China's engagement in Central and South America, 2024 Overview

Introduction

China's economic engagement with South and Central America has expanded significantly over the past two decades, driven by the region’s abundance of natural resources, strategic location, growing consumer markets, and China’s Belt and Road Initiative (BRI). As of 2024, China has solidified its role as one of the largest trading partners, foreign investors, and infrastructure developers in the region. With significant investments in key sectors such as mining, agriculture, manufacturing, energy, and digital infrastructure, China is helping transform the economic landscape of Latin America. This detailed and comprehensive analysis includes the most recent 2024 metrics and a deep exploration of the job creation impact of Chinese businesses across South and Central America.

1. China’s Expanding Economic Role in South and Central America (2024)

South and Central America, which includes key countries like Brazil, Argentina, Chile, Peru, and Mexico, has become a critical region for China’s economic growth strategy. China’s engagement spans across a wide range of sectors, including infrastructure, manufacturing, agriculture, and renewable energy. Trade volumes have grown steadily, and foreign direct investment (FDI) has increased as China seeks to secure access to key resources and integrate Latin America into its broader global economic initiatives.

Key Economic Metrics (2024)

• Total Trade Volume: In 2023, trade between China and South/Central America surpassed USD 550 billion, up from USD 520 billion in 2022, representing a 6% year-on-year increase. China is now the second-largest trading partner for the region, after the United States.
• China’s Exports to Latin America: China’s exports to the region reached USD 275 billion in 2023, primarily consisting of machinery, electronics, telecommunications equipment, vehicles, and consumer goods.
• Latin America’s Exports to China: Latin America exported USD 275 billion in goods to China, mainly consisting of natural resources like copper, iron ore, lithium, soybeans, and oil. Brazil, Chile, and Argentina are key exporters, supplying agricultural products and minerals to meet China’s growing demand.
• Chinese Foreign Direct Investment (FDI): By the end of 2023, China’s cumulative FDI in South and Central America exceeded USD 170 billion, focusing on sectors such as mining, agriculture, energy, manufacturing, and infrastructure.

2. China’s Strategic Engagement in Key Sectors in South and Central America

China’s investments across multiple sectors in South and Central America have created significant economic benefits for both regions. The primary focus areas of Chinese investment include natural resource extraction, agriculture, manufacturing, infrastructure development, and renewable energy.

Mining and Natural Resources

China has a significant presence in the mining sector in South America, particularly in countries like Brazil, Chile, Peru, and Argentina, which are rich in resources critical to China’s industrial base and technological advancement. Chinese companies have secured a strong position in the extraction of copper, iron ore, lithium, and oil.

• Key Metrics (2024):
• Job Creation Impact:

Agriculture and Agribusiness

China’s growing population and need for food security have driven significant investments in South America’s agricultural sector. Countries like Brazil and Argentina have become critical suppliers of soybeans, beef, and other agricultural products, while Chinese agribusiness firms are expanding their footprint in food production and logistics.

• Key Metrics (2024):
• Job Creation Impact:

Manufacturing and Industrial Investments

Chinese firms have established significant manufacturing operations in South and Central America, capitalizing on growing consumer markets and favorable trade agreements. Chinese companies are involved in the production of automobiles, consumer goods, and industrial machinery.

• Key Metrics (2024):
• Job Creation Impact:

Infrastructure Development and Construction

China’s infrastructure investments in South and Central America have been transformative, particularly through the Belt and Road Initiative. Chinese companies have been involved in constructing railways, highways, ports, and energy infrastructure, significantly improving regional connectivity and boosting trade.

• Key Metrics (2024):
• Job Creation Impact:

3. China’s Role in Renewable Energy Development in South and Central America

China’s leadership in renewable energy has had a significant impact on South and Central America’s green transition. Chinese companies are heavily investing in solar, wind, and hydropower projects, supporting the region’s shift toward renewable energy and helping countries meet their climate goals.

