China Is Challenging but (Still) Not Displacing Europe in Latin America

Abstract

While Latin America's trade with China is flourishing again, and China's government is courting Latin America, the European Union risks being outpaced. This is demonstrated by new cooperation initiatives within the framework of the second China-CELAC forum, which took place in Santiago de Chile on 21-22 January 2018. By contrast, the third summit between the European Union and CELAC (Community of Latin American and Caribbean States), originally scheduled for October 2017, was postponed indefinitely. China has displaced Europe as the second-most important trade partner of Latin America behind the United States; in some of the region's countries it has even become the most important trade partner. To further expand trade, the Chinese government invited Latin American governments to join the Road and Belt Initiative (RBI). European foreign direct investment (FDI) is still much more important in Latin America than Chinese FDI. But China is expanding and diversifying its investments in the region, and it has become an important lender. China's relations with Latin America are pragmatic, covering a broad political spectrum and evincing a strong focus on economic topics. But China is also projecting soft power to advance its interests in Latin America, promoting Chinese culture, fostering academic exchange, and welcoming future political leaders. While China has been able to take advantage of the United States' disregard of Latin America, the European Union has not lived up to expectations: it neither concluded the negotiations of a free trade agreement with Mercosur, nor managed to upgrade its existing agreements with Chile and Mexico, developments that had been expected to take place in 2017. Europe should take the Chinese challenge in Latin America more seriously, and the European Union should engage more with Latin America and develop a clear strategy. Concluding and improving upon free trade and cooperation agreements with Latin America should be a high priority. Latin American and Caribbean governments are interested in creating a win-win situation and cooperating with both China and Europe. China is not displacing Europe in Latin America, but it is expanding into areas vacated by the European Union.