With a library here, a power station there, China is using aid and investment to increase its presence in Central America, posing a challenge to the United States’ 2-century-old diplomatic dominance in the region.
China’s interest is driven in part by its rivalry for diplomatic recognition with Taiwan, a self-governing island which has claimed to be the legitimate government of China since the communist victory on the mainland in 1949. But Beijing is also open about its ambition to supplant the United States as the world’s dominant power.
Swayed by Beijing’s dollar diplomacy, three Central American countries — Panama, El Salvador and Nicaragua — have switched diplomatic recognition from Taiwan to China since 2017. So too has the nearby Caribbean island nation of Dominican Republic.
Costa Rica, Honduras, Guatemala and Belize round out the nations of the isthmus connecting North and South America, a region first claimed as part of the U.S. sphere of influence with the enunciation of the Monroe Doctrine in 1823.
Luis G. Solis, interim director of the Kimberly Green Latin American and Caribbean Center at Florida International University, told VOA Mandarin that the U.S. still enjoys an advantage in the region in terms of military, economic, trade, and cultural affairs.
“If these advantages are adequately handled through a proactive diplomacy and a solid developmental agenda, China’s space will be greatly diminished,” he said. “But this entails creativity, the investment of time and goodwill, and a permanent and productive dialogue on sensitive issues such as migrations, corruption and transnational organized crime.”
China’s most recent investment occurred in El Salvador, where President Nayib Bukele thanked China for funding of the country’s new national library as construction began Feb. 6.
The $40 million cultural center, located in the capital city of San Salvador, resulted from Bukele’s visit to China in 2019, according to Evan Ellis, a senior associate at the Americas Program of CSIS. The president also secured $500 million for projects including a sports stadium, a new tourist pier, improvement of its water treatment facilities as well as backing for his Surf City project to turn the country’s Pacific coast into a beach vacation destination, according to the 2021 CSIS article, China and El Salvador: An Update.
Also in 2019, El Salvador signed on with China’s controversial Belt and Road Initiative, (BRI) a global infrastructure plan consisting of a “belt” of overland corridors and a maritime “road” of shipping lanes.
Bukele’s efforts came after El Salvador severed its ties with Taiwan in 2018 under his predecessor, Salvador Sánchez Cerén, who led the fight against a U.S.-backed regime during a civil war that lasted from 1979-92.
China’s buildup in Central America has grown since management of the Panama Canal transferred from the joint U.S.-Panamanian Panama Canal Commission to the Republic of Panama in 1999, according to an article by Daniel Runde, director of the Americas Program at CSIS.
In November 1999, the Panamanian government awarded the Hong-Kong based firm Hutchison-Whampoa concessions to operate ports on both the Atlantic and Pacific sides of the canal, according to the website DialogoChino.
Since then, “Chinese companies have been heavily involved in infrastructure-related contracts in and around the canal, in Panama’s logistics, electricity, and construction sectors,” according to DialogoChino.
By 2017, Panama had shifted diplomatic relations from Taiwan to Beijing and five months later became the first country in the region to join BRI. Since then, China has invested in over 20 infrastructure projects in the country, including bridges, railways and power stations. As of January, Belize, Guatemala and Honduras are not BRI partners with China.
China's state-back media Global Times published an opinion piece on December 13, 2021, by Pan Deng, executive director of the Latin American and Caribbean Region Law Center of China University of Political Science and Law. He suggested that the U.S. views Central American nations as "sources of cheap labor and low-end industrial raw materials, but also the dumping ground for outmoded American industries.”
The piece continued to say, "Previously, these countries had no other choices but to turn to the U.S. However, as China has developed rapidly in recent years, a reference model is being provided for how developing countries can develop from backward agricultural countries to industrialized ones while achieving long-term social stability."
Analysts say that Beijing is using aid in various guises to persuade more Central American and Caribbean countries to establish formal relationships with the People’s Republic of China (PRC).
Benjamin Gedan, deputy director of the Wilson Center's Latin American Program, told VOA Mandarin that Beijing has an economic agenda in Central America and the Caribbean, but the effort is driven largely by geopolitical considerations, “including its bitter rivalry with Taiwan and its desire for support in multilateral institutions.”
“Given the Chinese Communist Party’s intense focus on isolating Taiwan, it is likely to continue investing in Central America and the Caribbean. After all, Beijing likely sees these countries as relatively cheap to buy off, and it has enjoyed a string of diplomatic victories,” Gedan added.
Another goal for China’s efforts in the region is to expand the BRI to Central America, as a push to play a bigger role on the global stage.
In December 2021, Cuba became the latest country to join China's Belt and Road initiative. Jamaica joined in 2019, as did six other island nations in the Caribbean, and Costa Rica joined in 2018.
China has also increased its investment in natural resources in Central America and the Caribbean Basin. According to the Congressional Research Service, in 2020, China’s imports from Latin America and Caribbean countries amounted to $165 billion, consisting primarily of natural resources, such as ores (35%), mineral fuels (12%) and copper (6%).
Rebecca Ray, a senior academic researcher at the Boston University Global Development Policy Center, told VOA Mandarin that she’s not surprised to see China’s interest in infrastructure cooperation with Central America and productive investments in the Caribbean.
She pointed out that the Central American region has suffered from weak economic growth for decades. It is also vulnerable to climate change, which is bringing more natural disasters to low-lying islands and coastal areas. As a result, according to Ray, these countries have a greater need for new inbound investment.
“At the same time, Western investors have not shown interest in starting new projects or being exposed to developing country economies during the COVID-19 pandemic. Thus, any new potential source of investment will naturally be taken seriously,” she added.
Despite the need for infrastructure investment in Central America and the Caribbean, the biggest obstacle to maintaining economic growth may be poor governance, according to online magazine Dialogo.
“Partnership with China might bring in new foreign investments, but it only deepens governance challenges, given China’s disinterest in corruption, its lack of transparency, and its export of technologies that enable Central American governments to curtail civil liberties,” said Gedan.
Microsoft said in December 2021 that it believed Beijing-backed hackers were targeting organizations in both the private and public sectors in five Central American nations: Dominican Republic, Ecuador, El Salvador, Honduras, and Panama.