As with other parts of the Global South, Chinese digital private and state-owned firms have been expanding into Latin America and the Caribbean (LAC) markets. This process can be traced back to China’s 1999 ‘Going Out’ strategy, which encouraged the arrival of Huawei and ZTE in the region, firms that operate in one of the core sectors of the digital economy: telecommunications.
Since then, the two companies have participated in numerous projects with several LAC states, selling a variety of products and services to local firms and consumers (e.g., deployment of telecommunication and fiber optic networks, smart city projects, smartphones, cloud infrastructure, among others). Chinese firms offering smart cities and surveillance solutions, such as Dahua and Hikvision, have also internationalized across the LAC, a region where citizens’ insecurity is a pressing issue.
The most recent kind of Chinese firms to enter LAC markets have been digital platforms, TikTok being the most prominent. The platform has become rapidly popular among different social groups, including politicians. Meanwhile, DiDi, the Chinese ride-hailing platform, operates in 10 LAC countries, competing with Us and European apps.
Other examples of this non-exhaustive list include Alibaba’s support of Mexican entrepreneurs via the Atomic 88 initiative; the construction of national fiber optic cables in Perú by YOFC; and Oppo and Xiaomi’s success in the smartphone and tablets market. Factors such as the increasing capability of Chinese digital firms, and the close economic and political ties between many LAC countries and China are driving this process.
World Bank statistics show that the trade volume between LAC and China increased from USD 12 billion in 2000 to USD 310 billion in 2020. Furthermore, as many as 20 LAC states have joined China’s flagship Belt and Road Initiative (BRI), which has prioritized increased connectivity with subscribing states through infrastructure (particularly, digital) development. Additionally, the digital economy frequently appears as a priority in bilateral and multilateral agreements between LAC countries and China. Take the case of the Community of Latin American and Caribbean States (CELAC), a regional bloc that excludes the US and Canada, which has established a forum with China where digital cooperation stands out. For instance, the China-CELAC joint plan for cooperation in key areas (2022-2024) proposes to “strengthen mutually beneficial cooperation between governments, enterprises, and research institutions in digital infrastructure, telecommunications equipment, 5G, Big Data, cloud computing, artificial intelligence (AI), Internet of Things (IoT), smart cities, Internet+, universal telecommunication services, radio spectrum management, and other areas of common interest”.
While the expansion of Chinese digital firms have led to increased connectivity between China and LAC states through the flow of data, hardware, skills, and digital infrastructures, it is important not to overstate Chinese companies’ influence in the digital economy of LAC countries. The expansion of these firms is recent, and in most sectors of the digital economy, Chinese firms tend to lag behind other extra-regional businesses, which are mainly from the US, and to a lesser extent, from European countries, Japan, and South Korea.
Furthermore, it is important to bear in mind that the LAC is a heterogeneous region, with states exerting varied levels of global economic influence, and in turn cultivating different types of bilateral relations with China. While this article contains itself to outlining general trends, this heterogeneity must be taken into account when making a more fine-grained analysis. Due to their proximity to the US, Central America and the Caribbean states have been beholden to the influence of their powerful neighbor to the north. The fact that several of these countries recognize Taiwan as a sovereign nation precludes diplomatic ties with China. In contrast, we see that currently, China has surpassed the US as the main trading partner of many states in the Southern Cone.
While the expansion of Chinese digital firms have led to increased connectivity between China and LAC states through the flow of data, hardware, and digital infrastructures, it is important not to overstate Chinese companies’ influence in the digital economy of LAC countries.
Considering the anxieties that China’s rising global influence has provoked in the West, the expansion of Chinese digital firms to LAC markets has not been exempt of contentious interpretation. On the one hand, we can group statements by regional policymakers and analysts that contend that LAC countries’ cooperation with Chinese digital firms is an opportunity for advancing national digital development goals. Likewise, these actors also argue that the LAC states can learn from Chinese policies on reducing inequality and promoting digital industrialization.
