China’s Economic Diplomacy in Latin America Gains Strategic Ground

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This is the 171^st in the China Chronicles series.

If any country in Latin America has perfected the art of balancing its economic interests between the West and the East, it is Brazil. Brazil is best placed to benefit from the United States (US)-China trade war. As an agricultural giant and one of the world’s largest food producers, Brazil competes head-on with the US on products such as soybeans, corn, beef, pork, poultry, and sugar. With the US and China imposing import tariffs on each other, Brazil has a rather large window of opportunity. China has removed phytosanitary suspensions from five Brazilian-based soybean firms, increasing Brazil’s exports of soybeans to China to nearly 2 million tonnes in April and May 2025. The Brazilian Meat Exporting Industries Association has planned to visit six Chinese cities in 2025 to promote its exports, and with China cancelling a 12,000-tonne order of US pork, Brazilian pork exporters are now eyeing the Chinese market.

China has removed phytosanitary suspensions from five Brazilian-based soybean firms, increasing Brazil’s exports of soybeans to China to nearly 2 million tonnes in April and May 2025.

This interplay between Brazil and China today is the result of concerted diplomacy between both countries. For 16 years now, China has been Brazil’s largest trading partner, whereas the US remains Brazil’s largest foreign investor. This balancing act is evident in economics as much as it is in politics. Brazilian presidents emphasise strong political relationships with Washington as much as they do with Beijing, with regular presidential visits to both countries. The evolving Brazil-China ties form a small part of a larger picture: Latin America and the Caribbean (LAC) as a region, once beholden to its northern neighbour, has pivoted firmly to China in the 21^st century. This is as much a result of Chinese diplomacy as it is a determined push from Latin American capitals to engage more with the Asian giant. Over the years, the Chinese government has published multiple white papers on the LAC region and has helped organise 17 China-LAC business summits, with the latest one organised in Nicaragua in November 2024. Chinese leaders at the highest levels have often visited the LAC region, and vice versa. Furthermore, China has signed free trade agreements (FTAs) with Peru, Costa Rica, Chile, Nicaragua, and Ecuador.

In China’s case, business and politics often go together. Its bilateral trade with the LAC region has ballooned from only around US$20 billion at the beginning of the 21^st century to US$516 billion in 2024. Its appetite for the LAC region’s commodities seems to know no bounds: in 2024, the LAC region exported more than US$180 billion worth of commodities to China, from copper and iron ore to soybeans and crude petroleum oil. Besides, China buys far more than commodities from the region and is amongst the LAC region’s main export markets for wines, exotic fruits, and integrated circuits (from Costa Rica and Mexico), as well. Although China is still not the largest foreign investor in the region, it is getting there. As per Chinese government data, the country’s Foreign Direct Investment (FDI) stock in Latin America currently stands at nearly US$600 billion, constituting 21 percent of total Chinese overseas investments. The nature of investments has also evolved over the years, from extractive industries to what China today calls ‘new infrastructure,’ a term that encapsulates innovation-related investments in sectors such as telecommunications, fintech, and green energy. Chinese loans to the region have also grown considerably. For eight years between 2009 and 2017, China extended more loans to the region than the World Bank.

China’s government machinery goes hand-in-hand with its companies to boost trade and investment, which also gives the Asian giant an edge over its competitors, be it the US, Europe, or India.

Nonetheless, the question remains— how did China-LAC relations get to this stage, and where are they headed in the next decade? First and foremost, China’s outreach to the LAC region is underpinned by its economic diplomacy. Beijing parleys with every country in the region, regardless of their ideology. Despite Washington’s efforts, the Chinese continue to strike business deals and deliberate with right-wing governments that lean more towards the West, whether it is Ecuador’s conservative leader Guillermo Lasso (who signed an FTA with China in 2023) or Argentina’s libertarian President Javier Milei, whose initial criticism against China during the election campaign phase evolved into pragmatism once he took office.  Second, China’s government machinery goes hand-in-hand with its companies to boost trade and investment, which also gives the Asian giant an edge over its competitors, be it the US, Europe, or India. This has also helped China gradually evolve its engagement with the region based on local and regional trends, attuned to the LAC region’s needs in infrastructure, technology, and, more recently, green energy.

As the next chapter unfolds, China will likely deepen its relationship with the LAC region further. In part, this is driven by the region’s impulse to diversify away from the US, which has escalated its threats to Latin America through wild claims of taking over the Panama Canal, deporting millions of migrants back to their home countries, and imposing import tariffs that overrule previously signed trade agreements. While South America completed its pivot to China about a decade ago, there are signs that even Central America and the Caribbean, traditionally a stronghold of US foreign policy, are considering switching sides. Costa Rica, Panama, Dominican Republic, El Salvador, Nicaragua, and Honduras have all switched diplomatic recognition from Taiwan to China in the past two decades. The Chinese see this as a quid pro quo: as the US increases its influence in the Indo-Pacific theatre, China does the same in Washington’s neighbourhood in the Americas.