A project in El Salvador shows how China is exerting growing power in America’s backyard
By Ken Dilanian
Two years ago, the U.S. government began loudly questioning a Chinese push to purchase an island off El Salvador’s coast, where a Chinese company was proposing to build a deep water port and manufacturing zone.
The American objections seemed to have had an impact, as a political backlash in El Salvadorstalled the project. But the Chinese were not deterred. After what U.S. officials publicly asserted was a successful Chinese effort to bribe El Salvadoran politicians, the project is now moving forward. NBC News has obtained a power point presentation by a state-owned Chinese firm called “Shared Opportunities, Shared Future,” that sketches out one version of the proposal.
American intelligence and military officials say the port project would give China a significant economic and strategic foothold in what has traditionally been an American sphere of influence. It is one of many examples of how China is making its power and influence felt across Latin America and the Caribbean in a way that officials say is harmful to U.S. interests, and via methods that the U.S. cannot employ.
“Chinese influence is global, and it is everywhere in this hemisphere, and moving forward in alarming ways,” said Adm. Craig Faller, the head of U.S. Southern Command, in an exclusive interview with NBC News.
“China is pursuing multiple portals in this hemisphere,” he continued, referring to seaports, airports and other transit hubs. “Depending on the day, count them as 40 or so. And as I look at where they’re focused strategically — West Coast, East Coast, South Panama, Caribbean — I absolutely can see a future where these ports will become a hub for their growing blue water Navy that far exceeds their…need for homeland defense.”
But it’s not only the military implications that concern American officials. Faller said China is rapidly advancing toward a goal of economic dominance in Central and South America within the next decade. In 2019, he said, the PRC surpassed the U.S. as the leading trade partner with Brazil, Chile, Peru, and Uruguay and is now the region’s second-largest trading partner behind the U.S.
From 2002 to 2019, Chinese trade with Latin America soared from $17 billion to over $315 billion, he said.
With economic influence comes political influence, said Evan Ellis, a research professor of Latin American studies at the U.S. Army War College Strategic Studies Institute.
“If you bring the projects in and you have the political relationships and all of the influence that comes with the politicians and leading families,” he said, “then other types of influence just come naturally.”
At issue in El Salvador is a proposal to expand and develop a Japanese-built deep water port called La Unión, located in the Gulf of Fonseca at the intersection of Salvadoran, Honduran, and Nicaraguan territory.
China is proposing to expand the port and establish trade zones that would exclude U.S. and European companies, allowing Chinese port operators, Chinese shipping companies, and likely Chinese service providers, to dominate the zones, Ellis said.
China aims to use the port and the zones to import Chinese products and distribute them to other Central American markets without involving local businesses, Ellis said, adding that Chinese investors have expressed interest in constructing an airport in La Unión, which would further bolster the zone as a multimodal hub.
A Chinese-Salvadoran investor, Bo Yang, has quietly purchased land for expansion of the port, including half of Perico Island, according to the State Department. He offered residents of the island up to $7,000 each to relocate, Ellis said, and the purchase went forward at the end of 2019. U.S. officials say Yang is China’s agent in El Salvador and has been promoting deals there for 30 years.
In 2018, Yang told Salvadoran media he was dealing directly with property owners on the island and wasn’t working with a government. “These are just business things, like when you go to buy a house you see it with the owners,” he said.
The 46-page presentation NBC News obtained said the economic zone would be a $3 billion project encompassing 1,700 square miles.
Earlier this year, the State Department released a Congressionally mandated list of officials in El Salvador “who have knowingly engaged in acts that undermine democratic processes or institutions, engaged in significant corruption, or obstructed investigations into such acts of corruption in Guatemala, Honduras, and El Salvador.” On the list was Ezequiel Milla Guerra, former mayor of La Unión, who “engaged in significant corruption by abusing his authority as mayor in the sale of Perico Island to agents of the People’s Republic of China in exchange for personal benefit,” the document says, in an extraordinarily blunt public assessment from the U.S. government.
State Department officials say China is increasingly adept at using bribes and other corrupt methods to advance its commercial interests, something that is illegal for American corporations to do.
The list also named associates of El Salvador’s president, Nayib Bukele, including a close aide and a former security minister.
Bukele has expanded his cooperation with China since his predecessor moved the country’s embassy from Taipei to Beijing three years ago. In response to the State Department’s “corrupt” list, he doubled down.
Bukele on Twitter praised what he said was China’s $500 million investment in El Salvador “without conditions,” which was interpreted as a jab at the good governance strings that Washington and U.S.-backed lenders often attach to aid.
Dipomatic representatives of China and El Salvador did not respond to requests for comment.
“You have a new generation of governments, that if they wish to engage in corruption and protect themselves from the consequences, they are able to turn away from Western investors in the U.S. and turn to China as an alternative,” Ellis said. “China has become effectively an incubator of populist governments.”
U.S. Southern Command covers Central America, South America and the Caribbean, including a responsibility to defend the Panama Canal. Faller, who ends his three-year tour of duty as Southcom commander in October, said he has observed China steadily encroaching on his area of operations.
“China seeks to leverage their vision for the future, their vision of the global world order and they don’t seek partnerships built on mutual respect and trust. They seek and build on dependency.”
In addition to strategic investments, Faller said, China provides technology to authoritarian governments, including Venezuela and Cuba, that allows them to more efficiently clamp down on dissent.
Venezuelan president Nicholas Maduro is “using Chinese technology, Chinese training, to control socially, that population,” he said, adding that the Chinese are “working alongside Cuba, Russia, and increasingly so Iran to ensure that Maduro stays in power, and that form of government, which is favorable to Chinese economic interest remains.”
The Cuban government was able to quickly quell civil unrest, he said, because it uses Chinese providers Huawei and ZTE to run its cell phone and information technology networks. “There’s a growing Chinese influence in Cuba,” he said.
The Biden administration’s response to China’s aggressive outreach has been measured.
“It’s not the policy of the United States to force our partners to choose between the U.S. and China,” said a senior administration official who was not authorized to be named. “But what we offer is a partnership that works in the interests of those of our partners, focused on our shared values, democratic governance respect for human rights, transparency…inclusive economic growth, entrepreneurship.”
The official acknowledged, though, that China has a much more strategic approach than the U.S. to leveraging its economic might.
“They use a geostrategic approach where if they deem that they need something necessary for their investment purposes, the government orders it to happen,” the official said.
“We don’t have a state-directed approach,” the official added. “Obviously we work to encourage U.S. investment, including significant projects in Latin America and Central America, whether it be in the Panama Canal or other major investment projects.”
Yet many experts say that China is winning, and that the U.S. needs to put aside its rigid adherence to pure free market principles when it comes to foreign investment.
“It’s probably counterproductive and unfeasible to try to block our partners from engaging commercially with China,” Ellis told NBC News. “However, the United States can shape the way in which that occurs in a way that’s less incompatible with principles of democracy and human rights and the rule of law and free markets, and less threatening to both the region and the United States.”
The U.S. government can do that, he said, by “insisting, using our commercial leverage and other tools of transparency, because transparent interactions prevents your Chinese companies and local elites from doing win-win deals in which they essentially deliver the goods of the country to the Chinese without benefiting the people of those countries.”