China Fully Engaged in Latin America: What Is the U.S. Plan?

International & National Security Law Practice Group Teleforum

Event Video

Listen & Download

China’s Belt and Road Initiative’s (BRI) global ambitions have involved more than seventy countries. For the United States, these BRI developments and independent influence operations in South America raise security and strategy concerns. In the region south of Mexico and related seas, China is reportedly participating in more than two dozen deep-water port expansion and building projects. The PRC’s deepening relationship with Panama’s government has raised alarm, but China is also engaging with Bolivia, Argentina, Cuba, and Venezuela. China’s People’s Liberation Army operates a space station from the south of Argentina. Is China exporting digital authoritarianism through surveillance architecture, as seen most recently with the Fatherland Identity Card in Venezuela? Are there long-term implications for the ability of Latin American countries to make autonomous sovereign decisions, and for longevity of U.S. relationships in the region?


  • Dr. Evan Ellis, Latin America Research Professor, U.S. Army War College Strategic Studies Institute
  • Ryan Berg, Senior Fellow, Americas Program; Head of the Future of Venezuela Initiative, Center for Strategic and International Studies
  • Erick A. Brimen, CEO & Chairman of the Board, Honduras Próspera
  • Moderator: Julian Ku, Senior Associate Dean for Academic Affairs, Faculty Director of International Programs, and Maurice A. Deane Distinguished Professor of Constitutional Law, Maurice A. Deane School of Law at Hofstra University


As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript



Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group Teleforum calls, become a Federalist Society member today at



Guy DeSanctis:  Welcome to The Federalist Society's webinar call. Today, October 19, we discuss "China Fully Engaged in Latin America: What is the U.S. Plan?" My name is Guy DeSanctis, and I'm Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today's call.


      Today we are fortunate to have with us our moderator, Julian Ku, Maurice A. Deane Distinguished Professor of Constitutional Law at Hofstra University in New York. Throughout the panel, if you have any questions, please submit them through the question-and-answer feature so that our speakers will have access to them for when we get to that portion of the webinar. With that, thank you for being with us today. Julian, the floor is yours.


Julian Ku:  Great. Thank you so much. And thanks for everyone for joining us on this call. So I want to first thank Karen Lugo, who brought this idea to fruition and then dragged all of us together and put everything together. And we're just here to implement her plan. So, thank you so much, Karen, for putting this idea together.


      I think it's a really important discussion. There's really two questions, I think, that -- just for an average FedSoc member to think about -- are in the news, but maybe you don't really understand, like I don't always really understand as well as I should. First is China's Belt and Road Initiative. You hear a lot about this, but what exactly it is is a little bit murky sometimes. And then I think another thing that we don't talk enough about is what is the actual concrete impact -- especially on places we care a lot about, like our neighbors in the south in Latin America.


      So this conversation, I hope, will illuminate in a more concrete way what, exactly -- how the US-China strategic competition that we hear a lot about is manifesting itself outside just the realms of, say, military competition. And arguably, this economic competition in places like Southeast Asia or Latin America are just as important to this US-China competition as the military question. So this is a great way for us to investigate this.


      And so I'm delighted to introduce -- we have three panelists today, all of whom have really terrific insights and knowledge on these questions in different ways. So we'll hear -- I'll briefly introduce them here, but all three of them have very long, interesting backgrounds. But we have Google; you can find out more about them. But just to briefly describe them, we have Dr. Evan Ellis, a research professor of Latin American studies at the U.S. Army War College Strategic Studies Institute, who also previously served at the State Department's Policy Planning Staff related to Latin America and the Caribbean.


      We'll also hear from Dr. Ryan Berg, a Senior Fellow in the Americas Program at the Center for Strategic and International Studies, whose research also focuses on US-Latin American relations, and that includes a lot of stuff I'm not going to mention because that's too much to go through here -- but pretty much everything, actually. So he'll be a great resource for us.


      And then, finally, we'll hear from Mr. Erick Brimen, CEO and Chairman of the Board at Honduras Próspera. Previous to his current career as a cool entrepreneur, Erick had a long career in investment banking and finance and he has some really great insights about some on-the-ground views with the things that are going on in Central America and Latin America with respect to BRI and other things.


      So I do encourage all of you -- these are all tremendous experts for us. And thank you so much for joining us. So I'm going to just take three minutes, hopefully, to set the table where I explain to our audience what BRI is. And then I'll turn it over to our experts to discuss the US relationship with Latin America and how BRI is affecting this relationship.


      So BRI was launched in 2013. So it's been around a long time. A series of speeches by, then, new Chinese leader, Xi Jinping -- it was originally called, in English, "The Silk Road Economic Belt and 21st Century Maritime Silk Road." The English often refer to it as "The Silk Road" or something like that. Later, it was shortened to Belt and Road Initiative. Silk Road seemed a little troubling association.


      But the bigger picture idea for China was it is a program -- a way for China to use its resources to expand economic cooperation with places that it already has a lot of trading with, like Europe, but also throughout the world by supporting various forms of infrastructure development to enable economic growth and trade. Sort of like -- some of you are familiar with the US Export-Import Bank -- but on steroids – like if it was 1,000 times bigger than it actually was when it was in [inaudible 00:04:54].


      So the state supported development projects around the world. And just to give you some perspective, there are an estimated 3,100 BRI projects that have been started since 2013 worth an estimated -- and this is just a guess -- at least $1 trillion. At least 123 countries around the world have agreed, in some way, to participate in a BRI project. Keep in mind this is not an aid program. China is not handing out money. It's a Chinese government-led program to facilitate mostly infrastructure projects -- roads, bridges, power plants, ports -- financed with mostly cheap state-backed Chinese government loans or Chinese bank loans.


      And the idea, from the Chinese perspective, is to support the continuing growth of Chinese state companies that have kind of run out of infrastructure projects at home in China to do and to expand their footprint, give them new -- more work around the world. And there's a lot of infrastructure that needs to be built around the world. And also -- this is the part that we might want to talk about -- it deepens China's political and economic influence in places that it might not otherwise have great influence. Think about 123 countries around the world.


