China to expand investments in Latin America

Featured - September 13th, 2012

Chinese companies are planning to expand their investments in Latin America, from mining and resources to vehicles and power-generation equipment, the Wall Street Journal reports.

China is seeking to shift the weight of investments from Africa to Latin America by “diversifying” to infrastructure, manufacturing, ‘agribusiness’ and forestry, says Liu Xia, an official at China’s top economic planning body, the National Development and Reform Commission, claiming that the China-Latin America relationship has become even “more crucial” over the years.

Chinese foreign investment in Latin America surged from $7.33 billion in 2009 to $10.54 billion in 2010. Most of the growth was due to State-owned China Petrochemical Corp., or Sinopec, purchasing 40% of Repsol YPF SA’s Brazilian unit for $7.1 billion in 2010 – one of the largest ever Chinese oil acquisitions.

Premier Wen Jiabao proposed a $5 billion cooperation fund for infrastructure investment and a $10 billion credit line during a trip to the region in June. State government said Tuesday that several companies were setting up investments in Brazil, Ecuador, Chile, Colombia, Peru and other Latin American countries.

Chinese car maker Foton Motor Co. plans to build an auto plant worth $300 billion in Bahia, Brazil. XCMG Construction Machinery Co. Ltd. will set up two factories in Brazi, with plans to expand to other countries in the region. Weichai Power Co. is considering investing in commercial vehicle manufacturing. Shanghai Electric Power Generation Group wants construct and possibly operate power plants.

However, many are skeptical of the investment expansion. Latin American companies are worried that it could echo an “unbalanced” Africa-China relationship, where China is accused of natural-resource extraction, importing Chinese labor for infrastructure and dumping local markets with cheap goods.