The political economy of China–Latin America relations: the making of a post-boom paradigm

Abstract

Since the turn of the twenty-first century, China’s political and economic relations with Latin America have undergone two major phases, with the end of the 2000s commodities super-cycle marking a turning point. Prior to this turning point, the commodities boom served to deepen the partnership, while subsequent drivers have been mostly endogenous. The increased political engagement stems primarily from heightened bilateral interaction and collective collaboration, whereas economic momentum is mainly derived from the strengthening of commercial ties and growing cooperation across a wide range of areas. This new interdependence has made political and economic relations between China and Latin America more conventional and predictable. Under the post-boom paradigm, two defining characteristics of China–Latin America relations are complementarity and development—one is an undeniable truth; the other is both a justification and an incentive for South–South collaboration.

1 Introduction

Since China joined the World Trade Organization (WTO) in 2001, its global development strategy has evolved consistently. One major change over the past two decades is that Latin America has assumed an increasingly important role in China’s global strategy. Currently, China acts as a non-traditional partner in the region and is a valuable external stakeholder for some Latin American nations. Meanwhile, Latin America has become more important in Chinese diplomacy. Although two decades have not been sufficient for many of the new features of these bilateral relationships to become institutionalized, evidence suggests that bilateral engagement becomes more self-adjusting as political and economic interdependence increases. Developments following the conclusion of the 2000s commodity super-cycle have made this more apparent. In what ways does the emerging post-boom paradigm manifest itself in bilateral political and economic relations between China and Latin American countries? What are the similarities and differences compared to the period prior to 2015? How can these changes be interpreted? This study is designed to identify and address these questions based on the changes that have occurred in bilateral relations over the past two decades, particularly the numerous transitional features that have emerged in recent years.

2 Remodeling political and diplomatic ties: China’s policy and institutionalization efforts

Marking a departure from the past, political and diplomatic relations between China and Latin America in the twenty-first century have been mostly grounded in rationality and pragmatism, both at the bilateral and the multilateral level. China’s first policy paper on Latin America signaled this epochal change in November 2008, a time when bilateral commercial relations were booming. This document stated that China’s policy objective for Latin America and the Caribbean (LAC) was to “build and develop a comprehensive and cooperative partnership featuring equality, mutual benefit and common development” (China Daily 2008). A considerably improved and expanded version was released 8 years later. Most notably, it incorporated significant proposals made by the new Chinese leadership during their visit to the region in the mid-2010s, such as the “1 + 3 + 6” cooperation framework, which was presented by President Xi Jinping when he met with Latin American leaders in Brasilia in 2014, and the “3 × 3” model of China–Latin America collaboration in production capacity, which Premier Li Keqiang initiated at the closing ceremony of the China–Brazil Business Summit in Rio de Janeiro in 2015.¹ Despite the greater specificity of these proposals, the new document still maintained China’s core policy objectives toward Latin America as they were first set out in 2008. The language China employs when describing relations with Latin America is more reserved than the language it uses when describing relations with Africa. This was evident when the aforementioned 2008 document took a more cautious stance than the one put forth in China’s 2006 African policy paper. It is particularly relevant to note that, over time, Chinese policymakers redefined their relations with Africa, upgrading the bond from a “new type of strategic partnership” to a “comprehensive strategic and cooperative partnership”(Xinhua 2006, 2015). The phrasing used to describe relations with Latin America has been more restrained; this difference is likely a reflection of both a calm appraisal of bilateral relations between China and Latin America and a manifestation of patience.

Restraint in defining policy does not necessarily imply an absence of strategic vision. From the perspective of bilateral relations, China employs different terms to distinguish between the depth of partnership with Latin American states. In 2012, Chinese relations with Brazil were upgraded from a “strategic partnership” to a “comprehensive strategic partnership”, which is generally regarded as the highest level of bilateral relations between China and any LAC country. Over the subsequent 4 years, China repeated a similar process with Mexico (2013), Peru (2013), Argentina (2014), Venezuela (2014), Ecuador (2016), and Chile (2016). Meanwhile, China has also established strategic partnerships with Costa Rica (2015), Uruguay (2016), and Bolivia (2018). These ten states are critical in China’s strategy for engagement with Latin America primarily because of their economies, commercial ties with China, and participation in international organizations (in at least one case). In addition, close diplomatic and political ties also play an important role: retrospectively, it is now clear that the establishment of strategic partnerships or comprehensive strategic partnerships between China and Latin American states roughly coincided with a period in which many of the latter were governed by left, center, or center-left parties or coalitions (see Table 1). Although China has not clearly indicated its ideological preferences or preconditions when interacting with Latin American nations, in practice, left-leaning governments tend to take a more proactive stance in developing relations with China than their right-leaning counterparts.

Table 1 China’s strategic partners and comprehensive strategic partners in LAC

As mentioned above, different levels of “partnership” have strategic implications and are an important criterion that can reveal the closeness of bilateral relations between China and different Latin American states. However, certain countries in the region, like Cuba, need to be treated separately. The island nation does not fit under the typology of partnerships described above. In China’s official discourse, Cuba is “a good friend, comrade and brother in need”, and the relationship between the two countries is “special and friendly,” as it is based on a “common ideal and belief”.² Cuba is the first Latin American country to have established diplomatic ties with the People’s Republic of China. The two sides have a high degree of political trust, frequent high-level interactions, and a mutual notification mechanism to communicate major concerns. Cuba has provided significant support to China on many issues in international affairs and in the multilateral arena, and vice versa. Cuba is currently China’s second-largest trading partner and the largest recipient of Chinese aid in the Caribbean. It is not always possible for China to completely disentangle itself from ideology in relations with Cuba; in some cases, the relationship between the ruling communist parties plays an important role in state-to-state interactions. There is an impression that Cuba seems to be more concerned with enhancing the role of ideology, rather than minimizing it. China’s engagement with Cuba is, arguably, a prominent example of political and ideological similarities playing an important role in diplomacy. In certain respects, the development of China’s relations with Venezuela is similar to its engagement with Cuba.

Colombia appears to offer some insight from the other side of the coin. In theory, one would expect it to develop close relations with China: it has the third-largest population in Latin America, the fifth-largest economy, and is China's fourth-largest trading partner in the region. Colombia also participates in numerous multilateral organizations, such as Organization for Economic Cooperation and Development (OECD), AP, CAN and CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa), among others. In spite of this, it appears that China has not considered a relationship with Colombia from a strategic perspective. Perhaps this is related to Colombia’s long history of political conservatism, as well as its status as the closest US ally in the region. However, some new developments have taken place over the past few years. In June 2019, President Xi Jinping and President Ivan Duque held what the Chinese ambassador to Colombia described as a “historic meeting” in Beijing. A series of deals worth as much as $20 billion were reportedly closed over the following months (Semana 2020). With Gustavo Petro, Colombia’s first left-wing president, taking office in August 2022, China–Colombia relations are expected to continue to develop further.

