China’s activity in Latin America is directed toward key sectors of its economy, defined by Beijing as “new infrastructure,” covering areas related to innovation such as 5G technology, electric vehicles, and electricity transmission, among others
China’s investments in Latin America and the Caribbean have shifted to what Beijing dubbed “new infrastructure,” which includes critical sectors such as telecommunications, financial technology, and energy transition, U.S. think tank The Inter-American Dialogue indicated in a new report.
According to the report, China’s direct foreign investments in the region have declined in recent years, reflecting China and its state-owned companies’ reorientation, seeking smaller deals in sectors aligned with Beijing’s strategic objectives.
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“We are facing the deployment of China’s soft power to expand its global influence,” Luis Fleischman, a political sciences professor at Palm Beach State University in Florida, told Diálogo on February 8. “It’s clear that their new actions do not represent good news for Latin America.”
Although China’s “new infrastructure” is loosely defined, it encompasses areas such as 5G, data centers, artificial intelligence, industrial internet, electricity transmission, electric vehicles, renewable energy, and urban infrastructure, as part of the China Vision 2035 infiltration plan.
Owners of the light
In the energy sector, Beijing is implementing an expansive strategy seeking to “become the owner of the light” in the hemisphere, Latin American news site Diálogo Político reported. Instead of building new facilities, it is buying up established companies.
For instance, China Southern Power Grid acquired Enel Distribución in Peru in 2023, securing control of electricity distribution in Lima and a large part of the country. State-owned company Yangtze Power owns Luz del Sur, another electricity distributor in the Peruvian capital, Inter-American Dialogue indicated.
This situation poses the risk of ceding near-absolute control of electricity supply to China whose state-owned companies represent its economic and geopolitical aspirations, the report says. Chinese companies operate with lower international standards and practices, which could have significant economic and logistical consequences for Peru.
China’s investments in Latin America and the Caribbean have raised many alarms, due to the negative effects accompanying several past and ongoing projects, including environmental damage and corruption cases, Fleischman said.
“Faced with the entrenched presence of corruption in the region, China focuses on strengthening its influence and economic gains, aligning itself with authoritarian or leftist governments; relegating social and environmental concerns to second or third place,” Fleischman added.
Growing influence
Projects such as electric vehicle maker BYD and its plan for a plant in Brazil, the acquisition of lithium in the so-called Lithium Triangle, such as Tianqi Lithium’s acquisition in Chile, are among China’s new investment strategy.
The new infrastructure is also evident in information and communication technologies, with companies such as Huawei expanding its presence in the region, especially in Argentina, Brazil, Chile, Colombia, Mexico, and Peru, with a focus on data centers and cloud computing, the report shows, raising concern about espionage activities in these countries.
“It is critical that countries, companies, organizations, and societies avoid generating excessive technological interdependence in the digital sphere with China, as well as throughout the supply chain, to mitigate risks, ensure data security, and foster competition and innovation globally,” Fleischman said.
High-end and agriscience
High-end manufacturing encompasses sectors such as high-precision machinery and medical manufacturing, mainly in countries such as Mexico and Brazil, and to a limited extent in Colombia, Ecuador, and Chile. Most Chinese investment in medical manufacturing services in Latin America and the Caribbean took place during and after the pandemic, says The Inter-American Dialogue report.
In contrast, urban infrastructure is barely highlighted in China’s investment profile in the region. The Bogotá Metro Line 1 project is one such example of China’s involvement in this sector. However, several concerns about irregularities have already been voiced, Colombian magazine Semana reported.
On the other hand, the report mentions that, in recent years, Chinese investors have shown increased interest in agriscience and the acquisition of agricultural science and chemical companies in the region, in line with their continued focus on food production and transportation, highlighting Chile, Brazil, and Mexico.
Although imports from Latin America and the Caribbean continue to be dominated by raw materials, a trend that has continued for more than a decade, technology-linked metals and minerals are expected to gain a more significant share over time.
Opportunity
In this context, “an opportunity arises for the United States and other democratic countries to adopt economic and technological policies, which will benefit the Latin American region and its people,” Fleischman concluded. “Beyond the economic implications, there is a high risk that Chinese influence will erode democratic values, which are fundamental in the relationship between nations.”
Source: Dialogo Americas
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