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Countering the trojan dragon: A Chilean case analyzing external influence in Latin America from the US and China

This paper analyses Sino-Us great power competition inLatin America, focusing on Chile as a case study. Chile, with an open economy, had invested heavily in multilateralism and liveral institutions as a way to enhance its long-term prosperity. In the past years, the US and China began a competition that is eroding these institutions, stressing medium economies that have trade dependence with both actors. From the one side, it seems that China is using its economic investements to lever national decision-making process while on the other, US has relied on its historical relations with the subcontinent, taking for granted a regional alignment. The question of this paper then becomes, how do the US and Chile minimize uncertaintl¡y while maximizing security and stability when there is so much potential for short-term gain from abroad?

States face significant challenges in the modern international order when determining how to balance short and long-term benefits and corresponding costs. The following narrative indicates that liberal institutionalism has been insufficient in providing Chile reasonable assurances against uncertainty when dealing with great power actors, like China, who seek to exploit institutions for their benefit. This problem is exacerbated by a general complacency on behalf of the US strategic polity by assuming they will be the preferred partner of choice based upon common values and interests regardless of external temptations. The reality is that Chinese economic incentives have been worth the risk for many US key allies, such as Chile, jeopardizing mutual interests within the bilateral US-Chile relationship. The question then becomes, how do the US and Chile minimize uncertainty while maximizing security and stability when there is so much potential for short-term gain from abroad? The US must realize that partner nations have difficult choices to make. If the US is not sensitive to partner nations’ options, it is evident that influential US allies’ economic investment choices with China may lead to significant security and military challenges as a product of Chinese diplomatic and economic leverage. Precisely, the US and Chile must recognize that each respective country possesses state-specific capabilities and needs that drive their particular world-views and each nation can benefit through intelligent investment in bilateral relationships that minimize uncertainty and maximize stability in the long-term.

John Mearsheimer remarked in his book, The Tragedy of Great Power Politics, “great powers are inclined to look for opportunities to alter the distribution of world power in their favor.”* Currently, the US and China are leading actors in the international order and compete for influence to tilt the balance of power. Most states are caught in the middle of this power struggle and seek to maximize their citizens’ benefit. Chile, a stable and prosperous country in Latin America, is an interesting example of a nation caught in this tug-of-war since they have begun to feel the pull from both sides. Concurrently during this power struggle, the US has drawn back from institutions that have not had “favorable terms toward the US.”* This is shown by the US’s phased withdrawal from the Paris climate accords in 2017 and Presidential challenges to partners to contribute more in the North Atlantic Treaty Organization (NATO) and the United Nations where the US is the largest financial contributor.* As the US pulls away from international institutions, China leverages them—without significant incurred costs—to support claims of legitimate investment when favorable to their interests.

Chile, a member of the Community of Latin American and Caribbean States (CELAC), has invested heavily in liberal institutions and agreements with other nations to provide for economic and physical security; however, short-term investments tilted in China’s favor threaten Chilean long-term stability. A Chilean case study illuminates how institutional investment, in line with liberal international relations theory, was intended to reduce uncertainty and generate stability. Chinese investments and actions in the region tend to be laden with ulterior motives and actually run counter to the long-term interests of the US and Chile.

As the US pulls away from institutions, Chilean uncertainty increases since a primary guarantor of the broader international order seems to be reeling. The US must continue to invest in these institutions since they provide legitimacy of action and develop formal ties that enable influence in the anarchic order. However, external actors, such as China, leverage these institutions in pursuit of their own interests that are counter to long-term goals for the US and Chile. Therefore, the US and Chile must capitalize on value of bilateral relationships independent of these institutions.

International relations theory justification

Ikenberry argues that the US shaped and facilitated the operation of substantial global institutions to favor US interests in the liberal international order. These institutions should theoretically regulate behavior of states that have free will in the anarchic order by increasing interdependence and reducing uncertainty.* Liberalist international relations theory generally operates with three basic assumptions: first, states are the main actors in the system; second, states operate across a range from good to bad, and third, democratic ideologies are preferable to reduce conflict in the system.* Not all states believe that liberal theories are sufficient in the current multipolar order, however.

