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China has dramatically ramped up its investment in Latin America in recent years, raising speculation about its long-term interests and intentions. This conversation has taken on renewed importance in light of the trade war between China and the United States, which could irrevocably shift the complex commercial and political dynamics among the three regions.
Despite the mounting speculation and China’s economic slowdown, China remains in for the long haul in Latin America. In addition to straightforward trade pursuits, it is also advancing what it calls its “Going Global” development policy, an initiative stretching back to 1999 that promotes overseas investment by streamlining procedures, simplifying currency rules, and increasing credit support for Chinese companies investing overseas.
As investors seek to more fully understand China’s role in Latin America, they would be well advised to pay close attention to Brazil, which will play an outsized role in the relationship between China and Latin America more broadly.
Simultaneously, global markets will be curious to see how China approaches its emerging trade and economic relationships with Mexico and Peru.
Brazil: Setting the Tone
Politics is both transitory and transactional. While campaigning for election, Brazilian President Jair Bolsonaro adopted a hostile public posture toward China. Bolsonaro railed against China’s efforts to mine Brazilian niobium, a valuable steel additive, expressing views that appeared to be influenced by right-wing Brazilian politicians and theorists fearing “cultural Marxism.”
Concern with such sentiments is one factor contributing to a sharp decline in China’s Brazil investments, which plummeted from $11.3 billion in 2017 to $2.8 billion in 2018. Other factors include Operation Car Wash—a sprawling corruption investigation that implicated dozens of Brazil’s business and political leaders, setting off waves of turbulence.
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