China has been broadening its sphere of influence across the globe, but it’s been conspicuously active in Latin America, where its most recent high-profile plans involve a transcontinental railroad. Since it’s already involved in the building of a new canal to rival the one in Panama, and Mexico is making nice with an airport after a rail tender was tainted by corruption, it’s obvious that the country is doing lots of business across the reg ion.
And that’s good news for Latin American countries, which the International Monetary Fund predicted would see growth slowing below 1% this year—not that 2014 was all that much better, at just 1.4%. Still, ongoing business with China has brought loans, infrastructure development and other projects to life that otherwise might never have occurred.
The irony is that Latin America experienced a 10-year-long “China boom” based on demand for its commodities—but that ended in 2013, when China’s own economy slowed and cut demand. The boom wasn’t all positive, either, since pressure to satisfy China’s vast markets led to social and environmental degradation. Some of the new projects China is involved with now are equally iffy for the well-being of the host countries.
So it remains to be seen, as Beijing looks to diversify its own interests and increase market demand globally for its own products, whether its participation in Latin American projects will continue to be a mixed blessing—or whether China will turn out to be best friends with Latin America after all.
Here are 10 Latin American countries with big business ties to China.
Chinese Premier Li Keqiang stopped in Peru on his recent South American visit to discuss plans for the Twin Ocean Railroad, a proposed transcontinental rail line that would run from Peru’s Pacific coast to Brazil’s Atlantic coast.
The rail is controversial, since it would traverse some ecologically fragile territory not just in Peru but also in Brazil’s Amazon rainforest, so it’s by no means a done deal. Still, Brazil has already signed on to explore the project’s feasibility, so Peru can’t be far behind.
But Peru was just one whistlestop on President Li Keqiang’s blitz through South America, and the controversial railroad just one business deal. While he was in Lima, Li signed a number of cooperation agreements with the Peruvian government for industrial capacity, energy, mining, infrastructure, quarantine, healthcare and aerospace.
Early this year China stepped in to give Venezuela some relief from falling oil prices, agreeing to invest more than $20 billion in the country.
Venezuela exports approximately 600,000 barrels of oil a day to China, but almost half of that amount goes to repaying loans Beijing has already made to the country. And in April China provided an additional loan of $5 billion—making the total Beijing has already loaned to President Nicolas Maduro’s government more than $45 billion. The money is supposed to be plowed into infrastructure projects.
Brazil is the other end of the proposed transcontinental railway, and it has already agreed to a feasibility study for the project, which would span a distance of 3,293 miles (5,300 kilometers) and journey through forests, swamps and either mountains or deserts, depending on the final route chosen.
While he was there Li also arranged to buy $1 billion worth of passenger jets from Brazilian firm Embraer as part of a group of business and investment deals worth $50 billion.
Other business agreements during his visit included finance and cooperation deals with Brazil’s Petrobras, worth $7 billion; an agreement to sell four ore carriers to China Merchants Energy Shipping Co. Ltd. by Brazilian iron producer Vale, in an extension of an existing agreement; the lifting of an import ban on Brazilian beef; and other deals on trade, investment, agriculture, energy and transport.
During his South American tour, Li also stopped off in Colombia to sign still more agreements for trade and cooperation—this time for production capacity, equipment manufacturing and infrastructure construction. In addition, the two countries are considering a free trade agreement.
But the big news here is another possible rail line to run from the Atlantic to the Pacific. China is negotiating with Bogota on the proposed 136-mile line, which would provide a land alternative to the Panama Canal. It would run from the Pacific port of Buenaventura to a new city near Cartagena and is expected to cost $7.6 billion—to be funded by the China Development Bank and run by the China Railway Group.
Among other things, China buys copper from Chile. But commodities aren’t China’s only interest in the Latin American country; Chile’s central bank has just inked a three-year currency swap deal with the People’s Bank of China. In addition, plans are underway by both banks to make it possible to use the yuan in Chile.
The swap agreement, according to Chile’s central bank, will facilitate the exchange of a maximum of 2.2 trillion pesos ($3.6 billion) for a three-year period.
China is also looking to set up a yuan clearing bank in the country; it would be the first of its kind in the region.
China buys lots of soybeans from Argentina, but its business ties with the country go far beyond agriculture. In a February state visit to China, Argentinian President Cristina Fernández de Kirchner signed off on an agreement for the two countries to collaborate on building two nuclear power plants in Argentina—with Chinese technology.
The two countries are already working together on two hydroelectric dams, but their collaboration extends even into space. Argentina’s congress has approved a deal with China on a satellite space station—in the foothills of the Andes Mountains. The agreement is viewed as a way for Argentina to provide some reciprocal benefit to China after an $11 billion loan last year.
Mexico is throwing China a bone in the form of an $11 billion airport after a high-speed rail project that was to link Mexico City to the city of Queretaro was originally awarded to a consortium led by China Railway Construction (CRCC). However, the rail project was halted indefinitely after the Mexican company involved in the consortium was found to have sold homes to government officials.
While the project was put out for rebid, the falling price of oil forced the country to shelve it indefinitely, and now it’s trying to woo China back by offering the opportunity to be involved in the construction of the airport. China would still have to bid to be awarded contracts, but thus far the ones its companies would be interested in have not yet been put out to bid.
Venezuela isn’t the only country to benefit from Chinese largesse during a time of plunging oil prices. Ecuador expects to receive about $4 billion in loans from Beijing this year, with about $1 billion of that constituting payments from a loan that was approved in 2014.
But Ecuador is also hoping that a boost in Chinese tourists and investors will result from an agreement for visa exemption that it reached with Beijing in January.
In May Bolivia reached an agreement with China to establish a mechanism to promote bilateral coordination and consultation on joint mining projects.
More than 10 Chinese firms are already working in Bolivia on various major projects, and the agreement was signed during a recent trip by Chinese Ambassador to Bolivia Wu Yuanshan and a delegation of Chinese investors.
To bolster cooperation between the countries, Bolivian Mining and Metallurgy Minister Cesar Navarro has been asked to form a team of technical experts to advise Chinese business leaders on the particulars of the country’s mining and metallurgy law, which went into effect in 2014.
The canal. Need we say more?