2011

Katherine Koleski 

Research Assistant

U.S.-China Economic & 

Security Review Commission

May 27, 2011

Backgrounder: China in Latin America
Backgrounder: China in Latin America 2

Disclaimer:

This paper is the product of professional research performed by staff of the U.S.-China 

Economic and Security Review Commission. This report and its contents do not necessarily 

reflect the positions or opinions of either the Commission or of its individual members, or 

of the Commission’s other professional staff.
Backgrounder: China in Latin America 3

China has gradually expanded its economic and political presence in Latin America1 over the past ten 

years. Though trade between China and Latin America continues to remain a relatively small share of 

their respective global trade, it is an increasing source of new economic growth for both. Resource 

acquisition remains a cornerstone of Chinese trade and investment in the region. China has also sought to

use investment and funding to encourage Latin American countries to officially recognize China instead 

of Taiwan, thereby weakening Taiwan’s global support for a role in the international arena. In addition to 

investments, China has sought to improve its diplomatic presence through an increasing number of highlevel visits, military cooperation and exchanges, and involvement in several regional organizations. 

Although China is currently not a major player in the region, China’s appeal as an additional source of 

investment and a potential new export market for Latin American goods will ensure the growth of its 

political and economic influence in the region.

 1 In this backgrounder, Latin America will refer to all countries in the Caribbean, Central America, and South 

America.

Map of Latin America

ARGENTINA

Introduction
Backgrounder: China in Latin America 4

In the past ten years, trade between China and Latin America has skyrocketed due to China’s enormous 

demand for new sources of natural resources and untapped markets for Chinese companies and brands. 

From 2000 to 2009, annual trade between China and Latin American countries grew more than 1,200 

percent from $10 billion to $130 billion based on United Nations statistics.

2

 This rapid growth has led 

China to designate Brazil, Mexico, Argentina, and Venezuela as its “strategic partners” in the region and 

to emerge as Latin America’s third largest trading partner. 3 Nevertheless, overall trade with China 

remains small, roughly one-quarter of the region’s total trade with the United States, and is highly 

concentrated in resource-rich countries.4 For more manufacturing-based economies in Latin America, 

particularly Central America, trade with China has been less beneficial as China begins to compete with 

these countries both at home and abroad in industries such as textile manufacturing. 

Trade

Trade between China and Latin America has increased dramatically in 

the past decade, yet still remains small. China has emerged as the 

largest export destination for Brazil, Chile, and Peru and the second 

largest export destination for Argentina, Costa Rica, and Cuba. 5 

Despite this enormous growth, only 7 percent of Latin American 

exports went to China in 2009, mainly consisting of raw materials and 

commodities (see Figure 1).

6

 For example, agriculture and mining 

sector goods composed 83 percent of Latin American exports to China, 

while goods from these two sectors consisted of only 33 percent of the 

region’s exports to the world between 2008 and 2009.7 On the other 

hand, Chinese exports to Latin America, generally industrial and 

manufactured goods, comprised 5 percent of the region’s global 

exports.

8

 

 2 John Paul Rathbone, “China is now region’s biggest partner,” Financial Times, April 26, 2011. 3 The United States is Latin America’s largest trading partner followed by the European Union. House Committee 

on Foreign Affairs, Hearing on The New Challenge: China and the Western Hemisphere, testimony of Daniel P. 

Erikson, 110th Congress, 2nd session, June 11, 2008; and R. Evan Ellis. China in Latin America. (Boulder, Colorado: 

Lynne Rienner Publishers, 2009). p. 107; “Latin America and the Caribbean,” European Commission, March 21, 

2011. http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/regions/latin-america-caribbean/. 4

In 2009, bilateral trade with the United States totaled $486 billion. John Paul Rathbone, “China is now region’s 

biggest partner,” Financial Times, April 26, 2011. 5 Cynthia J. Arson and Jeffrey Davidow, ed. “China, Latin America, and the United States: The New Triangle,”

Woodrow Wilson International Center for Scholars, January 2011. 

http://wilsoncenter.org/topics/pubs/LAP_120810_Triangle_rpt.pdf. p. 3. 6 Kevin P. Gallagher, “Taking the China Challenge: China and the Future of Latin American Economic 

Development,” Series Brief, No. 58, December 2010. http://www.latn.org.ar/web/wpcontent/uploads/2011/03/Brief58_TakingChinaChallenge_Gallagher.pdf. p. 2; Between 2000 and 2006, 70 percent 

of the economic growth of Latin America was due to the commodities export boom. Kevin Gallagher and Roberto 

Porzecanski, The Dragon in the Room: China and the Future of Latin American Industrialization (Palo Alto, CA: 

Stanford University Press, 2010). pp. 12-15. 7 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 12. 8 Cynthia J. Arson and Jeffrey Davidow, ed. “China, Latin America, and the United States: The New Triangle,”

Woodrow Wilson International Center for Scholars, January 2011. 

http://wilsoncenter.org/topics/pubs/LAP_120810_Triangle_rpt.pdf. p. 8.

Economic Developments

Soybeans from Argentinean farms represent 

a key agricultural export to China
Backgrounder: China in Latin America 5

Figure 1: Principal Latin American Exports and Leading Exporting Countries to China in 2008

Source: Kevin Gallagher and Roberto Porzecanski, The Dragon in the Room: China and the Future of Latin 

American Industrialization (Palo Alto, CA: Stanford University Press, 2010).

Leading exports from Latin America to China include copper, iron ore, oil, and soybeans (see Table 1). 