The relationship between China and Panama has improved rapidly since diplomatic relations were established in 2017. At present, China is Panama’s leading trade partner and second-largest user of the Panama Canal, while Panama is the first country in the region to sign a memorandum of understanding under the Belt and Road Initiative (BRI). In light of Panama’s importance as a logistics hub in the western hemisphere and the growth of bilateral ties over the past 5 years, it is likely that the country will join Costa Rica as a key strategic partner for China in Central America.

Although state-to-state interactions are important, China believes that bilateral engagements alone are insufficient to develop close relations with countries in the region. The strategic vision of China is to establish three-dimensional connections. As stated in the aforementioned second policy paper on Latin America and the Caribbean, China’s framework for developing relations with the region is to “promote complimentary development of collective and bilateral cooperation”(Xinhua 2016). China’s current collective cooperation with Latin America is more indicative of a strategy for engagement, rather than of its approach to managing bilateral relations. “Collective cooperation” refers to broad engagement with a region and is based on the concept that collective dialogue is conducive to maximizing the advantages of engaging on a larger scale. The Forum on China–Africa Cooperation, the China–Arab States Cooperation Forum, and the ASEAN–China (10 + 1) cooperation mechanism are all diplomatic practices of cross-regional collective cooperation between China and developing countries. It is important to note that, contrary to popularly held notions, it was Latin American leaders, not China, that promoted collective cooperation between China and Latin America around 2003. Since then, China has indicated its willingness to work in this direction, but little progress had been made.

The Community of Latin American and Caribbean States (CELAC) was formally established in 2011 as an intergovernmental dialogue and political agreement mechanism involving all 33 states in the region. From China’s perspective, this provides a unique platform for collective cooperation with Latin America. In this context, Chinese Premier Wen Jiabao proposed further ideas regarding China-LAC collective cooperation during his visit to the region in June 2012, including the establishment of a China–Latin America cooperation forum, a regular China–CELAC Troika Foreign Ministers’ dialogue mechanism, and a timely meeting mechanism between the leaders of China and CELAC. Several more specific initiatives were also suggested, including a China–Latin America cooperation fund, a special loan of $10 billion USD to facilitate cooperation in infrastructure development, a special fund for China–LAC agricultural cooperation and development, an emergency food reserve mechanism, and a mechanism for industrial cooperation, among others (Xinhua 2012). According to Chinese sources, these proposals did not initially receive a particularly positive response from Latin American side.

Huge variations exist within CELAC. It is likely that a regional power such as Brazil would rather engage with China directly or on a much smaller multilateral platform (such as BRICS), instead of simply acting as one of 33 members of CELAC. As a result of continuous communication with major members, and with the support of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), as well as in coordination with Cuba (then holding the rotating presidency of CELAC) and Venezuela, the China–CELAC Forum (CCF) was inaugurated in Brasilia on July 17, 2014. This became the final piece of China’s global framework for collective cooperation in developing regions.

China has high expectations for the CCF and, thus far, has made significant investments in it. Among the major mechanisms of the Forum are the Ministerial Meeting, the Dialogue between the Foreign Ministers of China and the CELAC Quartet (the immediate Chair, the current Chair, the incoming Chair and the Chairman of the Caribbean Community), the Meeting of National Coordinators, the China Follow-up Committee, sub-forums in specific fields, and financing arrangements worth tens of billions of dollars for Latin America. To facilitate communication and coordination, the Chinese government also established the post of a special representative for Latin American affairs. The CCF has promoted dialogue and cooperation between China and Latin America since its founding 8 years ago, but not all of its operations have been smooth. It is relatively easy to establish a platform and mechanisms for cooperation, but utilizing them to produce real outcomes is another matter. Willingness and effort alone are not sufficient to achieve desired strategic goals; to create sustainable internal dynamics, a high level of mutual trust and consensus is still needed.

In essence, CELAC is a regional dialogue mechanism, rather than a treaty-based organization. When it was founded almost 12 years ago, Latin American regionalism and the so-called “Pink Tide” were in full swing. Soon after the CCF’s launch in 2015, the political landscape of the entire region began to change. During the following years, the widening ideological differences within CELAC led to an erosion of consensus and a decline in cohesion. In 2018, when the Second Ministerial Meeting of CCF was held in Santiago, Chile, the number of participating countries was significantly lower compared to the previous meeting. A year later, Brazil, under then-President Jair Bolsonaro’s leadership, began to distance itself from CELAC, and in January 2020 suspended its participation in the organization, claiming that it failed to “achieve results in the defense of democracy” (Globo 2020). All of these factors inevitably restricted the operations of the CCF.

However, some new developments occurred around the same time. First, Mexico became more closely involved in CELAC affairs after taking over the pro-tempore presidency in 2020. During the next 2 years, the country worked to help maintain CELAC operations and coordinate a series of important CCF events, including the Special Foreign Ministers’ Meeting on COVID-19 in July 2020, the China–CELAC Cooperation Forum on Digital Technology to Combat COVID-19 in February 2021, the Second China–CELAC Ministerial Forum on Agriculture, and the Third Ministerial Meeting of the CCF in late 2021. Second, a resurgence of the “Pink Tide” began to take place across the region. Since October 2019, Latin America has witnessed the emergence of a rise in support for progressive ideas. Left-of-Center candidates have won general elections in Argentina, Bolivia, Chile, Peru, Honduras, Colombia, and Brazil. The unity of CELAC was strengthened and the mechanism was revitalized by these new developments.

Recently, Latin America and the Caribbean have been among the regions most affected by the COVID-19 outbreak, in terms of both the number of cases and the death toll. In the last 2 years, China has been effectively cooperating with countries in the region, and fulfilling the promise made in its second policy paper on Latin America to “provide assistance within its capacity for the prevention and control of sudden outbreak of infectious diseases”.³ Additionally, China presented several new initiatives at the Third Ministerial Meeting to promote smart, digital, and green development of industrial cooperation as a response to the current situation and common challenges. China also pledged to set up two special loans for development cooperation and digital economy cooperation, and to allocate $2 million USD from the FAO–China Trust Fund for South–South and Triangular Cooperation to support CELAC member states in addressing food security issues(Ministry of Foreign Affairs of The People’s Republic of China 2021; China–CELAC Forum 2021).