Key Renewable Energy Metrics (2024)

• Solar Power: By 2024, Chinese companies had invested USD 6 billion in solar energy projects across South America, primarily in Brazil and Argentina. These projects have added over 2.5 GW of solar capacity to the region’s energy grid.
• Wind Power: China has become a key partner in developing wind power infrastructure in Chile, Brazil, and Uruguay. By 2023, Chinese investments in wind farms totaled USD 4 billion, contributing more than 2 GW of wind power capacity.
• Hydropower: Chinese firms have been instrumental in building hydroelectric power plants in Brazil, Peru, and Ecuador. These projects, such as the Coca Codo Sinclair hydroelectric plant in Ecuador, have added over 5 GW of renewable energy capacity to the region’s grids.

Job Creation Impact

• Renewable Energy Sector Jobs: Chinese investments in renewable energy projects have created over 80,000 jobs across the region in construction, engineering, operations, and maintenance. These jobs are concentrated in solar and wind farms, hydroelectric plants, and grid infrastructure projects. Solar Energy Jobs: In Argentina, Chinese-backed solar farms have generated more than 20,000 jobs in installation, operations, and management. Similarly, in Brazil, solar energy projects backed by Chinese firms have employed 30,000 workers in both urban and rural areas.Wind Energy Jobs: Chinese wind energy projects have created 15,000 jobs in Chile and Brazil, where workers are employed in turbine manufacturing, construction, and grid integration.

4. Chinese Investment in Central American Economies

While China’s presence is more robust in South America, its engagement with Central American countries is also expanding, particularly in Mexico and Panama. These countries are critical to China’s broader economic strategy due to their strategic locations and growing consumer markets.

Mexico: A Strategic Manufacturing Hub

• Overview: Mexico has become a key location for Chinese manufacturing investments, particularly in the automotive, electronics, and consumer goods sectors. Chinese companies are capitalizing on Mexico’s proximity to the U.S. market, leveraging trade agreements like the US-Mexico-Canada Agreement (USMCA) to export goods to North America.
• Key Metrics (2024):Automotive Sector: Chinese automakers have expanded production in Mexico, focusing on electric vehicles (EVs). In 2023, Chinese investments in Mexico’s automotive sector exceeded USD 2.5 billion, creating more than 40,000 jobs in vehicle assembly, parts manufacturing, and supply chains.Electronics Manufacturing: Chinese companies, such as Huawei and Lenovo, have invested in electronics assembly plants and distribution centers in Mexico. These facilities support both domestic demand and exports to the U.S. market, contributing to the creation of 25,000 jobs in the tech sector.

Panama: A Gateway for Global Trade

• Overview: China’s investments in Panama are focused on logistics and port infrastructure, leveraging the country’s strategic location as a global trade hub. Since Panama joined China’s Belt and Road Initiative in 2017, Chinese companies have expanded their presence in the country, particularly in port operations and transportation.
• Key Metrics (2024):Port Infrastructure: Chinese companies have invested more than USD 1.7 billion in upgrading Panama’s port infrastructure, particularly in the Colon Free Trade Zone and the Panama Canal area. These investments have improved Panama’s capacity to handle increased trade flows between the Americas and Asia.Logistics Jobs: Chinese investments in Panama’s logistics sector have created over 10,000 jobs, primarily in port management, transportation, and warehousing. These jobs support the growth of Panama’s trade and logistics industry, which is crucial for global shipping routes.

5. Job Creation and Economic Impact of China’s Investments in South and Central America

China’s economic engagement with South and Central America has generated significant employment opportunities across multiple sectors. The creation of direct and indirect jobs has been one of the most tangible benefits of Chinese investments, contributing to economic development and poverty reduction in the region.