US strategy shifted away from faith in the liberalist paradigm in the 2017 National Security Strategy to adopt a “Principled Realism” perspective toward international relations. This is evidenced by the US withdrawal from a myriad of institutions and agreements such as Trans Pacific Partnership (TPP), Paris climate accords, and even the multilateral Iranian nuclear deal. Through these actions, the US sends a message that balance-of-power style alliances are more important than the institutions that underwrite them.* In the 2018 US National Defense Strategy, one major objective is to strengthen alliances and attract new partners. It appears this approach is intended to be on an exclusive, bilateral basis to shift the balance of power in great power conflict as opposed to building a collective defense based on multilateral institutions.* The US has evolved its approach to Latin America, and utilizes all instruments of power to garner mutual benefit for participating nations.

The US presence in Latin America

The US takes a long-term approach in dealing with Latin America. It seeks to advance national interests and propagate common cultural values by developing and reinforcing relationships with countries in the region. An examination of US regional policy goals within the diplomatic, information, military, and economic construct demonstrates this point.

Diplomatically, the US pursues a strategy of hemispheric cooperation and security. Under the umbrella of an Inter- American community, the Department of State enumerates three objectives for the Western Hemisphere. They are: democratic, stable, and prosperous economic partners; security from terrorism and illegal drugs through international assistance; and collaboration in advancing common political and economic values.* Employment of the remaining elements of national power (information, military, and economic) support the stated diplomatic objectives.

In the information sphere, the Department of State leverages numerous programs to accomplish its goals. These are oriented around five lines of effort: “expanding economic opportunity and prosperity, advancing social inclusion and essential social services, ensuring a secure and democratic future, supporting a secure energy future, and multilateral engagement.* One example of these programs in action is the “100,000 Strong in the Americas” student exchange, which the department utilizes to increase the number of students studying abroad across the hemisphere to 100,000 by the year 2020. The goal is to strengthen bi-national relations and shared values in order to increase social integration resulting in common security and prosperity.*

Military cooperation with regional allies is the primary means by which the US addresses potential threats originating in Latin America and also supports the collective defense of the Americas. Through building partner capacity initiatives, the Department of Defense seeks to secure national interests in the region while freeing up the majority of US military power projection and warfighting capabilities to focus on other areas of the globe. Conducting advise and assist missions as well as multinational exercises, such as United International Anti-Submarine Warfare Exercise (UNITAS) and PANAMAX, constitute the majority of defense operations within the region to maintain and continue these relationships.*

Economically, US trade is inconsistent across Latin America, and it is weakening in some areas. The degree to which goods are exported to or imported from the US varies from country to country depending on political relationships and resource production capabilities.* Strategically, the US seeks to use its trade relationships within the region to promote economic opportunity by encouraging open markets, fair labor practices, and business friendly environments. The anticipated long-term results of such practices would increase regional prosperity and quality of life standards.* In 2003, the US proposed to create a free-trade area in the continent, commonly known as Free Trade Area of the Americas (FTAA), but the initiative did not prosper due to some countries’ opposition, principally Brazil. The US then shifted to privilege nation-to-nation Free Trade Agreements (FTAs), opening the door for other nations, like China, to increase their presence in Latin American and Caribbean states (LAC).

The Chinese presence in Latin America

China claims a working relationship with LAC dating back to the nineteenth century and in 2009, the Chinese Government took a step forward and published a state policy paper on LAC. This document recognized the movement of the world towards a multipolar system, where China – as the lead developing country – has aspirations to share developmental opportunities with LAC. This political document shaped the relations between China and LAC. As a policy, it not only focused on the economic relationship, but it proposed a comprehensive approach in 14 different areas of cooperation, including trade, investment, energy, tourism, cultural, and social issues. In general, the paper proposed developing a win-win situation where both actors would benefit from a philanthropic China with significant potential for gain by participating parties.

