As the world grapples with shifting international power dynamics, one of the most significant geopolitical developments in recent years has been China’s increasing influence in Latin America. This growing footprint has the potential to reshape the region’s political, economic, and strategic future, especially as the United States faces internal challenges and a renewed shift towards isolationism under the leadership of former President Donald Trump.

In recent weeks, China has taken bold steps to solidify its presence in Latin America, a region traditionally seen as the United States’ sphere of influence. One of the most significant of these actions was the inauguration of the Chancay port in Peru. The event, which featured a rare appearance by Chinese President Xi Jinping, underlined China’s strategic priorities in Latin America. The $3.5 billion project, funded by the state-owned Cosco Shipping, is set to dramatically alter the region’s trade routes by offering a direct connection to Asia. This mega port could potentially bypass North America entirely, reshaping global shipping patterns and economic exchanges in the region.

Chancay Port: A Strategic Game-Changer

The opening of the Chancay port is emblematic of China’s broader strategy in Latin America, which includes large-scale infrastructure investments under the Belt and Road Initiative (BRI). Xi Jinping’s direct involvement in the inauguration of the port highlighted the significance China attaches to the project. Located along the Peruvian coast, Chancay has already begun transforming the small Andean fishing town into a logistics hub capable of handling ultra-large container ships. Once fully operational, the port will significantly shorten shipping times from 35 to 23 days, providing a more efficient route for goods traveling from South America to Asia.

The potential for Chancay to handle larger vessels and expedite shipping represents a monumental shift in global trade, particularly for countries like Peru, Chile, Ecuador, Colombia, and Brazil, whose products—such as copper, soybeans, and other raw materials—are highly sought after by China. However, the implications go beyond just trade: China’s growing presence in Latin America also carries geopolitical significance.

Economic and Strategic Implications for Latin America

The Chancay port is poised to become a key node in China’s global trade network, benefiting not just Peru but the entire South American continent. By offering a direct link to Asia, the port is expected to attract goods from other South American countries. Peru’s President Dina Boluarte hailed the port as a vital “nerve centre” for connecting the region to the “gigantic Asian market.” This level of infrastructure development is seen by many as a win for China, which has long sought to solidify its economic ties with Latin America, an area traditionally dominated by the U.S.

While the economic benefits for Latin America are clear—enhanced trade routes, improved infrastructure, and increased access to Chinese markets—there are concerns that this growing dependence on China could leave the region vulnerable to future pressure from both Beijing and Washington. As Latin American countries deepen their engagement with China, they may find themselves navigating a delicate balancing act between competing geopolitical interests. Countries such as Chile, Brazil, and Peru are now more deeply entwined with China, leaving them at risk of U.S. economic and political pressure, especially if relations between the U.S. and China continue to deteriorate.

The U.S. Response: A Region in Transition

The inauguration of the Chancay port and China’s broader influence in Latin America represent a clear challenge to the U.S., which has long considered the region its “backyard.” For years, U.S. policy towards Latin America has been characterized by indifference, with American leaders primarily focused on issues like immigration and drug trafficking. As China has steadily increased its presence in the region, many experts argue that the U.S. has failed to keep pace with the needs of Latin American countries, allowing China to move in and fill the void.

Monica de Bolle, senior fellow at the Peterson Institute for International Economics, notes, “The U.S. has been absent from Latin America for so long, and China has moved in so rapidly, that things have really reconfigured in the past decade.” According to de Bolle, this shift is significant because Latin America, often seen as America’s natural sphere of influence, is now engaging directly with China. This growing relationship is bound to have strategic implications for the U.S., which may now find itself at a disadvantage in a region it once dominated.

In contrast to U.S. disengagement, China’s President Xi Jinping has made numerous trips to Latin America in recent years, actively cultivating ties with both left-wing and right-wing governments across the region. Prof. Álvaro Méndez of the London School of Economics points out that while the U.S. has been “taking Latin America for granted,” China has been proactive, building strong diplomatic and economic ties across the region. “The bar has been set so low by the U.S. that China only has to be a little bit better to get through the door,” he says.

The Belt and Road Initiative: China’s Global Strategy

The Chancay port is just one example of China’s Belt and Road Initiative (BRI), an ambitious infrastructure and development strategy launched by President Xi Jinping in 2013. The BRI aims to expand China’s economic influence across Asia, Africa, and Latin America by financing large-scale infrastructure projects. Since its inception, the BRI has seen China pump money into nearly 150 countries worldwide. In Latin America, Chinese investments have transformed many countries’ infrastructure and trade capabilities, making China the largest trading partner for several Latin American nations.

Despite some negative outcomes, such as unfinished projects and mounting debt burdens for some participating countries, the BRI has been widely embraced in Latin America. Countries like Argentina, Venezuela, and Bolivia have benefited from Chinese loans and investments, often in exchange for natural resources or access to markets. For many Latin American governments, China’s financial support offers a welcome alternative to traditional Western lenders, including the U.S. and the International Monetary Fund (IMF).

Ms. de Bolle suggests that the growing alignment of interests between China and Latin America has led many countries to lower their guard when it comes to China. “They have lowered their guard out of sheer necessity,” she says. Whether it’s infrastructure projects, access to new markets, or financing for domestic development, Latin American countries see their relationship with China as a mutually beneficial arrangement.

U.S. Policy and the Future of Latin America

As President Trump prepares to return to the political stage, Latin America will no doubt be watching closely to see how the U.S. responds to China’s increasing influence in the region. Trump’s previous administration adopted a confrontational stance towards China, imposing tariffs on Chinese goods and blaming China for a range of global economic and political issues. If Trump returns to office, his policies towards Latin America could shift, with the U.S. potentially using its economic leverage to counter China’s growing influence.

However, the U.S. may find itself in a difficult position. As de Bolle points out, many countries in Latin America don’t want to choose between the U.S. and China. “The region doesn’t have to choose unless it’s put in a position where they are forced to,” she says. As countries like Peru, Chile, and Colombia deepen their ties with China, they may become increasingly vulnerable to pressure from both Washington and Beijing, especially when it comes to trade agreements and regional cooperation.

One area of concern for U.S.-Latin America relations is the upcoming renegotiation of the United States-Mexico-Canada Agreement (USMCA), which will be reviewed in 2025. Countries like Peru, Chile, and Colombia have already signed free trade agreements with the U.S., but as China’s influence grows, the U.S. may face pressure to adjust its trade terms with these nations.

A Need for Cooperation

Looking ahead, many experts believe that Latin America must find a more strategic approach to its foreign policy, one that balances the interests of both the U.S. and China while also fostering regional cooperation. Prof. Méndez from LSE argues that Latin America needs to develop a “coherent regional strategy” that will allow the region to avoid becoming a battleground for great power competition. However, achieving this level of unity will be challenging, given the diversity of interests and political ideologies across the region.

Eric Farnsworth, vice-president of the Council of the Americas, believes that the U.S. still has a significant amount of goodwill in Latin America, but that its “massive needs” are not being addressed. “The U.S. needs to up its game in the region,” he says. If the U.S. can offer a meaningful alternative to China’s economic influence, it could regain some of the leverage it has lost in the region.

In the end, the growing competition between the U.S. and China in Latin America reflects the broader struggle for global influence in the 21st century. As China expands its footprint in the region, the U.S. will need to recalibrate its approach to Latin America—an effort that will likely require both economic and diplomatic engagement. Latin America, for its part, will need to navigate this complex geopolitical landscape with caution, ensuring that it can maintain strong ties with both powers while also fostering greater regional unity.

(Adapted from Reuters.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy