Chinese investments are pushing the Latin American economy back in time

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Carol Hills: The canal project in Nicaragua involves a Chinese company. That’s just one example of China’s growing investments in Latin America, and the region’s strategic importance to the Chinese government has also been on the rise. Enrique Dussel Peters is a professor of economics at Mexico’s National Autonomous University. He says Chinese investments picked up when the recession hit.


Enrique Dussel Peters: Ten, fifteen years ago, China’s foreign direct investment in Latin America did probably not even appear in the statistics of most of the countries. In the last five years, after the international financial crisis of 2007-2008, China has massively been investing worldwide but also in Latin America. I remind you that increasingly in 2013 and 2014, China’s overseas foreign direct investment outflow accounts now for more than 80% of Chinese inflows of foreign direct investment. Regarding these outflows, Latin America counts for around 15% to 20% of the total overseas foreign direct investment in these last years.


Hills: What sectors of Latin America’s economy are they investing it?


Peters: The vast majority is in raw materials, particularly soybeans, meats, minerals, and oil and gas. This is almost 95% of the total overseas foreign investment in the last five years.


Hills: Do the kinds of investments that China is making in Latin America correlate to China’s rising standard of living?


Peters: Yes. What we are witnessing is a very important change in the way of living in China, and in particular demands, for example, regarding soybeans, meat, pork, minerals for the construction and urbanization of China, etc., and Latin America is becoming an increasingly important supplier for this urbanization process and for allowing for this change of the way of living, and for a growing GDP in China per capita and in general.


Hills: Who makes out better on these deals, China or Latin America?


Peters: Look, China is very coherent with their policies regarding what China is expecting from Latin America in terms of trade, in terms of foreign direct investment. What the problem is for Latin America is that this is posing massive challenges for development. Today, we’re witnessing, going back to what Latin America was several decades ago--mainly an exporter of raw materials with little value added, with little technological development, with little generation of employment, of supplier networks, etc., and importing massively manufactured goods. This is not sustainable development for Latin America today and in the near future, particularly if we consider that China is becoming increasingly important in all economic fields for the region.


Hills: For China, is this less about financial investments and really more about extending itself as a global power, or is it a mixture of both?


Peters: It’s a mixture of both. You have dozens of projects, in particular transactions all over from Argentina to Mexico, and you have firms such (03:53 unintelligible) who has become the #1 supplier in telecoms in Mexico. So, Mexico has become an important market for this firm. But you have also, for example, discussions of recent projects in terms of a Chinese firm building a transocean channel from the Pacific to the Atlantic in Nicaragua, and this would pose, of course, new challenges for the United States in what was usually called its backyard.


Hills: Enrique Dussel Peters is an economics professor at Mexico’s National Autonomous University. He was telling us about growing Chinese investments in Latin America.