Towards the end of the year, Latin America began to become bustling.
In November, the 31st APEC Leaders ‘Informal Meeting kicked off in Peru, where heads of government, officials and business representatives from 21 Asia-Pacific economies gathered in Lima. From the APEC meeting in Peru to the subsequent G20 summit in Brazil, a number of heavy multilateral events have been held in Latin American countries, attracting global attention.
Against this background, Caixin and Lenovo jointly held a Caixin International Roundtable APEC special event in Lima, inviting experts, scholars and entrepreneurs from China and Peru to conduct in-depth exchanges and discussions around the topic of “China and Latin America: Unlocking Growth Potential and Starting Prosperity Together.”
Latin America, as one of the largest economies in the world, is the second largest destination for China’s overseas investment according to the Statistics Bulletin of China’s Foreign Direct Investment in 2023 jointly issued by the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange. China-Latin America economic and trade relations are highly complementary. According to the report “International Trade Outlook for Latin America and the Caribbean 2024” released by the United Nations Economic Commission for Latin America and the Caribbean in October, the total trade volume of goods between China and Latin America has increased 35 times in the past 20 years, far exceeding the growth rate of trade between the region and the rest of the world (4 times). China has also become Latin America’s second largest trading partner for ten consecutive years. In 2023, the total trade volume between China and Latin America reached an all-time high of USD 489.047 billion. According to the statistics of the General Administration of Customs, from January to July 2024, the total value of goods exported by China to Latin America was USD 156.558 billion, an increase of 11.7% year-on-year.
This solid relationship not only stimulates the economic growth vitality of Latin American countries, but also provides a broad stage for China companies to go overseas. In today’s changing global situation, demand in Latin America continues to grow, providing new market space for China enterprises. With the successful holding of this APEC meeting in Peru, the trend of Chinese enterprises going to Latin America is expected to further deepen and usher in new development opportunities.
Chinese enterprises go to sea to welcome new opportunities
In the past 20 years of this century, Chinese enterprises have become increasingly active in investment activities in Latin America. In recent years, the total amount of funds invested by Chinese enterprises into Latin American countries is basically close to 10% of the total amount of foreign investment received.
From the perspective of past investment countries, Chinese enterprises ‘investment in Latin America is mainly concentrated in South American countries such as Brazil, Argentina, Chile and Peru; from the perspective of investment structure, it mainly involves infrastructure fields such as mineral extraction, agriculture, oil, railways, highways and electricity. Among them, the investment of China enterprises in Brazil accounts for about half of the whole Latin American region, and the investment of Chinese enterprises in Brazil covers many industrial fields in an all-round way. Venezuela, Chile and Peru have become key destinations for attracting China enterprises to invest in Latin America due to their rich oil and gas mineral resources.
Statistics show that as of September 2023, China has implemented more than 200 infrastructure projects in Latin America and the Caribbean, involving transportation infrastructure, public venues, airports, ports and power equipment. By the end of 2022, China’s stock of direct investment in Latin America and the Caribbean reached US $596.2 billion, nearly seven times higher than at the end of 2013.
In addition to mineral resources and transportation infrastructure and other key fields, a large number of China enterprises can be seen, and the field of consumer electronics is also the focus of Chinese enterprises in Latin America. A number of China mobile phone manufacturers, including Lenovo, Xiaomi, Chuanyin, Glory, etc., are aiming at this huge market with a population of 650 million. After years of development, Canalys data shows that among the top 5 mobile phone market share in Latin America in the third quarter of 2024, China mobile phone brands occupy 4 seats. Among them, Lenovo Group acquired Motorola brand ranked second.
Up to now, the industrial investment fields of Chinese enterprises in Latin America are also constantly expanding, and they have shifted from traditional fields such as infrastructure and consumer electronics to new energy, digital technology and cross-border e-commerce, making Latin America an important partner to jointly build the Belt and Road Initiative.
