Former White House economic adviser Larry Summers called it a wakeup call last month when China's Asian Infrastructure Investment Bank, a new alternative to the World Bank and IMF, began gaining traction with other countries, including many U.S. allies. But China's penchant for lending comes as no surprise to those who follow Latin America and the Caribbean, where China has long been a financier of choice.
China has made investments in Latin American totaling $119 billion since 2005, according to Kevin Gallagher, Boston University professor and co-author of an April report by the Global Economic Governance Initiative (GEGI). Chinese investment in Latin America has exceeded that of the World Bank and the Inter-American Development Bank combined in the last year, according to a report from Margaret Myers of the Inter-American Dialogue, a nonprofit that studies the Western Hemisphere.
"The Chinese government hopes to develop itself on par with (the United States), Europe and Russia as an international leader," said Rodger Baker, vice president of Asia-Pacific Analysis at advisory firm Stratfor. "Being able to be this lender of last resort, or person who seems willing to offer financial aid to these countries, gives China a leg up in the United Nations and other foreign affairs organizations. It's kind of buying friends."
So where in the U.S.'s backyard is China's influence greatest? Click ahead to find out.
—By Anita Balakrishnan, special to CNBC
Posted 6 May 2015
Chinese businessman Wang Jing and his company, Hong Kong-based HKND, plan to put $50 billion into a 173-mile canal through Nicaragua. In doing so, China is raising its bet that the global shipping industry will see a comeback and continue to fuel China's economic growth.
That said, the money-making potential of this Panama-canal alternative has been questioned by many experts.
Ecuador was the fourth-largest recipient of Chinese funds in 2014, according to the Inter-American Dialogue's database. The country makes for an interesting case study in energy, possessing both traditional oil fields and renewable sources such as hydraulic dams.
"Ecuador is a major recipient of Chinese finance," said Gallagher. "This helps China groom 'national champions' like the hydro power company Sinopec. It also helps China diversify its investments away from U.S. Treasurys."
In return, China has secured about half of Ecuador's oil production for itself, and is better insulated from major oil shocks.
Argentina and Brazil are the two standouts when it comes to Chinese investment, according to Jason Marczak, deputy director of the Latin America Center at Atlantic Council, an international policy center. But Argentina's 35 cooperation agreements with China come for a very different reason than Brazil's. Two defaults over the last 14 years have made it exceedingly difficult for Buenos Aires to find lenders.
"We've basically seen Argentine President Cristina Fernandez de Kirchner in Beijing with hat in hand for necessary funding," Marczak said. "As they are shut off from other capital markets, China is really the lender of last resort for Argentina."
Brazil's story is less about desperation to find capital and more about traditional investing. Trade with China has had a positive impact there, according to a World Bank working paper published in January, "The Rise of China and Labor Market Adjustments in Latin America."
Marczak again points to China's Sinopec, which holds shares in Brazilian oil companies, as an example of China's taste for marrying natural resource extraction with amicable political ties.
"The scope of Chinese attention to the region is not just commodity-based now," Marczak said. "Commodity imports used to just be about insatiable appetite of Chinese consumers. Now you see an increase in investments, not just trade."
Venezuela has received $56.3 billion in Chinese capital since 2007, or an estimated 47 percent of China's total finance in the region, according to the Inter-American Dialogue, though experts disagree on the exact regional breakdown. Among the most heavily funded Venezuelan industries are gold and copper mining.
Venezuela's public sector also benefits from China's deep pockets. With falling oil prices and general mismanagement pummeling Venezuela's economy, President Nicolas Maduro has been on Beijing's doorstep, soliciting $25 billion over the past few months alone, according to BBC. What does China get in return? A long-term play at Venezuela's oil reserves.
The United States has recently renewed interest in Cuba, but China still stands as Cuba's largest creditor and export partner.
To be sure, as Cuba opens to the U.S., the landscape in Latin America is becoming more complicated for China. Ties to China leave Cuba and other Latin American countries more vulnerable to external economic shocks: a 1 percent slowdown in Chinese growth equates to a 0.6 percent slowdown in Latin America and the Caribbean, according to World Bank estimates. Marczak points to Mexico, whose relationship with Beijing recently soured over investments in a bullet train, as evidence of growing skepticism of China in Latin America and the Caribbean.
"There are concerns with how closeness to China means doing business the Chinese way," he said. "What I mean by that is, there is always adherence to labor, transparency, environmental standards when working with the U.S. and Europe. So the question becomes: How do you protect those standards Latin American countries have worked hard to implement over the years when investors let them off the hook?"