Over the past two years, Chinese demand for these resources has nearly doubled, filling the drop in 

demand after the global financial crisis. For example, China accounts for nearly 50 percent of the growth 

in global iron ore exports and 58 percent of additional soybean exports.9 This rise in demand is expected 

to continue with China providing a steady, increasing demand for the commodities market and raising 

market prices.10 According to University of East Anglia (United 

Kingdom) Professor Rhys Jenkins, Chinese demand for 15 of 

Latin America’s major export commodities has caused prices to 

rise, leading to an estimated $42 to $75 million in revenue for the 

region between 2002 and 2008.11 As a result, benefits from the 

overall trade relationship are concentrated in a few resource-rich 

countries.12 Approximately 90 percent of Latin American exports 

to China as of 2008 were from four countries: Brazil (41 percent), 

Chile (23.1 percent), Argentina (15.9 percent) and Peru (9.3 

percent).13 Economic ties between these four countries and China 

have continued to deepen with China first becoming Chile’s 

largest export customer in 2007 and Brazil’s largest trading 

partner in 2009.14

 9 Kevin P. Gallagher, “The China Syndrome,” Latin Trade, August 12, 2010.. 10 Kevin P. Gallagher, “China and the Future of Latin American Industrialization,” Issues in Brief, No. 18, October 

2010. http://www.bu.edu/pardee/files/2010/10/18-IIB.pdf. pp. 3-4. 11 “Researchers Analyse Changes in Latin American Middle Class and the “China Effect” on Exports,” Economic 

Commission for Latin America and the Caribbean Press Release, April 19, 2011. 12 Mauricio Cardenas and Eduardo Levy-Yeyati, “Latin America Economic Perspectives,” The Brookings Institution, 

September 2010, p. 15. 

13Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, pp. 7-8. 14 R. Evan Ellis, China in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009) p. 25; Malcolm 

Moore, “China overtakes the US as Brazil’s largest trading partner,” The Telegraph, May 9, 2009. 

Approximately 90 percent 

of Latin American exports 

to China as of 2008 were 

from four countries: Brazil 

(41 percent), Chile (23.1 

percent), Argentina (15.9 

percent) and Peru (9.3 

percent)
Backgrounder: China in Latin America 6

Table 1: Five Countries, Eight Sectors, Dominate LAC Trade to China (2009) 

Sector Share of Total Latin American 

Exports to China 

Country (Share of Total Latin American 

Exports to China in Sector)

Copper Alloys 17.9 percent Chile (90 percent)

Iron ore and concentrates 17.3 percent Brazil (89 percent)

Soybeans and other seeds 16.8 percent Brazil (83 percent), Argentina (16 percent)

Ores and concentrates of base 

metals

13.5 percent Chile (47 percent), Peru (39 percent)

Crude petroleum 4.5 percent Brazil (65 percent), Colombia (20 percent)

Soybean oil and other oils 4.5 percent Argentina (79 percent), Brazil (20 percent)

Pulp and waste paper 4.4 percent Brazil (55 percent), Chile (43 percent)

Feedstuff 2.4 percent Peru (63 percent), Chile (30 percent)

Other 18.7 percent

TOTAL 100.0 percent

Source: Kevin P. Gallagher, “China and the Future of Latin American Industrialization,” Issues in Brief, No. 18, 

October 2010. p. 2

Although China’s demand for commodities has fueled economic growth in the region, experts have 

expressed concern regarding Latin American dependence on natural resource exports to China because of 

the inherent volatility in commodity prices and reliance on low-value added and less labor-intensive 

exports. 15 Mauriciou Moreira Mesquita, a trade specialist at the Inter-American Development Bank, 

echoed these concerns stating, “The region is going to have to live with the fact that it is rich in 

commodities that are in high demand. There are obvious concerns about what happens to the 

manufacturing sector in that perspective.”16 For example, 81 percent of Chile’s exports to China are 

comprised of copper and copper ore, a product that has seen volatile price swings in recent years.17

To mitigate the effects of changes in commodity prices, Chile and other resource-rich countries in Latin 

America have used profits from exporting commodities to China to establish education and job training 

funds.18 More specifically, the Chilean government used profits from copper sales to provide a stimulus 

package in response to the financial crisis.19 However, experts from Latin American remain concerned 

about China’s rising influence with Chile and other Latin American countries to pursue favorable trade 

policies and to protect its economic interests.

20 For example, Argentina’s soybean industry is dependent 

 15 Exports of raw natural resources such as iron ore does not allow for firms to earn additional profit from processing 

the iron ore to create steel. In addition, mining and agricultural sectors are highly mechanized with little opportunity 

for new job creation in a region of high poverty and underemployment. 

16 Matthew Kennard, “View from the US: ‘Backyard’ increases its global importance,” Financial Times, April 26, 

2011. 

17 Chris Kelly and Melanie Burton, “Metals-Copper slips from record on China inflation worry,” Reuters, February 

15, 2011; Cynthia J. Arson and Jeffrey Davidow, ed. “China, Latin America, and the United States: The New 

Triangle,” Woodrow Wilson International Center for Scholars, January 2011. 

http://wilsoncenter.org/topics/pubs/LAP_120810_Triangle_rpt.pdf. p. 4. 18 Javier Santiso, “Can China change Latin America?” OECD Observer, No. 262, July 2007; Brazil, Colombia, and 

Peru have followed Chile’s lead and set up similar offshore funds. John Paul Rathbone, “China is now region’s 

biggest partner,” Financial Times, April 26, 2011.

19 Kevin P. Gallagher, “China and the Future of Latin American Industrialization,” Issues in Brief, No. 18, October 

2010. http://www.bu.edu/pardee/files/2010/10/18-IIB.pdf. p. 7. 20 R. Evan Ellis, “Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st

Quarter 2010. http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. pp. 89-90; Some experts from

Latin America that are concerned about China’s growing influence in the region include Antonio Delfim Netto, 

Karen Poniachik, and Rubens Ricupero. Matt Ferchen, “China-Latin America Relations: Long-term Boon or Short-
Backgrounder: China in Latin America 7

on Chinese demand with approximately 74 percent of Argentina’s soybean exports going to China. When 

Argentina enacted restrictions to protect domestic manufacturers in 2010, China retaliated by not 

approving permits to import Argentinean soybeans, resulting in nearly $2 billion of losses.21 With Chile 

dependent on copper and copper ore for approximately half of its total exports in 2010 and 16.3 percent of 

its global national product, a sudden drop in Chinese demand would have a significant impact on the 

economy.22

Market Access

Both Chinese and Latin American companies have sought to enter each others’ respective markets. In an 

effort to remove barriers to trade and further expand their exports, three Latin American countries have 

signed free trade agreements (FTA) with China. Chile became the first Latin American country to sign a 

FTA with China in 2006, followed by Peru in 2010 and Costa Rica 

in 2011.23 Within a year of implementing the FTA with Chile, the 

volume of trade between Chile and China increased 100 percent, 

leading both countries to expand the scope of the agreement in 

2008. 24 Peru has also benefited from its FTA with China. 

