Escolar Documentos
Profissional Documentos
Cultura Documentos
ADRIENNE ARSHT
LATIN AMERICA CENTER
Chinese FDI
Latin
in
America :
New Trends with
Global Implications
BYROLANDO AVENDANO,
ANGEL MELGUIZO, AND SEAN MINER
Atlantic Council
1030 15th Street NW, 12th Floor
Washington, DC 20005
ISBN: 978-1-61977-402-5
June 2017
Chinese FDI
Latin in
America :
New Trends with
Global Implications
Angel Melguizo and Rolando Avendano are, respectively, Head of Unit and Economist with the Latin America and
the Caribbean Unit at the OECD Development Centre.
Sean Miner is Associate Director and Fellow, China - Latin America Initiative, at the Adrienne Arsht Latin America
Center of the Atlantic Council.
Table of INTRODUCTION01
CONCLUSIONS 17
ENDNOTES 20
C
reasonably priced energy resources and other
hina is an emerging power on the commodities. State-owned oil firms like China
world stage, rapidly expanding its National Petroleum Corp. (CNPC) and Sinopec,
influence beyond Asia. Chinese firms Chinas first and second largest oil firms, have
are now zeroing in on Latin America, rebalanc- quickly expanded their activities abroad. These
ing the role of traditional partners in the region. firms are securing the long-term stability of oil
Chinas engagement abroad is not new, but the exports to China, while also playing a growing
resources directed to this going out strat- role in the financial future of several govern-
egy have risen dramatically, increasing Chinas ments in Latin America.
global leadership role. This adds up to a major
economic and political rebalancing from the Soft Power Effects of FDI
West to the East, a phenomenon also known as In theory, the economic benefits of direct in-
shifting wealth. 1 vestment for the recipient country are clear:
Chinese companies are moving rapidly into more jobs, higher wages, knowledge transfer,
Latin America, and have invested over $110 increased productivity, and increased trade. But
billion since 2003, most of it in the last five there are strategic benefits for the investing
years (Figure 1). Once the most favored nation country as well, and they are also significant.
for inflows of global foreign direct investment The soft power effects of FDI for the investing
(FDI), China is now looking to acquire assets country can be substantial, and include improv-
abroad. Traditionally, Chinese firms focused their ing its image abroad, persuading others to side
investments in Latin America in the extractive with it in international organizations, and shap-
sector. Now, more than half of all investments
target the service sector, especially transport,
FIGURE 1. Annual Chinese FDI in Latin America
finance, electricity, information and communica-
tions technology (ICT), and alternative energy, 70 US$ Billions 25
increasing Chinas relevance in the region.
60 Amount
The increasing influence of China is also a
# of deals 20
result of reduced engagement by the United
50
States, which is focused on other global engage-
15
ments. Its recent exit from the Trans-Pacific 40
Partnership (TPP) could suggest that the trend
30
will continue.2 10
With the will to play an active part in the
20
global economic order, China is providing
5
economic and financial assistance to the region 10
also a way to open doors for Chinese firms to
0 0
expand.3 By delivering loans, increasing FDI, and
03 05 07 09 11 13 15
16
building stronger trade ties, China is ensuring its
companies maintain market access for its export Source: Bureau van Dijk, fDi Markets
ing friendly policies in other countries. As other your dreams) opened a solar panel factory
actors in international investment, Chinas firms, using the latest technology. Called double glass,
with a prevalence of state-owned companies, this new technology transfers solar power more
have the capacity to align economic trends efficiently, and increases the life of the panels to
with government priorities. At the same time, fifty years. BYD is a highly innovative global firm
China has made explicit its principle of mutual that has made several strategic investments in
respect and non-interference in countries in- Latin America, including in the auto industry.
