How China’s resources and ground-up relationships helped it push out the US to dominate South America
- Jujuy province in Argentina, home to one of the continent’s largest solar energy plants, shows how China is going local to expand and strengthen its financial grip
- The US has stressed the risk of buying technology from state-controlled companies that can be used for civilian and military purposes, including espionage
Chinese technology and money have helped build one of Latin America’s largest solar energy plants in Jujuy, where hundreds of thousands of panels coat the desert like giant dominoes. Chinese security cameras guard government buildings across the provincial capital. Servers hum in a Chinese data storage plant. Beneath the remote, craggy hills and vast salt lakes lie veins of copper, lithium and zinc, the raw materials of 21st century technology – including Chinese-made electric-car batteries.
Instead of focusing on national leaders, China and its companies have built relationships from the ground up. In 2019 alone, at least eight Brazilian governors and four deputy governors travelled to China. In a September 2019 speech, Zou Xiaoli, China’s ambassador to Argentina, said his country’s infrastructure push was helping weave Latin America into the global marketplace. “China will lend strong support to Argentina’s economic and social development,” he said.
As Argentina’s Jujuy province illustrates, no region is too remote for China’s scrupulous attention. With perhaps a touch of hyperbole, Gabriel Marquez, chief executive officer of a Jujuy lithium research and development centre, describes the effectiveness of the approach: “You have this poor governor from Argentina who has Xi Jinping’s phone number.”
Juan Gonzalez, the US National Security Council’s senior director for the Western Hemisphere, says China is seeking to expand its national security footprint. “Part of our engagement is to ensure governments are making the right decisions for their own security and development,” he says.
Cynthia Arnson, director of the Latin American programme at Washington’s Wilson Centre, says that kind of concern will not discourage local governments. “We must provide some alternative,” she says. “Dollar for dollar, the US will never be able to match the deep pockets of Chinese investment banks.”
Consider the enthusiasm in Jujuy’s capital of San Salvador, a city of about 300,000 where pedestrians seek shelter from the subtropical heat in the shade of magnolia and rosewood trees. “A lot of government officials told me that what we were talking about, a 300-megawatt solar park, was impossible,” says energy secretary Pizarro. “Today it’s no longer a dream but a reality.” Of increased solar and lithium production through Chinese investment, he adds, “The sky’s the limit.”
Argentina’s entry to belt and road is a win for China in Latin America
Latin America has long been a focus of great powers. In the 15th and 16th centuries, Spain and Portugal divided the region for colonial exploitation. After national revolutions in the 19th century created independent states, Washington promulgated the Monroe Doctrine, which required European powers to consider the Western Hemisphere the US sphere of influence. Well into the 1980s, Washington supported coups and sent troops into sovereign neighbours to its south.
This interference inspired anti-American resentment, creating an opening for China. Over the past two decades, as the US focused on wars in Afghanistan and Iraq, China moved into the Western Hemisphere with exceptional speed, as well as financial and political muscle. Much of China’s investment began at the start of the century during the so-called pink tide, when leftist parties rose to power in Argentina, Bolivia, Brazil, Ecuador and Venezuela.
China has bought so much copper, pork and soy – and built so many roads, trains, power grids and bridges – that it has surpassed the US as South America’s largest trade partner and is now the single biggest trader with Brazil, Chile, and Peru.
China’s pitch: We’re here purely to do business – and to offer deals others will not. When directed toward local officials, this approach seemed less interventionist and harder for the US to counter.
An episode during the Trump administration shows why the US will struggle to outflank China. In August 2019, just months into his tenure, Sao Paulo governor Joao Doria, a former businessman, was looking to bring home jobs and development. So he opened his state’s first trade office abroad – in Shanghai.
Covid-19 deaths forced an about-face. By January last year, Bolsonaro contacted the Chinese government requesting CoronaVac shots and materials to produce other vaccines. It obliged. “China’s position is: I don’t care if your president hates me or not,” says Thiago de Aragao, head of strategy at Brazilian political consulting firm Arko Advice. “It’s extremely pragmatic.”