On the other hand, we can distinguish two kinds of viewpoints: arguments advanced by academics grounded in the political economy of the digital, and geopolitically driven claims made mainly by US politicians, policymakers, and analysts. The criticism from the former is that China is an emerging digital power that only seeks to incorporate Latin American citizens and firms into its digital value chains in peripheral roles. In this way, its expansion is not particularly different nor any more promising than the one offered by other foreign companies in the region. Their business models reproduce the same form of unequal and unfair digital capitalism, furthering challenges such as algorithmic bias, data colonization, disinformation, and worker exploitation, among others.
Against the backdrop of rising rivalry between the US and China, US politicians, policymakers, and analysts assert that the expansion of Chinese digital companies in LAC poses serious threats to the region, i.e., increased dependence, espionage, hacking, and malicious political influence, among others. However, they have not been persuasive enough to sway LAC policymakers to adopt such viewpoints. The reluctance is linked to the fact that the US has provided little evidence to substantiate these allegations. Also, with the US’ long history of intervention in the region’s internal politics, many LAC actors mistrust its claims.
Notwithstanding this, the US government has sought to politicize the expansion of Chinese firms to LAC digital markets with mixed success. For example, the Trump administration launched the Clean Network Initiative in 2020, the first coercive strategy to prevent and expulse Chinese companies from the digital systems of partner states. The program aimed to “addresses the long-term threat to data privacy, security, human rights, and principled collaboration posed to the free world from authoritarian malign actors”, making explicit reference to the Chinese Communist Party as the main threat.
In LAC, Brazil, Ecuador, and Dominican Republic endorsed this global US initiative. In principle, these states should have eliminated Chinese digital firms from their digital networks; however, the outcomes have not been as the US government may have expected. In 2020, the Brazilian government under President Bolsonaro, supported the Clean Network Initiative, which at the time would have meant the exclusion of Huawei from the upcoming 5G tender in the country. Nevertheless, the decision faced the opposition of numerous stakeholders in Brazil who criticized an ideological-driven ban of the Chinese company, including agricultural exporters who feared a retaliation from China, telecommunication companies who claimed that the ban was commercially inconvenient and argued that they could manage the cyber risks, and the opposition that denounced the ideological alignment of the former Brazilian president with the Trump administration. In the end, the government did not fulfill its commitments to the Clean Network Initiative and Huawei participated in the commercial auction for 5G.
US actors have also criticized the ECU 911 system in Ecuador. This project was initiated in 2011 by President Rafael Correa’s administration in partnership with a Chinese state-owned company: CEIEC. The goal was to build a national network of 911 centers, with surveillance capabilities to dissuade crime and to respond to numerous national emergencies. For example, the ECU 911 was central in the government’s response to the 2016 earthquake that wreaked havoc in many coastal cities of Ecuador. However, the US media, analysts, and pundits have portrayed the system as the expansion of the Chinese surveillance state to the country, in part, partially reproducing polarized debates within Ecuador’s national politics. Due to the success of the ECU 911 in Ecuador, CEIEC sold similar, smaller scale systems to other states in the region, such as Venezuela, which led to the US decision to sanction CEIEC for presumably supporting President Maduro’s efforts to undermine democracy. In Ecuador, such restrictions made the cooperation with CEIEC more difficult. Since then, the US has continued to misrepresent the role of ECU 911 in Ecuador with the objective to drive out Chinese companies. For instance, in 2022, the US Congress tried to pass a draft of a partnership act with Ecuador, which claimed the ECU-911 posed “risks to democratic governance”. However, due to the opposition of several social forces in Ecuador, these statements were removed in the finally approved act.
Bipartisan consensus against the expansion of Chinese (specifically, digital) firms has carried on into the Biden administration. Perhaps the main difference when compared to the previous Trump administration has been the preference for a more persuasive approach by the current administration to convince LAC partners to choose American firms over Chinese ones. For example, in June 2022, the Biden administration announced the Partnership for Global Infrastructure and Investment (PGII), which aims to compete with China’s BRI via the mobilization of USD 200 billion over the next five years in several strategic sectors. The US government has also prioritized the construction of information and communication technology networks and infrastructure to invest in “internet service providers and financial technology companies in Africa, Asia, and Latin America that use secure network equipment and advance competition and choice in emerging markets”. Although it is too early to assess the outcome of this initiative, it signals a whole-of-government US approach to compete with China for foreign markets in the Global South.
