Chinese Investment In Latin America (archived)

Over the past 20 years, Chinese investment in Latin America has risen significantly.

Industries including energy, infrastructure, telecommunications and health care have been the primary recipients for Chinese investment.

China’s foreign direct investment, or FDI, the Belt and Road Initiative, or BRI, and the COVID-19 pandemic response have yielded a dramatic increase in their influence on the region.

While the U.S. relationship with Latin America has been paramount to the region’s economic initiatives and growth in the past, this dynamic is changing.

China’s strategic interest in the region can be seen with its FDI in Latin America just last year amounting to somewhere between $7 billion and $10 billion, which was on par with or exceeded China’s investments in the U.S. and Europe.

Prior to FDI funding, China used lending to expand its relationships and influence in the region.

Between 2005 and 2020, the China Development Bank and Export Import Bank of China have extended a total of $138 billion in loans to various countries in Latin America and the Caribbean, attached with requirements to pay back amounts owed with commodities such as oil, through the purchase of Chinese products, or by providing access to industries such as telecommunications and energy.

The BRI was introduced in 2013 as a project to originally link Asia and Europe, but was extended to Latin America more recently with agreements or active projects in 21 out of 24 Latin American and Caribbean countries as of December 2022.

Additionally, it was mostly China — not the U.S. — that stepped up and provided needed medical personnel, protective equipment, devices and an estimated 400 million vaccines in response to the COVID-19 pandemic.

The collective results of these efforts accelerated trade and economic alliances between China and Latin America. China has now become South America’s largest trading partner, growing 26-fold from $12 billion in 2000 to $315 billion in 2020.

Inevitably with economic gains comes equivalent gains in influence and geopolitics. It’s fair to say that China’s strategic moves are paying off as some Latin American countries have pivoted decisions to favor its political agenda.

Recent decisions made by several countries over the past few years reflect an alignment with China, such as dropping recognition of Taiwan as a sovereign country.

This has not gone unnoticed in Washington, as recent actions suggest an interest in maintaining strong relationships throughout South America.

In June 2022, the U.S. announced the Americas Partnership for Economic Prosperity — a framework to deepen economic ties within Latin America.

Key tenets of APEP include increasing levels of private investment, enhancing supply chains, broadening anti-corruption efforts, making infrastructure investments, promoting clean energy initiatives, and bolstering trade between the parties.

The strong U.S. push for wide APEP adoption has been unsuccessful thus far, with only 10 Latin American countries agreeing to participate.

Despite this, the U.S. remains strategically important to Latin America given its close proximity, but China undoubtedly has loosened the grip on its preferred partner status and regional influence.

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The next decade will be interesting to follow as China and the U.S. battle for regional influence.