Mauricio Claver-Carone, president of the Inter-American Development Bank, says China offers cheaper credit and that companies from other countries often give up on competing. Claver-Carone, a former senior Trump adviser on Latin America, also warns of national security risks: “The last thing countries need is to become reliant on secretive contracts and non-transparent actors like Chinese state-owned companies.”
Such concerns are a “rich-world problem,” says Oliver Stuenkel, a professor of international relations at the Getulio Vargas Foundation in Sao Paulo. “You really can’t have the luxury of thinking about potential negative outcomes down the road if you have to face a very urgent problem right in front of you.”
More than meets the eye with China’s diplomatic ties in Latin America?
When China began focusing on Latin America, Jujuy was ready. In the 1990s, Argentina had overhauled its constitution and granted provinces greater leeway to guide their economies and forge international ties. Jujuy, 1,450km (900 miles) from the Argentine capital of Buenos Aires, began to cut loose from the central government and sought to manage its own relations with neighbours in Argentina, as well as in Chile and Bolivia.
The region remains one of Argentina’s poorest, known mostly for the tobacco and sugar farms dotting its hillsides. Yet Jujuy, which has a population of 770,000, has some key advantages. Miners can extract lithium from its bright-white, high-altitude salt flats more easily than in Bolivia or Chile. It is also situated in a prime crossroads. The road that climbs up to the Chinese-built solar plant, Cauchari, continues west, crossing the Andes to Chile and reaching the Pacific coast. To the east, Jujuy links Argentina to Paraguay, and then to Brazil.
With initial help from Germany, Jujuy developed small solar projects in the early 2000s, around the time Chinese demand for lithium was starting to increase, according to Alejandro Safarov, dean of international relations at the Jujuy campus of the Catholic University of Santiago del Estero. “When China changed its geopolitics, Jujuy really began to open its mind up,” says Safarov over a lunch of fried beef empanadas and humitas, a corn dough boiled in the plant’s husks, a regional speciality.
By 2014, a year after Xi unveiled China’s Belt and Road Initiative, Jujuy’s government opened its first foreign office. Two years later, Pizarro, the energy secretary, travelled to China with the delegation that negotiated a US$330 million loan for Cauchari. China’s state import-export bank offered a rate of 3 per cent when Western peers were demanding about 8 per cent. The plant began producing electricity in 2020. Local leaders have an ambitious goal of ultimately tripling its capacity, to 1,000 megawatts, which would make it one of the world’s biggest solar plants.
Pizarro, like his regional governor, has been to China several times. A notary by training, Pizarro, who wears black-framed glasses and speaks with a distinct northern Argentine accent, likes to get things done. He is using revenue from solar power to finance schools for Indigenous people while respecting what those groups call la Pachamama, or Mother Earth.
“Argentina’s economy is so calamitous that only adventurers like China can do business here,” says Carlos Oehler, who ran the provincial energy and mining company Jemse. He also met five Chinese delegations interested in Jujuy’s lithium salt flats and magnesium deposits. “Jujuy is starting to dream of being an independent global player,” he says.
The province is making sure it gets a return by taking an 8.5 per cent ownership stake in lithium mines. Jemse is in talks for new projects with suitors from China, Australia and Canada, says company president Felipe Albornoz. Provincial officials are also pushing companies such as Ganfeng to open battery-parts factories in Jujuy rather than ship materials to Asia.
The contrast between Jujuy’s past and present is striking. The province is building a hub to spur lithium-related manufacturing right outside San Salvador, in the dying steel town of Palpala. New, shiny warehouses sit on overgrown land, in the shadow of the rusting steelworks and its cracked cooling tower.
Back in the capital city, on a recent weekday, vendors hawked bric-a-brac out of stalls by an old bus terminal. The new foreign influence seemed to both bemuse and worry them. “At this rate we’re all going to become Chinese,” says Mirtha Ramos, a 49-year-old mother of three who was selling fake designer caps. Nancy Ortega, 31, working at the next stall, adds, “I have a friend up in the mines who said the Chinese are taking over everything.”