China’s Influence in Mexico and Central America:
Despite efforts by past Mexican administrations to strengthen economic ties with China, the U.S. remains Mexico’s top trading partner and foreign investor. The recent signing of the USMCA trade deal further cemented Mexico’s commercial ties to North America. Nonetheless, Chinese companies continue to invest in strategically important sectors including energy and telecommunications.
In Central America, China’s recent engagement resulted in Panama and El Salvador breaking diplomatic ties with Taiwan. Belize, Honduras, Guatemala and Nicaragua are Taiwan’s remaining allies in Central America. However, we can expect China to continue its efforts to further reduce Taiwan’s ties to the region.
Despite the failure of several infrastructure projects, China continues to push more projects aimed at buying political influence through corruption and other illicit means. China’s engagement also threatens to weaken the region’s already fragile democratic institutions.
China’s Investment’s in Mexico and Central America:
Panama has received $3.16 billion in investments from China since 2005, the largest investment in the region, with additional investments following Panama’s establishment of official ties with the PRC in 2017.
- $2.52 billion of this total investment has gone to the country’s transport sector with much of it focused on development related to the Panama Canal.
Since 2005 China has invested $3 billion in Mexico
- $2.26 billion of this investment was in Mexico’s energy sector with the rest divided among the logistics, metals and transports sectors.
Other Central American countries have also received investments from China including $700 million in Guatemala’s technology sector and $810 million in Costa Rica’s transport, entertainment and technology sectors.
China’s Investment’s in Mexico and Panama’s Telecommunications:
In 2017, China’s Huawei landed a contract to provide the equipment for Mexico’s communications network, but was blocked from supporting the system’s “core” and sites near the U.S. border.
- However, in 2018 Huawei began working on three tech infrastructure projects in three northern Mexican cities that were originally meant to go to Nokia, raising concerns about the close proximity of Huawei’s equipment’s to the U.S. border.
AT&T acquired two Mexican telecom companies and removed Huawei equipment from sensitive parts of its 4G network. However, concerns remain about AT&T and Mexico’s ability to push back on Huawei during the eventual rollout of a 5G network.
In Panama, Huawei has made the Colon Free Trade Zone a regional hub for the distribution of its electronic systems and installed its intrusive “Safe City Technology” that includes facial recognition cameras used to deter crime in the area.
- This technology is integrated into China’s Orwellian surveillance system used to monitor citizens and specifically target disadvantaged minority populations such as Muslim Uighurs – raising concerns about the potential for the abuse of the technology in other countries where it is implemented, and ethical concerns for interactions with the companies involved in creating these technologies for China’s security agencies.
China Projects in Mexico and Central America:
In 2020, the Chinese Development Bank announced it would invest $600 million for the construction of the Dos Bocas oil refinery in Mexico, which would be the country’s largest state-controlled refinery.
In 2018, China struck a deal with the government of El Salvador for a Special Economic Zone (SEZ) that would have conceded 14% of the country’s territory to China in return for political favors.
- In 2019 the new government of El Salvador struck down the SEZ deal, but opted for infrastructure projects including a stadium and a water treatment plant following a visit to China by newly-elected Salvadoran President Nayib Bukele.
In 2013 a Hong Kong-based developer announced a deal with Nicaragua’s Sandinista government for a $50 billion canal to compete with the Panama Canal
- To date, the project has stalled, but the U.S. Treasury alleged that the Ortega family used the project to launder money and cited the project in its announcement of sanctions on Ortega family members. The project also resulted in a land concession along the proposed canal route for the Chinese company.
China Projects in Panama:
Since establishing relations with China, Panama has signed 30 agreements with Chinese companies in its infrastructure sector, including ports and energy, many of which are alleged to have been made under questionable circumstances.
- A $5.5 billion railway project
- Construction of a port for cruise ships, a bridge, and a convention center around the Panama Canal
- Chinese group Shanghai Gorgeous is investing $900 million to build a second, 441 MW natural gas fired electricity generation facility at the Atlantic exit of the Panama Canal
- An agreement for financing through Bank of China to Panama’s public electricity utility company
- China also almost succeeded in reaching a deal to build its new embassy at the entrance of the Panama Canal, but the deal was cancelled following pressure from the U.S.
Advancements by Chinese state-owned shipping companies, investment groups, and construction companies in projects around the Panama Canal threaten to further expand China’s influence over the canal’s operations at the expense of Panama’s sovereignty and democratic institutions.
China’s Projects in Costa Rica:
Costa Rica’s official recognition of the PRC in 2007 resulted in China’s construction of a $90 million sports stadium and the purchase of $300 million in government bonds. Agreements signed during high-level state visits resulted in additional infrastructure investments and a plan to establish six free trade zones throughout Costa Rica for Chinese companies.
Despite a promising start to the relationship, since 2008 multiple PRC-led projects have been halted or postponed due to irregularities, malpractice, and corruption.
- In 2013, a PRC-backed refinery modernization project was halted when the company conducting the feasibility study was found to have ties to the lead contractor, creating a conflict of interest.
- A PRC-backed highway improvement project was blocked by the Costa Rican Congress when over inflated project costs and interest rates, unacceptable arbitration mechanisms and the discovery that the parent of the company doing the work had been barred from World Bank projects over corruption charges.
China’s “Soft Power” Initiatives in Mexico and Central America:
China’s president Xi Jinping visited Panama in 2018 as part of the first high-level visit follwoing the establishment of diplomatic Relations. In December 2019, Salvadoran President Nayib Bukele traveled to China and met with Xi Jinping to sign an agreement for Chinese State-Owned Enteprises (SOE’s) to build several major infrastructure projects in El Salvador.
In January 2018, a delegation from a CCTV subsidiary made deals to air a Spanish-dubbed version of a Chinese-produced drama on state TV of Latin American countries including Mexico. That year, investors believed to have close ties to the CCP-friendly Phoenix TV moved to purchase a radio station in Mexico near the border with the United States, raising suspicions that it would be used to broadcast pro-Beijing content to Chinese speakers in southern California.
*Last Updated: 9/9/2020