Despite the fact that China–LAC collective cooperation has yet to be improved in terms of effectiveness, and there are still many uncertainties regarding CELAC’s future, it cannot be denied that the CCF platform has played a unique role in maintaining communication and enhancing strategic exchanges. However, both at the bilateral and at the multilateral level, the driving force behind the fast expansion of China–LAC ties in the first quarter of the twenty-first century has been economic engagement. The concept of equality and mutual benefit, common development, and pragmatic collaboration, which often appear in Chinese official discourse, can be interpreted through this lens.

3 Changing structure and composition of trade between China and Latin America: when the boom ends

Since the turn of the new millennium, nearly every account of China–Latin America relations has begun by mentioning a trade miracle. As reported in official Chinese statistics, between 2001 and 2021 trade in goods between China and Latin America increased from $14.9 billion to $451.6 billion. The period from 2003 to 2013 was characterized by particularly high rates of growth. In the midst of the sustained commodity price boom fueled by China’s robust demand, Latin America has emerged as a major supplier of energy and minerals (such as oil, copper, and iron ore) as well as agricultural products (such as soybeans, meat, and fishmeal) to China. China has subsequently become the second-largest trade partner in Latin America, surpassing the European Union. The decade has been described as the greatest win from the “commodity lottery” in Latin American history, especially in South America. An average annual growth rate of 4.8% was observed in the economy of Latin America between 2003 and 2013, nearly doubling the historical rate of growth for the region (Wise 2020). Chinese demand for commodities has fueled Latin American growth, which is also credited with helping the region weather the global financial crisis of 2008–2009.

Due to a combination of factors, including falling commodity prices on international markets, a slowing Chinese economy, and a recession in several key South American economies (Brazil, Argentina, and Venezuela in particular), the decade-long high growth of China–LAC trade gradually came to an end after 2014. Between 2014 and 2019, trade between China and Latin America grew by an average annual rate of 3.5%, much less than the double-digit growth of the previous decade.⁴ Over the same period, Latin America’s GDP growth averaged only 0.2%, a considerably lower rate than that of the rest of the world.⁵ In 2020, the Latin American economy was severely affected by the COVID-19 pandemic. According to  ECLAC, it had the worst performance among all developing regions, with a decline of 6.8%, the most severe contraction that the region has experienced since 1900, the year when economic data were first recorded (ECLAC 2021, 17). As the only major world economy to achieve economic growth in 2020, China was the most significant market for Latin American and Caribbean exports during this year. According to estimates made by ECLAC, in contrast to the 13% drop in total exports, those to China increased by 2% (CEPAL 2021, 71). As economic activity recovered in 2021, trade between China and Latin America increased significantly, reaching $451.6 billion. While this was in part due to the statistical impact of the severe fall in the previous year, it was also driven by an increase in imports and higher commodity prices (MOFCOM 2022).

As previously mentioned, the phenomenal growth in trade between China and Latin America from 2003 to 2013 can largely be attributed to the commodity boom; nevertheless, it is difficult to sum up the dynamics of China–Latin America trade over the past 8 years with a single factor. Statistical evidence suggests bilateral trade is still growing, albeit at a slower pace. In the meantime, several structural shifts are beginning to emerge. There are two aspects that stand out on the part of Latin America. First, while traditional resource-based exports to China, such as energy and minerals, are declining, agricultural exports continue to grow and are rapidly becoming more diversified. Second, exports of services possess a certain amount of growth potential.

China’s Ministry of Commerce (MOFCOM) has reported that China’s total agricultural imports from Latin America increased by 24.9% from 2020 to $64.79 billion in 2021. They account for approximately 29.1% of China’s total imports of goods from the region and for 29.5% of its total annual agricultural imports (see Fig. 1). Latin America remains China’s top source of agricultural imports. Brazil, Argentina, Chile, Uruguay, Peru, and Ecuador are the leading exporters, accounting for 97.76% of agricultural exports from the region to China (MOFCOM 2021a). Currently, China is the most important trading partner of the remaining five nations, with the exception of Argentina.

Fig. 1

Source: Data from MOFCOM (2021a)

China–LAC Agricultural Trade 2011–2021 (billions of US dollars).

Brazil is China’s largest supplier of agricultural imports not only in Latin America, but worldwide as well. Due to trade frictions between China and the United States, in recent years Brazilian exports to China have become increasingly dominated by soybeans. In 2018, China’s imports of soybeans from Brazil went up by 37.8%, making up 44.9% of its overall imports from the South American nation, while its imports of soybeans from the United States dropped by 49.2%. (Department of International Cooperation and Agricultural Trade Promotion Center, Ministry of Agricultural and Rural Affairs 2019). Despite the COVID-19 pandemic, over the last 2 years, Brazilian exports to China have expanded significantly, notably oil crops and animal proteins. In 2021, Brazilian agricultural exports reached $120.6 billion, with 34% of the total value going to China, a 20.6% increase over 2020 (Buss 2021). Aside from soybeans, Brazil is also China’s number-one import market for beef, chicken, sugar, pulp, and leather, as well as its second-largest import market for pork, soy oil, and cotton. With China’s economic and social development and the continuous upgrading of the population’s dietary structure and consumption demand, it is anticipated that the Chinese market’s demand for meat, fruits, and other special agricultural products produced and exported by Brazil, as well as high value-added processed products, will continue to increase, creating an optimistic outlook for Brazilian agricultural exports to China. Argentina is another major exporter of agricultural products, and it is currently China’s third-biggest partner in agricultural trade. Chinese data indicate that in 2021, Argentina was the largest exporter of soy oil and wool, the second-largest exporter of beef, and the third-largest exporter of soybeans to China. Chicken, frozen shrimp, sorghum, and other items are also exported to China. Similar to Argentina, Uruguay ranked second on China’s list of importers of wool and third for beef and lamb last year.

In comparison with the three Mercosur countries listed above, Chile, Peru, and Ecuador on the Pacific coast do not possess superior farming conditions; however, their agriculture exhibits some distinctive features. Chile benefits from a long, narrow topography and a varied climate. The country has made great strides in promoting agricultural exports to China since the China–Chile Free Trade Agreement (FTA) was first signed in 2005 and subsequently updated in 2017.As of present, Chile is the second-largest exporter of dry and fresh fruit to China, following Thailand. Additionally, Chile is the second-largest supplier of bottled wine to China, an increasingly large supplier of olive oil, and a major supplier of forestry and fisheries products such as pulp and fishmeal. Peru is in a similar situation. A growing number of its fresh fruit, Andean specialty agricultural products, and non-traditional fishery products have entered the Chinese market in recent years as a result of a bilateral FTA, in addition to the export of traditional fishery products such as fishmeal and fish oil. As of 2021, Peru was China’s top supplier of fishmeal, blueberries, and avocados, and third-largest exporter of table grapes and citrus (Gob.pe N.D., 2, 6). Recently, Ecuador has also increased its exports of non-oil products to China, including bananas, light wood, flowers, and, in particular, white shrimp, for which China has become the largest market.