Job Creation Impact (2024)

• Total Jobs Created by Chinese Investments: By 2024, Chinese investments had created over 500,000 direct and indirect jobs across South and Central America, spanning industries such as mining, agriculture, manufacturing, infrastructure construction, and renewable energy.
• Sector-Specific Job Creation:Mining: Over 60,000 jobs have been created in South America’s mining sector due to Chinese investments, particularly in Peru, Chile, and Argentina. These jobs support the extraction of critical minerals like copper, lithium, and iron ore, which are essential for China’s industrial growth.Agriculture: Chinese investments in South American agribusinesses have created 150,000 jobs in farming, food processing, logistics, and supply chains. Brazil and Argentina have benefited the most, with job creation concentrated in rural areas.Manufacturing: More than 80,000 jobs have been created in the automotive and electronics manufacturing sectors, particularly in Brazil, Mexico, and Argentina. Chinese firms have established production hubs to serve both domestic and export markets, driving industrial growth and workforce development.Infrastructure: Chinese infrastructure projects under the Belt and Road Initiative have created over 150,000 jobs in construction, engineering, and logistics. These projects include railways, highways, ports, and energy infrastructure, contributing to long-term economic growth.

Economic Empowerment and Social Development

• Wage Growth and Poverty Reduction: Job creation driven by Chinese investments has contributed to wage growth and poverty reduction in many Latin American countries. In regions where Chinese-backed projects are prominent, such as the mining regions of Peru and the agricultural zones of Brazil, workers have reported wage increases of up to 15-20% compared to previous years. This has had a positive impact on local economies, raising living standards and improving access to education and healthcare.
• Skills Development and Technology Transfer: Chinese companies have invested in training and skills development programs for local workers, particularly in sectors such as manufacturing, construction, and renewable energy. These programs have facilitated the transfer of advanced technologies and industrial knowledge, helping local workers improve their technical skills and increase productivity.

6. The Future Outlook of China’s Engagement with South and Central America

China’s economic influence in South and Central America is expected to deepen in the coming years, driven by continued investments in natural resources, renewable energy, and manufacturing. Trade and investment flows are likely to grow as China seeks to secure access to essential resources and integrate the region into its global supply chains.

Projections for 2030

• Trade Growth: By 2030, trade between China and Latin America is projected to exceed USD 800 billion, with increased exports of natural resources, agricultural products, and manufactured goods.
• Foreign Direct Investment (FDI): China’s cumulative FDI in South and Central America is expected to surpass USD 250 billion by 2030, driven by growing investments in renewable energy, high-tech manufacturing, and infrastructure development.
• Job Creation: Chinese investments are expected to generate an additional 1 million jobs in South and Central America by 2030, with a focus on renewable energy, manufacturing, and digital infrastructure.

Key Trends to Watch

• Renewable Energy Expansion: China’s investments in solar, wind, and hydroelectric power projects are expected to accelerate, helping South American countries meet their climate goals and transition to cleaner energy sources. By 2030, Chinese renewable energy investments in the region are projected to exceed USD 60 billion, creating tens of thousands of new jobs in green energy sectors.
• Digital Infrastructure and Technology Transfer: China’s investments in digital infrastructure, including 5G networks and e-commerce platforms, will continue to expand. This will facilitate technological innovation and job creation in sectors such as telecommunications, fintech, and artificial intelligence (AI).
• Supply Chain Diversification: As global supply chains continue to evolve, China will rely more on Latin American countries for critical resources such as copper, lithium, and soybeans, as well as manufactured goods like automobiles and electronics. This diversification will further integrate Latin American economies into China’s global trade networks.

Conclusion

China’s economic engagement with South and Central America has had a transformative impact on the region’s industries, job market, and infrastructure. Through significant investments in mining, agriculture, manufacturing, renewable energy, and digital infrastructure, China has become a key driver of economic growth and job creation in the region. As China continues to deepen its ties with South and Central America through trade, investment, and technology transfer, the region is expected to play an increasingly important role in China’s global economic strategy. The job creation resulting from Chinese investments is not only boosting local economies but also contributing to long-term social development, improving living standards, and fostering sustainable growth across Latin America.

Kjeld Friis Munkholm Associate Parter at Vejle - China Business Center

www.munkholmconsulting.com

? 2024 Kjeld Friis Munkholm. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of the author. transmitted in any form or by any means without the prior written permission of the author.