ternal affairs.4 This example is just one of a number of across
Chinas sudden spike in FDI can be under- the region. Chinese companies have awakened
stood as part of a strategy for relevance and to the many investment opportunities. And new
collaboration with Latin America. China is also data show that the service sector and indus-
promoting a state-led policy of development tries like automotive and IT are growing targets,
in the region, where rising global investments along with traditional investments in oil and
could mean increasing influence in the inter- mining.
national arena. Latin America will play an Chinese companies are now controlling an
important role in Chinas efforts to shape issues increasing share of Latin Americas electricity
internationally. At the same time, Chinese FDI generation and transmission. This kind of invest-
could give the region more leverage when ment in critical infrastructure can help make
negotiating with traditional partners, such as the Latin American economies more productive and
United States and the European Union.5 competitive. Electric power will be increasingly
generated by Chinese-built renewable energy
New Reality: Chinese Firms Set sources such as hydro, wind, and solar. And a
Their Sights on Latin America growing number of business transactions will go
In the southeastern city of Campinas, Brazil, the through Chinese-owned banks. This, increasingly,
Chinese company BYD (which stands for build is the new face of Chinese FDI in Latin America.
Chinese companies will play a large role
Chinese firms are increasingly investing in renewable sources of in connecting the next generation of Latin
energy production in Latin America, including hydropower, solar, American middle class consumers to the Internet,
and nuclear.
with numerous deals in telecoms and network
equipment confirmed in the past few years.
China could play a growing role on the definition
of unilateral or multistakeholder Internet gover-
nance, the latter being promoted regionally by
countries like Brazil and Argentina.6
Philippines
China
India
Mexico
Korea
Vietnam
Brazil
United States
Peru
LAC Average
OECD Average
Chile
Italy
Costa Rica
United Kingdom
Denmark
Argentina
Germany
Netherlands
States could, in theory, force a slowdown of
major Chinese deals in the United States with
some investments potentially diverted to the
region. The United States is also considering
reviews of investment from Chinese state-owned Source: OECD, 2017 (see www.oecd.org)
Note: Scale is from 0 (open) to 1 (closed).
enterprises on national security grounds.7 A sim-
ilar situation is occurring in Europe, where some arisen.10 At the same time, while Chinas growth
in Germany argue that they should have more has long been driven by investment, supported
power to block transactions that may harm their by high savings rates, the growth model has
national interests.8 Rising barriers to Chinese obvious financial risks, as well as excess capacity
investment elsewhere may be to Latin Americas in heavy industry and real estate.11
advantagealthough other factors play a role in Capital left the country at high rates in 2016,
the surge of Chinese FDI flows. putting pressure on Chinas currency, the ren-
Over the past ten years, governments in Latin minbi, to devalue.12 Investors and even ordinary
America from across the political spectrum Chinese families looked to diversify their assets
have lowered barriers to foreign investment. into other currencies, mainly the US dollar.
According to the Organisation for Economic Authorities enacted strict capital controls to
Co-operation and Developments (OECD) FDI stem the outflow.13 This had a noticeable impact
Restrictiveness Index, several countries rank at on outward FDI flows, but these restrictions
or near the level of the United States, including largely targeted financial market investors and
Argentina, Chile, Colombia, and Brazil (Figure 2). consumers, and had less of an effect on large
Chinese companies are also racing to get some Chinese multinationals. Chinese firms are more
of their cash out the door. Chinas economy has likely to be targeted when they invest outside
slowed from double-digit growth rates to around of their core competency, such as when an
6.6 percent (OECD estimate for 2017),9 and insurance firm enters the real estate sector.14
many large Chinese firms are overly reliant on Investments from Chinas firms in industries
the domestic market for their revenue streams. In such as extractive, electricity, alternative energy,
addition, and despite the economys impressive and automotive are unlikely to be significantly
performance and unprecedented poverty reduc- affected, which bodes well for future Chinese
tion (nearly 700 million have been lifted out of investment in Latin America. In 2017, there were
poverty since 1980), economic imbalances have already signs that outflow controls had subsided.
