Commercial deals and lines of credit are not the only instruments that China uses to foster its influence across Latin America. Although we have become used to seeing the Peruvian, Argentine, and Venezuelan governments requesting more and more loans aimed, not for investment but for regular payroll obligations, the Chinese approach to technology and infrastructure projects is the main target for Beijing to expand its presence and influence in the region.
Initially, loans were offered for countries to execute key infrastructure projects. Since 2018, this has been shifting to Chinese companies, backed by Beijing, becoming investing partners and not only financiers of these projects.
Infrastructure projects in the region have offered political leverage, commercial dependency (through enhanced logistics), financial dependency (through debt), but also became useful as showcases for Chinese high-end technologies to be presented to local decision-makers.
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In Western societies, the interpretation of the term “soft power” generally relies on non-technical aspects, essentially cultural and easily attributed to a country. These same aspects can be intentionally used to generate indirect influence over people, States, regions. The U.S. exercises its soft power through pop culture, Brazil through soccer and Carnival, Argentina through tango and parrilla. Because of its distinct culture, the notion that China cannot offer soft-power appeal to Latin American societies is not correct.
Beijing understands that technology can be its most efficient mechanism of soft power. The capability to produce high-end technological equipment for entertainment, security, government operations, and scientific research at low prices (due to an intense subsidy from the Chinese government as well as lack of intellectual property rights culture) enables China to offer Latin American governments, and companies access to technological products that would not be economically viable if acquired from the U.S. or Europe.
For China, the soft-power approach to technology aims at developing a trusting relationship with Latin American consumers through affordable and reliable hardware (Huawei and Xiaomi phones) and software/apps (Tik Tok), neutralizing, in time, the U.S. narrative of reliability and data protection. Simultaneously, as companies and governments opt for Chinese products, mainly because of the price-tag aspect, Beijing establishes a long-term technological relationship with these countries, making it hard for a private-sector approach from U.S. or European companies to gain more access to local markets.
As China focuses on the research and development of artificial intelligence and quantum computing, access to data becomes imperative to enhance the capabilities of facial recognition, deep learning, and synthetic data generation. Given the fact that its products have back-door access, the expansion of Chinese technological products in Latin America may offer China a continuous flow of valuable data ranging from consumer habits, social media interactions, decision-making patterns, among other things.
In 2020, for example, Brazil was influenced by the U.S. pressure, as well as decisions in the United Kingdom, France, Sweden, and Germany, to consider excluding Huawei from the 5G auction – expected to be held in 2021. As the telecom authorities in Brazil evaluated the best way to exclude Huawei, a final decision was not made until December 2020.
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Aware that their exclusion was a reality, Huawei shifted its strategy from lobbying the Brazilian government directly to focusing on large private agribusiness and mining companies. The goal was to offer Huawei 5G kits to influential private companies, making it harder for the Brazilian government to exclude Huawei if several key players in important producing sectors in Brazil were already using their kits. This enhanced the difficulty of excluding Huawei since their 5G kits were already being installed in several private enterprises in the country.
As the pandemic grew and the government’s lack of organization in acquiring vaccines became evident, the federal government had to rely on the agreement tailored between the Government of São Paulo State and Sinovac. By expanding the production capacity of the Coronavac in São Paulo, the federal government had to request larger quantities of Active Pharmaceutical Ingredients from China. In a direct conversation with President Xi Jinping, Brazilian President Jair Bolsonaro had to negotiate a larger influx of APIs and, in exchange, agreed to have a more friendly and tolerant approach towards maintaining Huawei as a supplier for the 5G auction to be held this year.
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In Argentina, the intense loans provided from China to Buenos Aires and Argentina’s incapability to pay these debts in regular manners generated a hybrid mechanism of payments that benefitted the technological goals of China in the country. While part of the debt is paid through commodities exported below the market price, another part is converted into special strategic access for projects such as the Space observation facility in Patagonia, controlled exclusively by Chinese nationals without access to Argentine authorities.
This Space observation center could, in theory, be converted into a SIGINT station, though there is no clear evidence that this is the target usage of the Station. Nevertheless, the duality of function allows China to operate the observation center at will, enhancing its signal capabilities in the region.
The established relations between China and several Latin American countries are an open door for the offering of other products, services, and agreements, including technological ones, mostly through Chinese companies.
Last year, Huawei increased its revenue in Latin America by 21.3%. The expansion of its telecom infrastructure is robust in Brazil, Venezuela, and Mexico. Tencent, in its turn, has partnered with Mexican digital payment company Openpay as Huawei also began the integration process of its servers with Brazilian SOE Caixa Economica Federal. Alibaba has also expanded its presence in Mexico. DaHua donated numerous thermal cameras to Argentina, Chile, Panama, and Colombia. Donations of equipment have proved to be an efficient mechanism to establish tech relationships (and dependency) with Latin American countries.
As I mentioned in my previous column, for many government officials in the region, China promises much more than it actually delivers. However, what it delivers ends up being far superior to what any other country does, including the United States.
It is clear that the United States has had difficulties in competing in this aspect. Incentives from the government and specific, facilitated lines of credit for the acquisition of U.S. and European tech equipment could be an alternative to balance this out under the U.S. strategic tech goals in the region.