Will There Ever Be a "Fortress Americas"? US and Chinese Investment Policy in Latin America

This week’s New York Times published a fascinating article about a topic that many experts on Latin America should find very intriguing. The article titled Deals Help China Expand Sway in Latin America by writers Romero and Barrionuevo was an analysis of China’s growing influence in Latin America, with examples of how Chinese liquid investment in many large projects in the Southern Cone and Andean region seek to take American influence via multilateral organisations and FDI and divide the regions investment among the US, EU, China and the rest of Asia.

Since the admitting of China to the WTO and the drastic change in global trade and manufacturing flows, China has become a benefit to some in Latin America and less of a benefit to others. The New York Times article goes into many examples of how Chinese FDI seeks to fund many large projects in the region, from a development fund in Venezuela, to a hydroelectric project in Ecuador and providing Argentina $10 billion in financial loans and Brazil’s national oil company a similar amount to ensure future projects will send a guaranteed percentage of future oil to China. Relations between the US and many of its southern neighbours often have been strained politically in places like Venezuela and Bolivia, or have been tied in with economic restrictions such as Argentina’s relationship with many international financial institutions which set high risks for investment in the country, often funded and controlled by US investment policy within those institutions. For some in Latin America, Chinese investment is not only a good alternative, but can equal the amount invested by the IMF, World Bank and the US itself as noted in the article.

Concern from American officials will likely become greater as China seeks to displace any US and European FDI and by-pass conditions set by many international institutions that often placed Latin American and other developing countries into a position of forced policy measures. Chinese investment, most notably in Sudan and other parts of Africa, Latin America and Asia are starting to become an alternative source of funds for many countries which prefer to receive investment, but do not want conditions on their local policies, namely those which affect human rights and those connected to poverty reduction strategies. A benefit to a country like Argentina, who’s loan defaults in the past has placed it in a position where poor investment ratings still linger from 8 years ago, have received Chinese investment without major sacrifices at this point. However, places like Sudan, who are responsible for one of the largest ignored genocides since Rwanda receive not only Chinese investment in developing their oil industry, but are also suspected of receiving arms which some have connected to human rights violations in Darfur. Investment without any restrictions or a moral compass was not always practised by those in the West; especially during the colonial period, but the international investment community must decide how investment should be dealt with in the future to avoid mass slaughter of innocent communities, whether it be Chinese FDI or from the West.

Investment in Latin America has often been seen in a different light, depending on the attention Latin America has been paid during various American administrations. The Summit of the Americas this weekend comes on the heels of one of those moments in history where Latin America is becoming re-engaged, at least for the first few months of the Obama Presidency until there are added problems in the Middle East once again. The issue often seems not only one of Economics vs. Security, but one of the Americas being seen as one complete investment block/FTAA vs. a source of illegal immigration and narcotics. Often this debate plays out using clear statements of interest, referring to Latin America as a region described as America’s backyard as opposed to statements linking narcotics, illegal immigration and terrorism in much of US media on Latin America. A debate on US policy always accompanies the region, wavering as Latin America fades in and out of their sphere of influence with attention due accordingly. This challenge does have a distinct element however in 2009, as Mexico continues to fight a full scale drug war and continues its very close economic ties to the US, and Cuba and the US opening dialogue between Raul and Fidel Castro and the Obama administration. These issues may keep the US tied to regional policy until those issues lose interest, as has always been the case. Luckily some policies linked with security and partnership often pay off, as Colombians have seen in 2008-2009 and some successes with Plan Colombia and in Mexico with the Merida Initiative, not always a media attention grabber, but long term policy nonetheless.

Likely future Chinese investment may re-ignite the debate on trade with Latin America if it is seen as a major threat. The US must decide in the end where it wishes to develop its trade policy as those in the Americas seek to promote their own investments abroad if the US does not wish to pursue major investment and trade in the Americas. Debates on NAFTA and trade agreements with countries like Colombia must be taken as policies which benefit not only the United States, but the Americas region as a whole. In reality, trade between those countries in South America had on average less than 40% of their trade with the US and a significant amount with the EU and Asia. China has now displaced the EU as the second largest investor. Countries such as Canada, America’s closest trading partner has signed trade agreements beyond NAFTA, with Chile, Costa Rica and are discussing an FTA with Colombia and even the EU. According to writers such as Khanna and Zakaria, the US must consider its role in the Americas as its leader and develop its interests beyond security in the region if it is to maintain investment in a strong United States. China as a matter of investment policy is often not competing in places where the US have established strong investment ties, but in those areas where the US have been absent. The next decade of American policy towards the Americas will likely been discovered in the Summit of the Americas this weekend, determining the viability of a Fortress Americas in future US investment policy.