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Trade flows between Asia and Latam have surged in the last 15 years.
But it remains very unbalanced, focused on commodities as main
South American export. China has gathered a lot of influence on
commodity markets
Japan’s FDI stock in Latam is larger than China’s. This could reverse
sooner than expected, as Chinese FDI into the region is surging at a
faster rate than Japan’s.
Sizable Asian assets are being increasingly allocated in FDI rather than
reserves, which provides a huge opportunity for financing key
investment projects in Latam, such as infrastructure.
0
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150
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250
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00
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03
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11
Asia Exports to Latin America
Asia Imports from Latin America
China59%
Japan17%
Korea10%
India8%
Singapore4%
Hong Kong2%
China52%
Japan18%
Korea15%
Singapore7%
India5%
Hong Kong3%
Metalliferous ores35%
Petroleum18%Non ferrous
metals10%
Oil seeds, nuts and kernels
9%
Meat3%
Rest25%
Transport equipment
23%
Electrical machinery
16%
Non Electric Machinery
13%
Scientif & control
instrum, photogr gds,
clocks5%
Clothing4%
Rest39%
0%
5%
10%
15%
20%
25%
30%
0%
5%
10%
15%
20%
25%
30%
1990 1993 1996 1999 2002 2005 2008 2011
Argentina
Brazil
Chile
Peru
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1990 1993 1996 1999 2002 2005 2008 2011
ARG-soy
BRA-soy & iron ores
CHI-copper
PER-copper ores
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
196719711975197919831987199119951999200320072011
Exports Gini Index
Copper
Iron Ores
Ores Non Ferrous
Soybean
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1962196619701974197819821986199019941998200220062010
Imports Gini Index
Copper
Iron Ores
Ores Non Ferrous
Soybean
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Oil
se
ed
s
Oil
se
ed
s
Ore
s
Ore
s
Co
ppe
r
Ore
s
Ele
ctr
ica
l m
ach
ine
ry Oil
An
go
la:
Min
era
l fu
els
Oil
Co
ppe
r
Ba
se
me
tals
*
Oil
Co
ppe
r
ARG BRA CHI MEX VENAngola Congo RD CongoZambia
South America Africa
2005 2013
China’s investments in LatAm are hard to explain based on pure economic fundamentals . Venezuela is the
second largest recipient of FDI. Brazil, a much larger economy ranks only slightly above while Mexico’s investment from China is very low for its size.
0
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1200
1400
ARG BRA CHI COL MEX PER VEN
China Korea Japan
4115
-
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
ARG BRA CHI COL MEX PER VEN
China Korea Japan
33411
Historical FDI flows of China (USD billion) Source: National Bureau of Statistics People's Republic of China and BBVA Research
Historical FDI flows of Japan (USD billion) Source: JETRO and BBVA Research
Asian overseas foreign direct investment continues to go primarily to countries within
the Asia region and developed economies, followed by Latin America.
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40
60
80
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120
140
160
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Asia Africa Europe Latin America North America Oceania
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40
60
80
100
120
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Asia Africa Europe Latin America North America Oceania
FDI flows to Latam ex. Cayman Islands and BVI (USD billion) Source: National Bureau of Statistics People's Republic of China, JETRO and BBVA Research
Chinese FDI stocks in Latam growing faster (YoY %) Source: National Bureau of Statistics People's Republic of China, JETRO and BBVA Research
Excluding tax havens in the Caribbean, China’s FDI stock in Latam is much smaller
than Japan’s, but faster annual growth rates make it potentially more significant
0
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20
30
40
50
60
70
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Japan FDI stocks in Latam (LHS)
China FDI stocks in Latam (LHS)
0
10
20
30
40
50
60
70
80
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Growth of FDI stock Japan (RHS)
Growth of FDI stock China (RHS)
-40
-20
0
20
40
60
80
-40
-20
0
20
40
60
80
Korea China Japan
FDI Porfolio Derivatives Other Reserves Total
(%GDP)
With China’s soft landing, Latin America’s growth should recover from a difficult 2014 but very heterogeneously
Source: BBVA Research
• Weighted average by GDP at PPP. • Pacific Alliance: Mexico, Colombia, Peru, Chile; • Mercosur: Brazil, Argentina, Venezuela, Paraguay, Uruguay
Bottom of deceleration probably over in Q4 2014.
Growth set to increase on higher global growth (especially in the US)
and public investment in Andeans, but still clearly below potential for the region
Strong heterogeneity: Pacific Alliance set to grow close to its potential in 2015-16. Mercosur
stagnant in 2015 and first half of 2016.
2.5
2.6
0.8
1.5
2.4
-1
0
1
2
3
4
5
2012
2013
2014e
2015e
2016e
LatAm Mercosur Pacific Alliance
4
5
6
7
8
9
10
11
12
1011121314151617 1011121314151617 1011121314151617
GDP Consumption Investment
Actual Base scenario Risk scenario
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%Oil Soybeans Copper Iron Coal
2014 2015 2016
-1.5
-1.3
-1.1
-0.9
-0.7
-0.5
-0.3
-0.1
ARG BRA CHI COL PER
2014 2015 2016 2017
Trade flows between Asia and Latam have surged in the last 15 years.
But it remains very unbalanced, focused on commodities as main
South American export. China has gathered a lot of influence on
commodity markets
Japan’s FDI stock in Latam is larger than China’s. This could reverse
sooner than expected, as Chinese FDI into the region is surging at a
faster rate than Japan’s.
Sizable Asian assets would be better allocated to FDI rather than
reserves. This provides a huge opportunity for financing key investment
projects in Latam, such as infrastructure.
COMPANIES SECTORS COUNTRIES ACTIVITIES
CNPC Oil Peru, Venezuela, Ecuador Oil exploration
Sinopec Oil Brazil, Argentina, Colombia Oil exploration
Sinochem Oil Brazil, Colombia Oil exploration
CNOOC Oil Argentina Oil exploration
Shougang, Chinalco, Minmetals, Nanjinzhao Mining Peru General mining
Wuhan Steel Steel mills Brazil Steel production
East China mineral exploration, China Niobium
Mining Brazil General mining
State Grid Electricity Brazil Electricity transmission
Huawei, ZTE Telecom. Brazil and other countries Telecomm. equipment
Chery Automotive Brazil, Uruguay, Venezuela Automobiles
JAC Automotive Brazil Automobiles
Gree, Midea Appliances Brazil Electric appliances
Lenovo Electronics Brazil, Mexico Computers
Golden Dragon Steel Mexico Steel production
Nexteer Automotive Mexico Automobile production
0
10
20
30
40
50
60
China Japan Korea
2000 2005 2011
0
10
20
30
40
50
60
China Japan Korea
2000 2005 2011
0
5
10
15
20
25
China Japan Korea
2000 2005 2011
0
5
10
15
20
25
China Japan Korea
2000 2005 2011
0
5
10
15
20
25
China Japan Korea
2000 2005 2011
0
5
10
15
20
25
China Japan Korea
2000 2005 2011
0
2
4
6
8
10
12
China Japan Korea
2000 2005 2011
0
2
4
6
8
10
12
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
8
9
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
8
9
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
8
9
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
8
9
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
China Japan Korea
2000 2005 2011
0
1
2
3
4
5
6
7
China Japan Korea
2000 2005 2011
0.0
0.5
1.0
1.5
2.0
2.5
China Japan Korea
2000 2005 2011
0.0
0.5
1.0
1.5
2.0
2.5
China Japan Korea
2000 2005 2011
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
China Japan Korea
2000 2005 2011
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
China Japan Korea
2000 2005 2011