According to the Inter-American Development Bank (IDB), the 

FTA has been mutually beneficial, causing Peru’s overall exports to 

grow 23 percent with a 48 percent increase in agricultural exports 

and 65 percent increase in processed food exports. 25 

Chinese brands in the consumer appliance, telecommunication, and automobile industries have been able 

to successfully compete in Latin American markets mainly due to their low cost appeal to price-sensitive 

consumers. For example, Chinese firms’ automobiles cost on average 15 to 30 percent less than those of 

their competitors.26 As a result, Chery, China’s largest automobile firm, has become very popular, selling 

out its 2007 supply to Chile and leading to a long waiting list for its 2008 supply.27 Similarly, the sale of 

 

term Boom?,” The Chinese Journal of International Politics, Vol. 4., 2011. p. 69-72; Alexei Barrionuevo, “China’s 

Interest in Farmland Makes Brazil Uneasy,” New York Times, May 26, 2011; Karen Poniachik, “China’s Buying 

Spree: Life beyond commodities,” Latin Trade, February 7, 2011. 21 Kevin Gallagher and Roberto Porzecanski, The Dragon in the Room: China and the Future of Latin American 

Industrialization (Palo Alto, CA: Stanford University Press, 2010). p. 20; William Bi, “China Said to Halt Import of 

Argentine Soybean Oil,” Bloomberg, April 11, 2010; Rodrigo Orihuela, “Argentina Soybean Growers ‘Optimistic’

Talk Will End China’s Oil Blockade,” Bloomberg, April 6, 2010. 22 Steve Anderson, “Chile’s copper dependency has taken a turn for the worse: 55% of all exports,” MecroPress.

November 16, 2010. 

23 Javier Santiso, “Can China change Latin America?” OECD Observer, July 2007, No. 262; Shayne Heffernan, 

“IDB and China’s Eximbank Sign Deal to Boost China-Latin,” Live Trading News, October 25, 2010; Integration 

and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the Caribbean 

Economic Relations,” Inter-American Development Bank, October 2010, p. 16. 24 R. Evan Ellis, China in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009) p. 42. 25 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 16. 26 In 2010, Chinese automobile manufacturers controlled 7 percent of the Chilean and 4 percent of the Peruvian 

automobile market. According to the Economist Intelligence Unit, the market share of Chinese vehicle exports to 

Chile rose sharply to 5.5 percent in 2008 but then stabilized in 2009. R. Evan Ellis, China in Latin America (Boulder, 

Colorado: Lynne Rienner Publishers, 2009) p. 38.; “Peru: Automobile Market Outlook,” BBVA Research, 2010, 

https://ws1.grupobbva.com/KETD/fbin/mult/automobile_market_outlook_peru_tcm348-239550.pdf?ts=2222011 p. 

11.; Economist Intelligence Unit, “Chile: Automotive Report,” August 4, 2010. 

http://www.eiu.com/index.asp?layout=ib3Article&article_id=827322267&country_id=1500000150&pubtypeid=11

12462496&industry_id=&category_id= . 27 In 2010, Chery experienced significant growth in 2008 after the enactment of the China-Chile FTA to gain 1.3 

percent of Chile’s light automobile vehicle market share, but it failed to further expand in 2009. R. Evan Ellis, China 

Within the past five years, 

China has signed FTAs 

with Chile, Peru, and 

Costa Rica
Backgrounder: China in Latin America 8

Chinese motorcycles from 2003 to 2007 in Chile increased 1,650 percent due to their cost 

competitiveness, with Chinese firms dominating approximately 75 percent of the Chilean motorcycle 

market.28 Chinese firms are aggressively competing to establish themselves as a household brand for 

Latin America’s emerging middle-class consumer market.

Latin American mining, oil, and agricultural industries have successfully exported to China, but 

manufacturing industries such as textiles, footwear, and furniture have been less successful due to global 

and domestic competition with Chinese firms.29 According to Kevin Gallagher, Associate Professor of 

International Relations at Boston University, 92 percent of Latin American companies faced competition 

from Chinese firms in 2009. The rise in imports of Chinese manufactured goods has begun to impact 

Latin American firms. The U.N. Economic Commission for Latin America and the Caribbean estimates 

that 60 percent of anti-dumping complaints initiated by Latin American countries are against China.30 As 

a result of competition between Chinese and Latin American manufacturing companies, there has been 

backlash by local businesses in Mexico, Brazil, Argentina, and Colombia against local Chinese business 

competitors and the influx of Chinese made products.

31 

Brazil’s Growing Trade Relationship with China

Brazil is one of China’s largest trading partners in the region. From 1998 to 2008, trade between the two 

countries increased 1,838 percent. 32 This rapid growth in trade and investment has fueled Brazil’s 

economy and provided needed demand in a slumping global market.33 However, similar to the rest of the 

region, Brazil exports mainly raw commodities and imports manufactured products from China. In 2009, 

77 percent of Brazil’s exports to China consisted of raw materials and commodities while industrial 

products were only 23 percent. Of Brazil’s total exports to China, iron ore accounted for approximately 

40 percent and soy beans and soy oil accounted for an estimated 23 percent.34 In contrast, Brazil’s 

imports from China are 98 percent industrial products.35 

While these exports have led to further economic growth in Brazil and improved quality of life by 

providing low-cost products, competition in manufacturing sectors has led to the outsourcing of factories 

 

in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009) p. 39; “Latin America: Automobile Market 

Outlook,” BBVA Research, December 2010, 

http://serviciodeestudios.bbva.com/KETD/fbin/mult/INTAULT_14122010_tcm348-239499.pdf?ts=2222011 p. 7.; 

Economist Intelligence Unit, “Chile: Automotive Report,” August 4, 2010. 

http://www.eiu.com/index.asp?layout=ib3Article&article_id=827322267&country_id=1500000150&pubtypeid=11

12462496&industry_id=&category_id=. 28 R. Evan Ellis, China in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009) p. 39.