In order to give substance to the policy paper, China targeted CELAC, an Inter- American political association that includes all American States except for Canada and the US. This was not a random choice since there were two covert objectives. One was to exclude the US from discussions and the second was to exploit the institutional weakness of the organization. This enabled China to define the agenda instead of letting CELAC member states develop a common posture against China.* The result of this approach was the development of two action plans covering the years 2015-2019 and 2019-2025.* These cooperation plans inherited many of the main topics of China´s Policy Paper, emphasizing the character of win-win relationships and the importance of both economics and a comprehensive policy between both actors. This policy has been used by China´s premieres during visits to LAC to reaffirm the Chinese narrative indicating the will to develop stronger ties between both parties across the spectrum of CELAC imperatives such as environmental cooperation, human rights and security.*

Economically, China evolved their relationship with LAC to become a preferred partner. There has been a substantial increase of trade between the countries—especially in oil, minerals, and food.* In the year 2000, trade between China and LAC was around 12 billion dollars, representing only 1 percent of LAC trade; these figures increased substantially by 2013 to 289 billion dollars, transforming China into the main economic partner in many LAC nations, including Brazil, Chile and Venezuela.*

China’s policy paper was intended as voluntary guidance for the LAC states, but the real impact has been support for Chinese domestic diplomatic objectives. Although envisioned as a regional policy, it emphasized that each country must negotiate individually with China and leveraged Chinese power during negotiations. One substantial impact of this effort has been reflected in support for China’s One China principle, considering that out of 19 countries that still recognize the Republic of China (Taiwan), 10 are in LAC. This nation-to-nation approach permitted China to persuade Panama and the Dominican Republic to switch from supporting Taiwan to recognizing the People’s Republic of China in the last five years.*

Chinese military investment in LAC has been the least developed area, but there have been some attempts to project influence and power abroad. There have only been minimal military exchange programs between the states. Some minor examples include members of LAC militaries attending China’s Staff College and a Chinese frigate flotilla’s port visit to Argentina, Brazil, and Chile in 2013. As another example, the Chinese hospital ship, “Peace Ark,” has operated in the Caribbean and police troops were sent to Haiti after the 2010 earthquake.* While investment has been low over the past decade, this trend might be changing due to the increased interest of some LAC countries in Chinese armaments – such as helicopters, transport airplanes, and anti-air missiles – that can be obtained at lower prices than their US and European counterparts establishing a basis for interoperability.*

The Chilean case

The Chilean case study is a significant indicator of the shift of international diplomacy with respect to Chinese influence in LAC because of Chile’s historical adherence to liberal international relations theory and being internationally recognized as having one of the strongest democratic institutions in the region with an open economy. Additionally, it has free trade agreements and stable diplomatic relationships with both the US and China as well as a capable medium military force with high operational standards that seeks to contribute to peacekeeping operations. It also has free trade with an orientation to the Asia-Pacific region, as stated in its 2018 Defense White Paper.*

In the diplomatic field, Chile has selected a multilateral path by participating in a series of international organizations and operating as a leader in the international community. In the UN, Chile has advocated for their interests as a non-permanent member of the Security Council five times. Chile and China maintain close coordination at the UN, Organization of American States (OAS) and CELAC. They also have country-tocountry meetings with the last ones being visits from the Chinese President in 2013 and the Premiere in 2015. Since the year 2000, the President and Premiere have visited Chile four times, compared to only one visit from the US Secretary of State. With respect to the relationship with the US, Chile remains one of its strongest partners in LAC because of mature institutions and respect for the rule of law. Both countries have frequent consultations on issues of mutual concern, including the areas of international commerce, multilateral diplomacy, security, academic exchanges, military cooperation, and science.*

In the economic field, as a country with one of the largest numbers of FTAs in the world, Chile is heavily dependent on free trade and a cooperative international environment.* Under this paradigm, the country has joined a number of regional and world organizations including the Asia- Pacific Economic Co-operation (APEC), World Bank, and the Organization for Economic Co-operation and Development (OECD). Chile and the US signed a Free Trade Agreement in 2004, allowing the duty free export of US consumer and industrial goods to Chile. The US is the second major economic partner for Chile after China. In 2006, there were significant additional Chinese investments in the Chilean mining industry, and Chile subsequently signed the first Free Trade Agreement with China in Latin America.* The principal Chilean export is copper and its byproducts, and significant imports consist of a variety of finished products, such as cars, tools and agriculture equipment. Because of Chile’s reliance on an import and export economy, Chile has recently revived the TPP without the US to protect Chilean interests.

