The U.S. Must Compete With China in Latin America

Author: ALI CEO Orit Frenkel, as published in RealClearPolitics, May 21, 2022

Kudos to President Biden as he heads to the West Coast to host the Summit of the Americas, the first time the U.S. has hosted the event since the original summit was hosted by President Clinton in 1994. This will be an important opportunity to hear from U.S. partners and discuss ideas for advancing the region. What happens after the summit, however, is even more important than the meeting. The administration must take the results and implement a comprehensive strategy to compete with China and advance the Western Hemisphere.

Over the past decade, China has sharpened its focus on countries considered to be in the U.S. zone of influence. China’s trade with Central and Latin America has skyrocketed from $18B in 2002 to $449B in 2021, making it the second largest overall trading partner in the region and the largest trading partner with Brazil, Peru, Uruguay, and Chile. Its investment in the region has also grown dramatically with its Belt and Road initiative now in 20 countries in the region and over $140 billion of investment.

China’s investments have been strategic in nature, focusing on infrastructure and ports. It also has been making acquisitions that give it access to key natural resources and commodities.

The president should announce a new comprehensive approach to Latin America. Otherwise it risks ceding America’s backyard to China. The U.S. should look to Latin America as it works to diversify sourcing from Russia and China. To encourage nearshoring and friend-shoring – working with countries that share norms and values about operating globally – the U.S. must offer these countries significant capacity building to counter China’s largesse and to assist the region to become an attractive sourcing destination for U.S. companies.

Capacity building should include funding to streamline regulatory and customs roadblocks. This would establish a positive investment environment and promote training to help companies create a skilled workforce. Upgrades to rule of law and regulatory transparency will also be important ways to improve the business climate in the region and attract more investment.

The U.S. should also work with groups of countries in the region, such as the Northern Triangle countries (Guatemala, Honduras, and El Salvador), to facilitate customs and regulatory harmonization across borders and streamline transportation bottlenecks to assist these countries to become more competitive.

The U.S. government has the advantage of having a robust private sector that it should use to its advantage by partnering to bring skills training, high environmental standards and key technologies to the region.

The U.S. relationship with Central and Latin America has often focused on contentious issues such as drug trafficking and migration rather than on regional prosperity. Now is the time for President Biden to chart a new course by announcing a large investment in the Western Hemisphere and an economic partnership that will increase the prosperity of the region and lift up workers from the entire hemisphere.