Argentina’s Embrace of China Should Be a Wake-Up Call

The ninth Summit of the Americas, which the United States is set to host in early June, is shaping up to be an unmitigated disaster. Faced with the threat of boycotts by key regional leaders, the White House is clearly having trouble navigating Latin America’s current political moment—which is marked by an increasingly anti-American turn that has paralleled China’s consistent investments in the region.

The Biden administration has not provided a comprehensive answer to China’s engagement in the Americas. Indeed, while discussing the still-classified National Security Strategy document with reporters in January, an unnamed senior official on the National Security Council revealed that “the word ‘China’ is not mentioned in the Western Hemisphere section.”

Argentina is a prime example of how Latin America is turning eastward for its economic and development needs, possibly locking in a China-centric trajectory for years to come. In February, Buenos Aires became the latest member of Beijing’s Belt and Road Initiative, its overseas investment program. The Belt and Road now includes 21 countries in Latin America and the Caribbean, with Argentina its largest economic partner in the region to date. China has invited Argentina to attend the upcoming June summit of the BRICS grouping of emerging economies—Brazil, Russia, India, China, and South Africa—and to become a member of its New Development Bank, a Shanghai-based multilateral bank that aims to be an alternative to traditional financial institutions like the International Monetary Fund and World Bank.

China continues to lure Argentina ever deeper into its zone of geopolitical influence, notwithstanding Buenos Aires’ strong diplomatic ties to Washington. Without a broader approach to Latin America that speaks to Argentina’s development needs, the United States risks losing the country to China permanently.

There is a bright spot: Rising commodity prices and the global food shortage linked to the war in Ukraine have been generating high incomes for Argentine agricultural exporters. For this reason, according to the IMF, Argentina has growth potential in 2022—but only if it can quell political turbulence at home.

Argentina’s ruling Frente de Todos (“Everyone’s Front”) coalition is currently riven by infighting between the more moderate wing of President Alberto Fernández and the leftist, more ideological wing of Vice President Cristina Fernández de Kirchner. The discord is largely a result of disagreement over the IMF deal negotiated by Fernández—and resisted by the Kirchnerists—as well as the coalition’s heavy losses in midterm legislative elections last year. IMF loans and other Western sources of funding often demand strenuous, politically challenging macroeconomic reforms and structural adjustments in borrowing countries, such as austerity.

Debt and recurring financial crises have kept Argentina from securing sustained long-term growth. Today, Argentina has almost the same GDP as it did 10 years ago. Next to Venezuela, the country has been one of the worst regional performers in the Emerging Markets Bond Index, which tracks the bond performance in developing economies. Argentina’s repeated crises and its unwillingness to engage in austerity measures that limit superfluous public spending mean that it rarely finds affordable financing from private backers and Western firms in international markets. Over the past decade and a half, China has seized this opening and presented its state banks as the solution to Argentina’s woes.

Argentina is a prime example of how Latin America is turning eastward for its economic and development needs.

Beijing’s keen interest in Argentina appears as a blessing to leaders on both the country’s political center-left and the center-right, the former seeking to move away from dependence on IMF loans and the latter seeking to diversify access to international funds. Since 2005, Argentina has received $17 billion in loans mostly from Chinese state banks and $20.6 billion in currency swaps. In October 2020, Argentina became a member of the Chinese-founded Asian Infrastructure Investment Bank, and this February it joined the Silk Road Initiative, a Chinese-led project to provide funding for infrastructure and to improve connectivity between its economy and global markets.

The Fernández administration has undertaken a delicate balancing act between China and the United States. For Washington, Buenos Aires is a key partner for regional peace, democratic stability, and human rights promotion in the Americas, while the United States is a major source of foreign direct investment and sponsor of international cooperation programs in Argentina.

But Fernández’s zigzagging between East and West has led to several recent foreign-policy faux pas. For instance, mere weeks before Russia’s Feb. 24 invasion of Ukraine, Fernández visited Russian President Vladimir Putin and presented Argentina as a “gateway” to Latin America for Moscow, only to have to condemn the Russian aggression in Ukraine in multilateral forums soon after. Fernández has also sought to be an interlocutor with the region’s dictatorships in Venezuela and Nicaragua, reestablishing full diplomatic relations with Venezuelan President Nicolás Maduro. (The United States does not recognize the Maduro regime.)