Militarily, Chile leverages institutions for their defense in addition to building very strong ties with the US. To underwrite Chilean security, Chile relies upon collective defense of the Americas through the Inter- American Treaty of Reciprocal Assistance, commonly known as the Rio Pact.* This treaty is buttressed through exchange and exercise operations with the US and allies. There is a large exchange of personnel in educational training programs plus a series of combined exercises that enable interoperability between both countries. An example of these exercises is PANAMAX, an exercise created in 2003 by the US, Panama, and Chile to protect the Panama Canal against foreign threats under UN mandate. Recently, Chile has become a major partner in the Rim of the Pacific Exercise (RIMPAC), an exercise designed to promote regional stability through multinational training. As an indicator of Chilean importance for the collective security, for the first time in 2018, a non-founding member (Chile) will be in charge of the maritime component of the exercise. Chile’s military relationship with China has been very limited with a small exchange program concentrated on the National Staff College. Chilean-Chinese military cooperation has been minimal, with the only combined exercise occurring in 2013 when two Chinese guided missile frigates executed basic exercises with Chile.*

Application and analysis of the Chilean case

As Chile moves forward in this uncertain environment, balance between utopian idealism and realistic consequences is imperative. In The Twenty Years’ Crisis, E.H. Carr outlined the potential for a dystopian alternative to liberalist ideology. Specifically, he states, “the relationship between theory and practice has come to be recognized in recent years as one of the central problems of political thought.”* Almost 80 years after publication, we continue to see elements of the utopian and realist tradeoffs in the international order with respect to investment in institutions designed to mitigate the uncertainty in the world. Chile, with a liberal vision of foreign policy, is wrestling with these issues as it balances economic development and security with the tradeoffs of political sovereignty and self-determination.

According to the liberal paradigm, economic integration with other countries should foster stability and increase collective benefit since greater exchange should reduce the possibility of conflict and improve opportunities for mutual prosperity; however, reality has not been representative of that advertisement. The China-Chilean relationship has grown increasingly unbalanced since the 2008- 2010 commodity crisis when China decreased their internal commodities import requirements. Chile, whose economy was overly dependent on commodities, felt the abrupt decrease in the copper trade and a subsequent economic shock.* Of significant note, the Chilean policy and investment did not shift substantially, and it was only able to rebound because of renewed Chinese commodity demands and a reopened market.

Despite increases on Chinese dependency by LAC states, Chinese emissaries continue to promote the “win-win” narrative in spite of evidence to the contrary. In April 2018, Xu Bu, the Chinese ambassador to Chile, made a public statement in a principal Chilean newspaper positing that China contributes to the world economy and all the countries of the world, including Chile, benefit from Chinese economic relationships. Additionally, he stated that China would continue as a main world peace builder, global developer, and defender of international world order.* In real terms, relations have not developed as expected—at least for Chile. China has become the dominant economic force in the relationship, buying only those commodities they cannot produce in the needed quantities domestically while also limiting Chilean foreign direct investment in China. Conclusively, there is no risk sharing in this relationship; unlike Chile, China has diversified its sources of income by purchasing commodities not only in LAC, but also other continental areas. As Leon-Manriquez and Alvarez stated succinctly, “while this trade relationship is now crucial for Latin America, it is not necessarily so much for the PRC.”* This trend is increasingly troubling since China significantly increased loans to developing nations in LAC that reinforce one-way  dependence on China. However, as of 2017, Chile is one of the few countries in the region with no state-procured loans from China, which increases Chilean diplomatic and economic maneuver space unlike many of their LAC counterparts, but pressure is increasing.*

The implications of this economic dependence are vast with the primary concern relating to how a country can leverage another without military coercion or compellence. The Chilean case presents a stark example of influencing international relations in this manner.