29 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 1. 30 Cynthia J. Arson and Jeffrey Davidow, ed. “China, Latin America, and the United States: The New Triangle,”

Woodrow Wilson International Center for Scholars, January 2011. 

http://wilsoncenter.org/topics/pubs/LAP_120810_Triangle_rpt.pdf. p. 4. 31 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 18. 32 Expo 2010 Brasil, “China and Brazil strengthen trade relations,” Press Release, March 24, 2010. 

http://www.expo2010brazil.com/en/press-releases/88-china-and-brazil-strengthen-trade-relations. 33 For example, China was the largest single source of foreign direct investment for Brazil in 2010 with 15 percent 

of the total followed by Switzerland with 13 percent and the United States with 11 percent. Economic Commission 

for Latin America and the Caribbean, “Foreign Direct Investment in Latin America and the Caribbean, 2010,” 

United Nations, May 2011. http://www.eclac.org/publicaciones/xml/0/43290/2011-138-LIEI_2010-

WEB_INGLES.pdf. p. 41. 34 Brian Winter and Brian Ellsworth, “Brazil and China: A young marriage on the rocks,” Reuters, February 3, 2011. 35 Expo 2010 Brasil, “China and Brazil strengthen trade relations,” March 24, 2010. 

http://www.expo2010brazil.com/en/press-releases/88-china-and-brazil-strengthen-trade-relations.
Backgrounder: China in Latin America 9

to China or an inability of domestic firms to compete with the lower prices of Chinese firms.36 According 

to a study of 1,529 firms conducted by Brazil’s National Industrial Confederation, one-fourth of Brazilian 

manufacturers face competition from Chinese firms in the domestic market, and two-thirds of Brazilian 

exporters have lost foreign clients to China.37 The Federation of Industries of the State of Sao Paulo 

estimates that this competition with China has led to the loss of approximately 70,000 Brazilian 

manufacturing jobs in 2010 and $10 billion in expected earnings for local industry.38

As these two countries compete in the same manufacturing sectors, the results of this competition have 

led to some recent political tensions. For example, in statements with union leaders, Brazilian President 

Rousseff stated that “There is a misbalance in our relations with China. Brazil exports commodities and 

imports too many knick-knacks. This happens particularly between Christmas and Carnival. I’m told 

that 80 percent of this year’s [2011] Carnival costumes came from China.”

39

Foreign Direct Investment (FDI)

China is also becoming a new source of FDI in the world as the world’s fifth largest investor country.

40 

Since 2003, China has increased its global outward FDI flows 1,880 percent to $56.5 billion in 2009. 

According to the Chinese government’s 2009 Statistical Bulletin of China’s Outward Foreign Direct 

Investment, only 13 percent of this outward FDI is in Latin America, whereas nearly three-fourths is in 

Asia. Of the $7.33 billion in Chinese FDI for Latin America in 2009, the Cayman Islands and British 

Virgin Islands received 73 percent and 22 percent respectively.41 A majority of the money invested in 

these two financial tax havens is sent to take advantage of tax breaks for “foreign companies” and is then 

reinvested in China.42 For a more accurate view of FDI in the region, these two countries’ figures will be 

excluded. 

Excluding the Cayman Islands and British Virgin Islands, Chinese FDI to the region increased 

approximately 1,500 percent from US$21.86 million in 2003 to US$349.55 million in 2009, becoming the 

region’s third largest FDI provider.

43 The largest recipients of Chinese FDI parallel China’s most 

important trading partners in the region: the leading recipients of Chinese FDI from 2003 to the first 

semester of 2010 were Brazil (41 percent), Venezuela (15 percent), Peru (12 percent), Argentina (11 

 36 For example, the Brazil-China Business Council estimated that Brazil lost 90 percent of its share of the U.S. shoe 

market to Chinese competition in 2008. Julie McCarthy, “Growing Trade Ties China to Latin America,” National 

Public Radio, April 1, 2008. 37 Iuri Dantas, “Brazil Will Work With Obama to Counter Rising China Imports, Official Says,” Bloomberg, 

February 3, 2011. 38 Joe Leahy, “Brazilian factories tested by Chinese imports,” Financial Times, January 30, 2011.

39 “Brazil’s Plan to Cut Chinese Imports & Stimulate Industry,” Merco Press, March 14, 2011. 40 For a breakdown on Chinese FDI worldwide see: Nargiza Salidjanova, “Going Out: An Overview of China’s 

Outward Foreign Direct Investment,” U.S.-China Economic & Security Review Commission, March 30, 2011. 

http://www.uscc.gov/researchpapers/2011/GoingOut.pdf; Economic Commission for Latin America and the 

Caribbean, “Foreign Direct Investment in Latin America and the Caribbean, 2010,” United Nations, May 2011.

http://www.eclac.org/publicaciones/xml/0/43290/2011-138-LIEI_2010-WEB_INGLES.pdf. p. 17. 41 Ministry of Commerce of the People’s Republic of China, 2009 Statistical Bulletin of China’s Outward Foreign 

Direct Investment, (Beijing, China: 2009). 42 Thomas Lum, Hannah Fischer, Julissa Gomez-Granger, and Anne Leland, “China’s Foreign Aid Activities in

Africa, Latin America, and Southeast Asia,” Congressional Research Service, February 25, 2009, p. 13. 43 Ministry of Commerce of the People’s Republic of China, 2009 Statistical Bulletin of China’s Outward Foreign 

Direct Investment, (Beijing, China: 2009); The United States is the region’s largest investor with 17 percent of total 

FDI to the region followed by the Netherlands at 13 percent and China at 9 percent. Economic Commission for 

Latin America and the Caribbean, “Foreign Direct Investment in Latin America and the Caribbean, 2010,” United 

Nations, May 2011. http://www.eclac.org/publicaciones/xml/0/43290/2011-138-LIEI_2010-WEB_INGLES.pdf. p. 9.
Backgrounder: China in Latin America 10

percent), and Chile (2 percent).44 However, Chinese FDI composes a relatively small portion of total FDI 

to the region with the United States investing approximately $142 billion in the region last year by 

comparison.45 Despite the small relative share, the rapid growth of China’s global outward FDI has 

attracted the attention of many Latin American governments and businesses as an alternative source of 

investment to fuel economic growth and fund infrastructure and resource projects.46 

Chinese FDI in the region has focused on three key objectives: 

resource acquisition, market access, and efficiency seeking.47 

Recent projects in the region have focused largely on resource 

acquisition (See Table 2). According to the United Nations

Economic Commission for Latin America and the Caribbean, 

90 percent of China’s investment in the region has gone to 

natural resource extraction.48 In 2010 alone, China spent $13.3 

billion on oil and gas deals in countries such as Ecuador, 

Argentina, and Venezuela. 49 Moreover, some Chinese 

companies have been able to win contracts in Latin America through their ability to secure additional 

funding from the Chinese banks. For example, the ability of the Chinese company SinoHidro to selffinance 85 percent of the construction of the Coco Coda Sinclair Hydroelectric plant through loans with 

