Chinese infrastructure in Latin America: A new frontier

Chinese infrastructure in Latin America: A new frontier

Over the past decade, China has become a leading lender and builder of infrastructure projects in the developing world. With extraordinarily high savings and a slowdown in investment at home, China has reached out to invest in a diverse array of infrastructure projects from West Africa to the Amazon.

One of the major drivers of this investment is the Belt and Road Initiative (BRI). Launched in 2013 by President Xi Jinping, funding for the initiative has increased over time (it’s aiming for US$1 trillion), and its scope spans projects in over 70 nations. This investment abroad constitutes an ambitious foreign policy with deep geopolitical implications.

The spread of China-backed infrastructure has been the focus of fueling debate among experts, governments and the media. From a contentious process over the control of a strategic Sri Lankan seaport to the controversial China-Pakistan Economic Corridor(CPEC), a major BRI-sponsored partnership, China’s global role is raising difficult questions.

Infrastructure provider

At the heart of the matter is China’s role as a main provider of public infrastructure in many Latin American and Caribbean (LAC) countries. Earlier in 2018, China invited LAC to join the BRI. With more than 100 Chinese-backed civil engineering projects already in design or construction, totalling US$60 billion, the region seems to have found in China a supplier that can fill its long-standing gap in energy and transportation infrastructure.

Our new bookBuilding Development for A New Era: China’s Infrastructure Projects in Latin America and the Caribbean, analyses this phenomenon’s central trends and associated challenges. The research builds on a truly global and multidisciplinary partnership between institutions and scholars, including political scientists, economists, anthropologists, and development practitioners from Asia, Europe, Latin America and the United States. With a focus on a diverse sample of LAC countries, our book is the first to take stock of what has been happening in the field of Chinese infrastructure investment.

China’s role is expanding

Thanks to Beijing’s loans, Chinese corporations are building dams and hydroelectric power plants in the Amazon and Patagonia. They are laying thousands of kilometres of rail track to reduce freight transportation costs and connect populations in Brazil, Peru and Venezuela. China’s development banks are even financing a state-of-the-art nuclear energy plant in Argentina.

In what has become the most ambitious civil engineering project in recent decades (although one plagued with challenges and uncertainties), a Hong Kong-based billionaire has been granted the authority to build a canal through Nicaragua, connecting the Pacific and Atlantic oceans to compete against the Panama Canal, as a transcontinental trade route.

Our analysis of Chinese infrastructure investment shows that it advances the Chinese government’s interest in strengthening bilateral relationships with countries it already have high levels of trade with. It also furthers the financial interests of Chinese firms seeking to expand their overseas activities.

This level of Chinese activity would have been unthinkable just three decades ago. Different (although not mutually exclusive) phases have structured the recent history of China-LAC relations. Beginning in the 1990s, the relationship experienced rapid growth in commercial terms. With the financial crisis of 2008, China funnelled a large volume of outward foreign direct investment (OFDI) finance to LAC. Since 2013, China has become significantly involved in major infrastructure projects on the continent.

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