C
completed transactionssecond only to those
hinas economy has grown at double of US firms.15
digits over the past thirty years, The past two years have seen a transformation
increasing the urgency for energy in the strategy of Chinese outbound investment.
security and access to cheap natural resources, Traditional Chinese investments were mostly
since any disruption could have consequences in fossil fuels, metals, agriculture, and other
for their development model. The countrys natural resources. Recent investment activity is
institutional stability also rests on its extraordi- often driven by these same objectives, but also
nary economic record, so China is encouraging by Chinas efforts to fundamentally transform
companies to invest abroad as an essential com- its economy. Deals in real estate, informa-
ponent of securing the necessary resources and tion technology, entertainment, finance, and
diversifying the revenue streams that facilitate transport were targets of major acquisitions.16
strong economic growth. The largest M&A deal in history came in 2016,
In the early 2000s, the Chinese government when ChemChina announced the purchase of
expressed its desire for Chinese companies Syngenta, the Swiss seed and pesticide com-
to internationalize by declaring a going out pany. Chinas HNA Group also announced a $6
strategy. This strategy gained importance in billion stake in Hilton hotels, and a Chinese com-
the years following the global financial crisis as pany agreed to purchase an important robotics
Chinese policymakers saw undervalued assets, firm based in Germany for nearly $5 billion.
especially in natural and energy resources. Now, Chinese firms are clearly targeting higher value
China invests more abroad than it receivesa companies with technological know-how, brand
major milestoneand its companies have value, and strategic assets, such as semiconduc-
expanded their overseas portfolios. tor and other advanced manufacturers.
The Pudong district of Shanghai is home to the headquarters of numerous Chinese multinational corporations.
The quality of Chinas investment in the region gas emissions and consume more water per
has also drawn attention, as environmental reg- dollar than the regions exports worldwide, 18
ulations, local labor laws, and other investment according to the Global Economic Governance
standards are being discussed with Chinese Initiative at Boston University.
companies. Environmental impact has been a
matter of recent contention with Latin American
governments, because the regions exports to
China are still concentrated in environmentally
sensitive sectors. Investment in these export- Chinese firms are
ing sectors creates relatively fewer jobs and clearly targeting higher
generates a greater environmental impact than value companies with
average Latin American and Caribbean exports. technological know-
Indeed, Between 2009 and 2012, the regions how, brand value, and
24X7PHOTO.COM/FLICKR
Focus
largest source of FDI, but China is catching up.
Annual FDI flows from China have been more
than $10 billion in four of the past five years. In
2014 and 2015, China accounted for an aver-
age of 10 percent of global FDI flows into Latin
America, a striking turnaround from the low
levels of investment even a few years earlier.20
T
As mentioned earlier, the data shows a
he origins of Chinese FDI in Latin major shift toward new industries (Figure
America lie in Chinese state-owned 3). Investments in the extractive industries
enterprises (SOEs) investing in the accounted for more than 60 percent of total
extractive industries (oil, gas, copper, iron ore), Chinese FDI in the region from 2003 to 2012,
a strategy to shore up natural resources to fuel but dropped to 37 percent in the following four
Chinas booming economy. Investment in com- years (2013 to 2016). Investments in the service
modities persists, even after a significant drop sector jumped from 21 percent of Chinese FDI
in commodity prices in 2015 when other foreign from 2003 to 2012 to more than 50 percent the
firms began to pull back on larger investments following four years (with alternative energy
in extraction in Latin America. included).
But now Chinese firms are shifting their focus Electricity generation and distribution have
toward the service sector, in line with the shift seen key investments, including the state-owned
in Chinas domestic economy, where services
now comprise more than 50 percent of GDP.
