Biden Wants to Compete With China in Latin America

In his 1933 inaugural address, U.S. President Franklin D. Roosevelt adopted a novel approach toward Central and South America, the “Good Neighbor” policy, aimed at substituting goodies for gunboats. It was ultimately derailed by U.S. economic woes, a global war, and an increasing focus in Washington on security.

Ninety years later, the same story is still playing out. For decades, Washington has halfheartedly sought to reach out to Latin America, only to be distracted by terrorists, the Taliban, or trade wars. While every other major power takes pains to tend its own garden, the United States has for decades let what it still regards as its own backyard grow unkempt.

“If the United States doesn’t show up with a meaningful economic agenda for the region, the region is going to turn to people who will,” Eric Farnsworth, the vice president of the Americas Society/Council of the Americas (AS/COA), told Foreign Policy. “And who’s the obvious choice? The one with the money: China.”

In his 1933 inaugural address, U.S. President Franklin D. Roosevelt adopted a novel approach toward Central and South America, the “Good Neighbor” policy, aimed at substituting goodies for gunboats. It was ultimately derailed by U.S. economic woes, a global war, and an increasing focus in Washington on security.

Ninety years later, the same story is still playing out. For decades, Washington has halfheartedly sought to reach out to Latin America, only to be distracted by terrorists, the Taliban, or trade wars. While every other major power takes pains to tend its own garden, the United States has for decades let what it still regards as its own backyard grow unkempt.

“If the United States doesn’t show up with a meaningful economic agenda for the region, the region is going to turn to people who will,” Eric Farnsworth, the vice president of the Americas Society/Council of the Americas (AS/COA), told Foreign Policy. “And who’s the obvious choice? The one with the money: China.”

The Biden administration is taking some steps—as previous administrations have—to put Latin America back on the agenda, especially in terms of economic engagement. The Americas Partnership for Economic Prosperity (APEP), which was unveiled at the Summit of the Americas in Los Angeles last June, is the Biden administration’s most significant effort to strengthen the U.S. position in the region. U.S. Trade Representative Katherine Tai described the initiative as a “new type of economic arrangement,” with cooperation in sectors such as clean energy and sustainable development. 

“What we are trying to do is create a framework for regional cooperation with the objective of stimulating integrated economic growth, that will guarantee that our hemisphere remains among the most dynamic and prosperous economic regions in the world,” Jose Fernandez, the U.S. undersecretary of state for economic growth, energy, and the environment, told reporters.

Congress is even getting in on the act, with a bill that would create a pathway to membership in the United States-Mexico-Canada Agreement (USMCA), which succeeded NAFTA, for democracies in the region. “We need to prioritize partnerships in the Western Hemisphere to improve trade, bring manufacturing back to our shores, and compete with China,” said Sen. Bill Cassidy, who introduced the legislation; Rep. Maria Salazar introduced companion legislation in the House.

U.S. interest in Latin America is, as in so many places, spurred by the specter of Chinese incursion. Chinese economic activity in Latin America has grown exponentially since the turn of the century—and is still growing. China and Chinese banks are major investors in Latin America, particularly in mining and energy. Beijing is now South America’s largest trading partner, with Chinese trade with the region expected to double by 2035, reaching more than $700 billion.

The U.S.-China Economic and Security Review Commission, in its most recent report to Congress last year, underscored the potential challenges posed by Chinese investments in critical minerals, infrastructure, and even vaccine diplomacy in Latin America. What for years was seen as benign Chinese investment has increasingly come to be seen in Washington as nefarious.

“I think the United States has finally come around to recognizing that it’s not just about trading commodities,” said Farnsworth of AS/COA.

Increased U.S. economic engagement in Latin America, especially in Central America, could also help stem the tide of migration northward. That is part of the rationale of the congressional push to open up a regionwide free trade area.

“You can also start dealing with all this mass of humanity trying to find better places to live in the Americas,” said Earl Anthony Wayne, a former U.S. ambassador to Mexico during the Obama administration. “I think that’s a very big, long-term challenge to work with. Part of the challenge is to create more opportunities for good jobs and good work in a variety of countries.”

The Biden administration gets some kudos from longtime Latin America watchers for seeking to engage with the region. But there is much ado and more nothing.

“It’s kind of like a grand dialogue over lots of issues,” said Cynthia Arnson, a Latin America expert at the Wilson Center. “There don’t appear to be any resources behind it. There’s just a lot of vague talk about what needs to happen to improve digital and physical infrastructure and how to have more inclusive growth and all these types of things.”

Part of the problem with competing with China in economic statecraft is that the United States is outgunned. It’s not just that Chinese state and state-influenced banks can pour vastly more resources into strategic regions than their U.S. counterparts. It’s that even the efforts made during the Trump administration to revitalize Washington’s checkbook diplomacy have had painful constraints.

The Trump administration set up the International Development Finance Corp. (DFC) to boost U.S. capacity to invest in the very kinds of infrastructure projects that China does in its big Belt and Road Initiative. But the DFC’s major pitfall, according to Arnson, is that it can only operate in lower-income countries; only five countries fall within this category in Latin America. The DFC is unable to engage with middle-income countries, such as Chile and Panama, despite widespread need.

“We are tying one arm behind our own back, saying we can’t provide strategic infrastructure assistance to some countries that are important in Latin America,” Farnsworth said.

Even congressional efforts to turbocharge trade relations in the hemisphere come at a bad time, said Farnsworth, as former President Donald Trump’s protectionism has leached into the soil of both parties’ current politics. The Trump administration renegotiated a decades-old trade pact with Mexico and Canada to tilt the economic balance more toward the United States; current trade talks promise more of the same.

“It costs more to be a friend to the United States these days than it costs to be an enemy of the United States,” Farnsworth said.

Still, greater trade opportunities could potentially swing much of the region back toward Washington. It could also bolster nearshoring—or “friendshoring”—efforts, which would relocate manufacturing capabilities closer to U.S. borders. Mexico has been the main beneficiary of nearshoring practices, due primarily to its membership in NAFTA, continued in USMCA. By opening the agreement, other countries, especially in Central America and the Caribbean, could reap similar rewards. Costa Rica had previously expressed interest in joining USMCA.

“The notion of leaving open this idea of countries being able to negotiate to enter USMCA is a valuable one,” said Wayne, the former U.S. ambassador. But what’s needed, he said, is a sustained U.S. effort in Latin America, rather than the periodic spasms of attention to the region that seize Washington whenever crises arise. 

“We have to try to keep momentum going across administrations in all the countries,” Wayne said.