By Andrew Braverman
In the first 20 years of the century, Chinese trade with Latin America and the Caribbean (LAC) grew
26-fold from $12 billion to $315 billion. In Mexico, Huawei helped build
the largest public Wi-Fi network in the region; In Brazil, they built almost every major mobile 4G network in use. Alibaba signed
contracts across the hemisphere to build data centers to help facilitate the expansion of cloud computing. Tencent invested
$180 million in a Brazilian fintech company. China Unicom, CamTel, and Huawei Marine Networks built
an underwater cable from Cameroon to Brazil that offers the largest data transmission capacity between Africa and South America. Beijing’s entreaties to the LAC region came as no surprise and neatly fit into President Xi’s broader efforts at economic diplomacy around the world.
Ever since Huawei CFO Meng Wanzhou was arrested
in Canada and subsequently indicted by the United States on charges of bank and wire fraud, America has warned allies away from doing business with Chinese ICT firms. Its partners around the world heeded the advice to varying extents. Many, though, raised questions about what exactly Washington expected them to do. Within the Belt and Road Initiative (BRI), China had developed
the Belt and Road Space Information Corridor, composed of services related to remote sensing, navigation, and satellites, as well as a so-called Digital Silk Road, which focuses on subsidized communications infrastructure and e-commerce. The CCP empowered industry champions to finance digital infrastructure projects in developing nations, giving them an advantage over their American, Finnish, and Swedish peers. As a result, NATO’s CCDCOE
declared in 2019 that Huawei “is currently the only company that can produce ‘at scale and cost' all the elements of a 5G network.” In many industries, there was no viable alternative to the Chinese offer.
As inequality in the 21st
century distills around the so-called digital divide, access to and influence over technological infrastructure like the high-speed, low-latency connections of 5G or cloud-enabling data centers will be pivotal in any country’s economic success. The World Bank estimates that in LAC, a 10% increase
in mobile and fixed broadband penetration can trigger 1.7% growth in GDP. But, in order to universalize broadband access in the region, LAC governments will need to mobilize significant capital—about 0.12% of annual
regional GDP. If Latin American governments can efficiently shepherd private sector investment and multilateral engagement with ICT projects, it could have a tremendous impact on the region and catalyze a decisive recovery in the wake of COVID-19.
It is now recognized
by most policymakers that the United States is locked in economic competition with China. Debate revolves around the finer points of the relationship—Beijing’s intent, their balance of political and economic imperatives, their vision for the future financial system—but the competition’s existence is hard to dispute. Unfortunately, Chinese business dealings through the BRI have often (not always) proven to be a tool of statecraft
for Beijing—a way to extract
IP from foreign businesses to increase domestic innovation and limit other countries’ productivity in critical technology sectors to increase reliance on China. As demonstrated, LAC has become a target for some of these political investments.
As Washington has shifted its gaze towards Asia, it left behind American partners and overlooked the global reach of this economic competition. The United States must seek to limit the penetration of these potentially duplicitous ICT investments by Chinese companies in LAC. There’s no doubt that American government has had an incredibly checkered (at times, even damaging) relationship with Latin America. But the reality today is that American companies offer a more forthright source of investment and development than their Chinese counterparts. The American government has an opportunity to support Latin America’s recovery from the pandemic and strengthen ties with its neighbors in LAC in a way that benefits both parties. It should expand investment into the region through development banks and international financial institutions, grow diplomatic engagement in the ICT space to strengthen ties with allies and minimize malign influence, and consider new free trade agreements (FTAs) that streamline and expand regional trade of ICT goods and services.
Part II of this series will take a closer look at some of these ways that the United States can catalyze tech-driven development in the region while simultaneously preventing duplicitous investment by Chinese companies.
Andrew Braverman is a research intern with the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, DC.
The Strategic Technologies Blog is produced by the Strategic Technologies Program at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).