PRC Makes Inroads in South America

On August 3, 2020, HBIS Resources Company, a subsidiary of Chinese steelmaker HBIS, finalized a deal to develop operations at Peru's Pampa de Pongo Iron Ore Mine. Alongside Zhongrong Xinda, another Chinese conglomerate with links to Beijing, HBIS intends to begin harvesting the mine's vast amounts of iron ore, copper, cobalt, and gold by 2023.



The acquirement of Pampa de Pongo Iron Ore Mine is a significant inroad for the People's Republic of China in South America. As one of the world's largest mining projects currently under development, its completion will mean Beijing has direct control over one of the biggest sources of minerals in existence. Ownership of the mine will also give China access to important infrastructure in Peru, as the cooperation agreement between Zhongrong Xinda and HBIS stipulates the creation of a port facility near the mine.


The PRC has repeatedly used infrastructure and facility development as a tool for the advancement of strategic objectives. Beijing places a special emphasis on the development of relationships with emerging economies, such as Peru, where future gains may be massive. Additionally, China is believed to utilize state-owned companies infrastructure in times of crisis. This means that the port facility in Peru may be the first step on the long road to the establishment of permanent commercial and military naval presence in South America.


The United States has viewed Chinese engagement in South America with a great deal of weariness. Less than one year ago, US Southern Command made clear its concerns about Beijing's actions in the region. In an unclassified report, it noted that Chinese investments in the region have strategic value for future military uses.


Over the past two years, Washington has sought to spur US investment on both sides of the Panama Canal. Despite a plethora of incentives, the initiative has taken time to garner significant steam in the American business community. As Mauricio Claver-Carone, the deputy assistant to the President and senior director for Western Hemisphere affairs, told diplomats at the White House in 2018, "it is not as easy for the United States to marshal support for its allies because it is not a state-controlled government." Mr. Carone's statement is a clear shot at the PRC, and reveals that Washington understands the strategic importance of encouraging investment in the region.

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