China's Economic Involvement in Latin America

October 4, 2016

China’s recent mini economic collapse this past summer caused mayhem not only within its borders but thousands of miles away in many Latin American countries. Ever since the early 2000s China has been one of the leading foreign investors across Latin America in countries such as Colombia, Ecuador, Peru, Argentina, Brazil, and Venezuela. In return for this investment, China has been reaping the rewards the many goods these countries have to offer such as soy, copper, iron ore and oil.1 But, many of the investments coming from China have been in the form of infrastructure development, and many of these projects have yet to come to fruition, putting these countries at the mercy of China’s will.

Recently, China has come forth with three major plans in both Central and South America. The first plan is to build a new Atlantic-Pacific railway, and ports in Honduras which would open the country up to more trade possibilities. The second is a railway linking the Caribbean and Pacific in Colombia, and the third is a transcontinental railway that would begin in Peru and end in Brazil, a railway that was attempted once before but succumbed to the inhospitality of the Amazon rainforest. This isn’t the first time China has attempted to seduce Latin American countries with big projects; in Venezuela, China began working on a 290-mile long high speed rail while Chavez was still in power but was forced to stop because of lack of funds.

Many fear that China’s continued involvement in Latin American countries may create an unhealthy dependency that could lead to further economic decline. After China’s devaluation of its currency, many witnessed a glimpse of the potential future if this dependency continued.  At the current rate many Latin American countries, especially Brazil, felt the direct effects of a tumultuous Chinese economy. After China’s currency crisis, Brazil’s currency, the real, also suffered devaluation against the dollar and this economic decline may have caused rampant crime in cities across Brazil, mainly in the home of the olympics in Rio de Janeiro.

All this involvement in Latin America has many critics thinking that China is attempting to create its own markets after being excluded from the Trans-Pacific Partnership, which among 12 countries, includes Chile and Mexico, two Latin American countries that have had little involvement with Chinese foreign investment. This partnership would allow for tariff free trade among the 12 countries (US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Peru, and Chile) in agricultural and textile trades among many other that are currently in negotiations.3 This obvious exclusion of China has led it to invest in different places but these investments have yet to be mutually beneficial to the Latin American countries involved that are selling their resources for unfulfilled promises.


 

1) Romero, Simon. "China’s Ambitious Rail Projects Crash Into Harsh Realities in Latin America." The New York Times. The New York Times, 03 Oct. 2015. Web. 08 Oct. 2015.

2) "China's Pivot to Latin America." BloombergView.com. N.p., 25 May 2015. Web. 08 Oct. 2015.

3) "TPP: What Is It and Why Does It Matter? - BBC News." BBC News. BBC News, 6 Oct. 2015. Web. 08 Oct. 2015.

About Author(s)

Sophia Winston
Sophia Winston is a Spanish and Urban Studies major at the University of Pittsburgh, she is also pursuing a certificate in Latin American Studies and a minor in Portuguese. She has spent a semester abroad in Rio de Janeiro, Brazil and is currently a senior.