China and Latin America have gradually expanded their trade relations over the past decade but now the pace has increased exponentially. Even though the trade between the two blocks is relatively small in the global trade perspective, it is interesting step for the growth of both the economies. Resource acquisition remains a cornerstone of Chinese trade and investment in the region. China has emerged as the largest export destination to Brazil, Chile and Peru and the second largest export destination for Argentina, Costa Rica and Cuba. Recent trade and economic tensions between the United States, Canada and Europe on one side and some Latin American countries on the other side has paved the way for Beijing to take control.
Although China’s demand for commodities has fueled economic growth in the region, experts have expressed concern regarding Latin American dependence on natural resource exports to China due to the volatility in commodity prices. However, Chile and other resource rich countries have used profits from Chinese exports to establish education and job training funds. The Chilean Government used funds from the copper exports to China to provide a stimulus package in response to the financial crisis. In recent months China has been negotiating deals to double the development fund in Venezuela to $12 billion, lend Ecuador at least $ 1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion and lend $10 billion to the Brazilian national oil company. These deals will make China even politically more involved in Latin America not only economically.
Investors around the world stand to benefit from this alliance not only in China but also in Latin America. The mutual trade agreements and the flow of FDI is a sign of increasing growth in the future. Annual investor meetings set by the two regions will result in joint ventures and expansion of local giants into the other region. Chinese infrastructure companies especially are looking at Latin America for expansion given the potential of infrastructure development in the region. Recent months show that China is now a big rival to the United States and EU for seeking trade partners and FDI abroad.