China-Latin America and the Caribbean Economic Bulletin, 2022 Edition

In 2021, Latin America and the Caribbean (LAC) continued to face challenges stemming from the COVID-19 pandemic and resulting economic strains. After a 7 percent contraction in 2020, the region’s GDP growth rebounded to 6.2 percent in 2021, according to a recent projection from the Economic Commission for Latin America and the Caribbean. This was slightly higher than the global 5.8 percent growth rate, but slower than China’s 8.0 percent growth rate. As both LAC and China continue to recover economically, their economic relationship offers mutual opportunities for sustainable growth in trade, investment and finance.

These are among the findings of the China-Latin America and the Caribbean Economic Bulletin, 2022 Edition, the seventh annual report summarizing and synthesizing trends in the China-Latin America economic relationship, expanded this year to include the Caribbean. Within the bulletin, Zara C. Albright, Rebecca Ray and Yudong (Nathan) Liu provide analysts and observers a guidebook to the ever-changing landscape of China-LAC economic relations, a landscape where data is not always readily accessible.

Main findings:

• China has established a strong and growing investment and trade presence in LAC commodities that is crucial for renewable energy development, including alumina, balsa wood and metals such as lithium, molybdenum and niobium.
• LAC’s trade deficit with China reached 1.2 percent of regional GDP, a record level, driven by China’s rebounding production amid ongoing LAC supply chain lags. China accounted for one-third of the region’s extractive exports and one-fifth of its agricultural exports.
• LAC purchases of COVID-19 vaccines from China have expanded rapidly to over 1.5 billon doses, or 29 percent of LAC’s total contracts. This is roughly in line with China’s 31 percent share of overall LAC merchandise imports from vaccine-producing countries.
• In 2021, LAC governments signed no new official financing commitments with the China Development Bank (CDB) or the Export-Import Bank of China (CHEXIM) for the second year in a row. A debt suspension agreement between China and Ecuador expired in 2021, and further negotiations for restructuring are ongoing as of March 2022. Argentina and Suriname have also sought debt relief, to be negotiated in 2022. Explore Chinese loans to Latin America in the China-Latin America Finance Database and read the related policy brief.
• New (“greenfield”) Chinese investments in LAC were depressed in 2021, totaling $646 million, less than $1 billion for the first time since 2005. Two data centers in Brazil and one home appliance manufacturing plant in Mexico accounted for $500 million.
• Mergers and acquisitions (M&As) totaled nearly ten times new investments at $5.9 billion, driven by China’s continued interest in LAC’s electricity sector. In the past five years, over 70 percent of Chinese M&As have been in the electricity sector, compared to only 7 percent of non-Chinese deals, which have the largest concentration in extraction.
• In December, Nicaragua established diplomatic relations with China and joined the Belt and Road Initiative (BRI). Argentina also joined the BRI in February 2022. In the past year, three LAC countries joined the China-led Asian Infrastructure Investment Bank (AIIB): Argentina, Chile and Peru.
• In 2022 and 2023, investment and finance packages for these new BRI and AIIB members are likely, with Argentina and China already signing a Memorandum of Understanding for $23 billion in financing. Debt renegotiation may continue with Ecuador, and Suriname has indicated it may seek renegotiation considering its new agreement with the International Monetary Fund (IMF).

The bulletin, available in English and Spanish, outlines major developments in China-LAC economic relations in 2021, beginning with rising trade and investments in commodities supporting green energy. It then covers important updates to trade patterns, contextualizing the year in ongoing trends, with special attention to China’s COVID-19 vaccine exports. The report also details China’s foreign direct investment in LAC, before discussing official financing and debt renegotiations, highlighting a potential debt-for-nature swap. The bulletin concludes with a review of 2021’s noteworthy achievements in bilateral and multilateral diplomacy and a brief outlook for 2022 and beyond.