China’s Renewable Energy Investment in Latin America

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Over the last few decades, China has become a major player in Latin America’s energy sector. As one of the world’s largest oil consumers, the Asian giant has provided oil-backed loans and equity investments in numerous countries with large oil reserves like Venezuela and Brazil. Yet increasingly, China has been expanding its footprint in the region’s renewable energy sector as well.

Within Latin America, the primary recipients of Chinese renewable finance have been Argentina, Brazil, Bolivia, and Chile, as well as Cuba and Peru to a lesser degree. According to data from Boston University (BU), more than 15 percent of the money invested in the region’s energy sector from 2000-2020 went to renewables. In many markets, resources have been allocated to large hydropower projects, such as the Cóndor Cliff and Barrancosa dams financed by the China Development Bank (CDB) in Argentina, as noted in the Inter-American Dialogue and BU China-Latin America Finance Database, and the planned Rosita hydropower project in Bolivia, financed by the Export–Import Bank of China (Exim). Indeed, hydropower has played a pivotal role in China’s renewables finance strategy for the region, in line with its behavior at the global level: Chinese public policy banks have financed over $44 billion worth of hydropower projects around the world.

Other renewable technologies have also attracted Chinese investment, such as solar. Negotiated by officials in Argentina’s Jujuy province, the Exim-financed Cauchari Solar Park, with 1.2 million solar panels, is one of the largest solar farms in the world. There are already plans underway to expand the project. Furthermore, Chinese manufactures play an active role in supplying solar panels for projects throughout Latin America and beyond. Even in cases where project developers are European, many firms opt to use Chinese equipment, given the competitive prices offered and large market share held by Chinese companies. 

Chinese commercial banks, such as the Industrial and Commercial Bank of China (ICBC), the Bank of China, and the China Construction Bank have also financed several projects in the region, from joint ICBC and Bank of China investment in Argentina’s CDB-backed dam projects, to the Punta Sierra wind farm in Chile, jointly financed by ICBC and the China Construction Bank. Commercial banks, which serve a different function than their policy bank counterparts, are still likewise characterized by heavy state involvement.

Beyond finance and equipment, Chinese companies are also constructing and developing renewable energy projects. China Three Gorges, a state-owned power company, has expanded its footprint in the construction of hydropower projects in Bolivia, Ecuador, and Peru. In 2016, the company also acquired extensive hydropower assets in Brazil thanks to its purchase of Duke Energy’s holdings in the country. Likewise, the Power Construction Corporation, better known as PowerChina, has a significant presence developing and constructing hydropower and non-conventional renewable projects from Cuba to Chile. In Central and South America, PowerChina has 57 projects under construction, valuing nearly $10 billion.

While Chinese loans and investment have helped countries that have difficulty tapping international capital markets, such as Argentina, to expand their renewable portfolio, Chinese-supported energy projects have generated controversies over environmental degradation and the use of equipment and labor from China. Chinese companies are the largest foreign investors in large hydropower projects in the Amazon region, according to research by the Inter-American Dialogue. In the case of the massive Coca Codo Sinclair dam in the Ecuadorean Amazon, Chinese construction giant Sinohydro faced allegations of poor infrastructure design and state corruption, as well as insufficient environmental impact assessments.

As part of the Belt and Road Initiative (BRI), China has diversified its investments in energy markets in Latin America, increasingly including renewables in addition to oil and gas assets. This influx of capital to develop low carbon energy systems and reduce growing emissions is crucial to mitigate climate risk and strengthen the region’s resilience. Ultimately, it will be up to governments in the region to develop policy frameworks to maximize and diversify investment while also enforcing clear environmental, social, and governance standards.

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