Features | Diplomacy | East Asia

Did China Overestimate the Geopolitical Returns of Its Latin America Strategy?

The assumption that economic leverage leads to political influence has underpinned China analysis for decades. Developments in Latin America are calling that into question.

Since China began making inroads into Latin America, its regional strategy has been driven by a relatively simple premise: that economic engagement can generate long-term geopolitical influence.

The logic appears straightforward. Countries that become increasingly dependent on Chinese markets, financing, investment, infrastructure, and trade should gradually become more receptive to Beijing’s political priorities.

This assumption has shaped discussions about China’s global expansion from Africa and Southeast Asia to the Pacific Islands and Latin America. It has also helped explain why Beijing has devoted enormous resources to expanding its economic footprint throughout the developing world through initiatives such as the Belt and Road Initiative (BRI), launched in 2013 to connect Asia, Africa, and Europe through a vast network of ports, railways, highways, and trade corridors.

But recent developments in Latin America are calling this perceived wisdom into question.

If economic engagement is measured through trade volumes, investment flows, and commercial activity, Beijing’s position in Latin America remains strong. The more relevant question is whether China’s economic success has generated the level of geopolitical influence many policymakers expected it would. After more than two decades of engagement, Latin America offers an opportunity to evaluate the strategic return on China’s investment.

China’s strategy has produced undeniable economic success. Trade continues to expand. Chinese companies have invested billions of dollars across multiple sectors and remain active throughout the region. Infrastructure projects continue to operate and financing agreements remain in place. Several governments view China as an indispensable economic partner; it is the second largest trade partner in Latin America and the Caribbean.

There have certainly been geopolitical impacts along with the economic expansion. In the last nine years, five Latin American countries switched diplomatic recognition from Taiwan to China: Panama, the Dominican Republic, El Salvador, Nicaragua, and Honduras. The BRI expanded into the Western Hemisphere, and Chinese influence became a permanent feature of discussions about Latin America’s geopolitical future.

Yet recent developments suggest that the geopolitical returns may be less obvious than many observers once assumed.

Panama illustrates the challenge facing China.

Given the strategic importance of the Panama Canal, many observers interpreted Panama’s 2017 decision to establish diplomatic relations with China as one of Beijing’s most significant diplomatic victories in the Western Hemisphere. The next year, Panama become the first Latin American country to join the BRI. The move was widely viewed as evidence that China’s influence was steadily expanding within a region historically dominated by the United States.

Yet Panama’s decision to formally exit the BRI in 2025 demonstrated how vulnerable political gains could be to changing geopolitical circumstances. China’s economic presence in Panama remains substantial – trade and commercial relationships continue – but one of Beijing’s most visible diplomatic achievements proved less durable than many expected.

Venezuela presents an even more significant case.

For years, Beijing invested heavily in its relationship with Venezuela and became one of the country’s most important external economic partners. The partnership appeared to demonstrate how economic and political interests could reinforce one another over time.

Today, however, Beijing faces a dramatically different environment. The rise of former Vice President Delcy Rodríguez following the capture of President Nicolas Maduro by U.S. forces has ushered in a new phase of engagement between Caracas and Washington. Efforts by the Trump administration to restore American commercial activity in Venezuela, particularly in the oil sector, have created a strategic landscape very different from the one China spent years cultivating.

China’s investments, trade, and financial interests in Venezuela remain. What appears less certain is the political environment through which those interests will operate and the level of influence Beijing can continue to exercise.

Making matters worse, reports indicate that Venezuela still owes China billions of dollars linked to years of loans and investment projects. Beijing therefore finds itself........

© The Diplomat