As US investment declines, China and India are rapidly expanding their presence across Latin America’s key industries.
With US investment in Latin America shrinking, China and India are seizing the opportunity to expand their economic reach in the region.
The US remains the largest foreign investor, but its stake dropped nearly 10% in 2023 alone, to 38% of the $224.6 billion total, according to the UN Economic Commission for Latin America and the Caribbean. Meanwhile, China has firmly established itself as Brazil’s top trading partner, increasing its foreign direct investment (FDI) to nearly $601 billion by 2023, while India is gaining ground in sectors ranging from energy to pharmaceuticals.
This growing influence signals a broader geopolitical shift, as the two Asian giants strengthen ties with Latin America’s resource-rich economies.
Connecting With China
China’s trade with Latin America surged from $12 billion in 2000 to $450 billion in 2023, according to the International Monetary Fund, and it is now as a primary regional trading partner and investor.
“The increase in Chinese investment stock in Latin America follows a logic of complementarity,” says Larissa Wachholz, senior fellow at the Brazilian Center for International Relations (CEBRI).
Chinese FDI stock grew from $126.3 billion in 2015 to $600.8 billion in 2023, according to data from Statista. India, despite operating at a smaller scale, has also deepened its ties with Latin America; while its contribution to FDI peaked at $49 billion in 2014, it still reached $16 billion in 2023.
The US is quickly losing ground to China, which since 2009 has become Brazil’s largest trade partner, according to both the IMF and the World Bank. As of 2023, China was the destination of 30.7% of Brazilian exports (approximately $104 billion) and was responsible for 23.7% of Brazil’s imports ($64 billion), according to the Brazil-China Entrepreneurial Council (CEBC). The US, traditionally Brazil’s top trading partner, was a distant second and is now responsible for just 18.6% of Brazil’s imports and 10.9% of its exports.
Many of the larger Chinese companies were homegrown in the years China was aggressively expanding its own infrastructure and services, notes Wachholz. While development is still growing domestically, the world’s second most populous country behind India, has reached a comfort level that allows for local companies to look outward.
“China has one big similarity with Brazil that makes investments in energy and oil attractive here,” says Wachholz. “Both are vast countries with an important hydroelectric and renewable energy matrix potential which requires long transmission lines to reach its population centers.”
Like Brazil, “China had to contend with the issue of having to transmit energy generated in distant corners through ultra-high voltage lines. This made the Chinese very efficient in all parts of the electricity cycle: generation, transmission, and distribution, which is a key necessity in Brazil. The level of complementarity in this segment alone justifies the increased appetite for Chinese investments in Brazil.”
Despite China’s renewed focus on energy in Brazil, the initial stages of the relationship date from the 1980s, when China’s State Grid first made inroads in the country, notes Mauricio Santoro, author of Brazil-China Relations in the 21st Century: The Making of a Strategic Partnership (2022).
China’s investment in Latin America goes beyond Brazilian energy projects, says Túlio Cariello, CEBC’s director of content and research.
“It’s true that China has nearly $73 billion in investment stock in Brazil alone, which,” he notes, “corresponds to one-third of its total investment in Latin America. And 75% of that amount in Brazil is indeed invested in the energy and oil sectors. But China is diversifying its portfolio in Brazil and expanding into building plants to produce electric cars via both BYD and Great Wall Motors (GWM).”
The two companies focus primarily on the Brazilian market, Cariello adds, but recognize that regional trade agreements like Mercosur will eventually serve as a platform for simplified exporting to neighboring countries.
China’s Latin American portfolio also includes commodity prospecting and purchasing while Mexico serves as a base for consumer-product plants that can more easily export into the US and Canada. And Peru attracts about 20% of regional Chinese FDI, mostly in mining: specifically, lithium and molybdenum.
“Peru has attracted an enormous amount of investment through China’s Cosco, which is building the port of Chancay north of Lima,” says Wachholz. “The port will cut maritime voyages between South America and Shanghai by roughly one week and is essential in China’s Belt and Road project.”
India’s Investments
India is increasingly augmenting its investments in Latin America, with Brazil most frequently the lauching pad, according to Leonardo Ananda, CEO of the Brazil-India Chamber of Commerce (BICC).
“Seventy percent of Indian FDI in Latin America happen in Brazil, with some sporadic investment also in Argentina, Uruguay, or Mexico,” he notes.
Says Wachholz, “India’s investments are more market driven and propelled by the natural growth and capabilities of the country’s own enterprises. It is a little different than what we see in China’s case, where there is a strategic push since Deng Xiaoping to expand its abilities to reach further corners of the globe.”
India’s investments gained traction after Brazil opened itself to the world in the 1990s, Ananda says, and tend to focus on Information technology, pharmaceuticals, oil and gas, energy, and automobiles, with a special focus on motorcycles.
“The fact that India is, along with many Latin countries, part of the BRICS, IBAS, and G20 groupings also facilitates the flow of investment,” says Ananda. “The investments in Brazil are so significant that some Indian corporations already obtain roughly 50% of their share of revenue in the Brazilian-Latin market rather than from within India itself.”
UPL, a Mumbai-based agricultural chemicals and pesticide producer, has invested $1 billion in São Paulo state, according to Ananda, where it has operations almost equivalent to those at home, while the Vedanta Group’s Sterlite Power has invested R$7 billion ($1.25 billion) in acquisitions and operations across Brazil, where half of its operations are now concentrated.
Tata, one of the largest Indian groups, gained its initial foothold in Latin America through a joint venture with Brazilian IT group TBA, but has since acquired the entire operation and now offers consulting services focused in technology, and outsourcing in Brazil but also in Uruguay, Argentina, Chile, and Mexico.
Tata acquired the global operations of Jaguar-Land Rover in 2008 and now produces Land Rover vehicles in Rio de Janeiro. Other Indian manufacturers followed. Royal-Enfield now produces its famous motorcycles in northern Brazil, a few kilometers away from competitor Bajaj Motors. Meanwhile, Mahindra has expanded production of its tractors and distribution to all of Brazil, with an eye to export the vehicles to other Mercosur countries.
“We foresee Indian investments in the region will increase significantly,” says Ananda. “The number of bilateral delegations visiting each country has grown exponentially since the pandemic. India and Mercosur currently have a preferential-tariffs agreement covering about 400 products that is under review since last year and will hopefully be concluded soon to allow more frictionless trade and investment between South America and India in the very near future.”