Especially in Brazil, China Internet enterprises have infiltrated many links of Brazil’s Internet ecosystem at present: SHEIN, AliExpress, Shopee and other China e-commerce platforms or China DNA e-commerce platforms have become the head players of Brazilian e-commerce; China head logistics enterprises such as Cainiao, Jirabbit and iMile have made breakthroughs and progress in Brazil;TikTok and Kwai (Fast Hand Overseas Edition) have also become Brazilian head Short Video platforms; Didi has become the second largest travel service platform in Brazil.
The year 2024 marks the 10th anniversary of the proposal of China-Latin America Destiny Community. With the smooth convening of this APEC meeting, the economic and trade cooperation between China and Latin America is expected to be closer on the original basis. At that time, the friendly diplomatic environment and foreign investment conditions will certainly provide new opportunities for more China enterprises to go to Latin America.
Latin American Market Methodology
Although Chinese enterprises are about to usher in a new era in Latin America, it is not easy to go to sea in this blue sea market. Past practice shows that Chinese companies frequently hit a wall in the Latin American market, especially in the field of electronic products. The strict protection policies implemented by Latin American countries, complex tax systems and high logistics and production costs constitute the main obstacles.
In Brazil, for example, high tariffs and complex tax requirements make market entry difficult. The economic crisis and currency devaluation in 2015 severely dampened market demand, and many Chinese companies significantly reduced or withdrew from the Brazilian market. In addition, Brazil has 58 taxes and high logistics costs, further increasing the difficulty of doing business.
Under this background, it has become a compulsory course for China enterprises to go to Latin America to cope with the challenges of complex tax system, high tax burden, localized operation, high logistics cost and cultural differences.
Lenovo Group, as a leading Chinese enterprise entering Latin America in the early stage, finally achieved success in personal computer and mobile phone business after experiencing twists and turns, and achieved outstanding performance in Brazil for many consecutive years: in terms of personal computer business, Lenovo Group’s market share of personal computer in Brazil increased rapidly from 3.56% in 2012 to 20.44% in 2022, achieving 6-fold growth in just ten years, ranking second at present; In terms of mobile phone business, Motorola has maintained its second mobile phone market share in Brazil for nine consecutive years since Lenovo acquired Motorola in 2014.
In addition, Lenovo Group has vigorously developed infrastructure and solution business, introduced mature and reliable China intelligent solutions to Latin American market, and provided effective assistance to Brazil, Mexico and other countries to promote the development of small and medium-sized enterprises and promote the re-industrialization process. By 2023, Lenovo Group’s server and entry-level storage business also successfully ranked among the top two in Brazil.
Looking back, Lenovo Group’s success in Latin America market fully demonstrates its actual combat methodology precipitated by 20 years of sailing, with the core including “three pillars” and “two cornerstones”. Among them, the three pillars are global supply chain, global R & D system and global marketing system, which also constitute Lenovo’s unique mode of “global resources, local delivery” explored in operation.
On the one hand, Lenovo Group makes full use of its global superior resources (capital, talents, R & D, supply, manufacturing, etc.) for unified allocation; at the same time, Lenovo Group creates marketing, delivery and service close to the local market, and opens up the “last mile” of localization for customers, which not only achieves higher customer satisfaction, better compliance and utilization of local policies, but also helps to build a safer and more resilient supply chain.
According to public data, Lenovo Group, as a global technology manufacturing enterprise, now has more than 30 manufacturing bases, more than 80 logistics distribution centers, business in more than 180 markets, more than 2000 core suppliers and a highly complex global supply chain network.
The support behind the “three pillars” is the two key bases of digitalization and ESG, which help Lenovo Group to keep moving forward steadily in a complex and changeable international environment. Specifically speaking, the all-digital cornerstone running through Lenovo Group’s “research-production-supply-sales-service” value chain not only supports Lenovo Group’s internal scale, efficiency and synergy, but also helps Lenovo Group realize the transformation from hardware products to solutions and service providers. In addition, ESG corporate social value constitutes Lenovo Group’s soft power, enabling Lenovo Group to win more respect in a complex and changeable environment.
