WASHINGTON, Michigan — Beijing and Santiago are strengthening bilateral ties, increasing trade and investment via China’s Belt and Road Initiative (BRI) in Chile. As Chinese presence in Latin America becomes more prominent, it is necessary to assess how these new relations will impact economic expansion in Chile, particularly for impoverished Chileans.

Chile is a country home to almost 19 million people. One of the wealthiest nations in Latin America, the Republic of Chile has become an influential regional player, partly because of its close relationship with the West and its burgeoning affinity with China. After a quick resurgence from the COVID-19 pandemic, the nation holds steady GDP growth while many other Latin American countries face worse economic woes.

Staring under Augusto Pinochet’s authoritarian regime in the 1980s, Chile began economic reforms that boosted GDP growth. Even after transitioning to democracy in 1990, Chile sustained these economic reforms, sharply reducing poverty. In fact, since the 1980s, Chilean poverty rates shrank by more than half, improving life for millions of Chileans.

Despite improvements in poverty reduction, new contemporary issues emit uncertainty for Chile. One substantial challenge is adopting a new constitution later in 2022, with the Chilean public voting to replace the 1980 constitution.

Another pressing issue comes from Beijing’s Belt and Road Initiative in Chile. As Chinese engagement in Chile reaches new highs, with record trade and investment in Santiago, Chilean poverty will undoubtedly change.

Diplomacy between the People’s Republic of China (PRC) and the Republic of Chile has remained strong since the 1970s and is growing stronger. Chile was the first South American nation to recognize the PRC’s sovereignty over mainland China and China was one of only two communist countries to maintain diplomatic ties with Chile after Pinochet’s coup d’état.

Since these acts of faith, China-Chile relations have only amplified, especially after Chile and China signed a Free Trade Agreement in 2005. Easing trade restrictions allowed the PRC to surpass the U.S. as Chile’s top trading partner.

Beijing’s prominence in Chilean affairs enables the PRC to significantly influence the Chilean government, as Chinese companies in Chile provide essential telecommunication networks, electricity distribution and financial services.

For example, Chinese-owned Huawei plays a crucial role in Chilean telecommunications by providing equipment for companies like WOM that provide Chile with 5G mobile phone service, displaying the weight of Chinese investments in Chile.

China and Chile’s commercial ties accelerated again after the Latin American country joined Chinese President Xi Jinping’s ambitious Belt and Road Initiative in 2018.

The Belt and Road Initiative is the focus of President Xi’s foreign policy agenda, providing a framework for how the PRC embeds itself in other nations. Launching in 2013, the BRI aims to link the world more closely with China through five primary priorities: “policy coordination, infrastructure connectivity, unimpeded trade, financial integration and connecting people.”

Chinese Foreign Minister Wang Yi affirmed Beijing’s support for the Belt and Road Initiative in Chile, emphasizing the importance of the Sino-Chile relationship.

InvestChile, a government agency tasked with promoting foreign investment in Chile, identified China as its top investor, with almost $8 billion worth of projects in 2021. Chinese investment in Chile exceeded the United States, the second-highest investor, by around $3 billion.

Chinese involvement in Chile opens new opportunities for Chileans, promoting job creation and increasing national GDP. The BRI in Chile contributes to sectoral growth, especially in renewable energy, public utilities and mining.

With an influx of Chinese investment in Chile, a remaining question is how this will impact the most vulnerable Chileans.

Before Chile joined the BRI, Chilean poverty in 2017 stood at a rate of 8.6%, lower than most Latin American countries. Santiago’s burgeoning partnership with Beijing promotes economic expansion, creating more job opportunities for Chileans and mitigating poverty. The COVID-19 pandemic, however, curtailed progress by driving Chilean poverty rates to soar to 10.8% in 2020, as per the World Bank.

Despite the recent rise in poverty rates in Chile, Chinese engagement supports pandemic relief, specifically by the Chinese-owned company Sinovac. This biopharmaceutical company established facilities in Chile to provide vaccines for Latin Americans, bringing more than 62 million doses of Chinese vaccines to Chileans as of September 2021.

With increased Chinese commerce in Chile, Chilean poverty rates may reach new lows, but other factors are also reshaping poverty.

InvestChile reported a 25.1% increase in global investment, including funds from more than just China. The United States, Canada and Brazil are top sponsors for Chilean businesses, contributing to Chile’s total foreign investment project portfolio of $28 billion in 2021.

Community-based organizations also tackle poverty, with many local projects designed to improve the lives of impoverished Chileans. One notable example is Hogar de Cristo, a foundation for helping the disadvantaged in Chilean society. Founded in 1944, Hogar de Cristo has helped more than 32,000 impoverished people in Chile, creating critical programs for the poor, including drug and alcohol rehabilitation, educational initiatives and job search opportunities.

Reducing poverty in Chile requires collaborative action, encompassing economic development, global engagement and local activities.

Type above and press Enter to search. Press Esc to cancel.