      And so the US originally did not have any, really -- it was just, kind of, "Oh yeah, this is great. It's just a project." But starting in 2017, the US government began to become more openly concerned and critical of the BRI as a mechanism for spreading Chinese influence. And the goal of the conversation today, I think -- I'd like us to try to explore -- in concrete terms, what exactly is the issue? Is there a problem with BRI? What should the concern be about this sort of BRI program in places like Latin America? So, for instance, Panama has a BRI project. Does that matter or should we care about Panama's relationship with China and the BRI?


      So what I want to do, then, is just turn this open to our panel. And I'll begin to set the table also, just because not all of us are up on US-Latin American relations -- so I asked Dr. Ellis to give us, maybe, five good minutes on the overview of what are some of the big issues in US-Latin American relations right now before we dive in to -- I'll talk to everyone else about BRI and Latin America, in particular. So Dr. Ellis, if you could, give us a quick overview. Thank you so much.


Dr. Evan Ellis:  Julian, thank you very much. And also, thanks to The Federalist Society for the opportunity to be part of this panel today. The usual disclaimer: although I am employed by the U.S. Army and previously by the State Department, none of what I'm going to share today necessarily represents the views of the US government.


      So a little bit of setting the scene for the US relationship with Latin America. First, it's important to recognize that, independent of the political to and fro -- just the bonds that continue to unite the US and the region, I like to refer to as bonds of family-shared values in commerce. So for example, the census bureau estimates that there are about 60.5 million people with family origins in the region as of 2019. US trade with the region was about $703.2 billion in 2020. That compares, for example, with about $312 billion of Latin American trade with China. So from a Latin America perspective, the US, in general, tends to be somewhat bigger. And also, from a US perspective, US-China trade was only about $560 billion. And so, in many ways, at least in abject overall terms, the US-Latin America commercial relationship is extremely important.



      Now, obviously, there is a great deal of baggage, as taught often in Latin American schools, remembering various occasions of real or imputed US intervention in the politics of the region, particularly over the past century. But on the other hand, the United States is oftentimes seen in positive ways at the individual level in Latin America. The perception of the United States is a place where things work, the recollections of US contributions, whether through USAID or others. Many countries in the region have, for example, what we call "Barrio Kennedys;" the places that were recipients of US aid and support. And those things are remembered, at least at the personal level.


      Obviously, at the same time, there's oftentimes attention that the US can be seen as overbearing, really, in two different wayson the one hand, its insistency on democracy procedures, rule of law, transparency, etc., and oftentimes, its insistency on corruption and anticorruption and certain policies. Certainly, there was both an upside and downside to engagement in the region under the previous -- under President Trump's administration. On the one hand, I think there was, in many countries, a sense of appreciation and respect for the relative hands-off approach to their internal policies. And at the same time, there was a certain amount of frustration with what was sometimes at least perceived in the region as a transactional stylean America's-first style.


      And one of the ongoing themes in the region, of course, is this question of neglect, whether real or perceived. This, of course, came around again with respect to the Covid-19 vaccines, which initially China actually had delivered more vaccines to the region than the United States, either directly or through the COVAX facility. However, that is actually ebbing now. You have about 580 million doses committed to the region, of which about 40 million have already arrived. And so, oftentimes, neglect is a relative perception.


      Now, moving towards current events -- there are clearly ideological difficulties. Perhaps now more than any other time in the previous, perhaps, century, the region is moving towards a leftist, populist mood. You can see this with the consolidation of, frankly, authoritarian, often criminal, regimes in Venezuela and Cuba. You can see it with an increasing turn to the left with the Peronist regime in Argentina; with the return of the MAS in Bolivia, the former party of Evo Morales; with the victory of Pedro Castillo in Peru and his Perú Libre party; the prospects -- something that my colleague Erick Brimen, I'm sure, is following quite closely -- the victory of -- possible upcoming victory in Honduras' November election of Xiomara Castro, with a new united grouping of leftist parties there; the prospect, frankly, of a turn to the left in Chile with Gabriel Boric in those elections also coming up very soon. And even as we look towards 2022 -- even longtime conservative, close-to-the-US partner, Colombia -- the prospect, again, that Gustavo Petro on the left could win there, and that the Worker's Party of Inácio Lula da Silva in Brazil could come back.


      And that has not just implications about individual relations with the United States, but also in terms of multilateral bodies, such as the Organization of American States or bodies that promote more conservative rule of law orientations, such as PROSUR, in the region, versus others of a different bent, such as CELAC.


      Now, obviously, we're here today to talk about China. So it's important to recognize that the advance of China in recent years is causing discomfort in Latin America. Arguably, some of the places in which -- at least in terms of military and technology -- they have made the most progress, has been with populist regimes such as, formerly, in Ecuador, with Rafael Correa, in -- obviously in Venezuela, in Bolivia, in Argentina. However, they've also made significant -- with resources -- the infrastructure projects in the Caribbean.


      And frankly, even partners of all ideological stripes across other parts of the region, such as, for example, conservative Sebastián Piñera's, Chile; Brazil, even under Jair Bolsonaro; and even close-to-the-US partners such as the Luis Albinader regime in the Dominican Republic who basically overrode a previous promise not too long ago to accept the Chinese company, Huawei, in its telecommunications infrastructure.


      Obviously, with the incoming administration of President Biden, there's been -- some things have changed, some things have stayed the same. There's been a surprising amount of continuity on things like Cuba and Venezuela. However, also, some would argue a surprising amount of frustration with a lack of more progress against those authoritarian regimes. On the other hand, there's been a lot of focus on immigration; a lot of focus on Mexico, especially with the recent US-Mexico security summit that was just held -- a lot of very good-sounding words, although questionable the degree to which the new proposal will reverse some of the difficulties in bilateral cooperation you've seen there with AMLO, and whether it will be enough money and a program enough to overcome some of the shortcomings of the previous efforts under Mérida.


      And then, finally, worth it to point out that there's been a new tone of the new administrationnot only more multilateral towards the region, but bringing new focus on things like anticorruption, new focus on climate issues, new focus -- even in places like Guatemala -- on working with particularly vulnerable or neglected groups in the region. So that has elicited both positive and negative responses, probably from a different group of people than who were pleased with US policy under the Trump administration.


      So it's an evolving relationship, a complex relationship. It's like a long marriage. But certainly, a key to that, across the region, has been the advance of China and how that impacts the US since we are so intimately connected with the region.


