Chinese investment in Latin AmericaWith the launch of the Belt and Road Initiative (BRI), China has become a major investor in Latin America in recent years. Between 2005 and 2020, Chinese investment in Latin America increased from $12 billion to $350 billion. This investment, which is part of a grand Chinese initiative, has had a significant impact on the region in terms of economic growth, infrastructure development and technology transfer. However, these benefits of Chinese investments also come at potential costs, with negative impacts on the environment and looming threats of dependency.

Pros of Chinese Investment in Latin America

  • Economic growth and employment: Chinese investment has helped boost economic growth and improve poverty rates. For example, Brazil witnessed economic growth of 3.3% between 2001 and 2013, along with a reduction in poverty from 13.6% to 4.9%. In general, Chinese investments have increased growth by creating more jobs. According to the International Labour Organization (ILO), Chinese investment created around 1.8 million jobs in Latin America between the 1990s and 2016.
  • Infrastructural development: China has invested in both hard and soft infrastructure and has become a major stakeholder in the power distribution sector, transmission lines, railroads and mining sector. According to Forbes, China has invested $17 billion in LAC, with a main focus on the energy sector. As of November 2022, Power China is working on 50 projects in 15 LAC countries. Similarly, countries like Bolivia, Peru and Argentina (Lithium Triangle) have received significant Chinese investments as they are the source of 56% of the world’s lithium. China also controls all of Peru’s iron production and a quarter of its copper production.
  • New Technologies: Chinese investment has also facilitated the transfer of new technology to Latin America. Huawei holds the largest share in the Latin American telecom market and is leading the implementation of 5G networks. Similarly, as of 2022, Hikvision, a Chinese security camera enterprise, has become the largest security system operator in Mexico. These new technologies are pivotal in enhancing digital connectivity and security.

Cons of Chinese Investment in Latin America

  • Environmental impact: Most of the Latin American exports to China come from the agriculture and mining sectors, which generate 15% more greenhouse gases than the average. China’s involvement in the construction and mining industry raises concerns about its development practices. In March 2023, a group of 50 civil society organizations presented a report to the U.N. about the ecological damage caused by Chinese development practices. According to the report, a Chinese company operating the San Carlos-Panantza copper mine in Ecuador would have impacted 70% of the native land if the court had not canceled the project’s environmental license.
  • Debt Trap: Critics argue that China is creating a debt trap by offering huge loans, thereby creating dependency. An example of this is the Hambantota port case in Sri Lanka, where the host country was unable to pay back the Chinese loan and had to give up its port on lease to China for 99 years. Similarly, in 2021, Venezuela owed $1 billion to China due to a failed deal regarding iron extraction.
  • Transparency: Many have expressed concerns about the transparency of Chinese trade practices and the use of corrupt means to influence government officials. According to Patriot Ledger, China is increasingly using its investments to gain political influence in Latin America. The report found that China has been providing loans and investments to Latin American countries in exchange for support for China’s interests on the world stage.

Looking Ahead

Chinese investment in Latin America has had a mixed impact on the region. While it has helped boost economic growth and improve infrastructure, it has also had some negative environmental impacts. This highlights a need for continuous assessment of the impact of Chinese investment in Latin America to ensure the overall progress of the region.

– Sarmad Wali Khan
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