China and the United States influence on LATAM Trade

Picture Source: Google-China Briefing From Dezan Shira & Associates.

México City CDMX, Updated on Nov 19th of 2020 (appro.).- China's economic and commercial success has led to an increase in its rivalry with the United States in recent years because their capability to massive production and lower costs, and Latin America is becoming the ideal setting for that confrontation. In this trade war between the United States and China, new markets, potential alliances and resources are disputed, but, above all, considerable economic benefits and global geoeconomic leadership.

As a whole, Latin America maintains an important position in the economy and in world trade, with its GDP close to 5,300 billion dollars only surpassed by the EU, the United States. and China.

Although Latin America has historically been under the influence of the United States, since the beginning of this century, the rise of China as Economic leader has been altering the balance of the area. Although China's impact has been moderate to date, largely due to the risk of a confrontation with the United States, the increasingly open trade war between the two powers is expanding its scope.

With a fragmented territory where there are no countries that can exercise regional leadership or oppose external economic intervention, the region has enough elements to alter the balance of power. So far, China's advance has been concentrated in the central and southern part of the continent, but its interest in Mexico and other countries in LATAM may disrupt the Status Quo. The fragility that can be seen in the economies of the region after the COVID-19 pandemic also points to drastic changes, which probably exceed the limits of the strictly commercial sphere.

The entry of Chinese companies to Mexico in the Renewable Energy, Oil Sector, Aeronautics or Military Defense and Internal Security sectors of Latin American countries seems imminent, proposing long-term contracts with the governments of the region for the sale and Concession of Technology (Software and Hardware) for various purposes in order to avoid restrictions in the US market in America.

The economic boom of China in Asia and the rest of the world as well as the need for Raw Material for its industry and the search for new markets for its products have led to a greater rapprochement with Latin America, which will never be to the liking of the United States. Latin America provides the ideal scenario to measure the reactions of the United States to the new challenges and advances of China's trade in the countries of the Region, challenging companies related to the 5G internet, industrial robotics artificial intelligence applications or geolocation with the argument of Espionage although the commercial near future in the expansion is in the so-called New Digital Silk Road between America and Asia that leads a great advance between Eurasia and Africa.

The good news is that for a time, hostile actions between China and the United States of America can be ruled out until new President Joe Biden defines the future of these negotiations that involve firm responses regarding its policy of International Trade with China. Meanwhile we see how China ventures into new areas controlled by the USA in Latin America every year and this region has a leading role in the trade war that is being waged between the United States and China, offering the setting for the dispute but also for a potential new trade agreement basis.