Chinese banks assisted the Chinese company in bypassing the local partner requirement and securing a 

$1.7 billion loan deal with the Ecuadorian government.50 Although Chinese investment has provided 

critically needed infrastructure for the region, many Latin America governments would like to see more 

diversification of Chinese investment to other sectors besides mining and agriculture to ensure long-term 

economic development.51 In addition, the rise of China as an alternative source of financing for projects 

has raised concerns about the ability of the United States and Europe to encourage progress on human 

rights and/or environmental protection issues with countries such as Venezuela.52 

 44 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 26. 45 For example, the United States foreign direct investment totaled $57 billion in Brazil and $23 billion in Chile by 

the end of 2009. White House Press Office, “Fact Sheet on the U.S. Relationship with Central and South America: 

An Emerging Partnership for Economic Growth,” (Washington, DC: March 15, 2011). 46 Simon Romero and Alexei Barrionuevo, “Deals Help China Expand Sway in Latin America,” The New York 

Times, April 15, 2009. 47 Efficiency-seeking FDI is investing in foreign markets to take advantage of a lower cost structure. 48 Economic Commission for Latin America and the Caribbean, “Foreign Direct Investment in Latin America and 

the Caribbean, 2010,” United Nations, May 2011. http://www.eclac.org/publicaciones/xml/0/43290/2011-138-

LIEI_2010-WEB_INGLES.pdf. p. 18; In February 2011, China indicated that it would like to derive 40 percent of 

iron ore imports Chinese-invested sources by 2015. To meet this goal, China may start investing more in iron ore 

mining operation in Brazil, Venezuela, Chile, and Peru. Chuin-Wei Yap, “China Plans Overseas Iron Ore Asset 

Spree,” The Wall Street Journal, February 23, 2011. 

49 Jim Bai and Farah Master, “China’s Sinopec buys Occidental Argentine assets,” Reuters, December 10, 2010. 50 R. Evan Ellis, “Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st

Quarter 2010. http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. pp. 89-90. 51 Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America and the 

Caribbean Economic Relations,” Inter-American Development Bank, October 2010, pp. 29-30. 52 Cynthia J. Arson and Jeffrey Davidow, ed. “China, Latin America, and the United States: The New Triangle,”

Woodrow Wilson International Center for Scholars, January 2011. 

http://wilsoncenter.org/topics/pubs/LAP_120810_Triangle_rpt.pdf. p. 5.

Natural resource extraction

composed 90 percent of 

Chinese investment in the 

region
Backgrounder: China in Latin America 11

Table 2: Major Chinese Investment Projects in Latin America 2009-2011

Date Investor Partner US$ 

million

Country Sector

2009

February Shougang Group Shougang Hierro 

Peru

$1,000 Peru Iron

May China Development 

Bank

Petrobras $10,000 Brazil Oil

October Baosteel Anglo American $1,600 Brazil Iron

December Shunde Rixin $1,900 Chile Iron

2010

March CNOOC Bridas Holdings $3,100 Argentina Oil

March State Grid Quadra Mining $1,050 Chile Copper

March East China Mineral Itaminas $1,200 Brazil Iron

April Wisco $4,700 Brazil Steel

April CNPC $900 Venezuela Oil

May State Grid Cobra, Elecnor 

and Isolux

$1,720 Argentina Power

May Sinochem Peregrino field $3,070 Brazil Oil

October Sinopec Repsol/YPF $7,100 Brazil Oil

2011

January Tierra del Fuego 

Energia y Quimica*

$1,000 Argentina Infrastructure

February China Development 

Bank and China 

Railway Group

$7,600 Colombia Infrastructure

Total $45,940

Compiled from Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin America 

and the Caribbean Economic Relations,” Inter-American Development Bank, October 2010, p. 27; Kevin P. 

Gallagher, “China and the Future of Latin American Industrialization,” Issues in Brief, No. 18, October 2010; and 

press releases.

*Tierra del Fuego is a Chinese joint-venture between Shaanxi Coal and Chemical Industry Group Co, Ltd., Shaanxi 

Xinyida Investment Ltd., and Jinduicheng Molybdenum Group Co. Ltd.53

Besides resource acquisition investment, Chinese firms are beginning to expand their operations in the 

region through market access investment. For instance, Chery, a leading Chinese automobile 

manufacturer, has invested in Latin America, establishing plants in Uruguay in 2007 and dealerships in 

Brazil in 2009.54 Through these investments, Chery is well-positioned to become a lead competitor in the 

world’s fourth largest new car market, Brazil.55 In addition, Lenovo, the world’s third biggest computer 

manufacturer, invested $40 million to open a plant in Mexico in 2009 to produce computers for the North 

and South American markets.56

 53 “KBR wins Argentina ammonia plant contract,” Houston Business Journal, June 22, 2010. 54 Kevin P. Gallagher, “China and the Future of Latin American Industrialization,” Issues in Brief, No. 18, October 

2010. p. 3. http://www.bu.edu/pardee/files/2010/10/18-IIB.pdf; “Ramping up Business in Brazil, Chinese Chery 

Deeply Exploiting South American Auto Market,” Chery Press Release, September 3, 2009. 55 Glenn Brooks, “The battle for Brazil’s car market,” AutomotiveWorld.com, July 19, 2010. 56 “Lenovo to Increase Global Footprint With New Manufacturing Plants in Mexico and India,” Lenovo Press 

Release, July 26, 2007.; John Hobbes, “Lenovo factory in Mexico starts up,” Lenovo, March 2, 2009. 
Backgrounder: China in Latin America 12

Chinese Firms Outcompete U.S. Firms in Telecommunications

Chinese telecommunications firms Huawei and ZTE have been particularly successful in winning 

lucrative contracts in Latin America due to their low cost advantage.57 Many Latin American countries 

deregulated the telecommunications industry in the late 1990s and early 2000s, thereby opening up this 

market to foreign competition.58 For example, when Argentina fully deregulated its telecommunications 

market in 2000, U.S. companies such as Nextel, Bell South, and AT&T quickly entered this rapidly 

growing market and spent billions of dollars to attract customers in urban areas.59 In contrast, Chinese 

firm like Huawei and ZTE focused on supplying equipment and technology to the less profitable rural and 

less developed areas, gradually building their experience competing in foreign markets.60 