Julian Ku:  Thank you so much, Evan. That was a very good -- at least, for me -- very informative overview of some of the things I haven't really kept track of. Before I move, I want to, then, dive into some of the specifics of BRI in particular and how that might be impacting some of the countries in the region. But before I do that, I wanted to let Ryan or Erick -- give them a chance if they want to add anything about big issues that we should also think about with respect to US-Latin America. Do you want to jump in on that, Erick? If not, go ahead, Ryan.


Ryan C. Berg:  Sure. Thank you, Professor Ku, and my fellow panelists, as well as The Federalist Society, and Karen and Guy for organization of this event. It's great to be here with you all today.


      I think Evan went through, very brilliantly, a lot of where we are in the current moment, what's the big, sort of, macro-regional landscape in Latin America. I just want to focus on just a few things that I would add to his overview. One is what I think has been ailing US-Latin America policy for a number of administrations now, across parties, which is a lack of strategic vision. What is the positive agenda for the US in Latin America? And I think it's not out of any sort of spite for the region. The fact is that the region, unfortunately, does not occupy the role that we all know that it has in terms of the United States’ security, prosperity, migration, domestic politics, etc. It plays an outsized role in all of those things, and, for whatever reason, fails to receive the requisite amount of attention in US foreign policy. And as a result, there's been a lack of strategic vision, I think, in the last few administrations for what is that positive agenda with the region.


      Meanwhile, China and other extra-hemispheric actors have been enacting some sort of vision. Not exactly a positive vision, in my opinion, but they've been enacting a vision in light of our -- I would characterize it as relative absence. The other thing is, as I mentioned, the entrance of extra-hemispheric actors in the last decade or so. So it's not just China. I realize we'll focus our comments today on China, but I just want to make a brief mention of the fact that there are other powers at play here as well, doing similar things, in some aspects, as what China is doing.


      So we're talking about the Russians and a certain amount of influence that Russia might have in various countries in the region, particularly those authoritarian populist ones that Dr. Ellis mentioned: Nicaragua, Venezuela, a little bit in Cuba. We're talking about Iran and a growing influence for Turkey in certain parts of the region. And so it's just, I think, important to keep in the back of our minds as we have our conversation today that it's not just China, even though we're going to focus our comments on China.


      And another thing that I think has ailed US-Latin American relations, and something that I want to add to Dr. Ellis's comments, is the breakdown in democratic values throughout the region that we've seen in the last couple years and the rise of what I would call elected autocrats in various countries, specifically because those have been ideal platforms for China to come in and exercise a greater amount of influence.


      And so it's not just Venezuela and Nicaragua. We’re seeing a burgeoning amount of influence in El Salvador. And that's been a particularly confounding place. We've seen a burgeoning amount of influence in Bolivia. Argentina was mentioned. We'll no doubt talk about BRI in Argentina and China's presence there. But I just want to point out the breakdown in democratic values and in the desire for democracy even.


      We've seen, in poll after poll in the region, a sort of democratic fatigue, a desire for possible experimentation with other political systems. I don't think it's quite at the point where we're worried about open calls for authoritarian political systems, necessarily. But I think it's important, in the context of China's engagement in the region, to keep in the back of our minds that support for democracy in the region has been sliding in the past few years. And that also explains some of what China is up to in the region, and some of the threats and dangers we'll talk about later, I'm sure.


Julian Ku:  Thank you so much. That's really helpful, and also dark and depressing. Okay. Erick, did you want to add something? I think you wanted to add something quickly to this as well. Thank you so much.


Erick A. Brimen:  Well, thank you. And, likewise, a pleasure to be here. Thank you to the fellow panelists and the organizers. I would highlight one thing that was just mentioned. The issue of immigration is very much a uniquely Latin American situation, or at least a predominantly Latin American situation nowadays. Immigration from all over the world into the US has always been an issue, but now, more than ever, it's both a humanitarian crisis, a national security concern, and an economic drag to one extent or another. But as I think we're going to explore a bit further, it can also be the underpinnings of an opportunity of how this strategic positive agenda might create a space in Latin America that would not otherwise be possible to the US elsewhere in the world.


      Another big theme I think that I see in the region very much relates to BRI -- is that there is a shift in the tools that other world powers are using such as to drive influence. So, 30, 40, 50 years ago -- Cold War, etc. -- the tools used would have been much more outright political to some extentmilitary in nature. Right now, they come cloaked in economic wrapping as well as technological investment. And so the tools themselves are quite different. And I think that that lends itself to the fact that, even though BRI has been a very significant strategy in the region, it's only until recently that it's really bubbled up as something of more concern because it comes through tools that don't seem as dangerous, if you will, as outright political or outright military investments. So I'll leave it at that for now because I think that tails in nicely to BRI in and out of the region.


Julian Ku:  Yeah, thank you so much. And I think that's one big theme, overall, to think about for all the folks who don't follow this as closely as that. I follow US-China a lot, and right now, we're talking about Taiwan and all the different possible military deployments, which is important, but there's a long game going on here. And it's much more sophisticated, complicated, than simply who's got more aircraft carriers.


      So let me shift gears and then turn to the meat of our discussion here. So let's talk about specifics of how BRI is impacting Latin America. I know Latin America is a gigantic place with like zillions of countries. It's a little crazy to talk about it as one place. But maybe talk some examples of how BRI has had an impact in Latin America, maybe which countries have had the largest impact or largest BRI projects. So maybe we'll start with Dr. Berg to start with this on this one, and then with Ryan, and then other folks can jump in afterwards. But Ryan, do you want to start us off here?


Ryan C. Berg:  Sure. I'm happy to give an overview of the BRI landscape in Latin America. China was relatively late to arrive in Latin America with BRI. In 2017, we saw the first country, Panama, sign on to BRI. But since then, what has struck us Latin American analysts is actually just how quickly BRI has expanded throughout the region. The region has 34 countries other than the United States, and 19 have signed on to BRI, if I'm not mistaken, with more expected in the future. One thing I often tell people, as well, is in Latin America, it does matter, to an extent, who's in BRI and who doesn't. But China has such a large trading partnership with quite a few countries that a country like Brazil, for example, is not in the BRI, but that doesn't mean that it's not the recipient of similar-style loans, of similar-style engagement and relationship. And so we have to bear that in mind, as well, that BRI matters, of course, but there are other countries with whom China is engaging and might not be in BRI, but in similar manners to which it's engaging countries in BRI.


