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Latin America has increasingly embraced China but there might be a few downsides for these emerging economies.

In recent years, the global geopolitical landscape has been undergoing a rapid and significant transformation, marked by the U.S.-China trade dispute, the pandemic, Brexit, and the war in Ukraine. In this era, every nation, whether developed or still developing, aims to expand its influence in all sectors, from agriculture to the military.

Since the 1970s, China has been steadily increasing its global footprint. More than four decades have passed since Deng Xiaoping’s structural economic reforms catapulted the nation onto the global stage. These reforms were instrumental in pushing China to its current position of influence.

Over the past two decades, numerous Latin American nations have strengthened ties with China, entering into various agreements and pacts that have led to more favorable trade deals and loan arrangements than those offered by the IMF, the U.S., or its allies.

China’s investments in Latin American countries skyrocketed from a modest $12 billion in 2000 to a whopping $445 billion in 2021. Additionally, China’s state-owned banks have granted over $139 billion in loans to Latin American countries for use in industries such as agriculture, mining, and energy.

In comparison to the U.S. and its allies, China has maintained more robust ties with Latin American nations, striking superior economic agreements. This success can be attributed to various factors, including adherence to South-South principles such as non-interference in internal affairs and China’s alternative growth model.

China has been a substantial contributor to the economic growth of Latin American nations in recent years. Numerous countries, including Argentina, Chile, Bolivia, Ecuador, and Venezuela, have signed multiple military cooperation agreements with Beijing.

However, many analysts predict that the “special relationship” between China and Latin America may be geopolitically more advantageous to China. The military implications of China’s growing presence in Latin America, once perceived to be minimal, have rapidly expanded in recent years. China is utilizing Latin American nations to build and maintain listening posts for surveillance purposes.

China has been extending its influence in authoritarian nations like Venezuela and Cuba, which are facing U.S. sanctions. What’s troubling is the lack of transparency concerning China’s goals for these facilities.

The U.S. is increasingly concerned as several Latin American countries have agreed not to disrupt or interfere with Chinese activities. This has heightened U.S. fears that these listening posts might intercept sensitive information transmitted between Washington and its allies. The U.S. and its allies have warned Latin American nations of the potential risks of allowing China to operate these facilities, even for “peaceful purposes.”

Despite China’s repeated insistence that these facilities are intended for peaceful purposes, the country has been tirelessly enhancing its capabilities in this field over the past twenty years.

However, aligning closely with Beijing has its downsides. While Chinese loans may initially appear more favorable, they have led several nations into a debt trap. Argentina is already showing early signs of this trap, accepting payments in yuan as its currency depreciates against the Chinese currency. Countries like Pakistan and Sri Lanka, forced to sell their assets to repay Chinese loans, provide a cautionary tale. As a result, not only should the U.S. and other democratic nations be concerned about losing their hegemony over the continent, but the host countries should also be wary of getting into bed with Beijing without considering all their options.

Anuj Dhyani is studying for a Master’s degree in International Relations at O.P. Jindal Global University. His areas of interest include Chinese foreign policy, South Asia, and security.