China-Latin America Economic Bulletin 2016

Rebecca Ray, Kevin Gallagher, and Rudy Sarmiento

Chinese lending to Latin America more than doubled in 2015, rising to $29.1 billion USD. Meanwhile, China-Latin America trade stagnated, as the commodity boom of the last decade continued to cool. Overall, last year saw the China-Latin America relationship shift toward finance, especially finance for large infrastructure and energy projects in Latin America. Activity continued —albeit at an early stage — in several large developments such as the Nicaragua Canal and Twin Ocean Railway. Meanwhile, other Chinese-financed projects such as the Coca Codo Sinclair dam neared completion.

These are the main findings of the 2016 China-Latin America Economic Bulletin, the third annual brief on developments in trade, investment, and finance between China and Latin America. These bulletins are designed to provide analysts and observers handy reference to the ever-changing landscape of China-Latin America economic relations, a landscape where data is not always as readily accessible.

Other findings include:

• LAC’s trade deficit with China stayed relatively constant in 2015, at 0.6 percent of regional GDP. Behind this unchanged level are increasing volumes of major commodities coupled with falling prices. In effect, LAC spent 2015 spinning its wheels in its exports to China.

• Chinese lending to LAC leapt upward in 2015, to $29.1 billion: more than the World Bank and Inter-American Development Bank combined. China has emerged as an important source of counter-cyclical finance during economic slumps in LAC, both in the recent financial crisis and now in 2015. What is more, China has established $35 billion in new regional funds with Latin America in infrastructure and industrial development.

• Chinese overseas investment continued to be concentrated in primary materials in 2015. Over the last five years, three-fourths of Chinese mergers and acquisitions in the region were in extractive industries (oil, natural gas, and mining), while three-fourths of other countries’ mergers and acquisitions in the region were in services. In new “greenfield” FDI projects, 18 percent of Chinese investment was in agriculture, compared to just two percent of other greenfield investment in the region.

• Movement continued on major Chinese investment and financing projects initiated during the 2015 China-CELAC summit. Feasibility studies began for the Twin Ocean Railway, linking Peru and Brazil, and the Capital de las Ciencias industrial park in Mexico. Also, the Nicaragua Canal’s environmental impact assessment was published, but met with significant criticism by an independent panel of experts and the Nicaraguan public.