China-Latin America and the Caribbean Economic Bulletin, 2023 Edition

According to the International Monetary Fund (IMF), Latin America and the Caribbean (LAC) is experiencing continued low economic growth projections amid a stalling COVID-19 recovery, rampant inflation and the knock-on effects of Russia’s war in Ukraine.

Amid this challenging economic time for LAC, what are the latest developments on trade, investment, development finance, debt and diplomacy with China, LAC’s largest trade partner and the world’s largest bilateral creditor? And how are green supply chains, electric vehicles and lithium-mined batteries shaping the relationship? 

The 2023 edition of the China-Latin America and the Caribbean Economic Bulletin, published by the Boston University Global Development Policy Center, summarizes and synthesizes the latest trends in the China-LAC economic relationship with data up to March 2023. Within the bulletin, Zara C. Albright, Rebecca Ray and Yudong (Nathan) Liu provide analysts and observers a reference to the ever-changing landscape of China-LAC economic relations, a landscape where data is not always readily accessible.

Main findings:

• In 2022, LAC trade with China once again rose to record levels, with the LAC region exporting an estimated $184 billion to China and importing an estimated $265 billion in goods in return. 
  • The LAC trade deficit with China reached a record high for the second year in a row, at 1.4 percent of regional GDP. 
  • LAC continued to grow its share of the Chinese market for a few core commodities (including iron, copper and beef), but LAC purchases of Chinese goods grew at an even faster pace. 
  • LAC nations with strong trade surpluses with China include Chile, Peru and Brazil. Those with trade deficits include Mexico, Colombia and Argentina. 
• Over the last 20 years, China has risen in importance as a regional export market, while LAC has shifted away from heavy reliance on the US and European markets. 
  • For example, Chile, Peru and Brazil each primarily exported to the European Union in 2001, but shifted to China in 2021. Nonetheless, over the last 20 years, most LAC countries have diversified their exports across the US, EU and China, rather than focusing on one trading partner. 
• Ecuador and China concluded negotiations in December 2022, while Uruguay announced the conclusion of a feasibility study for a free trade agreement (FTA) in July 2022.
• Chinese development finance to LAC rebounded slightly in 2022 to $813 million with three new loans for the transportation and finance sectors in Barbados, Brazil and Guyana. 
• Ecuador and China restructured $3.2 billion in loans and extended oil delivery deadlines for Ecuador’s oil-backed loans. Debt relief for Suriname, the LAC country with the highest bilateral debt to China to GDP ratio at 18 percent, urgently awaits the start of debt restructuring negotiations.
• Chinese announcements of new (greenfield) investments declined somewhat to $3.5 billion in 2022, while Chinese mergers and acquisitions (M&As) of existing investments in LAC grew to $2.3 billion in 2022 from $900 million in 2021. 
  • Both greenfield and M&A investment was centered on emerging supply chains in the renewable energy and electric vehicle (EV) industries, including lithium mining and manufacturing batteries and EVs. 
• For only the second time in regional history, a Chinese company brought an investor-state dispute settlement (ISDS) case against a LAC government.
  • Mineral resources firm Junefield filed for ad hoc arbitration in October 2022 after an Ecuadorian court halted mining operations at the Rio Blanco gold mine for violations of local Indigenous communities’ right to prior consultation. 
• Argentina announced that it had joined the Belt and Road Initiative (BRI) in February 2022 and has made overtures to join the BRICS group, while Honduras’ 2023 opening of diplomatic relations with Beijing signals continued diplomatic warming.
• Looking ahead to 2023, China-LAC relations are likely to see advancements on FTA finalization with Ecuador and Uruguay. Notably, Bolivia has already announced a $1 billion deal for lithium development with a Chinese consortium. 

After more than a decade of significant Chinese presence in LAC, regional governments are showing signs of putting forth their own strategies for the relationship through trade agreements, new supply chain investment deals and novel portfolios of potential development finance projects.