      And another thing that struck us, I think, as an alarming factor, is just how quickly the economic and development relationship that's fostered by participation in BRI has gained other points of strategic depth in certain countries. And so it's moved well beyond just the simple building of infrastructure to the construction, for example, of so-called safe-city initiatives, the export of pretty critical surveillance technology that many of us would consider quite frightening if we knew the full extent of what it was monitoring and what it was capable of.


      And there's a real market for that kind of strategic relationship in Latin America with China if you consider that the region itself is only about eight percent of the world's population and yet represents about 33 percent of the world's homicides. So perpetual insecurity and security politics in Latin America has given the conditions to a situation where there's a market for that kind of technology. And that has followed on, in many cases, engagement through BRI mechanisms and through infrastructure development, and so forth, to become more strategic in that sense.


      And so, the other thing that I think we’ve seen -- before I allow other panelists to chime in here -- is that, in many cases, the diplomatic recognition of Taiwan has been at stake in countries engaging with China on BRI terms. And so it was a precondition of Panama, the first country to sign on to BRI -- to be able to sign on to BRI, it had to move away from Taiwan. And that's always sort of at the forefront of Chinese engagement with a lot of countries through BRI in the region.


      If I'm not mistaken, seven of Taiwan's 15 diplomatic allies are located in the region. And so there's a big upside for China there in terms of engaging through BRI. And that's pulling diplomatic allies away from Taiwan. So, I believe it's 7 of 15. But please correct me, Evan or Erick, if I'm mistaken. But those are three -- as I paint the landscape of
BRI in Latin America, those are three areas that I think are quite concerning, and areas for future analysis and to pay attention to.


Julian Ku:  Excellent. That's a great overview. It's an interesting angle that there's a market for Chinese surveillance and authoritarian mechanisms in Latin America, which I guess makes sense to me. But I never really thought of it that way before.


      Maybe, let's start with Dr. Ellis. Do you have any thoughts on maybe some specific ways BRI is impacting LatAm from your perspective?


Dr. Evan Ellis:  Sure. Thanks, Julian. And let me try to add to Ryan's really good overview here. So, first of all, the interesting thing -- since Panama came on, a total of 19 countries in Latin America have officially joined BRI, although it's not always apparent what that commitment actually means other than some perception that doing so allows one to plug in more deeply and receive presumed prioritization within the Chinese money train.


      It's expected that at the upcoming expected state visit with Argentina and China early next year, that Argentina is expected to be number 20 in Latin America. In terms of the number of overall projects, and because projects in Latin America -- infrastructure projects -- are not officially assigned to BRI -- I'm going to talk about infrastructure projects in general across the range of countries. Probably the most authoritative database on this is actually put out by a good friend and colleague of mine, Enrique Dussel Peters, at UNAM and CECHIMEX in Mexico City. And they estimate that from about 2000 through present, there have been a total of about 140 different projectsinfrastructure projectsby China in Latin America, totaling about $94 billion.


      Now, also, it's important to remember that there are other aspects of this besides just the projects. We can also talk about trying to do strategic partnerships in the region -- membership in the Asia Infrastructure Investment Bank, of which you have five Latin American members and three prospective members. Bu, in general, when we talk about the actual projects, we can really -- and again, as Ryan so well pointed out -- it's multidimensional. It is construction of roads, but it's also rail. It's port construction and expansion. But it's also things like electricity generation and transmission and distribution. It's also telecommunications infrastructure. It's also banking and e-commerce infrastructure.


      So, when we begin to put those things together, including this new term that the Chinese have coined and applied in Latin America, the "Digital Silk Road," you come up with some interesting insights. Number one is that it is true that very few of the big-ticket items that the Chinese government or its companies have announced in Latin America have actually gone forward. So if we talk about, for example, the Twin Ocean Railway that was going to be a $10 billion project connecting the Atlantic in Brazil to the Pacific in Peru, carefully avoiding Bolivia, that didn't go forward, nor did the famous Nicaragua Canal of entrepreneur, Wang Jing, nor did the trans-Colombia canal, nor did a series of other dry canal projects.


      What's interesting, though, is when you really look in the details of the number of projects that I talk about -- that little projects have quietly gone forward. Even today, for example, it's actually one of China's biggest infrastructure companies -- CCCC -- that is involved in Andrés Manuel Lopéz Obrador's Tren Maya project. Of course, you mentioned the Belgrano Cargas Rail system, which connects Argentina across the country and with its neighbors. S, already about $5 billion worth of work has been done by Chinese companies on that in the past decade, and they just signed up for about $5 billion in new work for the further modernization of that.


      There are countless highways worked by about five major Chinese companies, for example, in Bolivia under the Abel Morales regime. And even in smaller places like Jamaica, about a billion dollars' worth of different project fundings, first under the JDIP and then under the MIDP, but just in Jamaica itself.


      But again, it's important not to think about just the building of highways. So, for example, when we think about ports, it is true that you find the formerly Hong Kong-based Hutchison Whampoa with, actually, a total of six ports operations in Mexicothree in the Bahamas; one in Buenos Aires, Argentina; three in Panama. But there are also new Chinese port operations, such, for example, as construction of a big new minerals port in Chancay in Peru; the actual subbing to DP World by China Harbour of the construction of the port of Posorja, in Ecuador; about four major port projects in Brazil; China Merchants Port in Kingston, Jamaica; the talk, of course, about the possible expansion into a port free-trade zone complex -- which, I believe Erick will have some things to say with respect to El Salvador -- even a new possible petroleum port in Berbice, Guyana, etc.


      But as I mentioned before, it's also electricity generation. China has done numerous projects in the hydroelectric sector. China has done numerous projects, also, with respect to solar panels, many of which are often believed to be -- the technology often accused of being stolen from European partners previously. But for example, the two biggest PV projects in Latin America right now, the Cauchari Complex in Argentina, and the new expanding complex near Acu in Brazil, both by Chinese -- electricity transmission. The Chinese have invested about $25 billion in Brazil in electricity transmission state grid -- China, through Gorges, SPIC. They’ve invested in about five total acquisitions in Chile, giving them control, literally, of 57 percent of electricity transmission. Yes, 57 percent of all electricity transmission distribution in Chile with the completion of the most recent CG acquisition.


      Of course, Ryan, importantly, mentioned smart cities, things that are frightening in their implications with the possibility as the exporter of authoritarianism, such as ECU-911, or BOL-110, and others, as well as e-commerce. Although in the United States we often think of Uber or Lyft, in Latin America, the Chinese rideshare application, Didi Chuxing, has about 50 percent, five-zero percent of the entire rideshare market in the region. And of course, there are other Chinese e-commerce companies, like Alibaba, that continue to struggle as well.


      But finally, consequences. So obviously, number one is that because so few of the Chinese companies are bound by ties of transparency, things like that, we’ve seen massive corruption associated with Chinese projects in Venezuela and Ecuador, among other places. The risk is an incubator of populism. So with, for example, in El Salvador right now, Nayib Bukele basically bet on Chinese money and basically told the United States and its human rights agenda to go pack sand with respect to the firing of five key persons within -- the attorney general, etc.


      One of the risks, of course, that Ryan alluded to is the loss of sovereignty. The risk that, if you're passing your datayour government or commercial datathrough Huawei technology -- given that Huawei is obligated, under China's national security law, to turn that over to the Chinese state if it asked -- you have questions of loss of sovereignty, loss of secrets, as Ryan also really alluded to, in Taiwan.


      So, yeah. Literally nine of the fourteen states in the world that continue to recognize Taiwan are found in Latin America. There's Paraguay, and then in Central America, you have Nicaragua, Honduras, Guatemala, and Belize, and then the rest in the Caribbean. And the issue then becomes -- and we've seen how scary things are getting with PLA violations of Taiwanese airspace in the cross-straits right now. And so the prospect of a war over Taiwan doesn't seem that far away anymore.


      But in that context, the fact that so many of the last partners that Taiwan has between it and international isolation are found in Latin America means that, as partners flip to get those infrastructure projects, that destabilizes the situation in the Taiwan straits more and more and more.


      And then, finally, the question of who benefits from these resources. There is an absolutely fantastic report that was done using USAID data taking a look at 100 loan contracts with the Chinese, taking a look at how things like the use of cross-default clauses and other things that we would consider lawfare, really allows the Chinese to lock -- they say, "Okay, we don't care about your internal political conditions or transparency." But at the end of the day, the contracts that China uses in case after case after case fundamentally does undermine the sovereignty and, frankly, the economic future of the countries that sign them. They effectively are payday lenders -- and expanding the question of who benefits from all these projects in Latin America, and who benefits from its resources, and who benefits from its markets.


      So those are some of the consequences, which again, for the United States being so intimately tied to this region, I think are of concern to us here in Washington.


Julian Ku:  Thank you so much. That's great. And that's also, really -- both are tremendously useful data points to think about. Let me just turn to Erick, who has a different perspectivea little more on-the-ground perspectiveto share with ussome thoughts about BRI. Go ahead, Erick.


Erick A. Brimen:  It's been excellent. Most of the major things have been covered. I would simply add that what effects are not being had? So one of the things I've noticed with BRI projects on the ground is that they tend to not include as much local labor, local businesses, and of course, Western enterprises, US companies, and what have you. They are basically Chinese-funded, Chinese-executed, and with temporary imported labor to carry it out. So there isn't as big a boost to the economic activity that would otherwise be happening if it were more locally sourced. So that's something that's not happening.


      Also, the environmental dimension -- in ESG-related matters, they're not as present as US-backed infrastructure projects. And that has repercussionsbig repercussionsin various countries more than others. We saw what happened in Panama, Jamaica, we can go on, project by project. But in general, there doesn't seem to be an organizing principle or decision-making on these massive infrastructure projects.


      And then something else that I think has been implied, and I think we all know, but it's worth mentioning very explicitly -- almost 100 percent of these projects are funded by almost 100 percent of Chinese government money through state-owned enterprises or flat-out banks owned by the state. And that's quite different than the typical US Western set of foreign direct investment where there is a healthy mix of multilateral and private investment. And that comes with repercussions and implications, obviously, in the exercise of those draconian loan terms that you mentioned. But more broadly, it's just a different ballgame altogether. It is the Chinese Communist Party, basically, lending and providing capital, not the Chinese economy at large.


      Digital Silk Road has been mentioned in the context of smart/safer cities. But the implications of that technology and technological infrastructure being funded by China and Chinese companies I don't think can be overstated -- the security implications and the economic implications, by way of accessing secrets, data, and just -- without having to control -- essentially leveraging that information for strategic advantages. In a context where, again, the Communist Party and state-owned enterprises having all that at their disposal without the same standards of due process that we're used to in the US, I don't think it can be overstated. It's huge. It's completely a different structure as US-backed and the Western-value-backed financing.


      I'll leave it at that for now. I think so much has been covered. Eventually, we'll get down to some specifics and, I think, what we can do about it. But, back to you. Thank you.


Julian Ku:  Thanks. Thanks so much. Can I just -- there's a question that popped up I thought I would just float in now, just to go with something that Evan mentioned, specifically. China is being accused of debt-trap diplomacy. And I think I agree with Erick that, although it's kind of complicated, you're right. The money is flowing through state-owned banks. It's ultimately the Chinese government who backs those banks. But there is a Chinese government influence that's not present in a lot of US infrastructure or other countries’ infrastructure, in essence. And that gives them a different cast. But you were talking about specific contracts, Evan. But is that across the board? Do you feel like that's debt-trap diplomacy? And one thing I've always wondered is, what's the worst that can happen? We've seen countries default on their lenders, and the lenders are the ones who are kind of screwed, not the borrowers. So, is there a way out for these borrowers in Latin America?


Dr. Evan Ellis:  Well, Julian, this is a great and very important question. And I think that so much of the use of debt-trap diplomacy has been an unfortunate term because, while it's partially accurate, it leads us to focus on one of the lesser important parts of what China does. In general, the overall contribution by China to a country's debt-load, in overall terms, is -- in some cases, it's a little bit worse than others, but it's generally not that great. But it's really how China acts as a loan sharkas a payday lender. It ensures that it gets paid, oftentimes to the disadvantage of the country's development.