During 2018, ambassador Xu Bu has been involved in two polemics related to Chilean internal policies. The first was a Chinese investment in lithium exploitations because Chile wanted to add a chain of value to the product. The ambassador advocated that they intended to purchase unrefined material against the desires of the Chilean government, which would have significant economic implications for Chile. Similar to Chinese shaping efforts on Panama and the Dominican Republic with the One China initiative, the second instance was a direct request to reduce the influence of several parliamentary members who supported Taiwanese independence. The ambassador’s attempt to leverage economic dependence for diplomatic gain is a troubling indicator of a malignant trend to follow.*

Across LAC, China has exploited the imbalance of dependency for their benefit with a concurrent shift in imported goods from refined products to raw materials; this directly challenges the economic security of developed countries since exports that have value-added at the source generate significantly more revenue for the exporting country. As an example of this indicator, the Argentinian soy oil case reflects how China seeks to benefit its own market first. By 2008, Argentina was the top producer of oil from soy in the world, adding chain value to the product. China subsequently reduced its acquisition of this oil after developing domestic refinement capacity, limiting Argentinian imports to soybeans only.* This trend has continued across LAC as China has concentrated its imports on unrefined products by increasing ores, seeds, and copper from 50 to 72 percent of LAC exports in the last decade.*

The following table illustrates the dilemma and summary conclusions of the respective strategies in the current environment:

From this situation, the country’s leaders have to make a crucial decision: whether to maintain the country’s reliance on Chinese commerce, which means shortterm benefit vs. long-term uncertainty or develop another strategic approach that might not have the short-term benefits but may allow Chile to obtain a long term stability and security. While it is true that countries like Chile will heavily weight economic incentives to guide decisions in foreign relations, it is also true that countries electing to accept Chinese influence should consider long-term implications with respect to a vision of security and stability. This does not seem to be the case today. The US must understand this linkage between economic dependency and long-term stability of other nations. A true partnership will only be possible after considering the respective needs and capabilities of the participating states.


Effectively, China has developed the capability to project influence into LAC without the requirement to invest in military projection. Its increasing dominance in the economic field gives it enough potential leverage to deter other states from participating in military exercises and operations if China feels that the purpose of these operations – especially in the Asia-Pacific region – threaten their strategic objectives. China utilizes liberal institutions in the Americas to provide a guise for expansion of influence to bolster their capability to secure dependence of foreign nations, reduce US influence, and increase power to achieve the Chinese goal of regional hegemony. Therefore, despite significant investment in US-Chilean coalition military capability, collective defense of the Americas by American states is held at risk if that defense is counter to Chinese interests that are also in play. Alarmingly, China can do this without a corresponding Chinese military presence.

The US must increase investment in capturing and promoting a strategic narrative to counter Chinese malign influence. This should include promotion of advantages of resisting predatory influence and focusing on balanced investment that considers the long-term effects and benefits of US alignment. It is evident that short-term benefits from Chinese economic boosts have the potential to lead to longterm uncertainty with respect to stability and security for LAC states. However, it is impractical to encourage abstinence from China’s economy in LAC, and therefore the strategic narrative must increase deliberate consideration of the second and third order effects that Chinese predatory influence can offer.

The US and Chile must continue to invest in liberal institutions to build legitimacy in the strategic narrative while strengthening state-to-state relationships. Because of the inability of international institutions to guarantee security for participating states, strengthening and securing alliances with bilateral security relationships (along the realist paradigm) are fundamental to ensure appropriate security with the other instruments of power. Additionally, strong positions with respect to balance of power politics offer the ability to negotiate from a position of strength. Great power competition that relies on allies, such as Chile, must recognize that nations have options in the international arena that are not exclusive to them. States will operate in their own interests. Because of this, the US and Chile must continue to invest in secure relationships based upon identifying and pursuing common interests based on relative capabilities and needs of those countries.

Nota del editor: este artículo obtuvo el premio “LtGen Paul GCerjan Distinguished Writing Award”, otorgado por el Joint Force Staff College, de la National Defense University

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