The People’s Republic of China (PRC) has increased its influence in Central America over the past two decades, establishing diplomatic and trade relations with all countries, with the exception of Guatemala and Belize, which maintain ties with Taiwan. This growing involvement raises concerns about governance in the region, reports the Central American platform Expediente Abierto.
China is Central America’s second largest trading partner. Although this rapprochement was initially seen as an opportunity for economic development, the conditions imposed by the Asian country in all its negotiations indicate that the “aid” is conveniently strategic, such as reducing support to Taiwan and securing its access to new markets, which affects economic interests and local democratic continuity, the report stresses.
“In order to establish relations with China, it is a condition that countries cut ties with Taiwan,” former Nicaraguan opposition lawmaker Eliseo Núñez, in exile in Costa Rica, told Diálogo on August 3. “This demand establishes an asymmetrical relationship, since no country should impose on another country conditions on which other nations they can maintain relations of any kind.”
To engage these countries, China offers economic incentives including the construction of infrastructure such as sports stadiums, libraries, and housing. “The PRC has long sought to expand its influence in countries with lower levels of development,” Núñez said. “It sees Central America as a particularly receptive region for its initiatives.”
Expediente Abierto identifies three main interests of China in Central America: Political, promoting the “one China” principle and obtaining diplomatic support in international forums; strategic, taking advantage of the geographic location of these nations to expand its global influence; and economic, securing access to natural resources essential for its industrialization and acquisition of food for its population.
The report indicates that Central America perceives China as an option to diversify and boost its exports. They also see the PRC as a source of investment for their national economies; for some, such as Nicaragua, China is perceived as an ally to strengthen their presence on the international stage.
However, Dante Mossi, outgoing president of the Central American Bank for Economic Integration and an ally of the Ortega-Murillo regime, warned that China’s relationship with Central America does not translate into benefits, Nicaraguan newspaper El Confidencial reported.
“We conducted a research paper called the Taiwan Document, which shows that none of the Central American countries have made significant gains from trade or investment with the People’s Republic of China, during the many years they have established diplomatic relations,” Mossi said on LinkedIn.
Costa Rica’s experience indicates that agreements with China do not translate into “good business.” Costa Rican foreign trade data indicates that in 2022 it exported $460 million in Chinese products but imported more than $4.1 billion. “This means that a decade after its Free Trade Agreement (FTA) with China came into force, Costa Rica only sells 2.5 percent of its exports to that market,” El Confidencial reported. In other words, it buys much more from China than it sells.
Costa Rica and Nicaragua have signed an FTA with China, while El Salvador recently announced the start of negotiations in mid-April. Panama is keeping up on a slow negotiation that started in 2018. Honduras announced negotiations to establish an FTA with China in March 2023, after the diplomatic rupture with Taiwan.
Growing concerns
Although Central American relations with China are growing significantly, there are concerns about the growing trade asymmetries in favor of Beijing, generating a trade deficit that grew 32.68 times larger between 2003 and 2022 and displacing local production, Expediente Abierto reported. Chinese investments carry risks of corruption, environmental and social damage, and possible military use of strategic infrastructure.
The report details that Chinese companies are the object of frequent complains due to cost overruns, delays, and quality problems. The requirement to use Chinese companies and labor in all the projects China finances limits the transfer of technology and the creation of local employment, increasing foreign dependence and reducing the space for the participation of national companies.
An example of projects arising from diplomatic relations with China is the SORESCO refinery in Costa Rica, started in 2008. This initiative was halted in 2013, when the Comptroller General’s Office rejected the financial feasibility study conducted by another Chinese company, preventing it from fulfilling the contract and taking the case to international arbitration, Semanario magazine of the University of Costa Rica, reported.
In addition, China’s close relationship with some authoritarian regimes such as the Ortega-Murillo in Nicaragua, along with opacity in diplomatic negotiations, and growing influence in local media, undermines democracy and limits citizens’ ability to scrutinize their governments. The lack of transparency in agreements and project implementation makes it difficult to assess their long-term impacts, the report adds.
Long-term game
“Nicaragua not only allows great advantages to China by displacing local traders, but also faces a danger due to its control and presence,” Núñez said. “Beijing possesses technological tools for social dominance, such as internet monitoring and facial recognition. These mechanisms can be employed to exercise similar social authority in Nicaragua.”
Núñez, warned that because China has a culture of long-term planning, it is preparing Latin American markets including Central America, where it already wields considerable influence, for future collaboration in surveillance. “This represents a serious security risk to the hemisphere.”
“China is a medium- and long-term threat in the region. It builds dependency relationships that will eventually transform into security alliances,” Núñez said. “In a few years, it is likely that the PRC will replace the role that Russia currently has in Nicaragua and Venezuela, due to its greater economic and technological capacity. This is a long-term game that should not be underestimated.”
Recommendations
Given the secrecy and opacity that characterizes diplomatic relations and cooperation with China, civil society plays an important role in ensuring transparency. Therefore, Expediente Abierto urges to promote social auditing processes on agreements, and to monitor the PRC’s influence efforts in the media, including social networks.
It also encourages the development of comparative studies on the experiences of negotiations with China in different countries and sectors. The region’s entrepreneurs need to be included in trade negotiation processes with Beijing. Central American governments should consider both their own experience and that of third countries and ensure the participation of a wide range of social actors.
“Political parties must be strengthened, as they are the main channel for civil society to exercise political power,” concluded Núñez. “If there is a disconnect between the two, civil society will be relegated to a merely protest role, with no real capacity to influence government decisions. China, for its part, will take advantage of this situation to deepen its influence in the region, promoting an economic model that will control the autonomy of the countries.”
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Publish date : 2024-09-05 23:00:00
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