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Chinese investment in Latin America has slowed in recent years amid global economic headwinds and shifts in economic policy in Beijing. Brazil has been the leading destination for Chinese foreign direct investment (FDI) in Latin America for the past twenty years, despite a recent decline in flows. To understand the nature of Chinese foreign direct investment to Brazil and the wider Latin American and Caribbean (LAC) region, the Inter-American Dialogue partnered with the Brazil-China Business Council (CEBC) to hold the joint event “New Infrastructure – emerging trends in Chinese investment in Latin America’, which took place on 11 April 2024. The discussion and Q&A, moderated by Claudia Trevisan, centered around the outlook and impact of Chinese investment in LAC, as well as the LAC region’s approach to the opportunities and risks associated with field activities Chinese engagement.
Ambassador Luis Augusto de Castro Neves, President of the CEBC, opened the event with an overview of changes in Chinese FDI in Brazil, noting that fluctuations in Chinese investment are often linked to the economic and environmental challenges and obstacles China faces at home and abroad.
Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue, presented key findings included in her program’s new report, New Infrastructure: Emerging Trends in Chinese Investment in Latin America. This was followed by Tulio Cariello’s presentation of the recent CEBC report “Chinese Investment in Brazil 2022: Technological and Energy Transition”.
Meyers and Cariello agreed that whether in Brazil or other parts of the region, Chinese investors appear to be shifting away from large-scale, high-dollar projects to focusing on smaller deals in specific sectors. Myers noted that China’s domestic focus on high-tech, innovation-related industries has much to do with this shift. These industries – called “new infrastructure” by the Chinese government – include telecommunications, fintech, renewable energy and other industries that are vital to China’s domestic economic growth.
However, Chinese investment is not evenly distributed across the region or even within specific countries. Cariello and Trevisan noted that deals are often made at both the federal and local levels in Brazil, but the Brazilian state of Sao Paulo is by far the most popular destination for FDI in China – a result of the extensive and long-standing reach of participants from both countries.
The panelists also looked at China’s continued focus on the LAC energy sector. Myers highlighted China’s growing focus on renewable energy (including hydropower) in the region, which has nearly displaced mining investment since 2017. Carrillo also sees this shift in Brazil, where electricity and oil have historically accounted for about 70 percent of Chinese investment. Carrillo also suggested that Brazil’s geography makes it a good candidate for technological cooperation with China in areas such as transmission, wind, solar and hydropower.
Both panelists noted China’s focus on electric vehicles (EVs) in the region and the implications for regional value chains. According to CEBC research, Chinese automakers such as Great Wall Motors and BYD have often acquired production facilities from Western companies. In addition to electric cars, China has other forms of manufacturing in Brazil, including electrical appliances, heavy machinery and textiles.
Finally, Myers and Cariello touched on the extent of Chinese ICT investment, which is growing and diversifying across the region, even though FDI in China is generally slowing. In many cases, Chinese FDI in Latin America’s ICT sector is moving beyond devices and equipment to focus on data and computing. According to Cariello, there has been a surge in investment in the IT sector in Brazil, with major companies such as Tencent and Ant Finances leading the way.
During the event, panelists highlighted the need for LAC to maximize the benefit of Chinese investment diversion and guard against potential risks through policy responses and regulatory actions on data regulation, technology transfer and local content requirements.
