China’s direct investment in Latin America surpasses US$200 billion, with cross-border e-commerce cooperation becoming a highlight

At present, China has become Latin America’s second largest trading partner and the first and second largest trading partners of several Latin American countries.
Over the past decade or so, trade between China and Latin America has grown by more than 20 times. The economic and trade relations between the two sides have become increasingly close and have shown a prosperous scene of trade, investment and finance going hand in hand, becoming a model for South-South cooperation. At present, with the evolution of development needs of both sides and the transformation and upgrading of economic structure, China-Latin America cooperation is becoming more diversified and dynamic. “The Belt and Road Initiative” is becoming a “new starting point” for China-Latin America cooperation. After the 19th National Congress of the Communist Party of China,”the Belt and Road Initiative” has become more prominent in the future development pattern of China and its importance to China-Latin America cooperation has become more prominent. With the transformation of China’s economy to consumption-driven economy, China’s demand for high-quality agricultural products in Latin America continues to increase. The “curve overtaking” of China’s e-commerce development has provided a strong boost to promote trade convection between China and Latin America and the precise docking of the two markets. In addition, with the deepening of innovation-driven development strategy, China’s technological and business model innovation is also being transplanted and shared to Latin America by some enterprises with international vision, injecting innovative elements into China-Latin America economic and trade cooperation.
At present, China has become Latin America’s second largest trading partner and the first and second largest trading partners of several Latin American countries. In 2014, China-Latin America trade reached an all-time high of US $263.6 billion. In 2017, China-Latin America trade got rid of the downward trend for two consecutive years, and the momentum of recovery growth was obvious.
On January 23, Foreign Minister Wang Yi announced at the China-Latin America Economic and Trade Cooperation Forum that the great concept of jointly building the Belt and Road Initiative has been fully extended to Latin America with the second ministerial meeting of the China-Latin America Forum as the symbol. Just before November 17, 2017, during Panamanian President Barrera’s visit to China, China and Panama had just signed several cooperation documents to promote the construction of “the belt and road initiative.”
Based on economic complementarity and common pursuit of development, the scale of trade between China and Latin America has increased by more than 20 times in the past decade, and economic and trade relations have become increasingly close, showing a prosperous scene in which trade, investment and finance go hand in hand. With the evolution of China-Latin America development needs and the transformation and upgrading of economic structure, especially the China-Latin America overall cooperation mechanism marked by China-Latin America Forum has become a reality, and the “economic nerves” of China-Latin America have deepened their docking, thus deriving increasingly diversified and dynamic cooperation formats.
The recently concluded second ministerial meeting of the China-Latin America Forum adopted three outcome documents: the Santiago Declaration, the Joint Action Plan for Cooperation (Priority Areas) between China and Latin American and Caribbean Countries (2019-2021) and the Special Statement on the Belt and Road Initiative, which became guiding documents and action programs for China-Latin America cooperation in the new era.
Create all-round “interconnection”
It has been reported that the cost of transporting a ton of soybeans by road from western Argentina to a central port is even higher than that to Rotterdam in the Netherlands. This inversion of transport costs at home and abroad is not uncommon in Latin America. Latin America is rich in natural resources and is considered to be “God’s blessed land.” However, insufficient regional infrastructure connectivity makes transportation costs too high and it is difficult for factors of production to flow in a wider range, which greatly restricts export competitiveness and economic development potential.
The Belt and Road Initiative is undoubtedly highly compatible with the demand for infrastructure integration in the region. At the second ministerial meeting of the China-Latin America Forum, China proposed that “building a land-ocean integrated connection” be one of the areas for deepening cooperation between China and Latin America in the next stage. China will actively participate in the construction and interconnection of transportation, infrastructure, energy and other hardware in Latin America, and open up more China-Latin America sea routes and direct flights.
As early as 2014, in order to strengthen the construction of transportation infrastructure in South America and promote the connection between South America and Asian markets, China, Brazil and Peru have reached consensus on promoting the construction of the “Two Oceans Railway.” Chinese enterprises have completed the feasibility study of the project within two years. When completed, the project will form a 5000-kilometer super-long railway across the Atlantic Ocean and the Pacific Ocean, connecting Brazil and Peru.
In addition to the “connectivity” of transportation infrastructure, Chile proposes that China and Latin America jointly build a “digital silk road” and “air silk road” to promote digital connectivity. Chile and China are considering building a trans-Pacific submarine cable between the two countries and have completed preliminary feasibility studies, Chilean Foreign Minister Heraldo Munoz said recently. If completed, Chile could become a bridge and hub connecting South America with China. “Scientific and technological progress has made it possible for Latin America to interconnect with China, not only by land and sea, but also by air and the Internet.” Munoz said.