      So even the classic case of Hambantota in Sri Lanka that you alluded to -- even there, it wasn't so much about unsustainable debt, but that when that deal was signed, it was signed by one party, and the work was actually done -- even though it wasn't a viable alternative port, it was a port that would be built where their supporters were concentrated, and so the economic benefit would go to a certain party. Now, the other party came into power in Sri Lanka and says, "Well, we don't want to be saddled with this debt for something that benefits, basically, the political base of our opponents." And so the Chinese were there with their contract terms, saying, "Hey. We've got a solution for you. Just give us the lease on the port, and we'll take care of things."


      And so, at the end of the day, it shows you how politics and personal benefit and, kind of, that lawfare with the loan terms come in to bear. And so, when you look at, especially the countries which are most vulnerablethe populous countries -- so Venezuela -- about $64 billion in Chinese spending just disappeared. And a lot of that was through corruption. But a lot of it was -- for example, the Tinaco-Anaco railroad project. The Chinese were actually paid to do work in a project that ended up basically being abandoned and didn't produce any value. In Ecuador, the Coca Codo Sinclair Dam facility -- again, even a relatively better oversight of the Correa government. But at the end of the day, Coca Codo Sinclair had over 400 different defects, according to a German audit.


      Almost none of the dam projects for which the Chinese were paid in Ecuador and beyond that -- if you talk about Toachi-Pilaton, if you talk about Minas San Francisco, if you talk about any number of the other ones -- either were completed later or weren't completed at all. And so, the real problem is that China uses these vehicles for making sure that they get paid for the work that they do, even if that work produces absolutely no value. And the only country that wasn't defaulted on by the Maduro regime was China because they had that loans-for-oil deal in which, basically, all the line of credit never left China. It went through – it basically went -- the Chinese banks. And actually, it was China CMPC who was actually working with PDVSA to pump the oil out of the ground.


      So unlike other populist governments who just say, "Well, we're not going to pay this bond," the only way for Venezuela to stop repaying China for that was actually to get in and physically stop the Chinese from pumping the oil out of the ground in Venezuela.


      So the problem that I see again and again when we talk about debt-trap diplomacy is the real problem is that the less transparent you are, the less rule of law that you have, the more you're at risk, basically, that all these things -- the win-win is it goes to China's benefit with China's influence working through local elites, working through weak institutions. And at the end of the day, Latin America is the one that's prejudiced, that is hurt like it has been hurt by other interactions throughout its history.


Julian Ku:  Let me just -- that was --.


Ryan C. Berg:  If I could just add to this.


Julian Ku:  Oh.  Yes. Go ahead.


Ryan C. Berg:  Can I -- do you mind if I just add to this Professor Ku?


Julian Ku:  Yeah, go ahead. Go ahead.


Ryan C. Berg:  So, Evan mentioned, I think, a really important report in his previous response. And I think he was referring to the most recent report out of AidData --


Dr. Evan Ellis:  Yes.


Ryan C. Berg:  -- which is a research lab at William and Marya very solid research lab that's engaged in excellent research, in my opinion, on BRI. And their most recent report found that, not only is opacity an intentional policy of Chinese BRI, but also that after observing and delving into more than 100 contracts, if I'm not mistaken, that countries are $385 billion more indebted than what is publicly reported.


      And so the level of indebtedness has been intentionally hidden as, I think, a way of protecting against buyer's remorse spreading further than it potentially has. And the other thing that I would say is, when it comes to debt-trap diplomacy, we haven't seen Chinese engagement through BRI for enough years in Latin America, given that I mentioned in my overview, 2017 is the first moment where we see a country in the region sign on to BRI.


      We haven't seen enough of that engagement, to the point where we would see the Chinese actually taking over infrastructure projects in the same way that they have in Sri Lanka. Evan mentioned Sri Lanka as an example.


      And so far, what we've seen is just an extension of further credit lines, or the acceptance of goods in kind, like Venezuelan crude, as a form of repayment, but we could in the future. And I don't think it's out of the realm of possibility that we could see Sri Lankan-style takeovers of critical infrastructure in Latin America if the Chinese decided not to either extend further lines of credit or extend payment timelines to countries that fall into arrears.


Julian Ku:  Yeah, okay. Thanks. Erick, go ahead.


Erick A. Brimen:  I’d simply invite the attendees to do a thought experiment. When countries in Latin America have become too indebted where it was obvious that they could not pay back the World Bank, and largely influenced and led by the US, engaged in a series of debt-forgiveness programs, not with zero strings attached, despite that it was so reported in some cases, but those conditions would have been, and were, relatively aligned with principles of good governance that we would associate with, I would simply invite the audience to consider, A, would China ever engage in debt-forgiveness programs? And then if they were to do so, in exchange for what set of conditions? Yes, takeover of critical infrastructure has already happened, but that, to some extent, is the lesser of the potential evils because in the end, it's just physical infrastructure, as strategic as it may be.


      But how could those conditions help shift governance institutions, principles of law and order, shift away from or towards democracy, free markets? So it is very significant. It's not just about, “Well, the lender might end up with a defaulted loan.” It is, “What can happen as a result of these countries becoming overburdened with debt, unable to pay, where the lender then holds the cards of influence, how would they resolve those disputes?”


      And in the middle, of course, is a system of international world order that the US has to stand behind. If it doesn't, then it erodes its own interests around the world of institutions and standards that, when agreements are reached among sovereigns, they have to be honored. So it ends up putting the whole system in a catch-22. And it does really matter a lot that they not become overwhelmed by it.


Julian Ku:  I wanted to shift gears just quickly to -- that's really an important point. So now that we've identified the problem, what, if anything, can the US do -- putting on my little Trump hat for the moment -- this is a Latin American problem. This is not America's problem. They entered into these agreements. It's their deal, not our deal. Right? I think you guys made some strong cases. But if the US were to do anything, what could it do at this point? It's not even what it should do. What could it do, I guess? Maybe I’ll start with Erick since you just wanted to talk about that one. Go ahead.


Erick A. Brimen:  All right. I think we've been talking mostly about the situation at hand. I would like to briefly recategorize it from this simplistic perspective, which is, in our current -- as USA -- state of engaging with the region, and recognizing the seeming lack of a positive strategic agenda as it was mentioned earlier by Dr. Berg, it would seem to me, from the ground, that the main tools that are perceived at the disposal of the US are often more sticks than carrots. They can be reduced, particularly, to sanctions -- withdrawing aid, if you will -- more so than being able to directly participate, as the Chinese are doing through BRI, with more positive projects inside of an FDI agendaForeign Direct Investment.


