A Different Kind of Investor?: Chinese FDI in Latin America

Introduction

The world economy is undergoing what have been called “tectonic” shifts in recent decades. The advent of huge, fast-growing producers like China and India to the global trading system, the “awakening” of Africa, the resource boom in many developing economies, along with the protracted crisis in the developed world and the powerful underlying forces of demography and the environment, are combining to change the face of the international economy and the geopolitical scene. The sheer size and vigor of China, in particular, means that its involvement in all of these realms will probably alter the rules of the game as it transforms the economic landscape. Part of this new world can be observed in China´s heightened activity as a foreign investor in developing countries.

Latin America has experienced the rising importance of China on many levels. China’s presence there is growing rapidly in the commercial realm, as Tables 1-3 demonstrate. Although the magnitude of U.S. trade and investment with the region still dwarfs that of most other nations, China´s imports, exports and foreign direct investment (FDI) to Latin America have been growing at spectacular rates from an initially low base. Between 2000 and 2005, Chinese imports from Latin America nearly quadrupled while its exports tripled, according to IMF data. In the period between the lifting of restrictions on its textile exports (2005) and 2010, Chinese imports from the region nearly tripled again, while Chinese exports to Latin America were multiplied by 2.2. Table 1 shows how China´s phenomenal rise as a trade partner with Latin America has decimated the ratio of U.S. to Chinese exports to the region. In some countries (Argentina, Paraguay, Uruguay), Chinese exports exceeded those of the United States by 2010.

*Change calculated from 2003 (2004 for Nicaraguan exports); no trade recorded with China before that date for these countries. Source: IMF Direction of Trade Statistics.