Fernández’s domestic power struggle with Fernández de Kirchner has reared its head abroad, too. Fernández de Kirchner’s bloc would prefer to adjust Argentina’s Western orientation while pursuing full geopolitical engagement with China. The vice president’s anti-U.S. proclivities are well known from her previous tenure as president from 2007 to 2015. During that time, Argentina moved closer to Hugo Chávez’s Venezuela and received Russian presidential visits from Dmitry Medvedev in 2010 and Putin in 2014. Fernández de Kirchner’s Argentina also declined to condemn Russia’s annexation of the Crimean Peninsula in 2014 at the United Nations General Assembly and elevated Argentina’s relationship with China during President Xi Jinping’s 2014 visit. In recent declarations as vice president, she has praised Beijing as the “most successful capitalist system.”

Meanwhile, China’s courtship of Argentina has helped Beijing reap geopolitical rewards. China is funding the construction of the third-largest hydroelectric plant in the country, while it has also committed to funding Argentina’s fourth nuclear power plant—Beijing’s first export of such sensitive infrastructure to Latin America. Argentina already hosts a Chinese deep-space ground station in Neuquén province, which has been described as a “black box”; the facility is purportedly meant to track satellite launches and support the Chinese deep-space program, but most of its activities are unknown even to Argentine authorities. China’s Antarctic and global naval presence has grabbed the attention of those engaged in geopolitical competition in recent years. There has been talk of Chinese funding in Argentina’s polar logistics facility on the Beagle Channel, which can function as a gateway to Antarctica and is close to the Strait of Magellan and the Drake Passage, strategic chokepoints for global maritime traffic.

All this investment occurred in a pre-Belt and Road Argentina. The country’s recent accession to the initiative will only accelerate these sorts of projects—and provide even more causes for concern in Washington.

There is significant reason to fret that China’s infrastructure construction could be dual-use in nature, providing the Chinese military with points of leverage in a potential future confrontation with the United States. Even short of conflict, China’s economic and development influence can be leveraged to extract political concessions from borrower countries, locking them into dependency by circumscribing their foreign-policy options and contributing to a loss of strategic autonomy.

In Argentina, this hits at a particularly sensitive nerve: One critique of the last IMF deal was that it diminished the country’s autonomy. However, deeper engagement with China would only add a new layer of complexity, potentially leaving the country with little to no freedom as it becomes wedged between great powers.

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The United States should course-correct by leveraging a wide range of economic statecraft, foreign-policy, and security tools to improve its position in Argentina.

Washington has powerful tools of economic statecraft at its disposal: the U.S. Agency for International Development and the U.S. International Development Finance Corporation (DFC), to name just two. Yet there are rules constraining the ability of agencies like the DFC to provide genuine financing alternatives to middle-income countries like Argentina. Most of the corporation’s funding is geared toward low-income countries, of which there are few in Latin America.

Further, under the Biden administration, the DFC appears to be straying from its original purpose of lending and financing development with a concern for geopolitics. The DFC is now engaging in more risk-averse projects that hinder development and competition against China, which often funds projects that are riskier in nature. In June 2021, the Biden administration announced the Build Back Better World plan, which would spend $40 trillion on infrastructure in developing countries, but follow-through has been lacking. One immediate step Washington could take would be to cut the bureaucratic red tape required for DFC project approval.

The United States risks losing Argentina to China.

The U.S. State Department could also develop publicly available databases to track and catalogue the performance of Chinese state-owned enterprises. There are myriad cases of corruption, environmental devastation, and shoddy construction connected to these enterprises that should give Argentina pause before embarking on new projects.

Finally, the United States should enhance security cooperation with Argentina. U.S. Southern Command (Southcom), the U.S. military combatant command responsible for operations in Latin America and the Caribbean, has been tracking China’s advances in Argentina for years, and the Fernández administration is contemplating the purchase of Chinese-made JF-17 fighter jets, which would be the first Chinese-built aircraft in Argentina’s Air Force. The acquisition would increase the interoperability of the Argentine and Chinese air forces and provide China a pretext to augment its military presence in Argentina. Helping Argentina to rebuild its Air Force should be a top priority in Washington.

Southcom also has the capacity to help Argentina’s navy deter illegal, unreported, and unregulated fishing. Enhancing the navy’s maritime surveillance capabilities could become a bedrock of long-term U.S.-Argentine strategic security cooperation. China is the main offender of such fishing in South America, thereby placing the livelihoods of local communities, economic sectors, and delicate ecosystems at risk.

Without deepening engagement with Argentina and providing the country with incentives to alter its current trajectory, the United States risks losing Argentina to China. The juxtaposition could not be clearer for U.S. policymakers: While many Latin American leaders see little benefit in attending the upcoming Summit of the Americas, China in December 2021 convened a gathering of foreign ministers from the Community of Latin American and Caribbean States with ease and presented a robust agenda that addressed regional development needs. The looming summit fiasco should be an urgent wake-up call.