Chinese FDI in Latam Continues to Surge

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The Trump Administration has successfully put the China-US investment relationship in a state of “Arrested Development,” according to the Rhodium Group. So much so that, Chinese foreign direct investment (FDI) in the US is down 92% so far in 2018, to $1.8b in greenfield and mergers and acquisitions (M&A) deals. Things have gotten so bad that even Alibaba, whose chief Jack Ma famously pledged would create 1 million jobs in the US, has announced it will scale back investment plans.

The current US government has successfully stymied the flow of FDI into the US, but Chinese investment in Latin American has been surging in 2018. ECLAC was set to unveil its latest FDI numbers today — until someone reminded them they were going to unveil them under the thundering roar of what turned out to be Colombia making it to the Group of 16.

While we wait for them to release the numbers now on World Cup-free July 5th, we looked back over the course of the year to see just how strong the deal flow had been.

And it’s been strong. Through the end of there first half of the year Chinese companies in the region have unveiled $15.3b in investments, according to Novam Portam’s calculations. That puts Chinese FDI in Latin America on course to increase 73% this year over 2017.

China-Latam FDI.png

While traditional sectors such as energy, natural resources, and infrastructure have dominated activity so far this year, new sectors such as health, technology, and financial services are becoming a larger part of the deal flow.

Kevin Gallagher and Rebecca Ray at Boston University’s Global Development Policy Center say that Chinese firms invested $22.1b last year: $4.4b in greenfield projects, and a record $17.7b on M&A. So if Chinese corporate greenfield FDI and M&A continues in the second half of the year at the same pace, the year-end figure $30.3b would represent a 73% gain. According to Moody’s this week, it’s a trend that is set to continue: "Chinese investment in Latin America’s infrastructure is intensifying, which will support the region’s infrastructure developments."

The above list may be overly optimistic — the Chilean government is looking to block Tianqi’s acquisition of SQM, for example — but it could turn out to be overly pessimistic. It doesn't reflect announcements of investment programs that have been rolled out over the past six months, such as:

So while Chinese investment in the US may be on hold, Chinese investment in Latin America is just getting started.

Top Stories

Ya ni las gorras van a venir de China: AMLO — El Financiero
Andrés Manuel López Obrador (AMLO) is the frontrunner and presumptive winner of Sunday’s Mexican presidential election. As our friend Boz puts it succinctly: “AMLO is going to win. Then what?" At his last event of the campaign — in what may be a taste of things to come — he lashed out at products imported from Asia:

“The caps and shoes they’re wearing come from Asia — that is impossible! It is not possible for them to be made in Asia. In Mexico we can do that: make shoes, clothes, and caps; produce beans, meat, milk, and wood. Mexico has all the resources." 

Will there be two protectionists in North America? Is the recent warming of business between China and Mexico about to come to a screeching halt?

México: Didi Chuxing expande su pelea contra Uber a Monterrey y Guadalajara, ofreciéndole 12 mil pesos semanales a sus conductores — Fayer Wayer
Competencia china de Uber promete a regios 12,000 pesos semanales — Forbes México
Didi is expanding its ride-sharing to new cities in Mexico: Monterrey and Guadalajara. It will be offering drivers MXN12,000 ($600) a week to get them to sign up.

CNBV autorizó operaciones de Bank of China México — El Economista
Avalan que opere Bank of China en México — El Universal
Mexican banking supervisor Comisión Nacional Bancaria y de Valores (CNBV) has given Bank of China the green light to begin lending in Mexico. Bank of China will start by lending to Chinese firms in Mexico, their suppliers, and Mexican firms doing business with China.

China, EE.UU. y Japón explicaron el 56% de las exportaciones chilenas a mayo — Estrategia
44% of Chile’s exports go to Asia, with China making up the lion’s share (38%).

China — LAC

Peru: Distance is the biggest barrier to increased shipments of mango to Asia — Fresh Plaza
General manager of the Association of Producers and Exporters of Peruvian Mango (APEM) Juan Carlos Rivera says that the distance to export to Asia makes maritime shipments unfeasible, so mangos get sent by air.

China and Latin America: A Complex Reality — Brink News
Carnegie-Tsinghua’s Matt Ferchen provides a succinct overview of China-Latin America relations:

Both ... must confront the legacy of past deals gone wrong and attempt to move beyond commodity-based trade, investment and financing ties to forge more infrastructure cooperation. This challenge is complicated by China’s still nascent efforts at understanding the region’s changing economic and political trajectory.

