China shifts Latin America investment to compete with west

China shifts Latin America investment to compete with west



Stay informed with free updatesSimply sign up to the Chinese business & finance myFT Digest — delivered directly to your inbox.China has shifted its investments in Latin America towards strategic sectors such as critical minerals, technology and renewable energy as it challenges the US and Europe in crucial 21st-century economic battlegrounds, a study has found.The shift in emphasis from costly infrastructure projects came as new investment in the region fell, but alarm grew in the US and Europe about growing Chinese competition for economic supremacy.The drop in investment levels did not reflect a lack of interest in Latin America and the Caribbean but rather China’s much tighter focus on high-tech and strategic areas, said the report released on Monday by the Inter-American Dialogue.On average, China’s foreign direct investment (FDI) in Latin America reached $14.2bn per year between 2010 and 2019 but fell to an average of $7.7bn from 2020 to 2021, and then to $6.4bn in 2022, the last full year for which data was available.“Our data show a clear shift in Chinese FDI towards specific industries in Latin America and the Caribbean,” said Margaret Myers, a co-author of the report by the Washington-based think-tank. “Many of these new priority areas are described by China as ‘new infrastructure’, a term which encompasses industries — telecommunications, fintech and energy transition, for instance — which are . . . critical to China’s own economic growth strategy.”The report found that Beijing had invested a total of $187.5bn in Latin America and the Caribbean between 2003 and 2022.Emblematic of the new Chinese investment strategy were projects such as electric vehicle maker BYD’s plans for a plant in Brazil, Tianqi Lithium’s acquisition of lithium assets in Chile, and the expansion of Huawei and other Chinese companies across the region in data centres, cloud computing and 5G technology.Brazil won by far the biggest share of Chinese FDI in the region over the two decades to 2022, with $78.6bn or 42 per cent of the total. Peru was the second biggest recipient, followed by Mexico, Argentina and Chile.Beijing’s investment in Mexico is increasingly concentrated in high-value manufacturing, with Chinese companies moving production from their home base to Mexico to take advantage of that country’s privileged trade access to the North American market.While investment has grown steadily, trade between China and Latin America has soared over the past two decades, growing from $14bn in 2000 to $495bn in 2022. Chinese exports to the region consist of increasingly high-tech goods and services, though Beijing’s imports from Latin America and the Caribbean still consist mostly of raw materials, just as they did over a decade ago. Biden administration officials have repeatedly warned Latin American governments of what they say are the dangers of excessive dependence on Chinese investment, citing security risks, debt traps and the possibility of infrastructure such as ports being used for military purposes. RecommendedHowever, the US’s failure in many cases to offer competitively priced alternative products, cheaper finance for infrastructure projects or new free trade deals has frustrated many Latin American officials.The European Union last year launched its Global Gateway initiative in the region, touting funding of up to €45bn for projects including green energy transition and digital transformation, but it remains unclear how much of the money will be spent.Angel Melguizo, another co-author, said China’s new focus on high-tech investment “challenges European investment strategy, as the EU’s Global Gateway programme identified the same priorities. It also sets a base to compete with the US in some markets”. 



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