Quietly vying with US, China boosts trade, investments in Latin América

octubre 04 2021, 7:48 am

Photo: Associated Press

China now leads the world in trade with África and in direct investment in parts of Asia, but despite rapidly increasing its trade and investments with Latin América it still lags behind the United States with no immediate chance of displacing it.

By VOA

Oct 01, 2021

Latin América stands out from other regions where China has invested due to its more protectionist government policies plus a long legacy of U.S. economic involvement that’s less obvious in other parts of the world, analysts say.

Data show that “China has become an emerging investment partner for Latin America, but it does not appear to be an immediate threat to traditional investors in the region,” the Boston University Global Development Policy Center said in a study earlier this year.

This week, a group of U.S. government officials is in Latin America scouting infrastructure projects for the Group of 7’s plan for the group’s “Build Back Better World,” which was announced in June and seen as an alternative to China’s Belt and Road Initiative building infrastructure projects in the developing world. The Group of 7, or G-7, comprises wealthy, highly industrialized nations.

Some economists have raised concerns over China’s lending practices, saying countries can take on too much debt for massive projects that do not justify their cost.

Chinese investment in all-new projects in Latin América rose from 4% of all sources between 2005 and 2009 to 6.8% over a five-year period ending in 2019, the database fDi Markets has calculated. In a bellwether case, China began investing in Chile just five years ago and it’s now the South American nation’s top source of foreign capital, said Jorge Heine, the former Chilean ambassador to China.

The United States has held steady as the region’s top investor at around 22% of all foreign sources. American consumers rely on Latin America for agricultural goods while México, the region’s second most populous country, counts the United States as its biggest direct investor.

China’s share of mergers and acquisitions in Latin América rose from 2.4% over the five years to 2009 to 16.3% between 2014 and 2019 – second after the United States, according to data from the analytics service DeaLogic.

On the trade side, the region’s $16 billion in trade with China in 2000 has grown to more than $400 billion, Heine told VOA.

But Chinese firms have found it harder in Latin América than in África or Asia to win government contracts, pay bribes or win over local communities concerned about environmental preservation, analysts say. They’re often barred from taking resources or any direct proceeds from resource extraction industries, said Yun Sun, co-director of the East Asia program at the Stimson Center in Washington.

“Latin American countries are very protective of their natural resources, so they don’t usually let China into the asset or into the equity of, for example, the mineral resources,” Sun said.

Trade and investment

In Latin America, analysts say China mainly is looking for food, oil, refinery investments and minerals – such as the mobile phone battery ingredient lithium. Chinese investors have focused mostly on Argentina, Brazil, Chile and Perú, the Boston University study says.

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