FIGURE 3. Chinese FDI in Latin America Shifts
This increased attention on serviceseverything Toward the Service Sector
from electricity generation and transmission
Agriculture Alternative Energy
to information technology and communication, Extractive Service
finance, and transportationrepresents rising Manufacturing
second saying Chinese enterprises will align Source: Bureau van Dijk, fDi Markets
Brazil 61 180
Peru 18 16
Mexico 6 65
Argentina 5 27
Bolivia 4 9
Chile 3 36
Venezuela 2 27
Antigua 2 1
Jamaica 2 6
Guyana 1 6
Cuba 1 3
Colombia 1 21
Ecuador 0.8 8
Costa Rica 0.7 2
Panama 0.6 12
Three Gorges purchase of hydroelectric plants coming from China Development Bank, mainly
in Brazil from Duke Energy. Information tech- to finance energy projects.
nology, finance, and transportation make up the Beyond Brazil, a number of countries have
vast majority of industries in the jump in service received large sums of investment from China
sector investment. Chinese firms such as Huawei, recently. Mexico has seen more than forty deals
ZTE, Hainan Airlines (HNA Group), and Bank of valued at over $4 billion in the span of three
Communications have all made major invest- years (2014 to 2016) from Chinaa remarkable
ments in Latin America in the past few years. amount considering no previous year had seen
This also reflects changes in Chinas domestic more than five deals. Many of these deals are
economy, as it shifts toward services such as in the automotive, IT, and alternative energy
health care, culture, and commercial services, industries. Argentina, too, has seen around $5
and relies relatively less on manufacturing. billion in cumulative FDI from China, including
Brazil, by far, is the preferred destination for investments by Chongqing Grain Group, ICBC,
these investment flows (Figure 4). Even though Chery Auto, and Sany. Bolivia has received$3.5
global FDI to Brazil was smaller in 2016 com- billion from two deals, a $3 billion joint venture
pared to 2014 as firms worried about political by Shengli International Drilling Co and Bolivias
and economic uncertainty, Chinese firms dou- state-owned oil firm YPFB and a $450 million
bled down, accounting for their largest annual investment in the mining and metals industry by
FDI ever to the countrymore than $11 billion. Sinosteel.
The increasing financial flow from China to Brazil Peru, due to favorable political relations
is also reflected by large government loans with China and abundant natural resources,
to the country in 2016, with nearly $15 billion has received special attention from Chinas
state-owned mining firms. In 2014 alone, it saw (Figure 6). But they are shrinking in terms of
four major deals in mining and metals worth percentage of annual investment.
over $13 billion (Figure 5). In the largest, a $7 bil- Manufacturing and the services sector have
lion deal in 2014, a group led by China Minmetals seen an acceleration in number of deals, as
(MMG) purchased a copper mine from Glencore Chinese firms rush to get into other parts of
Xstrata. CNPC purchased Petrobras Energia the Latin American economy. Firms such as
Peru for $3 billion that same year. Chinalco, a Huawei, ZTE, Beijing Automotive, and BYD have
Chinese aluminum company, originally invested all targeted the region in the past few years.
$2 billion in 2008, and has more than doubled Chinese state-owned banks have also opened a
that amount since. number of offices to increase their presence. In
Chinese firms are planning $10 billion more electricity generation and distribution, Chinas
in investment in 2017 and 2018, mainly in the state-owned State Grid alone has invested more
extraction of copper and iron ore.21 China needs than $7 billion in Brazil, through a combination
cheap copper to continue its fast-paced growth of greenfield investments and M&A activities.
