Chinese FDI in Latam Declines in 2H18, but remains strong

Chinese plans for investment in Latin America declined slightly in the second half of 2018, with at least $10.7b in projects unveiled.

After a strong first half of announced and completed foreign direct investment (FDI) totaling $15.3b, the rate of projects slowed. Numbers for the first half of 2018 were some inflated, in part due to complications with individual deals. For example, Tianqi Lithium spent most of 2018 working on approval from Chilean authorities to increase its stake in SQM by $4.3b.

Even as FDI slowed over the course of the year, 2018 was still a strong showing: more than a third higher than the $17.7b in 2017. This was highlighted by the Chinese Commerce Ministry around President Xi Jinping’s visit to Buenos Aires last month (商务部召开例行新闻发布会).

China 2H18 FDI.jpg

Unsurprisingly, infrastructure and natural resources continue to be a primary driver of Chinese FDI towards Latin America. A steel plant and iron mine expansion in Peru — along with CCCC’s construction of a fourth bridge across the Panama Canal — were some of the biggest projects announced this past six months.

It’s an open question whether some of the biggest deals represent any real new investment at all.  CNPC’s increase of its stake in Venezuela’s Sinovensa to 49% listed here as being worth $5b may end up being collateral for debts already owed. Other deals discussed — including an up-to-$10b from China National Nuclear Corporation for Argentina’s Atucha III nuclear power plant — may not get off the ground.

So while smaller, some other deals may be indicative of where the relationship is going. Technology continues to be an area of interest for Chinese investment in Latin America. Tencent’s acquisition of Nubank and Ant Financial’s stake in the StoneCo IPO paralleled expansion by companies such as Didi Chuxing and Mobike. Growing interest in specialty foods and products for China’s growing middle class led to acquisitions of fisheries and fruit plants by Joyvio and Shenzhen Golden Anda.

With all eyes now on 2019, we will be closely watching the impact which the US-China trade war, a slowing economy in China, the retooling of the Belt & Road Initiative (BRI), and other factors will have on FDI flows.

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