However, shortly after the influx of foreign companies into the market, Argentina experienced a 

significant economic downturn in 2001-2002. Faced with enormous losses, many U.S. firms exited the 

market, leaving it open for Huawei and ZTE to begin supplying equipment to Latin America’s leading 

telecommunication operators.61 As Alex Zorning, the Chief Financial Officer of Tele Norte, stated, “The 

Chinese are filling the space left empty by Americans and Europeans. They [the Chinese] are very 

aggressive, and they have a lot of money.”62 When U.S. firms sought to reenter the market several years 

later, they faced stiff competition from Chinese firms. U.S. firms Cisco and Nokia have had some issues 

maintaining market share as their Chinese competitors’ prices have been 20 to 50 percent lower.63

According to Steven Davidson, leader of strategic change at IBM in Asia, “A Cisco [representative] 

always starts a discussion with its software superiority, but many companies in developing countries 

would rather pay half the price for software that gets the job done.”64

Huawei and ZTE are able to provide these price advantages in part because of low to no-interest loans 

from the Chinese government. Huawei received a $10 billion loan in 2004 and a $30 billion credit line in 

2009 from the China Development Bank while ZTE received a $15 billion credit line in 2009.65 Although 

similar export credit programs are available to American and European companies, Adolfo Hernandez, 

 57 For information on the background of these telecommunications firms see: “The National Security Implications of 

Investments and Products from the People’s Republic of China in the Telecommunications Sector,” U.S.-China 

Economic & Security Review Commission, January 2011. 

http://www.uscc.gov/RFP/2011/FINALREPORT_TheNationalSecurityImplicationsofInvestmentsandProductsfromTh

ePRCintheTelecommunicationsSector.pdf. 58 Anton A. Huurdeman, The Worldwide History of Telecommunications, (Hoboken, NJ: John Wiley & Sons, Inc, 

2003) pp. 556-559.

59 AT&T spent $2 billion to build a fiber optic network in Argentina, Brazil, Chile, Colombia, and Peru and sold it 

for just $207 million in 2004 to the Mexican company Telmex. Janie Hulse, “China’s Expansion into and U.S. 

Withdrawal from Argentina’s Telecommunications and Space Industries and the Implications for U.S. National 

Security,” Strategic Studies Industry, September 2007. pp. 26-27; Gissel Gazek and Sebastian Pawlowski, “IT 

Landscape in Argentina: Liberalization and Deregulation,” American University, 

http://www1.american.edu/carmel/gg7870a/Liberalization.htm; Geri Smith, “The Telecom King of Latin America?,”

Business Week, March 29, 2004. 60 Janie Hulse, “China’s Expansion into and U.S. Withdrawal from Argentina’s Telecommunications and Space 

Industries and the Implications for U.S. National Security,” Strategic Studies Industry, September 2007. p. 6. 61 Ibid. pp. 26-27. 62 Edmond Lococo, Crayton Harrison, and Michael Forsythe, “Huawei’s $30 Billion China Credit Opens Doors in 

Brazil, Mexico,” Bloomberg, April 24, 2011. 63Pete Engario, Michael Arndt, and Geri Smith, “Emerging Giants,” Businessweek. July 31, 2006.. 64Ibid. 

65 Mitchell Silk and “Are Chinese Companies Taking Over the World?” The Chicago Journal of International Law, 

Volume 7, Number 1, Summer 2006.; Carolyn Whelan, “China’s new frontier,” Fortune Magazine, June 25, 2009. 
Backgrounder: China in Latin America 13

Alcatel-Lucent’s President for Europe, the Middle East, and Africa, notes that, “The difference in China 

is mainly that they [export credit programs] are bigger.”

66 As a result, Huawei and ZTE are able to 

provide larger, lower-interest loans to customers in Latin America than those offered by Americans or 

Europeans.67 For example, Tele Norte Leste Participacoes SA, Brazil’s largest land-line company, choose 

Huawei to supply their network equipment in part from the lower interest offered on the credit agreement: 

4 percent versus 5.99 percent.68 In addition to low costs, ZTE and Huawei have attracted government 

support in the region by providing pro-bono work or donated equipment to local governments, reducing 

overall costs to provide telephone service to rural areas.69 As a result, Huawei and ZTE became the 4th

and 8th largest global telecommunication equipment and service vendors in 2008 and are leading suppliers 

to Teléfonico and América Móvil, Latin America’s largest telecommunication firms.70

 66 Edmond Lococo, Crayton Harrison, and Michael Forsythe, “Huawei’s $30 Billion China Credit Opens Doors in 

Brazil, Mexico,” Bloomberg, April 24, 2011. 67 Ibid. 68 Ibid. 69 Janie Hulse, “China’s Expansion into and U.S. Withdrawal from Argentina’s Telecommunications and Space 

Industries and the Implications for U.S. National Security,” Strategic Studies Industry, September 2007. pp. 7-8. 70 The ability of these Chinese firms to provide low-cost, quality equipment is believed to have caused the mergers 

of leading Western telecommunications firms including Nokia and Siemens, Alcatel and Lucent, and the sale of 

Nortel’s assets to Ericsson. “China has made huge strides in network equipment,” The Economist, September 24, 

2009. 
Backgrounder: China in Latin America 14

In the past ten years, China has taken on a larger role within Latin America. The rising importance of this 

relationship was highlighted in the release of the first policy paper on Latin America by the Chinese 

government in 2008 and the growing number of high-level visits and bilateral agreements. China also has 

become an increasingly higher priority for Latin American countries, which see China as an alternative to 

the United States and the European Union as an ally in the international community, a source of funding 

for infrastructure projects and humanitarian aid, and a driver of economic growth. Although the United 

States remains the dominant power in Latin America, China’s influence has grown as the United States 

has become less active within the region due to its focus on wars in Iraq and Afghanistan and recovering 

from the global financial crisis.

