China-Latin America and the Caribbean Economic Bulletin, 2024 Edition

Rio de Janeiro, Brazil. Photo by Sébastien Goldberg via Unsplash.

Over the last year, Latin American and Caribbean (LAC) governments took intentional steps forward in their relationships with China, with frequent visits to discuss the important emerging sectors, such as telecommunications and renewable energy supply chains.

Concurrently, while lower-technology mineral and agricultural commodities continue to dominate LAC exports to China, Chinese firms operating in LAC have shown a broader array of interests, including automotive manufacturing in Mexico, energy in South America and transportation throughout LAC.

These are among the findings of the China-Latin America and the Caribbean Economic Bulletin, 2024 Edition. The report, written by Rebecca Ray, Zara C. Albright and Enrique Dussel Peters provides analysts and observers a reference to the ever-changing landscape of China-LAC economic relations, where data is not always readily accessible.

In the bulletin, the authors analyze the record number of LAC presidential visits to China and the economic themes that set the tone for the relationship, particularly telecommunications, commodity exports, infrastructure and renewable energy supply chains.

The authors also offer detailed descriptions and a comparison of the trends in trade, investment, infrastructure contracts and development finance, with emphasis on sovereign debt to China. Notably, China-LAC trade, investment and infrastructure have all continued to grow rapidly, while Chinese development finance in LAC has receded dramatically. The authors say this shift may reflect a maturing of the relationship, as Chinese firms are more likely to work directly in the region rather than requiring the intermediation of Chinese development finance institutions (DFIs).

The authors also discuss future prospects for the China-LAC economic relationship, including the continued strength of infrastructure and investment, and the implications of these shifts for sustainable development in LAC.

Key findings:
  • A record eight LAC presidents visited China in 2023, after just one visit in 2022 and none in 2021 or 2020. Major topics covered in these presidential agendas included cooperation in renewable energy and transition minerals, telecommunications, and trade agreements regarding traditional export commodities, such as beef and petroleum.
  • LAC exports to China rose to approximately $208 billion in 2023, while Chinese exports to LAC fell to approximately $242 billion amidst slower Chinese exports overall. As a result, LAC saw its merchandise trade deficit with China shrink to approximately $33 billion, or 0.5 percent of regional GDP.
  • LAC minerals exports to China declined in 2022 amidst lagging Chilean copper output, but that trend partially reversed in 2023. China now accounts for 34 percent of LAC’s mineral exports.
  • For the first time since China became a major trading partner with LAC, beef entered the ranks of the top five regional exports to China in 2023. This change is due in part to falling prices of refined copper (the traditional fifth largest LAC-China export) but also to rising beef trade, which has doubled in volume in the last five years.
  • Transition minerals continue to play a growing role in the LAC-China relationship. LAC-China exports now account for approximately half of global trade in the unprocessed forms of two major transition minerals: lithium carbonate and copper ores and concentrates.
  • While raw commodities continue to dominate LAC-China exports, the same is not universally true for Chinese investment in LAC. New (“greenfield”) Chinese investment projects in Mexico, Central America and the Caribbean have been predominantly concentrated in manufacturing (particularly automotive) sectors for the last 12 years. This trend continued in 2023 with Solarever investing $1 billion and Ningbo Xusheng Group investing $350 million in electric vehicle and vehicle part manufacturing in Mexico.
  • Minerals continue to play an important role in Chinese investment in South America, where Chengxin Lithium Group and Zijin Mining Group invested $823 million and $600 million in Argentina’s lithium sector, respectively.
  • Chinese investment through mergers and acquisitions (M&As) in LAC were concentrated in energy sectors in 2023, with State Grid Corporation purchasing Enel Peru for $2.9 billion and PowerChina purchasing Brazil’s Pontoon (and its Ceará solar plant) for $360 million.
  • New to the 2024 China-Latin America and the Caribbean Economic Bulletin is consideration of trends in infrastructure contracts: trade in services for building or operating public infrastructure projects. Over the last four years, the most important sector for Chinese infrastructure in LAC has been transportation, particularly in long-distance cargo rail and urban light rail.
  • Chinese development finance to LAC consisted of just $1.3 billion in new commitments in 2023, comprised of two loans from the China Development Bank to its Brazilian counterpart, Banco Nacional de Desenvolvimento Econômico e Social (BNDES).
  • Public and publicly guaranteed (PPG) debt to China is concentrated in a few countries. Suriname, the LAC country with the greatest PPG debt stock to China, owed 14.6 percent of GDP to China in 2022. From 2024-2028, its PPG debt service payments to China are expected to amount to 2.5 percent of exports. However, no country in LAC – including Suriname – owes Chinese creditors more than it owes other major creditor categories, including bondholders, Paris Club creditors, multilateral development banks (MDBs) or other creditors. Thus, any significant debt restructuring negotiations with countries facing unsustainable debt burdens will need to include significant participation of all creditor classes.
  • LAC-China exports have been relatively buoyed in recent years thanks to rising global commodity prices. However, those elevated prices are not expected to remain high. Thus, over the next few years, LAC is likely to see a rebound in its trade deficit with China unless it sees significant progress in diversification or significant increases in the volume of its commodity exports.
  • As Chinese firms have gained experience operating in LAC, they have relied less on the intermediation of Chinese development finance institutions and instead opted for direct investment or direct provision of infrastructure contracts. Thus, it is unlikely for development finance to rebound to the levels of its peak years, 2009-2015. However, this shift is a sign of the maturation, rather than the weakening, of the China-LAC relationship.

The authors say that the movement toward electric vehicles, rail transportation, renewable energy, transition minerals and agricultural commodities together present mixed prospects for regional sustainable development. While electric vehicles and urban rail play a crucial role in decarbonizing transportation, beef and soy supply chains are drivers of deforestation and the loss of carbon sinks. Additionally, transition mineral extraction and renewable energy provision can play positive or negative roles in local sustainable development depending on their design and policy environment.

Thus, to the authors, the growth in government-to-government communication, as seen in the record number of visits in 2023, is an important precursor to ensuring that the China-LAC economic relationship constitutes a “win-win” for both parties, particularly as transition minerals continue to play a growing role in the LAC-China relationship and the global energy transition.

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