China Looks to Expand Investment in Latin America, Eyes Raw Materials
China continues to pour money into Latin America, a trend that will continue in 2016 with new investments in the region.
China has begun to financially support Latin America as the United States has decreased much of their government and private assistance in the region. Last year, Chinese banks sent almost $30 billion to Latin American governments, more than twice the amount sent in 2014. That amount is more than the World Bank and the Inter-American Development Bank sent to Latin America combined, CNN Money reports.
Financial Assistance for Transportation
Infrastructure is particularly important. China is helping Latin America with financial assistance to build roads, bridges and railways. The country offered $35 billion to Latin America for these projects. In all, China is making its biggest investment ever.
"What we're seeing is a proliferation of Chinese finance in Latin America," Margaret Myers, a director at the Inter-American Dialogue said.
US Pulling Money Out of Latin America
While China increases their financial assistance and investments in Latin America, the U.S. continues to reduce aid. In the past three years, the amount of U.S. government aid and private investments to Latin America has declined.
China is improving its relations with Latin America as well. For the first time, the Asian giant invited each of Latin America's presidents to Beijing.
President Xi Jinping also promised to invest $250 billion in Latin America in the next 10 years.
China has greatly expanded its exports to Latin America as well. In 2014, Chinese exports to Latin America were worth $130 billion, compared to just $6 billion in 2000. Peru, Chile and Brazil are now top trade partners with China and not the U.S.
Latin America Prefers Two Country Agreements
The Trans-Pacific Partnership (TPP), an agreement that would make free trade even easier, left out many Latin American countries. Latin American countries have preferred to sign bilateral free trade agreements (FTAs) instead of multilateral agreements, according to Americas Quarterly. The TPP only involves Mexico, Chile and Peru.
Latin American countries favor dealing with China and other Asian countries for trade. In 2012, Brazil and China agreed to a $30 billion currency swap.
"What [the Chinese are] going for is influence -- strategic power in the region to create dependence," Ilan Berman, vice president at American Foreign Policy Council said.
With Chinese influence in the region, Latin America is noticing the United States even less. The United States' investors have pulled out $700 million from Latin America in the past year.
Chinese-Funded Railway
China wants to continue to help Latin America in 2016. China, Brazil and Peru are looking into building a long distance railway, which will stretch 3,300 miles from the Atlantic coast of Brazil to the Pacific coast of Peru. With the help of infrastructure investments from China, a huge project like that is very possible.
Even though the Chinese economy had its worst year of growth in 25 years, China increased its investments to Latin America. Latin American countries were similarly affected by a poor economy. China helped countries like Venezuela, which it gave a $10 billion loan.
China is staying close to Latin America because they have many of the raw materials the Asian nation seeks, including iron, oil and food. Latin America is happy to deal with China because it is not involved in the region's politics, while the U.S. has a history of intervening.
China has seen some of its projects and plans in Latin America fall through or get delayed, but they still are insisting on increasing their investment in the region.
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