      And that is historical in nature despite the fact that the multilaterals that are aligned to Western values in the US itself speak about private participation, the realities on the ground are often incompatible with foreign direct investment that is bound by FCPA standards and that, in fact, seeks a return on investment.


      And the reasons being, is, on the one hand, we have conditions on the ground, which in many countries can be corrupt, or weak institutions. And at best, even if they're not corrupt right now, there are short time-horizons during which investors can expect legal stability. Okay? So where the Chinese, through CCP-backed institutions, are able to have a more positive set of tools of investing, the US is kind of left in a defensive position of threatening to withdraw aid and not really able to promote responsible ESG-funded investments. So what can we do about it?


      You know, in an ideal scenario, you would help these nations improve, at the root cause of their issues, circumstances of good governance. That would be fantastic. And I think those are efforts that are ongoing. But they have relatively little impact at a national level in short periods of time. Especially in the meantime, as you have China and other world powers not really caring about those standards and seemingly getting ahead of the curve, and “I don't care about your environmental policy or labor laws or corrupt practices. Here's a billion dollars. And don't worry about the payment. We'll figure it out later.” You can't compete against that unless you have mechanisms by which to alter conditions on the ground in a timely fashion such that they are aligned to principles and values of good governance, property rights, human rights, environmental standards, etc.


      And what we see on the ground with Honduras, as a pioneer in the region, is that the best tool available to any of these countries are special economic zones, but not special economic zones in a very traditional sense, though they have largely worked around the world. And China, in a way, is a prime example. There are over 5,400 special economic zones in the world. Less than ten percent of them are in Latin America, and they are a bit of a late bloomer into the mix. But by and large, most of the foreign direct investment that has come into Central American countries have come in through special economic zones. And why? Because they provide a tool by which to create conditions on the ground sooner and with greater impact than if you just sit back and wait for the whole country to reform. That's messy, and especially with relatively short periods of time during which administrations are in power, they can be ephemeral.


      Special economic zones of the new form that are emerging, which seek to not just create better rules today, but actually a decentralized administrative structure so that you are creating public institutions that guarantee good governance, and you wrap that around longer than, say, four-year terms, legal stability agreements -- in the case of Honduras, they extend 50 years. But in other countries, they can be 10 years, 15 years, 20 years -- in any case, longer than what you, as an investor, need to consider what happens when the next party gets in power with a radically different agenda and can, through Congress, completely eliminate the laws upon which you invested.


      So special economic zones of the new type that are emerging, with Honduras as a pioneer, present that vehicle by which you break the cycle. US-backed capital can indeed enter into these countries with conditions of good governance that can be achieved in collaboration with national governments that honor their sovereignty, that respect property rights, and that, once you achieve those better conditions, are wrapped around a longer-term horizon of legal stability.


      And for the region, more so than anywhere else in the world, all these challenges that we were discussing earlier -- but immigration being, for me, at the top of the list -- and what's been happening with Chinese manufacturing and Covid, really highlighted the threat of having too much concentration in the manufacturing sector over there. We, on the ground, see a great opportunity for near-shoring, relocation of a lot of that manufacturing capability on to, especially, the northern triangle of Central America. But it applies to the whole region. In the context of true rule of law, ESG, Special Economic Zones, that, on top of countering China's influence, help deal with this humanitarian crisis seen at our border through illegal or irregular immigration.


      So on the ground, we are huge proponents of special economic zones properly designed and backed by US government and Western values as the right tool by which to cause reform, bring foreign direct investment, and effectively counter Chinese influence in the region -- with one last point. For these special economic zones to not become, basically, vehicles of, not just Chinese influence, but any other nation-state influence, there has to be -- and in some countries, there are -- standards that they do not apply where the principle on the other side is, basically, as state actor. Okay? They are privately funded, co-managed, like public-private partnerships, where the public side is the nation-statethe sovereign in the regionand a counterpart is, indeed, a private enterprise investing for profit, wrapped around a long-term stability agreement in a good-governance environment as opposed to a public-to-public partnership where the counterpart is a misaligned, perhaps nefarious, state actor or state-backed organization. I'll leave it at that, but happy to answer questions.


Julian Ku:  Okay, thanks. I think I didn't manage our time. We might be a little tight on time. But let me open the floor to start with, I guess, Ryan, and then, Evan, to give other thoughts on what the US -- short thoughts, maybe, unfortunately, at this point -- what the US might do. Maybe, Ryan, some quick thoughts on some additional things the US might do?


Ryan C. Berg:  Yeah. No. Erick gave, I think, a great summary of some of the potential benefits of special economic zones and, more generally, just what needs to happen with governance reform and property rights and the conditions for greater foreign direct investment in some places in the region. I think what we've seen out of the Biden administration so far is nascent discussion of rivaling the BRI in some sort of way with a recent trip of Deputy National Security Advisor, Daleep Singh, to the region -- to three or four critical countries in the region -- to talk about economic concerns and how the US might push back on BRI in certain ways. I remain skeptical that we're actually going to offer something that is enticing to many countries in the region. And I remain in a position of “show me the money,” because I just don't think it's necessarily there.


      I think one thing -- and this kind of dovetails with what I mentioned about the positive agenda in my opening remarks -- is we've been very clear with much of Latin America on our thoughts about China and about their relationship with China. And we've said "no" a lot. And we've also highlighted the dangers a lot. But what we haven't necessarily done is display that we have a super-sophisticated understanding of what an economic decoupling from China would actually entail for much of Latin America, nor have we really demonstrated much of an appreciation for what some of those costs would entail, nor have we really put in place what I would consider to be the conditions for a potential alternative. And so we're stuck in this space where we're saying, "No," but we're not facilitating the resources for some kind of alternative that we would find to be better.


      The other thing that I would say is we haven't really thought very much about the three-to-five critical industries where we really want to push hard to compete with China versus the ones where we see less of a strategic threat because it's just too big of an ask to say to Latin America, "You need to decouple economically from China." It's just not going to be possible. It's not going to be taken seriously by the region. And so we need to find those three-to-five areas where we really want to push hard and we really want to make the resources available to put in place the conditions for the alternative.


