China is doubling down on Latin America outreach for influence and trade

Beijing is strengthening economic ties in Latin America as it seeks to further bolster trade and gain influence in the resource-rich region, experts told CNBC.

China President Xi Jinping last week inaugurated a $3.5 billion megaport, majority-owned by China state shipping company Cosco, during a trip to Peru, creating a direct shipping lane between Shanghai and the Peruvian city of Chancay. 

“China’s own economy is slowing, and the government’s standard response to that is to try to export their way out of it,” said William Reinsch, Scholl Chair in International Business at the Center for Strategic and International Studies, referring to China’s increasing focus on Latin America.

“Among other things, that means looking at parts of the world that they have not yet extensively penetrated,” Reinsch added, noting that the Western Hemisphere has an abundance of commodities, agricultural products, and minerals that China needs. 

The Peru port under the Belt and Road initiative — China’s global infrastructure development strategy — will reduce shipping times from the Latin American country to China by 23 days, cutting logistics costs by at least 20%, Chinese Foreign Ministry Spokesperson Lin Jian said. 

“The completion of Chancay Port will effectively consolidate Peru’s role as a gateway linking shipping routes across land and sea, and between Asia and Latin America,” the spokesperson said Friday. 

Experts say that the port cements China’s growing position as a top trade partner of Peru and the rest of Latin America, as it supplants the U.S. in its own backyard. 

“The port of Chancay is seen as a game changer in the logistics of Latin America,” Juan Carlos Ladines Azalia, professor of international affairs and international trade management at Peru’s Universidad del Pacífico, told CNBC.

He added that it will open the door for more Chinese investment into South America as Beijing continues to crowd out the region’s traditional partners — the U.S. and Europe.

Amongst countries expected to be served by the port is Brazil, a large buyer of Chinese products and one of its top exporters of agricultural goods and iron ore.

“There is interest across the region in reaping the benefits of the new port,” Carlos Cardenas, Head of Latin American Insights and Analysis at S&P Global Market Intelligence, told CNBC. 

He added that it has also revived long-standing discussions on the potential construction of a “bioceanic corridor,” a railway link between Peru’s Pacific coast and Brazil’s Atlantic coast that could be used to export to Asia via Chancay. 

Xi was in Peru — his second state visit to the country — to attend the 31st APEC Economic Leaders’ Meeting before he traveled to Brazil for the 19th G20 Summit. 

His South American tour comes as Peru and Brazil have seen their bilateral trade with China expand amid deepening economic ties, as per data from Beijing.

China is Peru’s largest trading partner, having signed onto its Belt and Road initiative along with at least 22 Latin American and Caribbean countries through different cooperation agreements. 

While Brazil has not signed onto the BRI, China has long been Brazil’s largest trading partner and export destination for over a decade, while Brazil has been China’s top trading partner in Latin America.

“Latin America is home to 33 countries that consider themselves part of the so-called Global South, and China is keen to expand its influence [there] through trade and investment,” said Ryan Berg, director of CSIS’s Americas Program. 

“Often, a trading relationship develops into much more strategic ties, cultural exchanges, defense and security cooperation, etc,” he said, adding the long-term goal of China is to supplant the U.S. in the region. 

The U.S. has reportedly expressed concern over China’s increasing role in Peru’s infrastructure and the Chancay Port, which some officials claim could be used by Beijing’s navy.

Meanwhile, an adviser to Donald Trump has reportedly proposed 60% tariffs on goods that pass through Peru’s new port or any Chinese-owned or controlled port, in line with tariff hikes the President-elect has proposed for all goods from China. 

However, regarding Latin America accepting more Chinese investment, experts say the U.S. should hold itself responsible for ceding ground.

“The United States has practiced strategic neglect of its own shared neighborhood. That vacuum has allowed China the ability to expand with little pushback or contestation,” said Berg. 

This has been an economic and geopolitical mistake, though it’s not necessarily a national security issue as some have suggested, according to CSIS’s Reinsch. 

“The US has a long history of ignoring Latin America, and this is only the latest chapter,” Reinsch said.