The Reasons for China’s Cooling Interest in Latin America

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Latin America is a region of critical interest to China, but obstacles to further engagement — new and long-standing, at home and abroad — will temper Chinese activity in the region in the coming years. In fact, a review of on-the-ground developments in Latin America already suggests some moderation in levels of Chinese activity, whether by Chinese investors, or at the behest of Latin American governments, which in some cases are seeking ties with a wider range of economic partners.

Although trade remains dynamic, Chinese foreign direct investment and finance is already slowing somewhat in Latin America. Mergers and acquisitions and greenfield projects dropped from a record level of $17.5 billion in 2017 to just $7.6 billion in 2018, according to the Global Development Policy Center. Greenfield projects amounted to just $1.6 billion in 2018, the lowest level since 2006. And Chinese policy banks — China Development Bank and China Export-Import Bank — issued comparatively low levels of finance to Latin American governments over the past two years. 

This decline in activity is attributable to a range of factors, some of which have inhibited Chinese activity in the region for decades. Latin America is cast as a “land full of vitality and hope” in China’s official policy, but Chinese investors have for many years viewed the region’s distance from Asia as prohibitive—Buenos Aires, Montevideo, and Santiago, the farthest capital cities from Beijing, average almost 12,000 miles. Others see the region’s regulatory environments and bidding processes as exceedingly complex or taxing. As Zuo Pin of the Shanghai International Studies University noted in the Chinese journal Guoji Guancha in 2015, Latin America is a remarkably challenging environment for Chinese investors. 

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