in the construction sector, and iron ore because
China is the largest producer of steel in the Greenfield Investment
world. Chinas steel industry is now dealing with Chinese firms are also starting up many new
the serious issue of overcapacity; this has global companies in Latin America, which are known
consequences, as Chinese firms are pushing out as greenfield investments.22 These are typ-
other global producers of steel, and countries ically smaller investments and are spread
worldwide are starting to erect high barriers for across industries. The rise in greenfield invest-
steel imports, including the United States and ments could suggest that Chinese investment
the European Union. will have a greater economic impact on asset
To be clear, the extractive industries of oil and values. Greenfield investments imply that Chi-
gas and mining and metals still loom large in nese firms are having greater control in several
Chinese FDI in the region, accounting for more areas, including hiring, capital investment, and
than $50 billion in cumulative investments strategy. These investments also make more fi-
Transport 9 15
Automotive 11 79
Finance 7 28
Electricity/Utilities 9 16
Alternative Energy 4 14
Consumer Products/Electronics 4 54
Agriculture 0.8 15
Chemicals/Rubber 2 19
Other Services/Wholesale 7 16
nancial resources available for domestic capi- markets and maintaining a supply of intermedi-
tal formation and expedite the transfer of more ate goods. Mexico also has competitive wages
efficient technologies.23 One resulting implica- for factory workersby some measures cheaper
tion is that industry diversification of Chinas than in China. For these reasons, assembling
FDI in the region could come through green- automobiles in Mexico is gainful for both parties.
field investments.
The two leading categories for greenfield Mergers & Acquisitions
investment in Latin America are metals and Before 2010, mergers and acquisitions involving
mining and the automotive industry. In fact, Chinese firms were negligible in Latin America,
there have been more than seventy deals but since then, Chinese firms have awoken and
announced in automotive, worth over $10 billion, have averaged over $6 billion of M&A activity
with the focus on Mexico and Brazil. However per year (Figure 7). By dollar amount, the deals
trade barriers that restrict the import of vehicles are heavy in oil and gas, mining and metals,
are a large reason behind some of the Brazilian and finance. Looking at the number of deals,
deals. Accessing the market means setting up a though, we see deals across industries, includ-
domestic assembly plant. ing agriculture, chemicals, automotive, IT, and
Many Chinese firms are beginning to recog- consumer products and electronics.
nize the value of investing in Mexico. A strong Brazil is again the leader, attracting fifty-seven
manufacturing country, Mexico is well integrated deals from Chinese firms since 2003. Firms in
in the production supply chain, creating efficien- Chile, Argentina, and Mexico are also common
cies for factories located there. This is partly due targets of Chinese investors. By number of deals,
to the North America Free Trade Agreement Chinese investors, many new to the region,
(NAFTA) opening up the US and Canadian spread out M&A activity among a diverse range
State-Owned Enterprises
From mining, oil and gas, and infrastructure, to
hydroelectric plants, Chinese state-owned en- 81%
terprises dominate investments in Latin Amer- SOE
ica (Figure 8). Some come to fill overcapac-
ity, others to secure Chinas long-term energy
needs. Chinas state-owned Three Gorges Corp.,
for example, after constructing many dams in
China, turned to other parts of the world that Source: Bureau van Dijk, fDi Markets
Brazil
Chinese FDI in Latin America, and that could
increase. The head of the Brazil-China Chamber
and Key
of Commerce and Industry, Charles Tang, stated
that 2017 could see more than $20 billion in M&A
activity from China, as more Chinese firms turn
Industries
their attention to Brazilian assets that are under-
priced as a result of economic and political crises.
The worlds largest power company, the state-
owned China State Grid Corp., has bet the house
on the Brazilian electricity market. The firm has
invested more than $7 billion in Brazil since
Brazil 2012, in a mix of acquisitions, joint ventures, and
Brazil plays a major role in attracting Chinese greenfield investments. Having struck deals for
FDI in Latin America, which started to take electricity grids in Australia, Italy, the Philippines,
off in 2010. Total cumulative investment has and elsewhere, State Grid had annual sales of
reached over $60 billion (Figure 9). Tower- $330 billion in 2015, leaving it with deep enough
ing over other industries is nearly $14 billion in- pockets to outbid almost anyone.25 The firms
vested in the oil and gas sectoralthough many CEO envisions a global electricity grid where
industries have received more than $5 billion power lines dont just cross national borders, but
each, including mining and metals, transport, continents as well. It is also building transmission
automotive, finance, and electricity and utilities. lines that will help electricity generated from the
Transport 6
Automotive 7
Finance 6
Electricity/Utilities 9
Alternative Energy 5
Information & Communication Tech 2
Consumer Products/Electronics 1
Agriculture 1
Machinery & Equipment 0.6
Chemicals/Rubber 0.1
Construction & Construction Materials 0.1
Other Services/Wholesale 0
Chinese investment in electricity generation and transmission in Latin America is transforming the industry, con-
tributing to increased productivity and competitiveness in the region.
