China’s advances in Latin America and the Caribbean have been done in large part through Chinese companies, which may not always be seen as conveyors of the geopolitical objectives of the People’s Republic of China (PRC). These companies, however, operate in a complex fusion of politics and business that lacks transparency and exposes host countries to significant risks.
While Chinese companies are mainly classified as either private or state-owned, in practice, there are fewer differences and the boundaries between the two are blurred.
“Xi Jinping sought to thread state influence throughout business: Communist party cells embedded in large companies must be looped in on major moves and corporate governance. So-called guidance funds set up by central and local governments have assumed a greater role in providing capital to start-ups. And the party retains a tight grip on the supply of capital as almost all major financial institutions remain under some form of state ownership,” Reuters reported in late October.
While the risks of doing business with mega Chinese private corporations such as Huawei — instrumental in the PRC government’s transnational influence operations — have been largely documented, leading to a ban of its 5G technology in several countries due to espionage and national security threats, decision-makers and the general public often know little or underestimate the hazards of dealing with lesser-known Chinese companies.
The dangers go beyond fraudulent operations, malpractice, shoddy workmanship, human rights violations, and environmental degradation, but also involve the potential loss of sovereignty as Chinese companies increasingly gain control of varying sectors.
Blurred lines
In a joint investigation published in July 2024, The New York Times and The Wire China, revealed how the Chinese Communist Party (CCP) influences key businessmen such as Jack Ma, co-founder of Alibaba, who admitted, “I do whatever they [Chinese officials] ask me to do.” This report also pointed to the presence of actors high up in the government, including a sister of Xi Jinping, in large private Chinese firms, further blurring the boundaries between political power and the private sector in China.
In late 1978, China announced a program to reshape its economy, turning toward participation in the international community, and allowing the emergence of private businesses. While private firms gained a greater seat at the table, they learned that they had to adapt to the CCP, Big Data China, a project between the Stanford Center on China’s Economy and Institutions and the Center for Strategic and International Studies, indicated in a 2023 report. Under Xi Jinping’s rule, Big Data China continued, “there has been an even greater attempt by the political leadership to increase their control over the private sector […] and ensure their loyalty to the system.”
“Chinese companies operate under a system where politics predominates over economics,” Martin Hála, director of the Czech nongovernmental organization Sinopsis, told Uruguayan news outlet Diálogo Político. “The CCP adjusts the rules according to its interests, preserving its power.”
Chinese shadow
“Any country that establishes commercial ties with Chinese companies must be aware that the influence of the CCP will impact the bilateral relationship, especially if it does not align itself with the strategic objectives of the Asian regime,” Euclides Tapia, professor of International Relations at the University of Panama, told Diálogo.
The main risk is that recipient countries become trapped “under the shadow of China, losing sovereignty by depending economically on this regime,” Tapia continued. “This also generates pressure on governments to prioritize China’s interests over those of their own country, weakening their autonomy in strategic decision-making.”
Increased foothold in Latin America
China’s expansion as a trading partner, mainly in South America, is evidence of its growing influence, gaining foothold in Argentina, Brazil, Chile, and Peru. Although other partners predominate in Mexico, Central America and much of the Caribbean, dependence on Chinese capital in the region continues to grow, Argentine daily La Nación reported.
Under the Belt and Road Initiative, state-owned and private companies linked to the CCP invest in strategic sectors such as natural resource extraction; large infrastructure projects such as roads, dams, ports, and railroads; energy; information technology; and telecommunications, German news agency DW reported. These projects are not without controversy.
Corporations such as China Communications Construction Company (CCCC) and its subsidiaries, which have engaged in corruption, predatory financing, environmental destruction, and other abuses worldwide; or China National Electric Engineering Company Limited (CNEEC) and its subsidiaries, which face a bevy of accusations, were sanctioned by the World Bank for fraudulent practices, The Diplomat reported.
Among the projects CCCC has in the region, include the Bogotá metro; the Mayan Train in Mexico; the Port of San Luis in Brazil; the expansion of the international airport in Guyana; the North-South Highway in Jamaica; and a bridge over the Panama Canal. Many of these projects were found to have problems, irregularities, and delays, among other complaints, The Diplomat reported.
“These and other lesser-known Chinese companies erode local competitiveness hand in hand with the regime, often without people noticing the impact until it is irreversible,” Tapia said. “Latin American economies are seeing their ability to compete eroded by the advance of Chinese capital.”
Case study
One recent case that reflects the controversial practices of Chinese companies is the construction of the Cárcel del Encuentro, a maximum security prison in Santa Elena, Ecuador, by China Road and Bridge Corporation (CRBC), a CCCC subsidiary. According to Brazilian news site Prensa Mercosur, CRBC faces global accusations of poor project quality, delays, irregular bids, and human rights violations.
The prison, still in the early stages of construction, has already set off alarm bells. According to Prensa Mercosur, CRBC is deforesting an extensive primary forest, putting at risk wild habitats and pre-Hispanic archeological zones and the livelihoods of local communities, such as Bajada de Chanduy and Juntas del Pacífico. In addition, little is known about the award process. It did not go through a bidding for the contract with local companies, Spanish daily El País reported.
“For China, corruption is not a problem, but a tool. Its companies influence government decisions through opaque agreements and tenders designed in their favor,” said Tapia. “This modus operandi not only affects transparency, but limits competition and distorts markets, scaring away other international investments.”
Communist effort
There is also a concentrated effort to strengthen the expansion of Chinese companies in the region, with generous subsidies from China. Among the strategic sectors the PRC has prioritized are electric vehicles, solar panels, batteries, digitization, telecommunications, fintech technologies, electrification, and artificial intelligence, notes investigative journalism platform Dialogue Earth.
The Chinese model, focused on business and political integration, poses fundamental challenges for countries that accept its capital, Tapia concluded. “Fair trade with China is almost impossible, because of its lack of respect for international norms. This puts the sustainable development of regional economies at serious risk.”
