs with Chile, Costa Rica, and Peru.
In addition to its diplomatic lobbying, China takes part in economic and financial activities throughout Latin America. Such activities include the granting of development aid and loans, which compete with traditional multinational organizations such as the World Bank and the Inter-American Development Bank (IDB). However, unlike its Western counterparts, Chinese lending institutions do not usually require borrowing countries to implement financial and governmental reforms. In contrast, Chinese funding and aid does come with political costs for the borrowing governments. For example, Beijing requests that the borrowing government abstain from publicly criticizing China’s political agenda and that they abstain from recognizing the nationalist authorities of Taiwan or Tibet, which Beijing considers separatist regions.
Emerging Markets and International Trade Patterns
In 2014, Beijing and the Community of Latin American and Caribbean States (CELAC) created the China-CELAC Forum to continue strengthening multilateral relations. Within this context, China also articulated its 1 + 3 + 6 policy approach for Latin America: one general 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 main drivers of Chinese investment and financing in Latin America has been the fossil fuel sector, particularly during the early 2000s. However, the popularity of the oil-backed loans (petro-loans) granted by China throughout Latin America has declined. This dynamic is due to the decline in world prices of fossil energy resources, which has made it more difficult and costly for regional governments to pay their debts in the form of crude oil.
Overall, with the emergence of new manufacturing centers and the push towards free trade in the 21st century, the need for intermediaries among actors in the Global South has been diluted. Thus, the export of processed and value added goods from developing countries toward North America and Europe, as well as to other regions of the Global South are increasingly frequent. Meanwhile, the transition towards a services-centered economy in the most industrialized countries has moved them away from the industrial production chain that runs from the Bolivian mines to the Chinese factories.
Traditional monopolies and trade routes are no longer fixed in the global economy, as raw materials take new commercial routes intensifying exchange between Latin America and Asia. Moreover, the rapid advance of manufacturing industries in Asia will require evermore commodities that regions like Africa and Latin America can provide. Therefore, in a context of geostrategic realignment and the emergence of new economic powers, various countries have a unique opportunity to better position themselves within global markets and value chains.