Aside from the expansion of agricultural trade with China, Latin American nations have begun to explore the possibility of extending their exports of services to China. In the case of Brazil, for example, according to statistics from the Integrated System of Foreign Trade in Services (SISCOSERV), its services trade exports to China reached a record $664 million USD in 2019, making China the ninth-biggest export destination for Brazilian services trade (see Fig. 2). Freight transportation (i.e., services connected to the cost of production), as well as software and consulting services (i.e., services that contribute to the value of production), make up the bulk of Brazil’s service exports to China. However, Chinese services supplied to Brazil include a wider range of fields, such as consulting, transportation, technology, equipment installation, freight handling, telecommunications, hosting, and engineering, among others.⁶

Fig. 2

Source: Data from SISCOSERV

Brazil’s services trade with China, 2014–2019 (millions of US dollars).

Tourism has always contributed significantly to Latin America’s service exports. To attract more Chinese tourists, several countries in the region have revised their regulations since 2015, implementing visa-free policies (e.g., Ecuador) or conditional visa-free policies (e.g., Chile, Peru, and Argentina), visa-on-arrival policies (e.g., Bolivia), and other preferential policies, such as relaxing visa validity and round-trip times, while simplifying visa procedures (e.g., Brazil). The policy of visa liberalization has had some impact. For instance, according to data from the Peruvian Ministry of Foreign Trade and Tourism (MINCETUR), the country registered 41,067 arrivals from China in 2019, which was the largest number from any Asian country. This is an increase of more than 113%, when compared to the number of Chinese tourists who visited Peru in 2015 during the last year before the visa policy change (PROMPERÚ N.D.). The recent pandemic has significantly impacted global tourism and it may take some time for the number of Chinese tourists to Latin America to recover. Still, even throughout this challenging period, cross-border e-commerce has still continued to experience impressive growth in recent years. There is a possibility that Latin American exports to China could receive greater benefits from future digitalization of trade and finance, modernization of customs and postal services, and lower costs of cross-border online payments.

On the Chinese end, there are also new structural trends in trade with Latin America. Generally, trade in goods remains balanced across the three main categories of consumer goods, intermediate goods, and capital goods. However, some adjustments are taking place within these categories. For example, exports of anti-pandemic materials, medical equipment and devices, and information technology items associated with telecommunication (particularly electronic equipment like mobile phones and computers) have surged over the last 2 years. Following Sinochem’s acquisition of the Swiss Syngenta Group, there has also been a significant increase in Chinese exports of pesticides, seeds, and other agricultural inputs to Latin America. Furthermore, Chinese automakers are experiencing an increase in demand and market share in Latin America for their homegrown brands. At the moment, China is the primary supplier of imported automobiles to Chile and Ecuador. Increases in infrastructure spending in Latin America are also fueling a boom in China’s exports of machinery, equipment, and transportation vehicles to the region. The next part of the discussion will focus on the development of trade in services related to contracting projects, a subject that has received considerable attention in recent years, but where some misconceptions persist.

According to the most recent Statistical Bulletin on China International Project Contracting published by the MOFCOM, China contracted projects in approximately 20 Latin American countries between 2008 and 2020. The projects in Venezuela, Brazil, Argentina, Ecuador, Mexico, Colombia, and Peru accounted for 29.6%, 13.9%, 10.7%, 7.5%, 6.7%, 6.2%, and 4.2% of the overall contract value in the region, respectively (Fig. 3).

Fig. 3

Source: Data from MOFCOM (2021b, 32–33)

Chinese contract value in Latin America and key countries, 2008–2020 (Billions of US dollars).

Most Chinese infrastructure companies in Latin America still engage in conventional engineering contracting, and profitability is generally modest. Transportation (highways, bridges, ports, railroads, subways), housing (civil, commercial, and public buildings), power engineering (transmission and distribution, nuclear power plants, hydroelectric power plants, wind power plants, solar power plants, thermal power plants), petrochemicals (refineries and petrochemical plants, oil and gas pipelines, offshore oil platform construction and maintenance), mining civil works, and water extraction and transmission, comprise the majority of the contracted projects.

In spite of this, it should be noted that the expansion of Chinese infrastructure companies’ business in Latin America is not particularly closely related to the Chinese government’s formal extension of the BRI to the region in 2018. Each of the seven countries mentioned above has unique characteristics. In Venezuela, for example, China’s substantial infrastructure contracting was largely linked, directly or indirectly, to the financial cooperation model between the two governments on the basis of oil-for-loans deals. Similar circumstances exist in Ecuador. Between 2010 and 2018, China constructed numerous hospitals, roads, bridges, ports, airports, schools, hydropower projects, and housing projects in this country. However, in recent years, few large-scale engineering projects have been contracted for a variety of reasons.

In contrast, contracting projects in Colombia and Peru are usually achieved through market bids, and their governments seek to diversify the sources of funding they access. They also usually adhere to strict fiscal discipline and are very cautious about raising debt; hence, they generally refrain from accepting Chinese sovereign debt loans. Therefore, to achieve a successful outcome, Chinese enterprises operating there must rely more on their own strengths and market competitiveness, rather than on funding from the government or financial institutions.

There is no doubt that Chinese infrastructure businesses have grown significantly over the past two decades. In the most recent Engineering News Record (ENR) Top 250 International Contractors ranking, 79 Chinese firms are listed, with 4 of them placing in the top 10: China Communications Construction Company (CCCC), Power Construction Corporation of China (PowerChina), China State Construction Engineering Corporation (CSCEC), and China Railway Construction Corporation (CRCC) (ENR.com 2022). Although being a large player helps, on its own, it is not sufficient to achieve success. Chinese construction companies such as CCCC have been operating in Latin America for many years. However, in most Latin American countries like Colombia and Peru, Chinese companies face a number of obstacles and barriers to contracting business, due to the large amount of market share occupied by more established European companies, local businesses, and trans-Latin corporations, which have a strong tendency to protect their market shares and adjust to market interest rate patterns.