Political and Military Ties

Following President Hu Jintao’s 2004 visit to Latin America, the number of high-level exchanges 

between Latin American governments and China has rapidly increased. President Hu Jintao has visited 

the region twice since 2004 and sent various high-level officials to further engage the region, including 

heir-apparent Xi Jinping in 2009.71 Between 2004 and 2010, the most frequent countries visited by 

Chinese officials were Venezuela, Mexico, Brazil, Peru, and Cuba. Latin American government leaders 

have reciprocated with frequent visits to China.72 These visits have also corresponded with the signing of 

121 bilateral agreements and cooperation initiatives with Latin America and Caribbean nations since 

2000.73 Approximately three-fourths of these agreements focus on six key areas: cultural (17), economic 

and trade (15), protection of investment (14), public administration/consular (13), science and technology 

(17), and tourism (13).74 Although the impact of these agreements has varied, the overall number and 

frequency of high-level visits indicates a concerted effort by China to engage the region. 

China has also begun to expand its military ties with the region. Current military relations focus mainly 

on military-to-military exchanges through frequent official visits and the regular exchange of flag 

officers.75 Venezuela, Chile, Bolivia, and Cuba maintain strong ties to the Chinese military through a 

high number of official visits, military officer exchanges, port calls, and limited arms sales. 76 For 

example, Venezuela, Bolivia, and Ecuador have begun to buy Chinese arms and military equipment such 

 71 President Hu Jintao visited Brazil, Argentina, Chile, and Cuba in 2004 and Costa Rica, Cuba, and Peru in 2008. 

In 2010, he had to shorten the duration of his trip to Brazil, Venezuela, and Chile to address the aftermath of the

Qinghai earthquake. Vice-President Xi Jinping visited Mexico, Jamaica, Colombia, Venezuela, and Brazil in 2009. 

Kerry Dumbaugh and Mark P. Sullivan, “China’s Growing Interest in Latin America,” Congressional Research 

Service, April 20, 2005. http://fpc.state.gov/documents/organization/45464.pdf. p.5; Rory Carroll, “China pours its 

wealth into Latin America,” The Observer, April 18, 2010; “Chinese VP returns to Beijing after six-nation visit,”

Xinhua, February 23, 2009. 72 Since entering office in 1998, Venezuelan President Hugo Chavez has traveled to China six times. “Venezuelan 

President Hugo Chavez Concludes China Trip,” Xinhua, April 9, 2009. 73 Compiled data from Integration and Trade Sector, “Ten Years After the Take-off: Taking Stock of China-Latin 

America and the Caribbean Economic Relations,” Inter-American Development Bank, October 2010, pp. 35-37. 74 Ibid. 75 Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, Mexico, Peru, Uruguay, and Venezuela 

all have military exchanges with China. Compiled from R. Evan Ellis, China in Latin America (Boulder, Colorado: 

Lynne Rienner Publishers, 2009).

76 In December 2009, the Chinese naval fleet made an official port call to Peru, Ecuador, and Chile. In addition, 

Cuba is believed to host Chinese signal intelligence gathering operations. Xiong Tong, ed. “Chinese Naval fleet 

concludes goodwill port call in Peru,” Xinhua. December 8, 2009; R. Evan Ellis, China in Latin America (Boulder, 

Colorado: Lynne Rienner Publishers, 2009) p. 242.

Political Developments
Backgrounder: China in Latin America 15

as radar and aircraft.77 In addition, Bolivia solidified this growing military-to-military relationship in 

March 2011 by signing a military co-operation agreement with China.78 However, for the rest of the 

region, China’s current arms sales are generally uniforms and other nonlethal equipment due to the 

inferiority of Chinese weapons and equipment to U.S. and Russian equivalents.

79 

Regional Participation

China has recently increased its participation in Latin American regional organizations. In 2004, China 

joined the Organization of American States as a Permanent Observer.80 Four years later, China joined 

IDB as a Donor Member and donated over US$350 million for public and private sector projects.81 In 

2009, the IDB signed partnership agreements with the Export-Import Bank of China and China 

Development Bank to finance various projects in the region, strengthening China’s presence in the region 

as an alternative to the United States and European Union for funding.82 More specifically, China has 

used its membership in the IDB to open the region to Chinese imports and direct funding for lessdeveloped countries in the region as a member of the special committee.83 China has also expanded its 

diplomatic ties to the following regional organizations 84: Group of Rio, 85 Andean Community, 86and 

Caribbean Community (CARICOM).87 These developments have provided Latin American countries 

with an additional source of funding and a partner beyond the United States and European Union. 

 77 More specifically, Bolivia spent US$58 million in 2007 on six aircraft to assist with counternarcotic operations. R. 

Evan Ellis, “Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st

Quarter 2010. http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. pp. 87-88; R. Evan Ellis, China 

in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009).; “Bolivia and China sign military cooperation agreement, “ Jane’s Intelligence Weekly, March 9, 2011. 78 “Bolivia and China sign military co-operation agreement,” Jane’s Intelligence Weekly, March 9, 2011. 79 R. Evan Ellis, “Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st

Quarter 2010. http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. pp. 87-88. 80Ambassador Zhou Wenzhong, Permanent Observer of China to the Organization of American States. Santo 

Domingo, Dominican Republic, June 4, 2006.

81William Ratliff, “China’s Latin American Tango,” Wall Street Journal, November 27, 2008. 82 R. Evan Ellis, “The New Chinese Engagement With Latin America: Understanding Its Dynamics and the 

Implications for the Region,” Booz Allen Hamilton, March 3, 2006. http://www6.miami.edu/hemisphericpolicy/EllisTheNewChineseEngagementWithLatinAmerica030306.pdf. 83 R. Evan Ellis, “Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st

Quarter 2010. http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. p. 88. 84Speech by Mr. Chen Siwei, Vice Chairman of the NPC Standing Committee at the Organization of American 

States. Washington, DC. December 6, 2005.