Belo Monte Dam to reach the more populated municipal governments (a particularity of Brazil
cities in the south. State Grid, and therefore when it comes to Chinese loans) could extend to
China, is betting a big stake on Brazils future FDI investments in infrastructure development
success. (notably in electricity and transport).
With gloomy growth levels in 2016 (-3.6 per-
cent according to OECD) and a slow expected Energy
recovery (0.7 percent expected growth for Chinese investment in Latin America is rooted
2017 and 1.6 percent for 2018),26 Chinas invest- in the traditional energy sector, mainly in pur-
ments in Brazil are welcome, especially when suit of its own energy security. The largest in-
the country is experiencing serious external vestments have been acquisitions and joint
imbalances and a large trade deficit. Chinas ventures of oil assets all over the continent by
focus on electricity, mining, automotive, and state-owned firms Sinopec and CNPC. Chinas
transport suggests a more long-term strategy, other large state-owned oil firm, CNOOC, won
at a moment when external resources for the two of ten deepwater blocks auctioned by the DENI WILLIAMS/FLICKR
country are increasingly scarce. Besides the Mexican government in December 2016, worth
short-term stability this kind of investment can an estimated several billion dollars each. Peru,
bring, the prospects for Chinas FDI could be Bolivia, Colombia, and Venezuela all have seen
significant at both the national and the subna- major investments from these firms as well. The
tional levels. Chinese lending to regional and acquisition of seven power plants in Brazil and
operations abroad. Chinas domestic industrial PRODIAT, and other programs) to the automo-
policy limits foreign firms ownership of any tive sector pay off. Today, Mexicos main export
auto manufacturing company set up in China destinations, apart from the US market, include
to 49 percent. Further, China slaps at least a China, Brazil, and India. However, the sector is
25 percent tariff on car imports, and some cars facing challenges to adapt its practices to new
face much higher taxes. These two measures demands coming from the Chinese market. As
heavy tariffs and ownership control in joint a host to original equipment manufacturers
ventures for local Chinese firmspartly explain (OEMs), the know-how on light vehicle models
why foreign-made cars represent just 5 percent will be handy to expand in Chinese markets.
of the Chinese market.28 Increasing domestic content will present a chal-
Brazil, with one of the largest auto markets lenge to scale up investments in the automotive
in the world, also has very high import taxes, sector in the future.30
although it does not have the same limits on
foreign ownership. Brazil, once facing increasing Service Sector
auto imports, especially from Japan and Korea, The services sector has grown markedly in
implemented quotas in 2013, heavily taxing any prominence, fueled by capital flowing into fi-
cars above the limit. Still foreign firms can set nance, transport, information technology, elec-
up factories with little restrictions or pressure tricity, and construction. The service sector re-
to hand over technological know-how. This, ceived more than half of all Chinese investment
together with targeted programs for strength- from 2013 to 2016, nearly double that of the
ening global value chains and incentives for previous ten years.
innovation, are behind the significant increase China will have a large role in connecting the
in investment in the auto sector in Brazil over next generation of middle class consumers to
the past several years. In the end, protectionist the Internet, with more than fifty deals related
policies like these often can do more harm than to ICT. Huawei, the Chinese telecom giant, has
good, as Brazilian consumers end up paying made more than a dozen investments across
more for their cars, and Brazilian-owned auto Latin America, followed by its peers, such as
firms see little innovation shared from the China Unicom, ZTE, and TP-Link. From commu-
growing number of foreign companies in the nication lines to routers, Chinese firms are on
market.29 the frontier of the next generation of digital data.
