Latin America has some of the world’s major energy and commodities supplies, so it’s no surprise that it is a very attractive place for resource-hungry China to do deals. And so it has racked up a staggering 286 per cent rise in investments in Latin America in from June 2010 to May 2011 compared with the previous 12 months.
According to a new report by consultancy Deloitte & Touche, China invested $15.6bn in Latin America in the year – nearly a third of its total $43.7bn foreign investment during the period.
As the following graph shows, the pace of investment has been breakneck, and Beijing’s Latin American focus is clear: Brazil and Argentina, which represented some 59 per cent and 41 per cent of its total investment in the region (Chile represented a tiny fraction – just 0.12 per cent). Nearly three quarters of investment was in the energy sector.
Oil company Sinopec’s investments – buying the Brazilian assets of Repsol-YPF and the Argentine assets of Occidental – alone added up to $9.6bn, 62 per cent of the total invested in the region in the last year.
Here is a table of the top 10 deals.
Can it continue? The consensus seems to be a resounding yes. At the same pace? That’s less certain.
Deloitte & Touche wrote:Our view is optimistic – we consider there will be more Chinese investment in future, not only in the energy and natural resources sector but also in other industries like manufacturing, agriculture, infrastructure and finance, etc, which offer differential value in the region.
In Argentina alone, Chinese groups are increasingly involved in manufacturing, such as mobile phones, and there are persisten signals of a move into banking through a purchase of the Argentine assets of South Africa’s Standard Bank.
China appears to see plenty in Latin America to keep feeding its appetite.