In July 2023, a bipartisan group of U.S. lawmakers introduced the Inter-American Development Bank Transparency Act seeking to limit Chinese influence at the IDB — a regional financial institution established in 1959 at the request of Latin American leaders to promote development in the region.
U.S. policy makers are right to be concerned about some of China’s activities in the region and interactions through the IDB, which today is owned by 48 sovereign states. Likewise, during her presentation to the House Armed Services Committee, U.S. Southern Command Commander, General Laura Richardson, noted that the United States should seek to maximize its shares in the recently voted on IDB capital increase as a means of countering China.
However, Washington must be careful in how it approaches China’s engagement in regional organizations lest it undermine U.S. interests and the ability of regional organizations to address the challenges that are facing the Americas.
China joined the Inter-American Development Bank as a non-borrowing member in 2009 and in its first few years the IDB quickly developed ties to Beijing. Indeed, in the years following the 2008 financial crisis, not only did China engage with the region through the IDB, but was an important source of regional finance.
However, in recent years, U.S. policy makers have become increasingly wary of Chinese engagement in the Bank and in the region at large. Not only are U.S. leaders concerned about Chinese influence, but also about Chinese firms winning a disproportionate share of IDB-funded infrastructure contracts — receiving approximately $1.7 billion in contracts between 2010 and 2020 compared to just $249 million won by U.S. firms.
It is important to note, however, that while U.S. firms win 61% of the IDB contracts that they compete for, they are unlikely to compete for all contracts — thus ceding some to others such as Chinese companies. And Chinese firms often employ Chinese workers, limiting the positive spillovers of these loans to Latin American and Caribbean countries.
But given the sizable value of contracts going to Chinese companies, there has been push back from both the United States and other member states within the Bank. In 2019, the IDB canceled its annual meeting in Chengdu due to Beijing’s refusal to recognize Juan Guaidó as the interim president of Venezuela.
Furthermore, in 2020, the bank elected U.S. citizen and vocal China critic, Mauricio Claver-Carone, as its president — he has since been removed from the role. These efforts put a spotlight on Chinese engagement at the bank and showcased concerns to key U.S. policy makers.
The IDB is not the only regional organization in the Americas where China has sought to curry favor. The Americas are home to over 30 regional organizations, forums, and initiatives with overlapping memberships and mandates. While China is only a formal member of two of these organizations, it is a permanent observer in six and there are signs of active engagement with 11 other regional bodies. China has even developed a forum with the Community of Latin American and Caribbean States to further facilitate its engagement with the region.
Also, the IDB isn’t even the only regional development bank in the Americas where China engages. China is also a member of the Caribbean Development Bank — where it holds 5.58% of shares and engages in regional projects. It also has actively sought to boost its engagement with the CAF- Development Bank of Latin America through the Belt and Road Initiative and it was recently reported that China was seeking to become a member of the Central American Bank for Economic Integration. Given the number of channels that China is engaging Latin America and the Caribbean, simply pushing to limit its engagement through the IDB would be futile.
I've been researching the topic and recently authored the report, "When the Dragon Joins the Club," published by the Jack D. Gordon Institute for Public Policy at Florida International University.
While U.S. policy makers are seeking to curb Chinese influence at the Inter-American Development Bank, the organization’s recently elected president, Brazilian economist Ilan Goldfajn, is making it clear that he does not want the bank to become embroiled in U.S.-China geopolitical competition.
While it is true that the IDB allows the United States to leverage its funding to greater impact in the region, which can improve U.S. perceptions vis-à-vis China, forcing the bank to engage in a “cold war” between the United States and China will undermine the ability of the IDB to promote regional development or to push for meaningful reform. While the United States has previously leveraged its position in the IDB for geopolitical purposes, doing so makes the bank appear to be an extension of U.S. foreign policy rather than as a tool for Latin American and Caribbean leaders to access critical resources for development and as a purveyor of knowledge on development practices. Pushing for a U.S. president of the IDB, as the Trump administration did with Claver-Carone, already fueled this perception.
Furthermore, the IDB is actively engaging with the United States in ways that promote U.S. interests. In September 2023, the IDB launched its “BID for the Americas” initiative aimed at encouraging U.S. companies to engage more and promote regional development through deeper integration across the Americas.
In November, the IDB hosted an event on boosting interconnectedness in the Americas in the leadup to the White House’s Americas Partnership for Economic Prosperity Summit. Goldfajn also visited Miami where he sought to build ties between the city and the region, an effort that would further promote regional U.S. trade and interests. He also met with U.S. Southern Command which has recently taken the approach that “economic security is national security.” These actions support U.S. regional interests and can boost U.S. influence vis-a-vis China while supporting the IDB’s role and not directly putting the bank into confrontation with China.
As the United States seeks to curb Chinese influence in the Americas it must be cautious and recognize both the interests of the region and the important role that regional organizations play. Forcing regional organizations, like the IDB, to choose between China and the United States hinders their ability to meaningfully engage on the issues impacting the region. Engaging this way also reeks of the Monroe Doctrine and of U.S. interventionism, perceptions that will undermine U.S. interests and engagement with Latin America and the Caribbean.
Instead of seeking to counter Chinese involvement at the IDB, the United States should engage with the bank and the region to develop mechanisms to encourage U.S. companies to integrate with the region and compete for IDB contracts. By showing that the United States wants to engage rather than trying to ban the region from relations with China, U.S. policy makers will not only build closer relationships with the region, but limit Chinese influence in the process.