      Otherwise, we're really not going to get anywhere. And I would call that -- and I've characterized it in a couple of reports before -- as a policy of strategic denialdenying China extreme influence in certain sectors that we deem to be critical, after further study and further analysis, and then moving to put the resources in place to make the alternatives possible. But as of right now, I fear that we're just too busy saying, "No," and pointing out some of the dangers of engagement. But it's falling on deaf ears because those alternatives aren't being marshaled.


Julian Ku:  Thanks. This is -- I think we're still okay with -- we'll go over our time a little bit. So I'll just say one note on the -- we should never try to out-China China. America will never be a better China than China is. That's always a lesson to keep in mind. Go ahead, Evan, with thoughts on what the US might do here.


Dr. Evan Ellis:  Thanks, Julian. And both Erick and Ryan have made some excellent points here. And I concur with both. I just wanted to start out by highlighting a few things I think are particularly important from what they said and then add a few thoughts of my own. Number one -- and I think Erick did a great job of really highlighting some of the difficulties with programs like development finance corporation, which I think is a great idea in principle -- channeling private sector investment. But if, strategically, you don't have the tools in place after place to be able to actually have bookable investments that real, private sector investments actually want to invest because they don't have the judicial security, don't have the transparency, they don't have the other conditions, then it becomes very hard to actually put enough money in to, basically, compete against China's loan shark diplomacy, making sure that they always get paid.


      And I think DFC has continued to wrestle with that. And frankly, I become increasingly concerned when I see even more conditions being lumped onto DFC with respect to, it has to be green, it has to be super-anti-corrupt, etc., etc. I think we're actually shooting ourselves in the foot.


      The other thing I think that Erick points out -- and I thoroughly concur with the potential power of SEZs under the right conditions -- it's interesting, actually, that -- I think the second point that Erick made is very important as well, which is, we need to push back against the effort of going real or, effectively, Chinese-only SEZs. They tried to do it in Costa Rica when Costa Rica was a problem. They tried to do it in Trinidad and Tobago. They're proposing doing it right now with a buildout of the Port of La Union in El Salvador.


      And the bottom line,  what China likes to do is, basically, create a space for government-to-government deals in which Chinese companies have latitude of not only not paying taxes, but special dispensation with hiring Chinese labor, and how they treat the Chinese labor and things like that. It actually augments their competitive advantages and decreases transparency. And so SEZs, I think, are a powerful tool. But we have to recognize that it also can be a risk when used in the wrong way in the wrong hands.


      But, in general, I thoroughly also agree with what Ryan said about the difficulty. It's counterproductive to just say, "No, no, no." And part of the problem, I think, is we can't -- it's a strategic loser to tell our counterparts, "Don't do business with China." I think, number one, we have to focus on transparency and use our leversTreasury OFAC, our economic influence of other things, vehicles like USMCA, CAFTA-DRto use our economic and other levers to insist on transparency of interaction with all players, to insist on rule of law and things like open competitive public procurements.


      Oh, by the way, to be there and help our partners to strengthen their capacity in things like technically competent evaluations of those complex bids, planning up front -- I mean, one of the messes in Panama was the fact that you had then-president, Juan Carlos Varela -- became enamored with Chinese fast trains and was ready to commit $4 billion of the Panamanian people's money on something that was just commercially completely unviable, and, oh, by the way, was nowhere to be found in the Panama 2030 long-run Panama plan.


      So if you're spending billions of dollars of the people's money without having a plan of how it will add value-added for your country, you probably are going to spend a lot of money without getting value added for your country. And, oh, by the way, also -- as has been alluded to -- on the backend, pressing for enforcement of laws, whether labor or transparency. You're not going to stop all Chinese projects, but you will, in many ways, force the Chinese into a more level playing field in a way that makes that engagement less threatening.


      Then, I think -- two final things. Number one is there are certain areas that are so threatening to a country's sovereignty. And in that, I put things like Smart Cities with Huawei, and Hikvision cameras, and things like that, and 4G and 5G -- again, with significant reliance on Huawei equipment -- where the ability to even do an investment in the country, because you can't protect your own IP -- governments can't protect their freedom of decision because you can compromise the Vice-Minister’s personal life, etc., etc.


      And so, I think -- but when we do those things, we have to work with like-minded other allies, whether it's Nokia or Erickson, or others, to help provide commercially viable alternatives if we say, "Don't go with Huawei."


      And then, finally -- and I'm glad what we're doing here -- and I'm very happy with studies that -- and again, support what Ryan said about the excellent study -- thoroughly encourage everyone to take a look at the hundred Chinese debt projects with USAID data. Excellent --and an example of the type of thing that we need to be doing more of, which is more data-based analysis of what do the Chinese actually do, what is good, what’s bad, how does that compare with others -- so that when we engage, either politically or otherwise, we're not just saying, "China is bad. Don't do business with China," but we have empirical evidence of why certain types of things do not lead to an outcome that is not just in our own best interest, but lead to outcomes that are not in the self-interest of our partners. And so we need more data-driven things like that. And I think we need to invest more time and energy in doing so.


      But this is a very, very hard problem. But I think forums like this and data efforts like that move us at least a little bit in the right direction, and absolutely need a new strategic concept for how we do this.


Julian Ku:  Well, thanks so much. And I think we've blown through our time. So I'm sorry that we weren't be able to get to folks' questions. I noticed some folks have to sign off anyway, so they only allocated this time. So, I think that's a great way for us to end this -- to take this conversation. But I’ve learned a lot anyway. And this tremendous amount -- I think it's a complicated problem to deal with. I really appreciate the different angles everyone's provided here. So, thanks so much. I hope we can continue to discuss this issue in different ways down the road. I really learned a lot, and I hope our audience has done so as well. And we'll go ahead and sign off, if that's okay. And thanks so much.


Guy DeSanctis:  Thank you, Julian.


Dr. Evan Ellis:  Thanks to all of you.


Ryan C. Berg:  Thank you to everyone; appreciate it.


Erik A. Brimen:  Thank you much.


Julian Ku:  Thanks. Okay. Well I guess -- go ahead.


Guy DeSanctis:   Oh, sorry. Yeah. I was just going to give -- yeah. On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. And I want to thank our audience for joining and participating. We also welcome listener feedback by email at [email protected]. As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.




Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at