Gerente general de Maersk Container Industry, Ronnie B. Jensen: “La operación en Chile demostró no ser competitiva en los mercados globales” — La Tercera
Maersk is closing its container factory in Chile due to over-supply in the global market for containers and that production in Chile cannot compete on a cost basis with that from China.

Temen que un acuerdo con China profundice el déficit comercial — La Nación
Nin Novoa: "No seremos los sepultureros del Mercosur” — El Pais Uruguay
Mercosur continues debating whether to pursue a Free Trade Agreement with China, with concerns about its impact on the trade deficit. Following speculation that Uruguay would go it alone to get an FTA with China, Foreign Minister Rodolfo Nin Novoa says otherwise: 

“If the Free Trade Agreement between Uruguay and China means the breaking up of Mercosur, we will not be the gravediggers, we will not give it the death certificate — this government will not do it."

El plan que busca convertir a Chile en el segundo país con más buses eléctricos del mundo — La Tercera
Chile’s Transantiago bus system is going to implement “electrocorridors” for electric buses by the end of the year, in a project expected to cost up to $30m. 200 BYD and Yutong buses will be circulating by the end of the year.

Las relaciones con RD se inician tras el relanzamiento de los vínculos de China con América Latina y el Caribe — El Caribe
ENTREVISTA: Aspiramos a formar parte de la Franja y la Ruta, dice ministro de Economía dominicano — Xinhua
Empresas chinas manifiestan a ministro interés por comerciar con RD — El Nuevo Diario
Dominican Republic Finance Minister Isidoro Santana visited Beijing this week, looking to have his country join the Belt and Road Initiative (BRI).

Evo elogió cooperación incondicional de China con América Latina — El Ciudadano
Morales defiende lazos con China frente a EEUU ‘enemigo de la paz’ — HispanTV
Coming off his visit to Beijing last week, Evo sees China as a better partner than the US.

Factible un TLC México-China: contadores públicos — Milenio
The Mexican Accountant's Institute says that in the face of trade uncertainty with the US, an FTA with China is certainly feasible.

México alista exportación de plátano a China: Sagarpa — TV Azteca
A delegation from China’s General Customs Administration and Health Ministry visited Tabasco this week, inspecting plantain plantations ahead of approving them for importation.

The middling passage — TT Newsday
Scathing editorial on the ill-starred Galleon's Passage: 

In a startling reversal, it was revealed that the Galleons Passage would leave the Damex Shipyard in Cuba without promised retrofitting being done. The reason? The altogether unimpressive discovery that critical equipment and materials could not be sent to Cuba because of international embargoes against the socialist Caribbean nation.

Na guerra comercial, China vê Brasil como parceiro estratégico para obter alimentos — Gazeta do Povo
China mira Brasil como parceiro estratégico em meio a guerra global — Folha
China Targets Brazil as Strategic Partner in the Midst of Global Trade War — Folha
Is US President Donald Trump’s coming trade war an opportunity for Brazil to become China’s breadbasket? Folha seems to think so.

Why China can’t count on Brazil to fill soybean gap in US trade rift — South China Morning Post
Diplomacia de EE. UU. y China, con paso firme — El Colombiano
Las oportunidades de Colombia en guerra comercial EE. UU. - China — Portafolio
¿Por qué los nuevos aranceles de Trump no afectan tanto a Colombia? — Dinero
El Dólar al mayoreo baja de los 20 pesos — Expansión
Disputa entre China e EUA pode afetar exportações do Brasil, diz MDIC — Istoé
EUA X China: consumidor brasileiro pode pagar a conta — R7
"Mientras los impactos sean acotados en China, en Chile también serán acotados” — Pauta
Fed asegura que las amenaza son para China, no para México — El Sol del Centro
But there are lots of nerves about the coming trade war, and how it won’t be all roses for Latin America.    

Trump's original sin on trade — Axios
Washington conventional wisdom catches on:

TPP was actually signed in Chile, and included Mexico and Peru. All three countries have Pacific-facing coasts. Trump's TPP withdrawal has made these countries less reliant on trade with the U.S., creating an opening for China to increase its investment in Latin America. This has arguably made it harder to renegotiate NAFTA with Mexico, and given Latin America less reason to cooperate with the U.S. on other trade matters.

Chile, China y el “milagro” del Grafeno — Cooperativa

A Chilean observer worried that mass production of graphene will put his country out of the copper and lithium business. In theory...

