Argentina and Ecuador turn to China while the US Congress flounders
If the US wants to compete with China in Latin America, then the US Congress has to get serious about fixing itself and being more effective.
Presidents Fernandez and Lasso traveled to Beijing, using the Olympics as an opportunity to negotiate resources from China. Catherine Osborn’s newsletter highlighted these two trips on Friday, so go read that too.
Argentina received several billion in Chinese currency swaps and signed an agreement for billions more in financing in exchange for joining the Belt and Road Initiative (BRI). That funding allows Argentina to make some short term debt payments including those to the IMF, giving it greater flexibility and leverage.
There was also a bit of diplomatic symbolism as China supports Argentina’s claims in the Falklands/Malvinas dispute. There are clear parallels to the China-Taiwan situation, though perhaps not ones that Xi Jinping wants given the narrative of Argentina’s war in the early 1980’s.
The Lasso administration in Ecuador wants to renegotiate its oil for loans deal and strike a new trade deal with China. China is suggesting that it may do so in exchange for being allowed to make bids in Ecuador’s telecommunications sector.
On one hand, China is continuing its reputation as a vulture or economic hitman, offering funding to countries facing significant financial distress in exchange for political support and economic linkages that will lock in Chinese technology for years to come.
This economic assistance also comes with some risks to China. While its business with Ecuador is relatively small compared to China’s total investment in the region, the deal with Argentina points to billions in aid that will swiftly interlink Chinese aid regionwide with Argentina’s economic fortunes. China already has one difficult economic challenge in its assistance to Venezuela. The Argentina situation will not mirror the Venezuela one, but it could be another example of China finding itself losing far more money than they expected. As Europe, the US, the IMF and private bondholders know from past experience, that comes with a special set of risks because the question about Argentina is always when, not if, the country will default next.
A strategy for the US to compete
At the same time, China is providing funding, opportunities, and diplomatic personnel to Latin American countries when other countries and institutions are not.
Yesterday, two Senators proposed a bill asking for a written strategy report on how the US can better compete with China and Russia in the hemisphere. Let me give them a summary of the report that should be written in fewer than 500 words below.
The US can’t complain about China’s rising influence when the US Congress is so dysfunctional that it refuses to raise new funding, pass reform bills, or confirm ambassadors.
Any discussion of significant new funding for US initiatives in Latin America is immediately nickel and dimed to death. The US can’t compete with billions of dollars in investment and financing that is being offered by China by hoping to “do more with less.” The US private sector can provide some investment, but the US government actually needs to spend more resources in the region if it wants to promote its own vision for a secure, democratic, prosperous, and transparent hemisphere. Congress needs to start thinking in the billions and stop pretending that a few million dollars will somehow compete with the billions spent by China.
The Senate has also blocked and delayed numerous ambassadorial nominees. China and Russia don’t skimp on their diplomatic efforts in the region. I’ve written before that the US would never leave the commander of Southcom empty, but other agencies are regularly understaffed and forced to operate under interim leadership while the Senate plays games with nominees.
Among the biggest advantages the US has in the hemisphere are our geographic proximity and our cultural linkages thanks to decades of immigration and exchange. The US remains the country where many Latin Americans wish they could immigrate (by contrast, even if geographic distance were not a barrier, I highly doubt anyone from Guatemala would want to flee to Guangzhou).
Yet, Congress has actively blocked proposals to reform the US immigration system, US visa system, and US asylum system and impedes opportunities to further build these linkages between the US and the region. The anti-migrant rhetoric and actions such as building the wall under the previous administration (something that received billions in funding when Latin American initiatives do not) and Migrant Protection Protocols and Title 42 under both administrations are harming one of the key advantages the US has over China in the region.
Separate from US policy in Latin America but definitely critical to our reputation and ability to compete with China, the Senate has blocked infrastructure funding that would allow the US to better compete with China and an election reform bill that would help us better model democracy after the embarrassment of the January 6 insurrection.
If members of the House and Senate want the US to compete better with China in Latin America, step one is to fix the US Congress so that things actually get funded and accomplished.