China-Latin America Economic Bulletin, 2020

In 2019, trade between China and Latin American and the Caribbean (LAC) hit record figures, though the relationship between exports and imports has largely held steady from 2018. Infrastructure continued to form the backbone of the relationship, providing the majority of both development finance and investment. 

These are among findings of the China-Latin America Economic Bulletin, 2020 Edition, the sixth annual report summarizing the trends in the burgeoning relationship. Compiled by Rebecca Ray and Pedro Henrique Batista Barbosa, the bulletin provides analysts and observers a reference to the ever-changing landscape of China-Latin America economic relations, a landscape where data is not always as readily accessible. 

Main findings: 

• LAC trade with China hit record levels in 2019, as the region exported $141.5 billion in goods to China and imported $161.7 billion in Chinese goods. 
  • Since both exports and imports rose at about the same rate, the resulting merchandise trade deficit, 0.4 percent of regional GDP, held steady from 2018.
• LAC exports to China continue to be concentrated in a few raw commodities, particularly soybeans, copper, petroleum and iron. Countries that export these commodities saw continued merchandise trade surpluses with China, while other LAC countries saw growing merchandise trade deficits. 
  • For soybeans in particular, the China-US trade dispute of the last few years has spurred a major South American boom, particularly in Argentina, Brazil and Uruguay, as Chinese importers substituted away from US producers.
• LAC development finance from the China Development Bank (CDB) and the Export-Import Bank of China (CHEXIM) fell to $1.1 billion, its lowest level in over a decade, as Ecuador, Brazil and Venezuela ceased borrowing.
• New announcements of Chinese investment boomed for new “greenfield” projects, with $12 billion in new announcements, while mergers and acquisitions fell for the second consecutive year to just $4.3 billion. 
  • In each avenue, infrastructure investments, particularly ports and hydroelectric dams, dominated.
• In economic diplomacy, Ecuador became LAC’s first full member of the Asian Infrastructure Investment Bank (AIIB). Seven additional countries are prospective members. 
• Jamaica and Peru joined the Belt and Road Initiative (BRI), bringing the total number of LAC BRI countries to 19.

Considering the prospect for 2020 and beyond, the authors suggest closely examining three areas that could signal the potential dampening of China-LAC trade: commodity prices, the “Phase 1” US-China trade deal and the onset of the COVID-19 pandemic. While they point to the weak commodities market, COVID-19 and potential end to the US-China trade tensions that have fueled a soybean export boom, Ray and Barbosa argue other signs show that the China-LAC relationship will continue to be fueled by Chinese participation in new infrastructure and extraction projects. Specifically, new lithium opportunities have arisen in Bolivia, Brazil and Mexico, as have greater infrastructure participation in Brazil and Peru. Thus, while several signs point to the potential for a slump in China-LAC trade and development finance, the authors believe investment may continue moving forward.