New Infrastructure—Emerging Trends in Chinese Investment in Latin America

Chinese investment in Latin America has slowed in recent years amid global economic headwinds and shifts in economic policy in Beijing. Brazil has been the top destination for Chinese foreign direct investment (FDI) to Latin America over the past twenty years, despite a drop in flows of late. To understand the nature of China FDI to Brazil and the broader Latin American and Caribbean (LAC) region, the Inter-American Dialogue partnered with Brazil-China Business Council (CEBC) to hold the joint event “New Infrastructure—Emerging Trends in Chinese Investment in Latin America,” which took place on April 11, 2024. The discussion and Q&A, moderated by Cláudia Trevisan, centered around the prospect and impact of Chinese investment in LAC, as well as the LAC region’s approach to fielding opportunities and risks associated with Chinese engagement.

Ambassador Luis Augusto de Castro Neves, president of the CEBC, started the event with an overview of shifts in China FDI in Brazil, noting that fluctuation in Chinese investment is frequently related to the economic and environmental challenges and obstacles that China faces at home and abroad.

Margaret Myers, director of the Asia Latin America Program at the Inter-American Dialogue, presented the main findings featured in her program’s new report “New Infrastructure: Emerging Trends in Chinese Investment in Latin America.” This was followed by Tulio Cariello’s presentation of the recent CEBC report “Chinese Investment in Brazil 2022: Technology and Energy Transition.”

Myers and Cariello agreed that, whether in Brazil or other parts of the region, Chinese investors would seem to be in the process of moving from large-scale, high-dollar-value projects to focusing on smaller-scale deals in specific sectors. Myers noted that China’s domestic focus on high-tech, innovation-related industries have much to do with this shift. These industries—dubbed “new infrastructure” by the Chinese government—include telecommunications, fintech, renewable energy, and other industries that are vital to China’s domestic economic growth.

However, Chinese investment isn’t evenly spread throughout the region or even within specific countries. Cariello and Trevisan noted that deals are frequently struck at both the federal and local levels in Brazil, but Brazil’s São Paulo state has been the most popular destination by far for China FDI—the result of extensive and long-standing outreach by actors from both countries.

The panelists also considered China’s persistent focus in LAC energy sector. Myers highlighted China’s growing focus on renewable energy (including hydropower) in the region, having all but supplanted investment in extractives since 2017. Cariello also sees this shift in Brazil, where electricity and oil have historically accounted for about 70 percent of Chinese investment. Cariello also suggested that Brazil’s geography makes it a suitable candidate for technological cooperation with China in areas such as transmission, wind, solar, and hydro energy.

The panelists both made note of China’s focus on electric vehicles (EVs) in the region and implications for regional value chains. According to CEBC research, Chinese automakers, such as Great Wall Motors and BYD, have often acquired production facilities from Western companies. In addition to EVs, China has on other forms of manufacturing in Brazil, including electrical appliances, heavy machinery, and textiles.

Finally, Myers and Cariello touched on the extent of Chinese investment in ICT, which is growing and diversifying across the region, even as overall China FDI slows. In many cases, China FDI in LAC’s ICT sector is moving beyond devices and equipment to focus on data and computing. According to Cariello, there has been a surge in investments in the information technology sector in Brazil, with large companies such as Tencent and Ant Finances leading the way.

Throughout the event, the panelists stressed the need for LAC to maximize the benefit of shifting Chinese investment and hedge against potential risks through policy responses and regulatory action on data regulation, technology transfer, and local content requirement.

Watch the event recording here: