Latin American Governments Are Caught in the Middle of the U.S.-China Tech War

So far, policymakers have maintained strong ties with both nations. In 2021, they may face a point of no return.

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For most policymakers in Latin America, the best way to react to growing geopolitical tensions between the United States and China is obvious: Stay neutral. Given Latin America’s geographic proximity to the United States, growing economic dependence on China, and historic aversion to long-standing alliances that limit strategic autonomy, leaders across the ideological spectrum have largely decided to embrace a pragmatic stance and maintain friendly ties with both Washington and Beijing.

With few exceptions, this strategy was largely seen to be a winning formula over the past years. Chile’s right-wing president, Sebastián Piñera, for example, sought to present himself as the region’s most trusted interlocutor for both former U.S. President Donald Trump and Chinese President Xi Jinping. Mauricio Macri, Argentina’s center-right former president, and his center-left successor Alberto Fernández have likewise been keen to simultaneously maintain constructive ties with the United States and China. In Colombia, right-wing President Iván Duque preserved Bogotá’s historically close security cooperation with the United States but also made clear his administration had no plans to preemptively exclude Huawei as the country prepares to build its 5G network, a stance surely welcomed in Beijing.

Even Brazilian President Jair Bolsonaro, who projected himself as Trump’s greatest ally over the past several years, tasked his vice president, Hamilton Mourão, with protecting Brazil’s ties to China. Along with most of Brazil’s foreign-policy establishment, Mourão has long been an advocate of neutrality as tensions between Washington and Beijing have intensified. So even as Bolsonaro made deals with Trump—including an agreement to facilitate trade and to consolidate the United States’ role as leading investor in the country, a space cooperation agreement allowing the United States to use a launch site in Brazil, and the designation of Brazil as a major non-NATO ally—the country’s economic dependence on China deepened considerably. China is now the destination of almost a third of Brazil’s exports, while only about 10 percent go to the United States, the second biggest buyer of Brazilian products.

China has also become the most important trading partner for Chile, Peru, and Uruguay. In Mexico, on the other hand, the United States remains the largest trading partner by far, even though China has recently made inroads. Beijing also sought to woo Mexico City by promising to supply 35 million COVID-19 vaccines to the country. Although trade with third parties like the European Union remains important to Latin American economies, the last two decades saw Europe lose significant market share in the region.

Given the importance of both China and the United States to Latin America, it makes sense that policymakers would try to maintain a productive relationship with both. But it is unclear how sustainable the strategy will be in the long term. Latin American governments have largely sought to position themselves above the fray as the U.S.-Chinese diplomatic relationship worsened, quietly consolidating ties with both sides. In 2021, however, that strategic neutrality faces an unprecedented challenge. After being subject to diplomatic pressure from both the United States and China over the past few years, numerous Latin American governments will have to finally decide whether to allow Huawei to provide equipment for the construction of their 5G cellular networks. This pits the Chinese firm, which has a long-standing presence in Latin America’s main markets, directly against U.S.-backed competitors—and there will be no pleasing both sides.

After being subject to diplomatic pressure from both the United States and China over the past few years, numerous Latin American governments will have to finally decide who will build their 5G cellular networks.

Across the region, 5G technology and Huawei’s role has increasingly entered public debate during the past two years, shaped both by frequent U.S. warnings about Huawei and Beijing’s repeated denials of allegations that the Chinese telecommunications company would help China spy on Latin American citizens and governments. As the U.S. government ramped up its vaguely defined threats about “consequences” if Latin American countries did not bar Huawei from their networks and pick Western technology instead, Chinese diplomats began to lash out against the United States; China’s ambassador to Chile, Xu Bu, accused former U.S. Secretary of State Mike Pompeo of having “lost his mind” after the former secretary attacked Huawei during a visit to Chile in 2019. Huawei’s founder Ren Zhengfei said during an interview with a Brazilian newspaper that “the United States treats Latin America as its backyard … our goal is to help Latin America get out of this trap and maintain the sovereignty of each country.”

No matter which side Latin American governments eventually take, it will inevitably harm one of their two most important geopolitical relationships.

