The pivotal issue in current geopolitics is the transition from unipolarity to a new multipolar world. The United States views these dynamics as the challenge of China’s rising influence. China has increased its economic growth with greater trade, investment and cooperation, and its role in BRICS (Brazil, Russia, India, China, and South Africa) poses a further challenge to U.S. hegemony. Central America is becoming another theater of geopolitical competition between U.S. and China.
U.S. Hegemony in Central America
The United States’ political engagement in Central America has included numerous military interventions (1912, 1934, 1956, 1980, 1989). Washington has underpinned its influence in the region by supporting authoritarian power structures in an impoverished region with major socio-economic challenges. In contrast, China’s influence has flourished in the last decade with soft-power initiatives, precisely when U.S. development assistance is at its lowest. In the face of this positioning, standard U.S. policies are not sustainable.
Since the 1980s, deplorable conditions aggravated by unsustainable public indebtedness and social investment cuts fueled major crises through civil wars: sandinismo in Nicaragua, threatened revolution in El Salvador, and civil war in Guatemala. All these insurrectional processes with an anti-American ideological substratum put Central America at the heart of the Cold War, with the Soviet Union and Cuba directly involved.
The United States and the European Union understood the geopolitical relevance of bringing peace to the region, and military support to unpopular regimes was combined with generous preferential trade schemes. Trade helped to alleviate regional poverty, but the United States continued to rely on massive military support for the dictatorships in El Salvador and Guatemala and for the counterrevolution in Nicaragua from a military base in Honduras.
The dissolution of the Soviet Union and the end of the Cold War helped vulnerable liberal democratic regimes with their pacification processes. Although that precariously solved the prevailing political crises, the pre-existing social dissatisfaction was not addressed. Inequality, poverty, and insecurity were combined with corruption and drug and human trafficking in waves of migration to the United States, which are still increasing.
As was to be expected, the region saw the return of dictators and authoritarianism, with Daniel Ortega in Nicaragua, Nayib Bukele in El Salvador, precarious democracy in Guatemala, and coups d’état and co-optation of the government by drug traffickers in Honduras. Costa Rica, the only stable democratic country in the region, is in a crisis of political representation with aggravated social conditions. Economic growth and social progress did not prevent Panama from escaping corruption, with two presidents sentenced to prison.
A U.S. hegemony focused on security and interventions has not solved the problems of weak economies and weak polities that plague Central America. Democracy has not taken root in the region. The U.S. failure there has opened Central America to China’s development-oriented overtures.
China’s Influence
China has been positioning itself in Central America since 2007. It has signed two free trade agreements (Costa Rica, 2011, and Nicaragua, 2023), and one is being negotiated with Honduras. In addition to trade and favorable credit conditions, China offers cooperation in strategic investments, such as City Surf and a water treatment plant, both in El Salvador. The region has also joined the Belt and Road initiative (BRI). Panama entered a strategic alliance with China, with investments in logistics, energy, transportation, finance and real estate. Under BRI, Panama consolidated a major Chinese investment in the port of Colon. Honduras enjoys Chinese investment in the largest hydroelectric plant in Central America.
Net Assessment
Rather than competing with China, the United States is seeking to contain China and is thus inhibiting development in Central America.
The U.S. policy of China containment has followed familiar patterns – for example, pressuring Costa Rica’s government to back out of its link to the 5G network standard with Huawei. But Washington has lacked a holistic view of the region’s structural challenges. Beijing’s approach, however, has a different political intelligence when faced with regional socioeconomic needs. U.S. military involvement in Central America, repeating its support to dictatorships, not only is anachronistic but also risks deepening the United States’ reputational decline in the region.
Under the new U.S. administration, protectionism is on the horizon even though trade and investment between Central America and the U.S. is protected under a free trade agreement. Any change that implies a deterioration in terms of trade would negatively affect the region, given that the United States is its main trading partner and its priority source of foreign direct investment. Confronted with China’s growing influence in the region, the United States needs to reassess its approach to the region. Central America has been taken for granted as America’s backyard, but now the U.S. must compete for it with China.
An exhibitor showcases traditional dress at the booth of Nicaragua during the 7th China International Import Expo CIIE in east China’s Shanghai, Nov. 7, 2024. (Photo by Fang Zhe/Xinhua via Getty Images)