Following the Operação Lava Jato (Operation Car Wash) launched in Brazil in March 2014, the situation has changed significantly. In the country, 23 businesses, including the 3 largest builders, Odebrecht, Camargo Corrêa, and Andrade Gutierrez, were implicated in corruption proceedings, which indirectly led to the dissolution of the oligopoly in the Brazilian contracting industry. Several countries, including Peru, forced Odebrecht to exit the market; at the same time, the Peruvian government and judicial system discovered that the company was involved in a massive benefit transferring scheme with several local construction titans, and some of those companies were barred from bidding. The reorganization of the Peruvian contracting sector created a rare opportunity for Chinese companies to establish their presence and expand their market share. Despite COVID-19, Chinese companies have made significant progress in entering the Peruvian infrastructure market over the past 2 years. This is due not only to the factors described above, but also to the country’s recent increase in infrastructure expenditure to enable the reconstruction of important infrastructure following El Niño in 2017 and to ensure the construction of special public investment projects for Peru’s bicentennial, among other initiatives. A further important background factor is that the country’s status as an OECD candidate serves as a motivation for the Peruvian government to increase its public investment targets as means to accelerate the ascension process. In spite of this, most of the projects carried out by Chinese firms are still of a modest to medium scale. Aside from Peruvian government-tender projects, Chinese infrastructure companies are also taking part in some of the localized Chinese companies’ projects under construction in Peru, including COSCO Shipping’s Chancay Terminal project, which will be discussed in the next section, as well as Shougang Hierro Perú and Minmetals’s MMG expansion projects.

Unlike in Peru, Chinese contractors in Colombia primarily work on renewable energy projects, though traditional projects such as housing construction are also in demand. As an example, PowerChina has contracted nine photovoltaic (PV) projects with a total installed capacity of more than 570 megawatts (MW) in less than a year, including the Palmyra #3 9.9 MW PV power station project, Las Marias 109.2 MW PV project, Tikuna 238 MW PV Project Cluster, Surya 91 MW and Pupensa 55 MW PV projects, among others. A confluence of factors has contributed to this trend, including recent initiatives by the Colombian government to accelerate the development of renewable energy and the growth of Chinese construction in the country.

In Latin America, Chinese enterprises still construct a relatively small proportion of projects with contract values over $100 million USD under engineering, procurement, and construction (EPC) arrangements. In 2019, the $1.5 billion USD Fourth Panama Canal Bridge was awarded to a consortium of CCCC and China Harbour Engineering Company (CHEC). It has been described by the Chinese Ministry of Finance as “the largest single bridge project won by a Chinese company in the Americas.” Another one of the few large-scale projects awarded to Chinese bidders in recent years was the $630 million USD first stretch of the Maya train, a strategic national project of the Mexican government, which was entrusted to a consortium made up of CCCC, Portugal’s Mota-Engil, and Mexican companies Grupo Cosh, Eyasa and Gavil Ingeniería in 2020. Chinese construction companies are generally more interested in undertaking large infrastructure projects like these ones due to their expertise and track record of success. There is no doubt, however, that large-scale projects are typically unpredictable and uncertain, and that the efficiency of the funding process is often a crucial factor. As in other emerging markets and developing regions, there is a significant infrastructure deficit in Latin America. The Global Competitiveness Report 2020 indicates that the majority of Latin American countries perform poorly in terms of road connectivity, road quality indices, train coverage, and transportation efficiency. Thus, China still has a great deal of potential to carve out its own niche in Latin American construction markets. Along with traditional infrastructure, governments in the region are increasingly focusing on green and digital infrastructure, which is expected to create new market opportunities. A foreign contracted project involves comprehensive economic interaction and business activity. The ongoing growth of Chinese businesses in the Latin American contracting market boosts not only China’s exports of construction services, but also the exports of relevant machinery, engineering supplies, and technology, all of which contribute to greater industrial cooperation between China and Latin America.

For more than a decade, China’s free trade agreements with Chile, Peru, and Costa Rica have contributed to the growth of bilateral trade. China and Panama have gone through five rounds of FTA negotiations since June 2018. The first round of negotiations between China and Ecuador started in February 2022, and negotiations between China and Uruguay are expected to begin shortly as well. Since Uruguay is a member of Mercosur, which stipulates that exterior free trade agreements must be based on a uniform external position and multilateral negotiations, a teething period is unavoidable.⁷ The feasibility study between China and Colombia regarding the establishment of an FTA has been ongoing for ten years, but so far no significant breakthrough has been achieved. A number of factors may complicate potential FTA arrangements between China and several other major trading partners in the region, such as Brazil, Mexico, and Argentina. A trade agreement between Mexico and China is directly linked to North American supply chains, so there is a slim chance it will happen in the foreseeable future. Brazil and Argentina face the same rule constraints as Uruguay and, even if this issue can be overcome through internal coordination, their prospects for free trade cooperation with China remain uncertain. The Chinese government has repeatedly indicated its willingness to negotiate FTAs or trade facilitation arrangements with Mercosur, but the fact that Paraguay does not have diplomatic relations with China makes this somewhat unrealistic. Brazil and China had made some preliminary progress toward promoting bilateral free trade cooperation prior to the outbreak of COVID-19, and they jointly prepared two reports in 2020 (Chinese Academy of International Trade and Economic Cooperation of MOFCOM and Instituto de Pesquisa Econômica Aplicada, Ministério da Economia da República Federativa do Brasil 2020a, b). As Argentina has adopted a more cautious approach to free trade agreements, there are few prospects for pursuing trade agreements with China.

4 Investment and financial cooperation evolution: diverse developments and driving forces

In addition to trade, financial and non-financial direct investments are increasingly important aspects of China’s economic relations with Latin America. There is a clear asymmetry, however, when two-way comparisons are considered. Since the dawn of the twenty-first century, especially in the last decade or so, China has become one of Latin America’s important sources of foreign direct investment (FDI), while Latin American countries have been investing very little in China. One example is Brazil, which is China’s most important business partner in the region. According to data from its central bank, in 2019 the total outward FDI of Brazil was $385 billion USD, but only $200 million of that was invested in China, a negligible share of the total.⁸ In contrast, Chinese investment in Latin America is much greater. It is, however, difficult to make a precise estimation in terms of a specific figure, as no accurate data on Chinese investment are available. One potential data source is the Statistical Bulletin of China’s Outward Foreign Direct Investment, a joint publication of the MOFCOM, the National Bureau of Statistics, and the State Administration of Foreign Exchange. However, the reported numbers cannot be used directly, as they include funds flowing into tax havens, such as the British Virgin Islands and the Cayman Islands, as part of China’s Latin American investment portfolio. There are some institutions, such as American Enterprise Institute, The Heritage Foundation, and LAC Academic Network on China (Red Académica de América Latina y el Caribe sobre China), that track and compile data from multiple sources, which can be used for reference, but should not be overstated. Here, the author does not intend to focus on the investment data per se, but rather on analyzing certain key trends and the reasons behind them after the commodity boom petered out in 2015.