China-Latin America “financing” results are also very significant, China and Brazil, Argentina, Suriname, Chile signed currency swap agreements, involving a total amount of 283 billion yuan. In Argentina and Chile, China has also set up RMB clearing banks, Latin America’s global RMB cross-border payment system was successfully launched in 2015, and Brazil and other seven Latin American countries have joined the AIIB.
In addition, more than US $17 billion of China’s US $35 billion financing package has been implemented, which has benefited more than 80 livelihood projects in more than 20 Latin American and Caribbean countries. The US$30 billion China-Latin America Capacity Cooperation Special Fund has also been launched to support China-Latin America project cooperation in the field of capacity and equipment manufacturing.
In the field of energy cooperation, due to the high competitiveness of water resources, solar energy and wind energy resources in Latin America, China enterprises have come to dig gold and carry out energy projects in several Latin American countries. A month ago, the Kirchner-Sepenick hydropower project at the southernmost end of Argentina resumed construction, which is currently the largest hydropower project financing project of China enterprises overseas and the largest energy project currently determined to be developed by the Argentine government; In addition, Brazil’s beautiful landscape UHV transmission line was officially put into operation in January, which will balance Brazil’s power supply and demand and meet the annual electricity demand of Brazil’s population of about 22 million.
In terms of cooperation in overseas economic and trade cooperation zones, China proposed at the second ministerial meeting of the China-Latin America Forum that more industrial parks and special economic zones should be built in the next stage to support Latin America in building an independent and diversified industrial system as soon as possible.
Huafushan Industrial Park is the first large-scale industrial park developed by China in Mexico and the second overseas industrial park developed by Huali Group after Rayong Industrial Park in Thailand. The industrial park is located in Nuevo Leon, Mexico’s economic state, focusing on the development of automobile parts, information technology, mechanical equipment, electronic appliances, light industry, new energy and new materials industries. In March 2016, the project was listed as a key international production capacity and equipment manufacturing cooperation project of the National Development and Reform Commission.
“We conducted five years of research and demonstration before deciding to invest in the establishment of industrial parks in the Americas. We considered many factors, including the relationship between China and other countries, the market capacity and radiation radius of the country where the park is located, the local industrialization level and upstream and downstream supply chains, the cost of production factors, etc., and finally decided to set up an industrial park in Monterrey, Mexico, to help enterprises ‘group out to sea’.” North America Huafushan Industrial Park China Deputy General Manager Li Feng told the 21st Century Economic Report reporter said.
According to Li Feng, Huafushan Industrial Park is in the process of normal and efficient development and construction, and has fully rolled out the construction of “seven connections and one leveling” and standard workshops. Under the initiative of “One Belt and One Road”, more and more enterprises are interested in investing in Latin America and go to Huafushan for field visits. The investment situation of the industrial park is also relatively optimistic. At present, more than ten enterprises have expressed clear investment intentions.
Cross-border e-commerce cooperation becomes a bright spot
At present, China has become Latin America’s second largest trading partner and the first and second largest trading partners of several Latin American countries. In 2014, China-Latin America trade reached an all-time high of US $263.6 billion. In 2017, China-Latin America trade got rid of the downward trend for two consecutive years, and the momentum of recovery growth was obvious.
According to statistics from China Customs, in the first 11 months of last year, the total trade volume between China and Latin America was US $233.76 billion, up 18.4% year-on-year. Among them, China’s exports to Latin America increased by 14.3% and imports increased by 22.8%. From the perspective of commodity structure, China’s exports to Latin America are mainly mechanical and electrical products and high-tech products. In Latin America’s exports to China, in addition to energy and mineral products and bulk agricultural products, meat, seafood and fruits are increasing year by year, and exports to China are increasingly diversified.
The “curve overtaking” of China’s e-commerce development has provided a strong boost to promote the trade convection between China and Latin America and the precise docking of the two markets. Last year’s “Double Eleven”, Argentina’s ambassador to China Diego Gellar personally guest online shopping courier, sent a box of Argentine red shrimp to a Shanghai citizen’s home. “Latin America is the main source of agricultural and mineral products imported by China. China and Latin America have natural complementarity in industrial structure and trade structure, laying an important foundation for cross-border e-commerce cooperation.” Zhao Ping, director of the International Trade Research Department of China Council for the Promotion of International Trade Research Institute, told the 21st Century Economic Report reporter.
