As China reopens after almost three years of lockdowns some countries in Latin America are preparing for a boom. But, like the silver and gold rushes of the past, the good times may not last
, some countries in Latin America are preparing for another boom. Morgan Stanley, a bank, thinks China’s economy could grow by 5.7% in 2023. That would trigger rising demand for the region’s goods. China consumes more than 16% of the world’s oil, over half of its copper and more than three-fifths of its iron ore. When rumours circulated last year that covid-19 restrictions would be lifted, the price of copper jumped by 7% in a day.
Since 2020 China’s policy banks have approved no new loans to the region . Although commercial banks and private-equity funds have filled part of the gap, they are not as generous. Venezuela, which used to get two-thirds of Chinese finance in the region, today only receives credit to help it maintain oil shipments to China.
Even if engagement with the region increases again as China reopens, it will not follow the same pattern. As China’s economy shifts towards services and manufacture of high-tech goods, electric vehicles and renewable-energy products, its imports and investments abroad will change. China’s imports of crude oil will fall, while those of critical metals will increase. From 2005 to 2009, 95% of total foreign direct investment by China in the region went into raw materials.
Chinese investments are also becoming more strategic. Electricity is a key area. Between 2017 and 2021 investments in this sector made up 71% of Chinese mergers and acquisitions in the region, according to Boston University’s Global Development Policy Centre. In 2021 two Chinese state-owned firms splurged $6bn collectively to buy Chilean and Peruvian electricity companies. Both projects were among the largest foreign investments ever received by either country.
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