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China–Latin America relations

Bilateral relations

  • 7 min read
  • 7 chapters

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Through China, Commodity and Brand

Trade

Between 2000 and 2009, trade between China and Latin America increased by 1,200% from $10 to $130 billion. According to the Chinese Trade Ministry Counselor Yu Zhong, in 2011 the value of trade increased to $241.5 billion, making China the second largest trading partner of Latin America (the United States is the largest). The top five nations in this China-Latin trade were Brazil, Mexico, Chile, Venezuela and Argentina.

In 2009 7% of Latin America's exports was to China. It consisted largely of raw material and commodities such as copper, iron ore, oil, and soybeans. China was the largest export market for Brazil, Chile, and Peru and the second largest for Argentina, Costa Rica, and Cuba. Four nations contributed 90% of the exports: Brazil (41%), Chile (23.1%), Argentina (15.9%), and Peru (9.3%). Increased Chinese demand has also been argued to increase the commodity prices of Latin American exports. In the case of Brazil the rise of a new middle class has even been seen as due to Chinese commodity demand. On the other hand, a large part of the exports of Costa Rica (which has a Free Trade Agreement with China), El Salvador, and Mexico to China were high-tech manufactured goods.

5% of China's exports went to Latin America in 2009 and consisted mainly of industrial and manufactured goods. Chinese goods are popular in part due to their low costs. Chinese manufacturers are also making substantial efforts to establish themselves as brand names for the new middle class. China is investing in power plants in Brazil, and repairing a railway in Argentina.

According to a 2012 Fitch ratings report, in 2010, 92% of Latin American exports to China were commodities; 85% of Chinese foreign direct investment went to extractive industries, as did 60% of Chinese loans. The report stated that the effects are mixed. Still, overall, Latin America has benefited from its relationship with China through higher commodity prices, increased growth, increased investment, and improved governmental finances. There are also concerns of environmental impacts related to the huge increase in extractive industries and agriculture by Chinese companies in Latin America, including pollution, deforestation, habitat destruction and rising fossil-fuel emissions.

There have been concerns regarding the relationship due to Latin America’s dependency on exports of low-value-added, highly price-volatile commodities that employ relatively few people. Latin American manufacturers have faced increasing competition from China in both domestic and international markets. In some countries, there have been protests against the rising inflow of Chinese-manufactured goods, local Chinese businesses, and perceived loss of manufacturing jobs to China.

The book The Dragon in the Room: China and the Future of Latin America found that 92% of manufacturing exports from Latin America were in sectors where China was increasing its market share while Latin America was decreasing its share, or where both China and Latin America were increasing their shares but Latin America at a slower rate. Several experts have even argued that the long-term outlooks for Latin American manufacturing are poor, and other sources for growth and trade, such as services, should be sought.

After the 2015–16 Chinese stock market turbulence many Chinese investment projects in Latin America were canceled or have slowed. These include the Nicaragua Canal.

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