Experts warn that China’s strategy in Latin America has changed

Given the internal weakening of its economy, China is changing its strategy in Latin America, with which investment in the region shows a “significant” decrease, experts warned on Wednesday.

The new financing funds are focused on smaller projects and aimed at the energy and food sectors, coincided in pointing out analysts who measure the pulse of Chinese penetration in the American continent, who met on Wednesday at an event organized by the think tank Inter-American Dialogue.

“We see a significant reduction in multi-billion dollar deals with countries that were backed by oil, we could say that this is a thing of the past,” said Margaret Myers, director of the Asia and Latin America Program at that Washington-based think tank.

The pandemic only accelerated a phenomenon that was already on the decline, the experts agreed, noting that the level of indebtedness of the countries in the region with close ties to China began to decrease as early as 2017.

Rebecca Ray, a researcher at the Center for Global Development Policies at Boston University, added that there are at least two arguments to understand the change: on the one hand, investments are shifting towards sectors with “more demand”, such as renewable energy, extraction of resources for the production of electric cars such as lithium and agricultural diversification.

The Chinese banks led by the Development Bank and the Export and Import Bank, according to estimates by the Inter-American Dialogue itself, would have disbursed some 136,000 million dollars in credits for countries such as Venezuela, Brazil, Ecuador, Argentina and Bolivia, up to 2019, which that reached freezing point in the middle of the pandemic.

A analysis conducted by economists from the International Monetary Fund (IMF) for the Western Hemisphere, found that after the peak of Chinese investment in Latin America, the Asian power has been impacted by changes “from fossil fuels, metals and agriculture to manufacturing and services, such as basic supplies, transport, financial services and telecommunications”.

This has prompted a “China rebalancing” that pushed its investments to a peak that has then pushed Chinese companies to expand abroad with their capabilities and focus on projects where they have developed capabilities such as renewable energy.

China’s strategy in the region would also be influenced by changes in Beijing’s global agenda, which has had to adjust to achieve its objectives with the investment megaproject known as the Silk Road.

A study carried out by the Academic Network of Latin America and the Caribbean entitled ‘LAC-China Network: Economy, Trade and Investment 2023’ it analyzes the patterns of change in China and how that country invested in strategic sectors as the years went by until it covered 18 projects in electricity companies in the region for some 34,000 million dollars.

Latin America and the Caribbean continue to experience low economic growth typical of “a stagnant recovery” post COVID-19, according to the IMF, which also points to high inflation and the collateral effects of the war in Ukraine as elements in a scenario of uncertainty for China, even though its economy is showing signs of recovery this year.

The World Bank has calculated that growth for Latin America and the Caribbean this year will be 1.4%, and that low growth will remain until 2025 due to multiple factors. On the contrary, China has seen its economy emerge and it is projected to grow by 5.1%, almost one percentage point above the projections for this year.

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