First, when trade drivers were weakened, this led to a decline in trade-related investment in the commodities sector. Prior to 2014–2015, because of high domestic production and the demand gap with respect to resource-based products, sustained high international prices, and relatively high investment returns, China’s investments in Latin America were primarily driven by trade and had obvious resource-seeking characteristics, with fossil energy and mining investments accounting for approximately 80% of the total. After the international financial crisis of 2008–2009, there was a significant increase in the scale and amount of investment projects in related fields, with several large transactions valued in the hundreds of millions, and sometimes even billions, of US dollars. The series of large acquisitions of Latin American oil and gas assets by China’s four major oil companies—CNPC, Sinopec, CNOOC, and Sinochem—as well as large state-owned mining enterprises, such as China Minmetals and Chinalco, have directly contributed to the rapid growth of China’s non-financial direct investment flows and stocks in Latin America, and have also attracted unprecedented international attention to Chinese FDI in Latin America. In 2014, the plunge in the price of energy and mineral products, such as oil, copper, and iron, interrupted the sustained, rapid growth of China–Latin America trade over the previous decade. In this context, the slowdown in the growth of China’s economic development and crude oil imports, as well as the ongoing upgrades of its industrial structure, the reorientation of its overseas investment, and the implementation of policies aimed at promoting energy transition in Latin American countries, have all contributed to a restructuring of China’s investment patterns in Latin America. Since 2015, there have not been any large-scale oil and gas asset acquisitions by Chinese oil companies, except for their participation in public tenders for relevant oil blocks in Brazil and Mexico. In the same vein, most Chinese mining companies engaged in the bulk mineral industry have significantly reduced their overseas investments and expansion, including those in Latin America.

Second, Chinese investment in the Latin American energy sector is increasingly focused on renewables and is gaining greater visibility in the process.

The power sector ranks highest in terms of the number of China-backed projects and amount of funding. In Brazil, which has the highest potential for welcoming renewable energy investment in the region, around 45% of all Chinese investment is in the power sector, as of late 2019 (Peng 2019). About half of those investments are provided by State Grid, followed by the China Three Gorges (CTG), State Power Investment (SPIC), and China General Nuclear Power (CGN). These companies primarily fund hydropower projects, but a subset of their resource allocations are distributed among wind power, solar photovoltaic, co-generation, and other renewable energy projects. As of 2022, State Grid is the world’s third-largest company by revenue and is currently involved in a number of large greenfield transmission concessions in Brazil, including Phase I and Phase II of Belo Monte’s 800 kV UHVDC Transmission Project and other new projects under construction, such as the large transmission project in Goiás State, awarded in April 2021. In addition to purchasing 14 Brazilian power transmission concessions in the early 2010s, in 2017 State Grid acquired 54.65% of CPFL Energia, Brazil’s largest private power company, for $4.49 billion (USD). In 2020, State Grid Brazil Holdings (SGBH) operated 16,025 km of transmission lines in Brazil, making it the second-largest transmission company in the country after Empresa Nacional de Electricidade de Brazil. CTG owns the 1550-MW Jupiá and 3444-MW Ilha Solteira hydroelectric plants in Brazil, under the Companhia Energética de São Paulo (CESP), on a 30-year concession agreement, for approximately US$3.69 billion in assets paid to the Brazilian government. Through the acquisition of Duke Energy’s assets in Brazil, the company has also acquired 95% of the equity in ten hydroelectric plants. At present, CTG Brasil is the second-largest private power producer in the country. Brazil is also an important market for SPIC’s offshore expansion. The company has invested in and completed a number of clean energy power projects since its entry into the Brazilian market in 2016, including hydroelectric power (San Simão Hydroelectric Power Plant), wind power (Millennium and Vale dos Ventos wind farms), and gas-fired power plants (GNA I and GNA II projects, located in the Açu Port, Rio de Janeiro), making it one of Brazil’s top ten private power producers. In June 2022, SPIC acquired from Canadian Solar a 70% stake in two PV projects in northeastern Brazil, Marangatu, and Panati-Sitia. CGN has invested in several renewable energy power projects in Brazil, including the Nova Olinda PV project in the northeastern state of Piauí, the Santa Vitória do Palmar wind power project in the state of Rio Grande do Sul, as well as the Largo do Barro expansion project in Piauí.

In recent years, Chinese power companies have also begun to invest in Latin American Hispanic countries. In 2016, SPIC acquired Pacific Hydro, becoming the third-largest operator in Chile. In 2018, China Southern Power Grid (CSG) acquired a 27.7% stake in Transelec, Chile’s largest electric transmission system, from Canada’s Brookfield Infrastructure, for US$1.3 billion. CTG entered the Chilean market in the same year, through the acquisition of Atiaia Energía, which forms part of Brazil’s Cornélio Brennan Group. In 2020 and 2021, State Grid acquired 100% of Chilquinta Energía, the third-largest electricity distribution company in Chile, and 96.04% of Compañia General de Electricidad (CGE), the number-one electricity distribution company by number of clients, for US$2.23 billion and US$3 billion, respectively. In Peru, a series of investments by CTG have garnered attention, such as the group’s joint development with Energias de Portugal (EDP) of its first greenfield investment in the country, the San Gabán III hydroelectric project, which began in 2016. Two other notable investments include the Chaglla project, the third-biggest hydropower plant in Peru, from Brazil’s Odebrecht in 2018 and Luz Del Sur (LDS), Peru’s largest electric utility, from North American energy supplier Sempra in 2020–2021. In Mexico, SPIC purchased the renewable power firm Zuma Energia, the largest independent renewable power company in the country.

In recent years, global demand for new energy minerals has been rising. As the world’s largest lithium consumer, China has further increased its reliance on imports of lithium concentrates and compounds. Chinese giants, such as Ganfeng Lithium and Tianqi Lithium, as well as traditional miners, such as Zijin Mining, have recently launched new mineral businesses. Meanwhile, non-ferrous mining resource developers, such as Tibet Summit Resources, have increased their investments in lithium mines in Latin America. Ganfeng Lithium currently has five projects under construction in the region, including a lithium clay project in Mexico (Sonora) and four lithium salt-lake projects in Argentina (Mariana, Cauchari-Olaroz, Incahuasi, SDLP).⁹ In 2018, Tianqi Lithium purchased a 23.77% stake in Chilean lithium mining company SQM from the Canadian fertilizer giant Nutrien. In Argentina, Zijin Mining and Tibet Summit Resources invested in two lithium salt-lake projects, Tres Quebradas and Sal de los Ángeles.

