The news came a few weeks ago. Brazil, Latin America's largest country, announced that China had for the first time eclipsed the United States as its biggest trading partner during the first six months of 2009. Despite the global economic crisis, Chinese imports from Brazil surged by more than 40 percent. If the trend continues, China will remain the country's leading trading partner for the entire year, relegating the US to second place.

While the Chinese surge past the US has been mainly caused by the economic crisis, and with the US likely to regain the pole position in trade with Brazil after the crisis ends, it highlights an underlying trend in Latin America. China is steadily increasing its presence and influence on the continent.

Kerry Brown, a China expert at Chatham House, says that Chinese relations with Latin America follow a similar pattern as the country's role in Africa. "China's overwhelming interest in Latin America is business and resources."

Business is paramount for China, agrees Hanns Guenther Hilpert, an Asia expert with the German Institute for International and Security Affairs. When China is conducting foreign relations, it always has in mind how it can advance business interests and contribute to China's development, argues Hilpert.

As in Africa, Beijing is primarily interested in natural resources and energy and has become a major importer of copper, iron ore, gold and oil from Latin America. But it's not a one-way relationship, explains Hilpert: "Latin America is a huge export market for China and it is now the leading manufacturer of industrial goods and they can export quite a lot to Latin America."

From electronic goods to cars, more and more products sold in Latin America bear the imprint "Made in China." By increasing its exports to Latin America, Beijing is pursuing a diversification strategy. "They do not want to be too dependent on the US and European markets," says Hilpert.

Business isn't everything

Despite its clear focus on business, economics isn't everything for China. "Of course they also pursue some political interests," says Brown. "They want recognition of China over Taiwan and make that a condition for their investment in countries." Taiwan still has relations with some Central American countries and with Paraguay, adds Hilpert, but China tries to isolate Taiwan and the countries that recognize it.

"China is also trying to advance its principle of no interference in internal affairs - including human rights issues - and they are looking for allies and some Latin American countries may be allies for them," says Hilpert.

What's more, says Brown, the Chinese are also trying to gain influence through so-called soft power and have opened many Confucius cultural institutes across Latin America.

So should the US and the EU be worried over China's increased presence in Latin America? "It's not so much a story about Latin America, but it's a story about vying for influence in global governance and China is a main challenger for the West in that matter," notes Hilpert.

Not everyone benefits

But even on economic terms, all hope is not lost for the West. As the Argentine writer Andrés Oppenheimer pointed out recently in his column for the Miami Herald, US direct investment still dwarfs Chinese direct investment in Latin America and the Caribbean. While American companies poured $350 billion into the region in 2007, Chinese firms only spent $22 billion.

"Even if China's foreign investments - which go mainly to trains and bridges to help take raw materials to the ports - continue at present rates, it will take decades before they catch up with America's," writes Oppenheimer.

In addition, as China's presence grows in Latin America, criticism of its "no questions asked" policy could increase as it has over its increased role in Africa, says Hilpert. That is because not everyone in Latin America benefits from China's economic endeavors.

"Of course there are mixed feelings, especially in the extractive industries," explains Hilpert. "These are industries which aren't contributing that much to the welfare of the people - it's rather a small minority, an elite that is making profits and gaining wealth. And so of course, the poorer and the middle class, they are not as much as in favor of China, as is the elite."

Author: Michael Knigge

Editor: Susan Houlton