Some countries have made it clear that they will simply side with the highest bidder—but even that calculation can be tempered by diplomatic priorities. In Ecuador, for example, the U.S. International Development Finance Corporation negotiated a framework deal that involved helping Quito repay billions of dollars in loans to China in exchange for excluding Huawei from Ecuador’s telecom networks, but the deal has been criticized since last month. In Brazil, the Trump administration convinced Bolsonaro to join the U.S.-led Clean Network, an initiative to exclude Huawei that so far includes more than 50 countries, but in a humiliating backtrack, Bolsonaro later toned down his rhetoric against the Chinese telecommunication company and decided not to limit Huawei’s role in Brazil in what was seen as an effort to avoid delays in the delivery of Chinese-made COVID-19 vaccines.

Mexico faces similar pressures. Although President Andrés Manuel López Obrador has not joined the U.S. Clean Network initiative so far—other than Brazil, only Ecuador and the Dominican Republic have done so in the region—the United States does possess significant leverage over Mexico given the country’s far greater economic dependence on the United States. The Dominican Republic also decided later on to backtrack.

Paraguay, for its part, has opted for a somewhat peculiar compromise between Washington and Beijing. Although it maintains full diplomatic ties with Taiwan, it imports more from China than from anywhere else, and the government in Asunción is thought to strongly favor working with Huawei in its 5G rollout, largely due to its competitive pricing compared to its main rivals.

The decisions made now could color relations for decades. The debate around initial 5G building contracts is merely the starting point of a broader standoff. The United States and China are on track to build their respective technological spheres of influence with different technological standards not only for 5G but also with regard to any technological innovations that follow, such as artificial intelligence and quantum computing. Huawei has filed more standard-essential patents for 5G than any other 5G-related company. And China submits more technical documents to the International Telecommunication Union—which serves as the basis for debates about new standards—than any other nation, a move seen as an attempt to internationalize its own standards and make its companies more competitive.

The U.S. response—seeking to isolate Huawei and push for its own standards—has raised concerns about the negative consequences of two separate technological spheres. In 2019, in his annual report prior to the opening of the United Nations General Assembly’s 74th General Debate, U.N. Secretary-General António Guterres said he feared “the possibility of a great fracture: the world splitting in two with the two largest economies on Earth creating two separate and competing worlds, each with their own dominant currency, trade and financial rules, their own internet and artificial intelligence capacities, and their own zero-sum geopolitical and military strategies.” That seems to be coming to pass.

Perhaps even worse for Latin America in particular, it is possible that the region’s nations will opt to join different spheres, which could make their technologies largely incompatible further down the line. Latin America has already paid a heavy price for its inability to jointly tackle challenges as raging transnational crime, refugee crises, and incoherent responses to political crises suggest. Yet the geopolitical toll of diverging 5G decisions could be greater still, creating irreversible obstacles to greater regional cooperation in the future. After all, a significant part of the global economy will be tied to new technologies—from autonomous cars and drones used for transport and warfare to communication and global finance—and all of them will be subject to the new rules of the emerging tech war.

Perhaps even worse for Latin America in particular, it is possible that the region’s nations will opt to join different spheres, which could make their technologies largely incompatible further down the line.

Although the global tech industry will be the most exposed, other sectors will feel the pain as well. Growing restrictions on technological firms have quickly seeped into other related areas: Broader restrictions in banking and venture-capital funding are already emerging, a trend that will inevitably grow to include other industries. For example, the United States might be expected to consider limiting intelligence sharing with Latin American countries that use Huawei technology, a move that could affect the fight of security forces against the region’s powerful drug cartels.

After Chile began its 5G auction in 2020 without banning Huawei from supplying components, most Latin American countries are now in the process of defining the rules of their own bidding processes. Aware of the potential backlash their decisions may have on ties to either Beijing or Washington, governments will likely either attempt to include caveats—for example, not banning Chinese suppliers but establishing monitoring mechanisms in an attempt to appease Washington—or attempt to negotiate generous financial support from Washington in exchange for limiting or banning Huawei outright. Whatever they decide, it is bound to have far-reaching consequences not only for individual nations but for Latin America as a whole.

Oliver Stuenkel is an associate professor of international relations at the Getulio Vargas Foundation in São Paulo. Twitter: @OliverStuenkel

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