A third and very important change is the rapid expansion of Chinese–Latin American cooperation in energy and infrastructure sectors through public–private partnerships (PPPs).

As previously mentioned, the infrastructure gap in Latin American countries, together with a recent restructuring of the contracting market, provide opportunities for Chinese infrastructure companies to expand their operations in the region. Aside from EPC projects, which involve exports of services, capacity for investment cooperation, in the form of PPPs, has also improved in recent years. According to the latest index of the 26 countries, which was reported in the 2021–22 Latin America and Caribbean Infrascope report, two countries, Brazil and Chile, stand out for their dynamic PPP markets. Meanwhile, Uruguay, Colombia, Peru, Panama, and Costa Rica also show a recent increase in this regard (Economist Impact 2022). Most of the PPP projects involving Chinese companies in Latin America are concentrated in countries where the legal environment is most favorable for infrastructure development through this mode, especially Brazil, Chile, Colombia, and Peru. In Uruguay, Mexico and Costa Rica, Chinese firms have not yet initiated PPPs. In Chile, legislation on concessions was introduced in the early 1990s, and legal regulations for providing public infrastructure through the Concessions Program are contained mainly in the Concessions Law and its accompanying regulations.¹⁰ Peruvian PPPs were also first introduced in the 1990s following the government’s experimentation with privatization, selling public shares and assets to private investors for public projects. In 2018, the Peruvian government enacted a new PPP law, through the Legislative Decree N°1362. PPPs were enacted into law in Brazil by the Lula government in 2004 (Lei 11.079/2004). Colombia passed its first PPP law in 2012 (Ley1508/12). As of today, PPPs are widely used in Latin American countries for transportation projects, such as roads, airports, ports, railroads, and energy projects (including power generation), as well as many other types of infrastructure projects, with concessions lasting around 20–30 years. According to the World Bank Private Participation in Infrastructure (PPI) Project Database, more than 60% of the large PPPs in Latin America from 2017 to 2021 were in the power sector, followed by the roads, other transportation, and housing construction categories (The World Bank N.D. 2022). Chinese involvement in Latin American PPPs is in line with this trend, as shown in Table 2.

Table 2 Recent major Chinese investment in cooperative PPP projects in LAC

In Argentina, though, things are a little different. After the Macri administration took office in 2015, it opened up public infrastructure to foreign investment, which was followed by the adoption of a new law on PPPs (Ley 27, 328) in early 2017. In 2018, the first PPP project in the country, the National Road B Line, was awarded to China State Construction’s American subsidiary China Construction America (CCA). Following the 2019 general elections, the scenario has shifted. The newly inaugurated Fernández administration has a negative attitude toward PPPs, and there was also public anxiety that such projects will expose the country to the interests of international finance. Hence, in December 2020, the Argentine government reached an agreement with CCA to terminate the project. At the moment, most of the infrastructure projects undertaken by Chinese companies in Argentina are in the form of general contracting, with many of them sponsored by Chinese financial institutions.

Risk allocation is the central issue of PPP projects, due to the large scale of investment and the long cycles. The macro-, meso-, and micro-level risks highlighted in the Argentine example are indeed stressful and demanding for the enterprises involved in such projects. Meanwhile, we have witnessed how some businesses are attempting to speed up the adaptation process through localization efforts. For instance, CCCC acquired 80% of Concremat, Brazil’s largest engineering design and consulting firm, and uses it as an operation platform to provide professional technical support as well as management services for CCCC’s concession projects in Brazil and other countries in the region (Peng and Chang 2019).

Lastly, market-seeking investments have gained traction and are gradually entering the mainstream of Chinese foreign direct investment in Latin America.

In addition to the previously mentioned renewable energy and infrastructure capacity investment collaborations, this type of FDI motivated by the interest to satisfy the demand of the local or regional market is also sought in a variety of sectors, such as financial and logistical services, manufacturing, communications, and e-commerce.

Since China joined the Inter-American Development Bank (IDB) in 2009, major domestic financial institutions have established their presence in Latin America to facilitate China–Latin America commerce and provide financial services to Chinese and Latin American firms. Since 2018, the Bank of China (BOC), the most globalized and integrated bank in China, has opened branches or launched operations in Chile, Mexico, Argentina, and Peru, among other states; this was preceded by the opening of BOC Brazil in 2009. In 2012, the Industrial and Commercial Bank of China (ICBC) acquired 80% of Argentina operations of South Africa's Standard Bank and established a subsidiary bank in Argentina, which has emerged as the country’s leading foreign-exchange trading, asset custody, and auto-loan bank. ICBC also opened branches in Brazil, Peru, Mexico, and Panama between 2013 and 2020. Meanwhile, China Construction Bank (CCB) completed the acquisition of a majority stake in Banco Industrial e Comercial S.A. (BIC) in August 2014, allowing it to enter the Latin American market and become the largest Chinese-owned bank in Brazil. In 2016, CCB opened in Chile, becoming the first Chinese RMB clearing bank in South America. Bank of Communications (BoComm), the fifth-largest commercial bank in China, acquired 80% of the former BBM Bank in Brazil in November 2016, which is now known as its Brazilian subsidiary. Agricultural Bank of China (ABC) established its first South American branch in March 2018 with the opening of a representative office in São Paulo, Brazil. Besides these commercial banks, Chinese policy banks, including China Development Bank (CDB), as well as insurance companies like China Export & Credit Insurance Corporation (SINOSURE), have also established branches in the region. For example, CDB has representative offices in Brazil (Rio de Janeiro) and Venezuela (Caracas), the Export–Import Bank of China (China Exim Bank) has a working group for South America in Argentina (Buenos Aires), while SINOSURE has one in Brazil (São Paulo).

