US pressures on Panama, and competition with China in Latin America

US pressures on Panama, and competition with China in Latin America Carlos Aquino* Secretary of State Marco Rubio visited Panama and got Panamanian President José Raúl Mulino to say that Panama will not renew the Memorandum of Understanding (MoU) on cooperation under China's Belt and Road Initiative (BRI). This means that the United States can exert pressure against some countries in the region, even though China became Panama's largest trading partner after the country recognized the People's Republic of China as the sole representative of the Chinese people and abandoned Taiwan in 2017. China is also a major investor in the construction of physical infrastructure in Panama. It would be interesting to know what the United States has promised Panama in terms of trade and investment so that it can replace China or compete with China. The question is whether Panama's decision to withdraw from the BRI will affect other Latin American countries participating in the initiative. It is interesting to note that Panama was the first Latin American country to join the BRI in 2017. There are 22 Latin American countries participating in the initiative (including Panama). Countries with the weakest ties to China in terms of trade and investment could be the most vulnerable to US pressure, and these are the countries in Central America and the Caribbean. These countries are quite dependent on the US, in the case of Mexico in particular, 80% of its exports in goods go to the US for example. South American countries have the strongest ties in terms of trade and investment with China and would be less vulnerable to US pressure. Peru and Chile, for example, export more than a third of their total to China. Anyway, if the US exerts pressure on countries in the region to withdraw from the BRI, it will need to offer alternatives to finance the construction of infrastructure and markets for goods from the region. But at this point it seems that the US does not have enough capacity to replace China. Regarding Peru, during his campaign, members of US President Donald Trump's team claimed that the Peruvian port of Chancay has military applications and threatened to impose additional tariffs on all goods transported from the port of Chancay to the United States. How could this affect Peru? It seems unlikely that goods will be shipped from the port of Chancay to the United States. Goods will be shipped from Chancay mainly to China and Asia. If so, there might not be an impact on relations between Peru and the US. One reason for Trump to put tariffs on his trading partners is that the US has a trade deficit with many of them. But in the case of Peru, for the US our country is one of the few with which it has a trade surplus. But there is also the problem of illegal immigrants in the US and there are Peruvians in that situation there. But Peru has so far said that it is willing to take back those Peruvians who are returned by the US, so there could be no problems with the US on this issue either (like for example the one that briefly arose between Colombia and the US on this issue). In any case, Trump's statements, threats, and actions are aimed at negotiating better terms for the United States and trying to curb what they consider to be growing Chinese influence in the region. For example, Latin American countries will have to adopt 5G technology soon and the United States will do everything possible to prevent China, particularly Huawei, from being the supplier of this technology. Already in April 2019, during Trump's first term, his then Secretary of State, Mike Pompeo, on his visit to four South American countries, advised them not to adopt Huawei's 5G technology (this was done especially when he was in Peru and Chile). So, we could expect more pressure in this field, for example, from the United States again. In any case, the US will not be able to put much pressure on Latin America to not have greater commercial relations with China if it does not offer alternatives. China buys most of the natural resources, minerals, energy and food, that the region exports. And Latin America exports, for the most part, between 60% and 70% of the total, only those products. In addition, Latin America needs investment for its physical infrastructure, such as ports, airports, railways, roads, hydroelectric plants, telecommunications networks, etc., and China has been investing more in this sector in recent years. If the US only pressures Latin America to reduce its relations with China without offering alternatives, it will be counterproductive for the North American giant. It is true that there are some critics regarding China's increased involvement in Latin America. China could perhaps address some of those concerns about its growing presence in the Latin American region in several aspects, for example: first, when appropriate, be more transparent about the details of the contracts, loans, it grants to some countries; second, China should open its market more to Latin American products, not only to raw materials for its industry, but to more food and some manufactured products in which countries in the region could be competitive; third, do more technology transfer and help the region give more added value to its natural resources (help it to industrialize); fourth, give more scholarships to students so that they learn more about China's experience in economic development and better understand China. February 8, 2024 *Director of the Asian Studies Centre, CEAS, UNMSM A few days ago, I offered interviews on these topics to the media. You can see that here: https://periodico.unal.edu.co/articulos/china-y-estados-unidos-en-la-disputa-por-el-comercio-latinoamericano https://radio.unal.edu.co/detalle/dependencia-economica-de-america-latina?fbclid=IwY2xjawIU7RxleHRuA2FlbQIxMQABHb6fzc_bymnhi-V0YbcHIhhG0nbqQjKW5Kj9CsKtKUi6MILXilA-TfDSRw_aem_MCUN20J_KXoDN6RxsZQ4ow https://larepublica.pe/economia/2025/02/06/guerra-comercial-entre-estados-unidos-y-china-afectaria-el-crecimiento-de-la-economia-trump-xi-jinping-aranceles-hnews-195480?fbclid=IwY2xjawIU7TpleHRuA2FlbQIxMQABHUdgMBTq3KeN27ihgTCdH91RkB8K643YZGSdWiK Interview from minute 1 hour 15 minutes on "China's Belt and Road Initiative is affected in Latin America by an announcement from the government of Panama." https://radio.unal.edu.co/detalle/la-oralidad-la-lectura-y-la-escritura-factores-esenciales-en-el-aprendizaje