In Latin America, Lenovo Group has adopted a core strategy of targeted penetration into different markets. In Brazil, Lenovo Group launched mid-to-high-end products that meet the needs of the Brazilian market through the hybrid manufacturing model of “own factory +ODM”, and at the same time, through measures such as establishing the brand image of “technological innovation” and taking advantage of the first-mover advantage of 5G market, the PC and mobile phone business firmly occupied the second market share in the Brazilian market and maintained a strong growth rate.
In Argentina, Lenovo Group actively adjusted its strategic layout according to local policies, proposed a “vertical integration” manufacturing model, cooperated with foundries to establish exclusive factories to realize localized production of Motorola mobile phones; and assisted Argentina to build “the strongest computing power” and supported its scientific research efforts, making Lenovo Group’s PC business ranked first in Argentina for five consecutive years, with a market share of 16.14%; The mobile phone business increased from 12% in 2017 to 37% in 2021, and also successfully jumped to the first place in the market.
In Mexico, Lenovo is well equipped to respond to external tariff changes by building its own factory in Monterrey to produce desktop computers and servers. By the second quarter of 2022, Motorola mobile phone market share in Mexico reached 28%, ranking first in the market.
Lenovo Group’s successful experience in Latin America has important reference value for Chinese enterprises going to sea in Latin America under new opportunities: facing the complex challenges of Latin American market, Lenovo Group provides specific coping strategies with its own experience, which helps China enterprises to better expand their business locally and enhance their competitiveness.
Guide the value of new trends in the sea
On November 13, 2024 local time, Caixin International Roundtable APEC was held in Lima, Peru.
If it is a marathon for China enterprises to go to Latin America, ESG determines to a considerable extent whether Chinese enterprises can “stand” and “go far” locally after “going out.” This requires Chinese enterprises in the new era to go to sea in Latin America no longer just to export simple products and brands, but to pay more attention to fulfilling social responsibilities while laying out local supply chains.
In fact, practicing ESG (environment, society, governance) concept has also become an important new trend for Chinese enterprises to go to sea in Latin America market. Through active ESG practice, enterprises can not only enhance brand image and value locally, but also obtain greater development space. Lenovo Group, for example, fully demonstrates this trend in its ESG practices in Latin America:
In Brazil, Lenovo Group continues to explore green technologies and introduces degradable bamboo fiber packaging technology, which significantly reduces packaging costs and carbon emissions, as well as transportation costs. Lenovo also uses warm water cooling technology to save energy on machine cooling, saving more than 40% of the cost of traditional air-cooled systems, helping Brazil’s data centers achieve lower carbon emissions. These green technology initiatives not only save energy and reduce carbon, but also improve production efficiency and cost control capabilities.
Lenovo Group also uses artificial intelligence technology to implement sign language to text projects in Brazil, helping 2.3 million deaf and hard of hearing people to communicate, significantly improving the quality of life of local residents. The project demonstrates Lenovo’s innovative capabilities in the global market and its strong sense of social responsibility.
In addition, Lenovo Group has created a “people-centered technology” project on Robinson Crusoe Island in Chile, using technology to connect this remote island community to the global economy and create new opportunities for the local community. At the same time, Lenovo Group imparts new knowledge and skills to community residents to help manage natural resources and improve infrastructure, enabling them to leverage local environmental advantages for long-term sustainable development; this project not only bridges the digital divide, but also improves overall local welfare. Lenovo also uses technology to help local conservation organizations make real-time decisions to protect rare species and ecosystems more effectively from destructive invasive predators.
It should be noted that Lenovo’s experience and achievements are not just the icing on the cake after its success in Latin America. On the contrary, in the current complex international environment, practicing the comprehensive ESG concept and implementing the concept of corporate social responsibility and sustainable development has long been an important cornerstone for China enterprises to go to sea in the new era, and has become the key key for Chinese enterprises to open more market opportunities in Latin American market and gain local social recognition.
Looking forward to the future, with the deepening of China-Latin America economic and trade cooperation, China enterprises going to Latin America will soon face new opportunities and challenges. By learning from Lenovo’s successful experience in Latin America, China enterprises are expected to better adapt to the market environment in Latin America. When new opportunities for China-Latin America cooperation come, they will not only succeed in “going out” but also strive to achieve “going up”.