“Latin America’s important demand for cross-border e-commerce comes from small and medium-sized enterprises. After the market-oriented reforms in the 1990s, the main body of the Latin American market is SMEs. These countries are relatively lacking in industrial production capacity, and small and medium-sized enterprises in the service industry and agriculture are very active.” Guo Cunhai, associate researcher at the Latin American Institute of China Academy of Social Sciences, told the 21st Century Economic Report reporter. In Mexico, for example, more than 90 per cent of enterprises are said to be SMEs, generating nearly 50 per cent of GDP and more than 80 per cent of domestic employment.
Another driving force for cross-border e-commerce cooperation between China and Latin America is the rising consumption demand of China’s middle class. Beef and wine from Argentina in Latin America, cherries from Chile and avocado from Mexico have become favorite commodities for China consumers. China is expected to import US $24 trillion in commodities in the next 15 years. More Latin American specialty commodities and high value-added products are expected to enter the China market.
Latin America is the fastest growing e-commerce market outside the Asia-Pacific region, and China e-commerce giants are also targeting the “critical opportunity period” for Latin American e-commerce development. In May 2017, Ma Yun visited Argentina and Mexico and announced that he would “long-term layout” in Latin America. Alibaba has signed e-commerce cooperation agreements with the governments of Argentina and Mexico, and its B2B business has millions of registered users in both countries.
According to the Alibaba Cross-Border Ecommerce Research Center, Brazil is the largest e-commerce market in Latin America, accounting for 42% of the total in Latin America. As early as 2014, Ali established a partnership with the Brazilian Postal Service, and AliExpress is popular in Brazil.
“The scale of China’s e-commerce ranks first in the world, and some new technologies and business models are also very advanced. The successful experience of China’s e-commerce development can provide reference for Latin America to develop e-commerce. Cooperation within the e-commerce industry between China and Latin America also has broad prospects. In particular, China’s cross-border e-commerce enterprises have taken many important measures to vigorously develop overseas warehouses and expand import channels, creating conditions for promoting the development of Latin American e-commerce and forming a close e-commerce ecological chain between China and Latin America.” Zhao Ping told the 21st Century Economic Report reporter.
The new format of cross-border e-commerce trade has a positive effect on promoting China-Latin America trade, but bottlenecks in technology and other aspects need to be broken through urgently. “The penetration rate of e-commerce in Latin American countries is still much lower than that in China, and cross-border e-commerce still has obstacles in expanding the sources of imports from Latin American countries.” Zhao Ping said.
China’s innovation achievements docking Latin America
Latin America is recognized as one of the most promising regions in the world and the second largest destination for China’s overseas investment after Asia. Data show that at present, China’s stock of non-financial direct investment in Latin America exceeds US $200 billion, and there are more than 2000 Chinese-funded enterprises investing in Latin America.
Brazil, as Latin America’s largest economy, has become a hot spot for China enterprises to compete for investment. In 2017, China enterprises successively acquired CPFL Company, Brazil’s second largest container terminal operator TCP Company, and San Simão Hydropower Station, Brazil’s ninth hydropower station… Brazilian media said that in 2017, China received US $10.68 billion in Brazil, accounting for 35.6% of the total foreign investment in that year, and China became Brazil’s main source of foreign investment.
It is worth noting that in addition to the traditional infrastructure, energy and mineral fields, China’s investment in Latin America has also expanded to finance, agriculture, manufacturing, information industry, service industry, e-commerce, air transportation and other fields.
Latin American science and technology innovation industry urgently needs the participation of China capital. Latin America’s innovation industry is growing, with IDG reporting in January that Latin America’s tech start-up market is worth $37.7 billion. Among them, Latin America has 123 innovative enterprises worth more than US $25 million, including 9 unicorns, each worth more than US $1 billion.
China tech giants and venture capital firms are stepping up their efforts. At the beginning of 2017, Didi Chuxing, a representative enterprise of China’s “sharing economy,” landed in the Brazilian market and realized “borrowing ships to go to sea” through strategic investment in a local company. Meanwhile, Bluesmart, a Latin American smart luggage start-up, received $12 million in Series A funding from Qingyun Venture Capital, one of China’s largest venture capital firms. In addition, Huawei provides technical solutions for many telecom companies in the Latin American market;”360″ company escorts Brazil’s network security through strategic investment.
Alicia Balsena, Executive Secretary of the United Nations Economic Commission for Latin America and the Caribbean, expressed the hope that China would invest in Latin America through joint ventures and partnerships with Latin American entrepreneurs, especially in high-tech fields, so that Latin American countries could benefit more from it. “We hope to use financial resources such as the China-Latin America Cooperation Fund to help Latin America solve the problem of technological backwardness.” Balsena said.