Chile seen as battlefield for US-Chinese interests

Experts now see Chile as another of the indirect battlegrounds between China and the US.

Although the US lacks the means to compete directly with Chinese investments in Chile, it is argued that Washington can still exert diplomatic pressure on Santiago to stymie Beijing’s efforts in the country, particularly in the telecommunications sector. 

Chinese FDI in Chile jumped from under US$1bn in 2018 to some US$6.4bn in 2019, before dipping again to US$3bn in 2020.

Most of these investments have come through acquisitions, such as the purchase of 24% of lithium miner and industrial chemicals producer SQM by Chinese firm Tianqi (US$4.1bn) in 2019 and State Grid's US$3bn capture of energy distributor CGE last year. 

On the other hand, US influence in the country is seen as waning somewhat, and Washington did not even name an ambassador to Chile for over two years until President Joe Biden nominated Bernadette Meehan for the position in July. 

“The US has realized that it is not capable of competing in any direct way. Its financing corporation [DFC] has a minuscule budget compared to China’s – they're not even in the same league. So what the United States is trying to do is find ways to leverage the private sector to move in and do things the government can’t do because of lack of resources,” Barbara Stallings, international affairs professor at Brown University said during a Chinese financing webinar held by the Wilson Center.

She said that the changes in the design of the US$650mn Humboldt submarine fiber optic cable, which was originally meant to connect Chile and China, but will now only reach Australia, was an example of this approach.

“The Japanese then came in [through a memorandum of understanding] and one way or another, behind the scenes and as well up front, the cable will now only reach Australia. So the US can do things behind the scenes to maneuver and pressure,” Stallings said.

Another example was given by Francisco Urdinez, associate professor at the political science institute of Chile's Pontificia Universidad Católica, who pointed out that President Sebastián Piñera traveled to China in 2019, where he planned to visit the headquarters of tech giant Huawei.

Although Piñera did meet the head of the company, he did not visit the company headquarters following complaints from the US State Department.

“That creates a lot of difficulties in political terms in Latin America, because the feeling of having to chose a side or having to have a strategy to manage pressure from both sides is something that our ministers are not generally for,” he said.