Chinese companies, especially large, state-owned enterprises (SOEs), have been interested in investing in logistics hubs, focusing on ports. Notable cases in recent years include China Merchants Port Holdings’ acquisition of a 90% stake in the Brazilian port operator TCP in Paranagua in 2018, as well as COSCO Shipping’s subscription to the Chancay Terminal project in Peru in 2019; the latter is the largest Chinese investment in the Latin American port network to date. The US$3 billion mega-infrastructure project is expected to transform the Western Pacific Cost shipping network. More importantly, in the words of State-owned Assets Supervision and Administration Commission of the State Council (SASAC) Deputy Director Weng Jieming, it will help ensure the stability of the supply chain by “laying out a global pivot network and strengthening the control of core resources in the industrial chain” (Weng 2021). The majority of Chinese manufacturing investments have been in countries such as Brazil and Mexico, which have large economies, growing consumer markets, unique geographical advantages (adjacent to the North American market or proximity to many countries in the region), and relatively favorable business or market access conditions. It is important to highlight that, although some of the projects may not have been significant in terms of investment and received relatively little attention, they still provide insight into how Chinese companies, many of which are private and family owned, have successfully localized, overcome growing pains, and moved to international production and operations, as in cases like TCL’s joint venture in Brazil. Nevertheless, Chinese companies still have a long way to go compared to their European, American, and even Japanese counterparts, which have a much longer history of cultivating Latin American markets.

Digital infrastructure, green infrastructure, and other new business models and industries that have evolved over the last 2 years via digital transformation and the COVID-19 pandemic have given Chinese companies like Huawei and ZTE new momentum and opportunities to increase their investments in Latin America. For example, Huawei has recently made significant strides in its digital cooperation with Latin American countries, specifically in the areas of digitalization, networking, and intelligent infrastructure upgrades, as well as in construction and improvement of broadband networks, internet and other communication network infrastructure, data centers, cloud computing, artificial intelligence, 5G networks, smart cities, and other computing and smart infrastructure. Many of these projects involve cross-industry cooperation. For example, Huawei invested in the municipality of Rio Verde, the largest grains producer in Goiás State, Brazil, partnering with the local government and local telecommunications operator Claro Brasil to create a Cloud + 5G + AI future agriculture pilot project in which the cloud platform, as well as drones, are used to monitor and analyze crop growth, improve productivity, and respond quickly to disease outbreaks.

These changes demonstrate, from several perspectives, that the tendency to make investment decisions based on market factors has become irreversible. Elements of both pulling and pushing are at work. The former includes global trends and policy as well as market opportunities, which emerge in potential investment destinations, whereas the latter comprises both enterprises’ own international development planning at the micro-level and strategic planning and adjustments made by China at the national policy level, regarding relevant rules for economic cooperation with foreign entities. These include, for example, the requirement to encourage more of China's equipment, technology, standards, and services to go global by engaging in international cooperation on production capacity and equipment manufacturing; guide enterprises in participating in international markets in ways that utilize their group advantage; expand outward investment while deeply integrating into global production, value, and logistics chains; and improve the internationalization of Chinese financial institutions and services, among others.¹¹

The modifications in Chinese financial outward foreign direct investment in Latin America have been triggered by similar circumstances. Throughout the last decade or so, China’s loans to Latin American countries, particularly through policy banks, have received considerable attention in academic and business circles globally. As with non-financial FDI, Chinese lending is subject to the lack of accurate data, but to a greater extent. In the absence of official releases, particularly from the relevant lenders, monitoring figures provided by specific institutions, such as the China–Latin America Finance Database co-produced by the Inter-American Dialogue and Boston University Global Development Policy Center, are almost the only ones that are regularly consulted. Likewise, the purpose here is not to discuss the quality of the data or the loan amounts, but rather to highlight the trend toward the diversification of approaches to financial cooperation.

Until a few years ago, it was common to follow a government-to-government lending model led by policy banks (such as CDB and China Exim Bank) that mobilized China’s vast domestic financial resources to create international business opportunities. Recently, however, there has been a transition to a diversified financing model stemming from specific projects involving the participation of various financial institutions and Chinese funds. Specifically, the financial institutions involved include both Chinese policy and commercial banks, as well as some emerging multilateral financial institutions, such as the Asian Infrastructure Investment Bank and New Development Bank, which were created with Chinese participation. The Chinese funding mechanisms in use include the China–Latin America Production Capacity Cooperation Investment Fund, China–LAC Cooperation Fund, and China–Brazil Cooperation Fund, among others, as well as special loans in the region.

Overall, three generalizations can be made about the transition period. First, while commercial factors have become more important, several other factors remain relevant, including intergovernmental lending, a model of financial cooperation with a long-term perspective, risk tolerance, and general policy conditions, particularly with regard to financing entire projects in countries with high debt financing costs, such as Argentina. Second, while the above-mentioned funds and special loans have become essential components of China–LAC financial cooperation, their full potential has not yet been realized. Finally, the process of providing financing for Latin America through expanding multilateral financial organizations, such as Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB), has just begun and is still in the early stage of development.

5 Conclusion

Former Chilean President Michelle Bachelet once shared a childhood fantasy, stating that if Chileans keep digging down in the ground, they will eventually reach China. For a long time, geography has prompted China and Latin America to see each other merely as exotic, mythical, and magical places. The rapid growth of connections between them since the turn of the century, however, has proven that distance is not an insurmountable barrier, and reality is sometimes only one step away from magic. With China–Latin America relations entering the third decade of the twenty-first century, their political, diplomatic, and economic ties are stabilizing. Over the past two decades, the trajectory of China–Latin America relations has been largely insulated from external factors, such as the global financial crisis, tensions in Sino-US relations, and the recent global health crisis.

The keywords for understanding the resilience and predictability of China–Latin America relations are “complementarity” and “development.” The pursuit of extra-regional partners, such as the United States, Europe, and Japan, has historically been important to Latin American countries; over the last 20 years, however, China’s role has become increasingly prominent as well. The strong economic complementarity in the relationship between China and Latin America breaks the “curse” of the distance barrier and brings the magic of engagement to life. In other words, China’s relationship with Latin America, in terms of development cooperation, is not based on a homogeneous strategy. The topic of policy coordination and strategic planning that both sides have been discussing under the Belt and Road discourse should be considered from the perspective of strengthening and expanding the complementary relationship. Latin America varies substantially in terms of development level but, overall, it remains an integral part of the Global South. Its engagement with China is a form of South–South cooperation, which is traditionally shaped by shifts in international politics or state action. However, in the case of China–Latin America relations, engagement is primarily in the fields of economic collaboration and corporate interactions. Because the economies of China and Latin America are both emerging and developing, they are both confronting the challenges inherent in the simultaneous pursuit of reform and transformation while maintaining economic growth. In recent years, China and Latin America have become increasingly interdependent. Using South–South development cooperation as a framework, and based on the principles of equality and mutual benefit, it is expected to contribute to the advancement of a new paradigm in China–Latin America relations.