In June 2022, the Biden administration announced the Partnership for Global Infrastructure and Investment, which aims to compete with China’s BRI via the mobilization of USD 200 billion over the next five years in several strategic sectors.
However, the Biden administration has not excluded the use of punitive measures. In October, the US government introduced stringent sanctions against the export of advanced chips and the tools to fabricate them to Chinese companies. Analysts speculate that this exclusion of Chinese digital companies from accessing foreign chips may constitute one of the greatest threats to the latter’s comparative advantage, making it more difficult to remain competitive in state-of-the-art computing applications (e.g., AI, IoT, 5G, etc.). This would undermine Chinese firms’ potential to compete for foreign markets, such as those of LAC. However, it remains to be seen if this policy measure succeeds, or only serves to spur China’s chip autonomy and subsequent enhanced competition with the US in the digital economy.
In the majority of LAC states, there appears to be little appetite in choosing sides in what seems to be a budding second Cold War between the US and China. Policymakers in the region understand that behind the US hyperbole of the China threat, underlies more reasonable concerns over losing market share positions against Chinese competitors. However, the enormous asymmetry in power that LAC states have with the US, means that regional policymakers must choose wisely on how to react to US coercion strategies against their cooperation with Chinese partners. In this context, some LAC scholars and policymakers are advancing the idea of an active non-alignment foreign policy to avoid the pitfalls of great power competition in the region. In other words, they advocate for LAC states to make autonomous foreign policy decisions without siding with either China or the US. Although this proposal has not been widely formally adopted for foreign policy or extended to digital policies, there are nascent examples of this in play. Take the case of Chile’s 5G tender, which introduced a norm for respecting ‘technological neutrality’ that left the choice of suppliers free to the decision of telecommunication operators. Thereby, the Chilean government circumvented the demands of the US to ban Chinese companies. Argentina, later, followed the same approach for its 5G tender.
The competition between US and China to fund infrastructures may also offer LAC states the opportunity to be strategic and maximize benefits from contending initiatives (BRI vs PGII). They could bargain for support for strategic projects that accelerate national digital transformation, bring in investments and digital infrastructures on more favorable terms, and also argue for technology and skills transfer, which may wean away from the peripheral incorporation of these economies into US- or China-centered digital networks. For instance, LAC countries should push for joint research and development laboratories related to digital technologies, which could facilitate knowledge appropriation processes more suitable to LAC contexts. Likewise, civil society could push policymakers to ensure the accountability of Western and Chinese digital companies, since much more needs to be done in terms of regulating their negative externalities. This could cover more active demands for updated data protection laws and their effective enforcement. In most LAC states, there are still no laws regulating the platform economy, thus, this could be another area where civil society organizations working on digital policies could focus on.
LAC countries should push for joint research and development laboratories related to digital technologies, which could facilitate knowledge appropriation processes more suitable to LAC contexts. Likewise, civil society could push policymakers to ensure the accountability of Western and Chinese digital companies.
LAC states should also be doing more to advance a regional vision of ‘digital sovereignty’, as has been taking place in other regions and states, such as in the European Union or in India. The LAC initiative called ‘People’s Internet’, which articulates different civil society actors, is advocating for incorporating digital sovereignty into the agendas of digital integration processes. However, this policy vocabulary has been absent so far among the governments of the region because of the prevalence of deregulatory and neoliberal policies with respect to internet governance since the ‘90s. Time will tell if the new Lula administration in Brazil, which has made statements for the regulation of digital platforms, may initiate a change in direction in the digital policy discussions of the region. Meanwhile, the challenge will be the pursuit of non-aligned digital policies intelligently, amidst interdependent relations of LAC actors with American and Chinese digital companies.