China’s foreign direct investment (FDI) in Latin America and the Caribbean (LAC) has significantly impacted sectoral growth across the region in the past two decades, particularly in the largest markets of South America. Historically, Chinese companies have concentrated their investments in the abundant agricultural and extractive resources of the region. Over the period spanning from 2003 to 2022, Chinese FDI totaled $187.5 billion in LAC, although this figure remains notably lower than the FDI flows from the United States and Europe during the same timeframe.
Despite this, Chinese companies are progressively expanding their presence throughout the LAC region, actively pursuing targeted opportunities across various nations. However, recent years have witnessed a decline in the value of Chinese investment. For instance, between 2010 and 2019, China’s FDI averaged $14.2 billion annually, but this dropped to an average of $7.7 billion from 2020 to 2021, further declining to $6.4 billion in 2022.
This reduction is indicative of a strategic recalibration by both the Chinese government and its corporate entities, rather than a waning interest in LAC. Notably, Chinese companies are increasingly opting for smaller-scale deals, particularly in sectors aligned with Beijing’s economic growth objectives. This shift is evident in the dwindling emphasis on large-scale infrastructure projects characteristic of the Belt and Road Initiative (BRI), spearheaded by Chinese President Xi Jinping. Instead, there is a growing focus on innovation-driven sectors such as information and communication technology (ICT) and renewable energy.
For example, Chinese interest in major infrastructure projects such as canals and railways has been superseded by investments in innovative technologies. This includes advancements in ICT, renewable energy solutions, and other emerging industries. This strategic redirection aligns with Beijing’s overarching goal of enhancing domestic economic upgrading and global competitiveness. Concurrently, there is observable evolution within LAC’s innovation-related industries, as Chinese companies transition from the provision of ICT equipment and devices towards the delivery of computing infrastructure and fintech services, among other areas.