Chinese foreign direct investment in Latin America and the Caribbean

Includes bibliography.Although Chinese corporations were relatively unknown in Latin America until a few years ago, their direct investments in the region have averaged about US$10 billion per year since 2010. Their presence and economic leverage have become very significant in many industries and countries of the region, but their motivation, strategy and procedures are not always well understood by Latin America’s governments, businesses and civil society. Similarly, Chinese companies still need to gain a better understanding of Latin America’s business environment and opportunities. The authors have overcome certain limitations in the official data by constructing estimates on the basis of information provided by the companies themselves. These figures support a number of key conclusions: • Since 2010 Chinese companies have invested, on average, about US$ 10 billion per year in Latin American countries. • China is still far from being one of the largest sources of FDI in Latin America, but Chinese companies have a significant presence in many sectors and industries, particularly in oil and mining. • Not all Chinese investment projects in Latin America are successful. Chinese companies are still learning to operate in an economic environment that is very different from that of their home country, a factor that can lead to implementation problems and project cancellations. • In the context of increasingly significant South-South economic relations, Chinese FDI in Latin America is expected to keep growing (and Latin America FDI into China to develop as well). • Latin American countries should encourage Chinese companies to diversify their investments in Latin America. In turn, Chinese FDI could greatly enhance its welcome by further contributing to enhanced diversification and productivity in Latin American economies. The authors propose that more attention should be paid to the strategies and practices of Chinese companies in Latin America and to the features that set them apart from others. Latin American governments should also assess how Chinese FDI can be treated as a new source of capital and knowledge with a view to raising productivity levels and enhancing the diversification of their economies. This working document is intended as a starting point for this fruitful discussion.Introduction .-- I. The rise in Chinese outward foreign direct investment .-- II. Overview of Chinese foreign direct investment in Latin America .-- III. Extractive industries receive most capital .-- IV. Infrastructure needs and capacities .-- V. Manufacturing investments are concentrated in Brazil .-- VI. Conclusions and perspectives