Other countries, like Mexico, have seen policies
for attracting FDI (through ProMexico Fund, Lending vs. FDI: Differences
Between Financial Flows
Chinese FDI to the region is accompanied by
lending from Chinas policy banks (established
China will have a large
to take over the government-directed spending
role in connecting the next functions of the four state-owned commercial
generation of middle class banks), which has surpassed the $140 billion
consumers to the Internet, mark since 2005.31 Most of this financing has
with more than fifty deals gone to four countries: Argentina, Brazil, Ecua-
related to ICT. dor, and Venezuela. Rather than substituting
for other lenders, these loans are complemen-
tary, and are focused on countries where access
to capital markets is more expensive and where respects. Nearly 15 percent of Chinese loans to
international financial institutions are limited or Latin America today have a commodity-backed
do not have active portfolios. clause, such as loans-for-oil and purchase
As of 2016, Inter-American Dialogue data requirements. Unlike with the World Bank or IDB,
show that most loans from China to the loans from Chinas policy banks dont come with
region continue to be concentrated in infra- conditions for economic or political reforms.
structure, energy, and mining. In contrast, However, they can come with mandates that
international financial institutions, including the infrastructure or other construction proj-
CAF Development Bank of Latin America, ects funded use Chinese services or partsa
Inter-American Development Bank (IDB), and common practice today when Chinese policy
the World Bank, seem to be expanding to banks provide financial assistance. In terms of
other areas, with 60 percent of their portfolios costs or lending conditions, Chinas loans are
focused in education, health, environment, and similar to the ones provided by multilaterals.
public administrationbasically the moderniza- However, the stabilizating role Chinese loans
tion of the state, rule of law, and justice. have played in recipient economies over the past
Chinas loans to the region are different than two years, particularly in Ecuador and Brazil,
other international financing sources in several should not be underestimated.
WALLY GOBETZ/FLICKR
Unlike China, the Inter-American Development Bank, which China joined as a donor member in 2008, attaches
conditions to its loans.
Chinese President Xi Jinping, who has visited Latin America three times since 2014, has zeroed in on Latin
America, promising vastly increased trade and investment with the region by 2025.
are particularly important in the environ- Provide a productive environment for compa-
mental domain. Latin America needs to pro- nies to operate in by building and maintain-
tect lands, communities, livelihoods, and in- ing efficient infrastructure. Quality roads and
dustries where a focus on primary extractive ports provide a foundation for dynamic eco-
industries (where China and other foreign nomic growth.
investments are concentrated) could put en- Maximize the potential of Chinese intermedi-
vironmental sustainability at risk. Regulatory ary services for Latin Americas manufactur-
frameworks that should be either created or ing sector, particularly in the areas of distri-
strenghened include those that reinforce eval- bution and logistics, where the Chinese are
uation and monitoring mechanisms, improve globally competitive.
ministries capacity to enforce standards and Focus on policies that will boost R&D spend-
laws in extractive projects, and establish a ing to facilitate greater innovation and
clear consultation processes to address local productivity.
civil society concerns.
Implement domestic policies that favor skills
Guide FDI, from China and elsewhere, to in- development, technological adaptation,
dustries that will further integrate national knowledge transfer, and innovative product
economies into global value chains. One way development to materialize the benefits of
to do that is to support special economic Chinas investment.
zones targeting strategic sectors for integra-
tion, as long as there is impact evaluation, and
revisions if the zones are not working.