85 The Group of Rio is an organization of Latin American states established in 1986 as an alternative to the US-led 

Organization of American States. Member states include: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, 

Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Nicaragua, Panama, Paraguay, Peru, 

Uruguay, and Venezuela. Coalition for the International Criminal Court,“Rio Group,”

http://www.iccnow.org/?mod=riogroup. 86 The Andean Community is a regional organization made up of Bolivia, Colombia, Ecuador, and Peru. Its 

Associate Members include Argentina, Brazil, Paraguay, Uruguay, and Chile. Communidad Andina, “About Us,”

http://www.comunidadandina.org/ingles/who.htm. 87 The Caribbean Community is a regional organization between 15 Caribbean nations that has established a single 

market and economy between countries. Member states include: Antigua and Barbuda, Bahamas, Barbados, Belize, 

Dominica, Haiti, Jamaica, Grenada, Guyana, Montserrat, St. Lucia, Suriname, St. Kitts and Nevis, St. Vincent and 

Grenadines, and Trinidad and Tobago. Caribbean Community, “The Caribbean Community,”

http://www.caricom.org/jsp/community/community_index.jsp?menu=community. 
Backgrounder: China in Latin America 16

Taiwan

A key issue for China remains the continued recognition of Taiwan by many Central 

American and Caribbean nations. Currently, 12 of the 23 countries with diplomatic 

relations with Taiwan are located in this region. These countries are mainly located 

in Central America and the Caribbean and include Belize, Dominican Republic, El 

Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, Saint 

Christopher and Nevis, St. Lucia, and St. Vincent and the Grenadines.88 In the past, 

Taiwan used to play a role in military exchanges and training, but more recently, 

Taiwan has focused its efforts on providing significant economic incentives, 

humanitarian assistance, and frequent high-level official visits. Taiwan regularly 

provides grants and infrastructure support such as housing projects and a new 

congress building for Paraguay costing over US$50 million.89

To encourage Latin American countries to switch their support from Taiwan to mainland China, China 

has followed Taiwan’s “checkbook diplomacy”, offering significant aid packages and other economic 

incentives.90 For example, Dominica shifted its recognition to Beijing in 2004 with a pledge of US$112 

million in aid over six years. Costa Rica followed suit in 2007 receiving various benefits, most notably a 

US$300 million in government bonds and various infrastructure and public works projects, US$10 

million cash donation, US$83 million for a new national soccer stadium, US$1 billion joint venture for 

petroleum refinery, and a free trade agreement finalized in 2010.91 More recently, Taiwan has been less 

able to compete with China’s offers, leading Taiwan to officially renounce its “checkbook diplomacy”

practices in 2008.92 The remaining countries are believed to be holding out for more lucrative deals with 

China and, in the meantime, use China’s offers to secure additional funding from Taiwan. For example, 

St. Kitts was considering switching its recognition to mainland China until Taiwan provided US$8

million for a stadium.93 This type of behavior is expected to continue as these countries work to negotiate 

more expensive economic packages in the future.94

 88The remaining countries are: Burkina Faso, The Gambia, Sao Tome and Principe, Swaziland, Kiribati, Marshall 

Islands, Nauru, Palau, Solomon Islands, Tuvalu, and The Holy See. “List of Embassies & Missions Abroad,”

Ministry of Foreign Affairs of the Republic of China (Taiwan),

http://www.mofa.gov.tw/webapp/lp.asp?ctnode=1867&ctunit=34&basedsd=32&mp=6. 89 Carola McGiffert, Ed. Chinese Soft Power and Its Implications for the United States – Competition and 

Cooperation in the Developing World, Center for Strategic and International Studies, March 2009. 

http://csis.org/files/media/csis/pubs/090305_mcgiffert_chinesesoftpower_web.pdf. p. 98.

90 China’s willingness to contribute civilian police to assist with the United Nations’ peacekeeping operation to Haiti, 

a country that still recognizes Taiwan, is believed to be another method the Chinese are using to encourage countries 

to switch recognition from Taiwan to mainland China. Bates Gill and Chin-Hao Huang, “China’s Expanding Role in 

Peacekeeping,” Stockholm International Peace Research Institute, November 25, 2009. 

http://books.sipri.org/files/PP/SIPRIPP25.pdf. pp. 8, 14.

91 Carola McGiffert, Ed. Chinese Soft Power and Its Implications for the United States – Competition and 

Cooperation in the Developing World, Center for Strategic and International Studies, March 2009. 

http://csis.org/files/media/csis/pubs/090305_mcgiffert_chinesesoftpower_web.pdf. p. 99-100; R. Evan Ellis, 

“Chinese Soft Power in Latin America: A Case Study,” National Defense University, Issue 60, 1st Quarter 2010. 

http://www.ndu.edu/press/lib/images/jfq-60/JFQ60_85-91_Ellis.pdf. p. 89.

92 Peter Ritter, “Taiwan’s Leader Keeps Low Profile Abroad,” Time, August 11, 2008. 

http://www.time.com/time/world/article/0,8599,1831382,00.html. 93 Carola McGiffert, Ed. Chinese Soft Power and Its Implications for the United States – Competition and 

Cooperation in the Developing World, Center for Strategic and International Studies, March 2009. 

http://csis.org/files/media/csis/pubs/090305_mcgiffert_chinesesoftpower_web.pdf. p. 98.

94 For example, St. Lucia switched its allegiance back to Taiwan after frustration with the terms of Chinese aid. R.

Evan Ellis, China in Latin America (Boulder, Colorado: Lynne Rienner Publishers, 2009). p. 248.
Backgrounder: China in Latin America 17

Over the past ten years, China has deepened its economic and political ties with Latin America. Trade 

between China and Latin America has grown rapidly with China emerging as the largest export 

destination for Brazil, Chile, and Peru and the second largest export destination for Argentina, Costa Rica, 

and Cuba. However, overall trade between China and Latin America remains relatively small and 

concentrated in resource-rich countries. China has focused this economic relationship on expanding its 

domestic industries’ access to raw materials and emerging consumer markets. Chinese investment has 

mirrored this trading relationship with more than three-quarters of Chinese investment directed towards 

resource acquisition. As a result, resource-rich countries such as Brazil and Chile have benefited from 

China’s growing demand and investment, while more manufacturing-based economies such as Guatemala 

and Mexico have faced stiff global and domestic competition with Chinese firms. 

Complementing its growing economic ties, China has actively engaged the region through high-level 

visits, bilateral agreements, military cooperation and exchanges, and participation in regional 

organizations. China’s high-level of engagement as well as its growing economic ties with the region 

have attracted the attention of many Latin American countries to China’s potential as a driver of 

economic growth, ally in the international community, and source of investment and funding for 

infrastructure projects and humanitarian aid. However, the continued recognition of Taiwan by many 

Central American and Caribbean nations remains an important issue to China and has led China to offer 

significant investment and economic incentives as a way to encourage these remaining countries to 

officially recognize China instead of Taiwan. Although China is currently not a major player in the 

region, China’s growing economic ties and investment, potential as a new export market for Latin 

American goods, and high degree of engagement will ensure the continued growth of its influence in the 

region.

Conclusion
Backgrounder: China in Latin America 18