El desarrollo de China y las oportunidades para Chile — Diario Financiero

Chinese ambassador to Chile Xu Bu writes how his country’s development give Chile opportunities, as well.

China Goes Avocado-crazy — WoowBow 哇包
Chile: auge y problemas en la producción de aguacates — Marco Trade News
China demand for avocados is booming, and doesn’t look to slow down any time soon. But that’s creating a problem in Chile where increased production is straining local water resources.

Ojo con la seducción china de las élites latinoamericanas — El Tiempo
Juan Pablo Cardenal warns that China is building an asymmetrical relationship (in its favor) with partners in Latin America, and using “personal diplomacy” to mask it.

China promoverá más cooperación con Perú en obras de infraestructura — Agencia Andina
China’s powerful National Development and Reform Commission (NDRC) is pushing for more infrastructure work by Chinese firms in Peru under the Belt and Road Initiative rubric.

Las relaciones de amistad de Panamá y la República Popular China — La Prensa
La ‘letra chiquita' de la inversión china en Panamá — La Estrella de Panamá
Chinese inroads in Panama: Transport hubs and BRI in the Americas — Global Americans
Looks at how China and Panama are doing, a year into their diplomatic relationship. Jorge Heine and Elías Castillo look on the bright side, but Panama’s La Estrella echoes what we hear - Panamanian businesses feel they have to move cautiously, and read the fine print. 

O que falta para o Brasil ser a China em tecnologias financeiras — Info Money
A look at what Brazil needs to do to “be more like China” when it comes to digital financial services. Short answer: the Brazilian Central Bank is making smart moves, but federal government regulatory and legal constraints are still holding it back.

Grupo Maco recibe importante visita desde China — Publimetro
Lifan Motors global head of marketing Luo Zhen came through Chile to meet with their local representative, Grupo Maco.

4,500 jobs to be created at new Phoenix Park — Trinidad Guardian
China belts TT — TT Newsday
New details on the MOUs signed between Trinidad and China last week. The Phoenix Park industrial development will require 60% local labor and 50% local content.

Mandatario de China expresó lo mejor para gobierno de Vizcarra en cita con embajador — Canal N
Peruvian Ambassador Luis Quesada Incháustegui presented his credentials to Chinese President Xi Jinping.

UNAM, puente para fortalecer las relaciones México-China — 20 Minutos
An article about how top Mexican university UNAM is expanding its presence in China to strengthen bilateral relations.

China's deals in Sri Lanka are a lesson for other countries taking Chinese investment and loans — Bloggings by boz
Our friend Boz highlights the NYT article about China’s relationship with Sri Lanka to raise a point we have discussed frequently with him: 

"Latin America and the Caribbean should take note of what happened in Sri Lanka. There is a high probability that China will use its loans and investments in a similar way in the coming decade to take control of other pieces of key infrastructure."

The Blocs building China’s Belt and Road — AJOT
Terry Gidlow, head of port agency WaterFront pens a detailed piece about how the key to the success of the BRI in Latin America will be the quality of the region’s ports.

O século 21 será chinês? — Outras Mídias
A Marxist reading of the rise of China. Really.

Korea — LAC

Samsung Pay enhances partnership with banks in Brazil — Pulse News Korea
Itaú Unibanco becomes the 12th bank in the country to accept Samsung Pay along with Bradesco, Banco do Brasil, Santander Caixa, and others. Google Pay works with eight partner banks in Brazil, and Apple Pay with only one — Itaú.

Destacan oportunidad de negocio para la miel chilena en Corea del Sur — Estrategia
How sweet it could be. ProChile is pushing for more Chilean honey producers to take advantage of the FTA with Korea to export more honey.

Japan — LAC

Japan's Sumitomo says to buy 5-pct stake in Peruvian gold mine — Reuters
Sumitomo has bought a 5% stake in Peru’s Yanacocha gold mine in Peru from Newmont Mining and Buenaventura for $48m.

India — LAC

India's eMudhra Expands To Latin American Market — CXO Today
Digital identity and transaction management firm eMudhra has partnered with partnered with Colombia’s Diplogrados Ltda to enter the Latin America education sector to curb diploma fraud by completely digitizing the diploma issuance process.

GCC — LAC

UAE Consul-General In New York Attends Opening Of Grenada's New Parliament Building — Urdu Point
Grenada inaugurated a new parliament building, built with funds from the United Arab Emirates and Mexico. The old building was destroyed by Hurricane Ivan in September 2004.

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