The greenfield data is from fDi Markets, the most comprehensive online data-
base of crossborder greenfield investments available (including investment proj-
ects, capital investments, and job creation), tracking announced deals from a
variety of sources (financial news, media sources, project data from industry or-
ganizations, and investment agencies). Some data sets that relate to Chinese FDI
in Latin America, track only announced deals from news articles. This leaves out
many smaller deals.
Note: Differences in reported figures (from IMF, national sources, and others)
of Chinas FDI to Latin America can be explained by under-reporting of official
data collected by the Ministry of Commerce. Three main factors may explain this.
First, many Chinese firms make their investments through Hong Kong-China, Ma-
cao-China, and other financial centers (such as Cayman Islands and British Virgin
Islands). Estimates of the share of Chinas investment entering the region through
tax havens can reach 78 percent of total investment.39 Second, not all countries
in the region register the country of origin of FDI investments. Third, FDI invest-
ments can be made through subsidiaries outside of the country. In addition, many
deals have multiple investors and this can skew the data.
The following Latin American countries are included in the database: Antigua,
Argentina, Bolivia, Brazil, Brazil, Cayman Islands, Chile, Colombia, Costa Rica,
Cuba, Ecuador, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama,
Paraguay, Peru, Suriname, Trinidad & Tobago, United States, Uruguay, Venezuela
America: An Empirical Analysis, 20032014, Latin Money Out of the Country, Bloomberg, November
American Politics and Society, November 2016, Vol. 30, 2016, https://www.bloomberg.com/news/
way, Financial Times, January 10, 2017, https:// of China, Chinas Policy Paper on Latin America
e7eb37a6aa8e. www.fmprc.gov.cn/mfa_eng/wjdt_665385/2649_
665393/t1418254.shtml.
9 OECD Economic Outlook, June 2017.
20 Economic Commission for Latin America and the
10 Towards the end of poverty, The Economist, June
Caribbean (ECLAC) data and authors calculations.
1, 2013, http://www.economist.com/news/leaders/
22 The distinction between M&A and greenfield 31 Kevin P. Gallagher and Margaret Myers, China-
investments differs among institutions. In general, Latin America Finance Database, Inter-American
M&A transactions refer to the purchase or sale of Dialogue, 2016.
existing equity, while greenfield investments refer
32 Macri, Xi seal infrastructure deals worth billions of
to entirely new investments. See OECD, Benchmark
dollars. Buenos Aires Herald, May 19, 2017, http://
of Foreign Direct Investment (Paris: OECD
www.buenosairesherald.com/article/225700/macri-
Publishing, 2008).
xi-seal-infrastructure-deals-worth-billions-of-dollars.
23 S.S. Golub, C. Kauffmann, and P. Yeres, Defining
33 Kevin Liptak and Dan Merica, Trump agrees not to
and Measuring Green FDI: An Exploratory Review
terminate NAFTA at this time, CNN, April 27, 2017.
of Existing Work and Evidence, OECD Working
http://www.cnn.com/2017/04/26/politics/trump-
Papers on International Investment, September 1,
nafta/index.html.
2011, http://dx.doi.org/10.1787/5kg58j1cvcvk-en.
34 Jude Webber, China trade is no path to growth for
24 OECD, Economic Survey of China (Paris: OECD
Latin America, Financial Times, April 28, 2017,
Publishing, 2017).
https://www.ft.com/content/
25 James Paton, China Builds an Empire of Electricity c5598d7c-2b4f-11e7-9ec8-168383da43b7.
With Australia as Target, Bloomberg, March 31,
35 Bureau van Dijk and fDi Markets.
2016, https://www.bloomberg.com/news/articles/
2016-03-31/chinese-power-behemoth-with-global- 36 Ted Piccone, The Geopolitics of Chinas Rise in
manufacturing competitiveness: What role for Guidance for Responsible Supply Chains of
EXECUTIVE VICE CHAIRS Wesley K. Clark *Jane Holl Lute Robert L. Stout, Jr.
(202) 778-4952,
www.AtlanticCouncil.org