As American investment decreases, China and India quickly widen their presence in the main industries of Latin America.
With American investment in Latin America in narrowing, China and India seize the opportunity to expand their economic scope in the region.
The United States remains the largest foreign investor, but its participation has dropped by almost 10% in 2023 only, to 38% of the total of $ 224.6 billion, according to the United Nations Economic Commission for Latin America and the Caribbean. Meanwhile, China has firmly established itself as the best trading partner in Brazil, increasing its foreign direct investment (FDI) to nearly $ 601 billion by 2023, while India is gaining ground in sectors ranging from energy to pharmaceuticals.
This growing influence points out a broader geopolitical change, because the two Asian giants strengthen links with the economies rich in resources from Latin America.
Connection with China
Chinese trade with Latin America increased from $ 12 billion in 2000 to 450 billion dollars in 2023, according to the International Monetary Fund, and it is now as a main regional and investor trading partner.
“The increase in Chinese investment actions in Latin America follows a logic of complementarity,” explains Larissa Wachholz, principal researcher at the Brazilian Center for International Relations (CEBRI).
Chinese FDI shares increased from $ 126.3 billion in 2015 to $ 600.8 billion in 2023, according to Statista data. India, despite the operation on a smaller scale, has also deepened its links with Latin America; While his contribution to the IED culminated at $ 49 billion in 2014, he still reached $ 16 billion in 2023.
The United States quickly lost ground against China, which since 2009 has become Brazil’s largest trading partner, according to the IMF and the World Bank. In 2023, China was the destination of 30.7% of Brazilian exports (approximately $ 104 billion) and was responsible for 23.7% of Brazilian imports ($ 64 billion), according to the Brazilian-China Entrepreneurial Council (CEBC). The United States, traditionally the best business partner in Brazil, were a distant second and is now responsible for only 18.6% of imports from Brazil and 10.9% of its exports.
Many of the large Chinese companies have been cultivated home in the years, China aggressively widen its own infrastructure and services, Note Wachholz. While development is still increasing at the national level, the second most populous country in the world behind India has reached a level of comfort that allows local businesses to look out.
“China has a great similarity to Brazil which makes investments in energy and oil attractive here,” explains Wachholz. “The two are large countries with a potential for hydroelectric matrix and significant renewable energy which requires long lines of transmission to reach its population centers.”
Like Brazil, “China had to face the question of having to transmit the energy generated in distant corners through ultra-high tension lines. This made the Chinese very effective in all parts of the electricity cycle: generation, transmission and distribution, which is a key necessity in Brazil. The level of complementarity in this only segment justifies the increased appetite for Chinese investments in Brazil. »»
Despite the renewed concentration of China on energy in Brazil, the first stages of the relationship date from the 1980s, when the state network of China first made percaee in the country, notes Mauricio Santoro, author of Brazil-China Relations in the 21st century: the creation of a strategic partnership (2022).
China’s investment in Latin America goes beyond Brazilian energy projects, explains Túlio Cariello, director of CEBC content and research.
“It is true that China has almost $ 73 billion in investment shares in Brazil only, which,” he notes, “corresponds to a third of its total investment in Latin America. And 75% of this amount in Brazil is in fact invested in the energy and petroleum sectors. But China diversifies its portfolio in Brazil and develops in the construction factories to produce electric cars via Byd and Great Wall Motors (GWM). »»
The two companies are mainly concentrated on the Brazilian market, adds Cariello, but recognizes that regional trade agreements like Mercosur will eventually serve as a platform for simplified export to neighboring countries.
The Chinese Latin American portfolio also includes prospecting basic products and purchasing while Mexico serves as a basis for consumer products factories that can more easily export to the United States and Canada. And Peru attracts around 20% of regional Chinese FDI, mainly in mining: in particular lithium and molybdenum.
“Peru has attracted a huge investment thanks to the Chinese Cosco, which builds the port of Chancay north of Lima,” explains Wachholz. “The port will reduce maritime trips between South America and Shanghai by about a week and is essential in the belt and road project in China.”
India investments
India is increasingly increasing its investments in Latin America, with Brazil most often Lauching Pad, according to Leonardo Ananda, CEO of the Brazil-Indies Chamber of Commerce (BICC).
“Seventy percent of Indian FDI in Latin America occur in Brazil, with sporadic investments also in Argentina, Uruguay or Mexico,” he notes.
According to Wachholz, “India investments are more market -oriented and powered by growth and natural capacities of the country’s own businesses. It is a little different from what we see in the case of China, where there has been a strategic push since Deng Xiaoping to extend its capacities to reach other corners of the globe. »»
India investments have gained ground after Brazil opened in the world in the 1990s, known as Ananda, and tends to focus on information technologies, pharmaceuticals, petroleum and gas, energy and cars, with particular accent on motorcycles.
“The fact that India is, as well as many Latin countries, part of the BRICS, IBAS and G20 groups also facilitates the investment flow,” explains Ananda. “Investments in Brazil are so important that certain Indian companies already obtain around 50% of their share of income in the Brazilian-Latin market rather than India itself.”
The UPL, a producer of agricultural chemicals based in Mumbai and pesticides, has invested $ 1 billion in the state of São Paulo, according to Ananda, where he has operations almost equivalent to those at home, while the power of sterlite of the Vedanta group invested R 7 billion rands (1.25 billion dollars) in the Brazil, where half of its operations are currently concentrating.
TATA, one of the largest Indian groups, has taken its initial debuts in Latin America thanks to a joint venture with the Brazilian computer group TBA, but has since acquired the whole operation and now offers advisory services focused on technology and outsourcing in Brazil, but also in Uruguay, Argentina, Chile and Mexico.
Tata acquired global operations in Jaguar-Land Rover in 2008 and now produced Land Rover vehicles in Rio de Janeiro. Other Indian manufacturers have followed. Royal-enfield now produces its famous motorcycles in northern Brazil, a few kilometers from the competitor Bajaj Motors. Meanwhile, Mahindra has expanded the production of its tractors and its distribution to all of Brazil, with a view to exporting vehicles to other Mercosur countries.
“We plan that Indian investments in the region will increase considerably,” said Ananda. “The number of bilateral delegations visiting each country has increased exponentially from the pandemic. India and Mercosur have a preferential rate of prices covering approximately 400 products during the revision since last year and, hopefully, will soon end to allow more trade and investment without friction between South America and India in the very close future. »»