What China is Working On Behind the Scenes In Latin America 2

China’s interests in Latam

Major countries like Russia, China, and Iran are seeing a golden opportunity for growth in Latin American countries. These countries view Latin America as a land full of abundant natural resources. All these countries have a large appetite for sourcing raw materials like iron, soybeans, copper and oil from this region. These raw materials make up nearly 75% of Latin America’s (ILF) exports to China (FXI). For China, it’s a double advantage to invest in this region as it also opens Latin American markets for Chinese manufactured goods.

Investors see attractive opportunities in countries throughout the South America continent. Infrastructure investments are flourishing in Peru, while Colombia and Chile are emerging destinations for investments in energy and mining. Revived demand for base metals and commodities will drive economic growth in nations like Peru, Brazil(EWZ), and Chile. Chile (ECH) is the largest producer of copper in the world and with infrastructure spending in major economies slated to rise, demand for copper is expected to spike.

To promote investments in Latin America, China set up two fund agencies in 2015, China LAC Industrial Cooperation Investment Fund and the China-Latin America Infrastructure Fund. These investment vehicles have a capital base of $20 billion and $10 billion, respectively. Additionally, China has also added $5 billion in the China-Latin America Cooperation fund that was established in 2014. China is also a major investor in Mexico. In February 2017, JAC motors, a Chinese auto manufacturer announced plans to set up a plant worth $212 million in Hidalgo.

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China is now the second largest source for Latin American imports after the US and the third largest export destination for Latin American exports – after the US and the European Union.

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