Trump Steps Up Efforts to Check China Influence in Latin America

(Bloomberg) -- The Trump administration is pushing back against China’s efforts to boost its economic ties with Latin America, as the rivalry intensifies between the world’s two largest economies.

The U.S. Treasury Department took steps to check the Asian nation’s growing influence in the region last month, when it raised questions about Beijing’s overtures to Latin America’s multilateral lender. The U.S. is the largest shareholder of the Inter-American Development Bank at 30 percent, whereas China’s stake in the lender is a minuscule 0.004 percent.

In a Dec. 19 letter obtained by Bloomberg, U.S. Under Secretary for International Affairs David Malpass asked IDB President Luis Alberto Moreno why he had selected China to host the bank’s 60th anniversary meeting next year. “I have serious reservations about the bank’s process that led to that initial decision, and I do not think the 2019 meeting could be nearly as successful in Beijing as it would be if held in the region,” Malpass wrote.

The IDB is preparing a written reply to Malpass’s letter, said Paul Constance, a press officer with the bank. The IDB’s shareholding countries, including the U.S., all agreed last year to hold the 2019 meeting in China, he said.

Influence, Concerns

Malpass’s letter comes amid a push by China to increase its influence in Latin America, where during previous U.S. presidential administrations it became the top trade partner for commodity exporters like Brazil and a lender for cash-strapped nations such as Venezuela. China’s ruling Communist Party, in its National Congress late last year, agreed to further strengthen commercial and strategic ties with the region as part of its drive to become a global economic leader.

Malpass in his letter to Moreno cautioned that China’s economic policies in Latin America could prove harmful to the very countries the IDB tries to help. He cited the Asian nation’s investments in telecommunications in the region, where for example Chinese funds in 2016 were behind a winning bid to build a new wireless network in Mexico.

“Huge export credits are flowing in non-economic ways that distort markets and leave borrowers burdened with ineffective projects and heavy debt burdens,” Malpass wrote. “China’s aggressive telecommunications investments in the region also raise security concerns about placing the region’s communications backbone on Chinese networks.”

Bilateral Friction

U.S. economic relations with China have grown increasingly tense since Donald Trump took office. The White House in December lumped China with Russia as powers seeking to undermine U.S. security and prosperity, and the president has repeatedly threatened to impose tariffs on Chinese goods.

Malpass in a speech late last year accused China of backsliding on market-oriented reforms, calling on other major economies to form a united front with the U.S. to put pressure on the Asian power. He has also critiqued Beijing’s relations with development lenders, questioning why the World Bank lends money to China when the country already has access to global financial markets.

In the letter to the IDB, Malpass repeated his concerns that “China’s economic liberalization seems to have slowed or reversed, with the role of the state increasing.”

©2018 Bloomberg L.P.