When Chilean Chancellor Francisco Pérez Mackenna published a photograph on social media last month, the message was unmistakable.
The image showed him shaking hands with U.S. Ambassador Brandon Judd and, in a nearly identical second photograph, with Chinese Ambassador Niu Qingbao. His posture and attire were the same in both.
The symmetry seemed deliberate. It also reflected the main challenge facing President José Antonio Kast, who took office on March 11.
Kast is one of the most openly pro-Washington leaders in Latin America, and his government has rushed to align Chile with U.S. positions on Venezuela, Taiwan, and some regional security issues.
However, China’s influence in the Chilean economy is so great that any drastic break with Beijing would have severe consequences. Officials, businesspeople, and investors in Santiago are well aware of this.
I spent the week of March 22 through Saturday in Chile, giving presentations and talking with business leaders, security officials, and academics about China’s role in the country. What I found was a government trying to manage a strategic tension without an easy solution.
Friction in security matters
This tension became evident almost immediately after Kast took office. In February, the outgoing Boric administration became embroiled in a controversy over U.S. sanctions against three officials involved in the approval of the "Chile-China Express," a Chinese project for a fiber-optic cable between Valparaíso and Hong Kong that, according to reports, U.S. officials considered a potential security threat.
Ambassador Niu publicly responded, accusing Washington of trying to undermine the sovereignty of other nations.
Almost simultaneously, a Chinese research vessel, considered by some external analysts to be potentially relevant to intelligence, conducted activities in Chilean waters that Beijing described as scientific research.
A People's Liberation Army hospital ship also docked in Antofagasta and Valparaíso, raising questions in some Chilean circles about the broader purpose of the visit. The Kast government had already halted construction of a Chinese space base in the Atacama Desert amid concerns it could have dual use.
China’s military presence extended beyond maritime activity. When I participated in the inaugural session of the academic year at Chile’s National War School, a three-person delegation from the People's Liberation Army, including the military attaché and his deputy, attended the event. My Chilean colleagues remarked that such a presence in that context was unusual.
Still, it is unlikely that the long-term contest will primarily be decided in the realm of security. It is more likely to be decided in the economy, where China’s position is much stronger.
Economic dependence
China receives approximately half of Chile's copper exports and 71% of its lithium, two key minerals for both the Chilean economy and the global energy transition. Reports indicate that Chinese companies control about two-thirds of Chile's electricity distribution network. China also buys nearly 90% of Chilean cherry exports and is an important market for grapes, wine, and other agricultural products.
Chinese automakers currently account for nearly 40% of the Chilean automotive market, while Chinese electric buses operate in Santiago and other cities. Huawei operates at least three data centers in Chile. Two state-linked Chinese companies are among the finalists competing to expand the Port of San Antonio, Chile's most important deep-water facility.
During my visit, my Chilean contacts also pointed to initial commitments related to a possible Chinese port project in Tierra del Fuego. If such a project moves forward, its significance would extend far beyond the south of Chile. At a minimum, it would deepen China’s presence near increasingly strategically important maritime routes.
This is the dilemma facing Kast. Chile does not only face a diplomatic dilemma between Washington and Beijing but also the practical question of how far it can distance itself from China without harming vital sectors for growth, exports, and investment.
The challenge for Washington
A prominent Chilean businessman put it bluntly: with 38% of Chile's total exports going to China, more than double that of the United States, it would be reckless for Chile to provoke Beijing without a compelling reason.
He pointed to China’s economic retaliation against Australia after Canberra called for an independent investigation into COVID-19, an episode that still looms large in many Latin American business circles.
There is an additional irony that Kast may not view favorably. His flagship economic agenda focuses on removing regulatory barriers that held back investment during the previous Boric administration. This could spur growth and improve the business climate. It could also create new opportunities for Chinese companies already well positioned in key sectors of the Chilean economy.
Washington has exerted pressure as much as possible. Judd has publicly spoken out regarding relationships with Chile he considers risky, and the sanctions related to the fiber-optic cable sent a clear political signal.
However, pressure without credible alternatives has limited reach. The United States has acted more slowly than many Chileans would like in offering financing, technological alliances, and access to markets at a scale that could provide Chilean officials and companies with a practical reason to reduce their exposure to China.
Kast is likely to continue using Washington's language on issues that matter most to the Trump administration. He will probably maintain some distance from Beijing on security matters and avoid more politically sensitive forms of engagement with China. What is much less likely to happen, because no Chilean government could do so easily, is dismantling the economic relationship that binds Chile to China.
Whether Washington acknowledges this limitation and adjusts its expectations accordingly will be crucial in determining the productivity of its relationship with the new Chilean government. The carefully staged handshake photograph taken by Pérez Mackenna was not a mere gesture. It was a concise expression of the delicate political balance that Chile is trying to maintain.
R. Evan Ellis is a senior non-resident associate at the Center for Strategic and International Studies. His most recent book, “China Engages Latin America: Distorting Development and Democracy,” has been published by Palgrave Macmillan.
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