Massive flows of investment from China have failed to stimulate sustainable growth in Latin America as the narrow focus on developing the region\u2019s oil and mining sectors has left it vulnerable to plunging commodity prices, which have suffered as a result of the former’s slowing demand.<\/p>\n
While Latin America\u2019s struggling economies welcome foreign investment, there is an urgent need to redress the existing trade imbalance with China, according to Enrique Iglesias, former president of the Inter-American Development Bank<\/a> (IDB).<\/p>\n For its part, China must better adapt to market conditions if it is to protect its interests in Latin America as close partners Venezuela and Argentina look set to open up to international markets, experts said at a conference<\/a> organised by the London School of Economics<\/a> (LSE) and the Latin American Development Bank<\/a> (CAF in the Spanish acronym).<\/p>\n China has invested more than US$120 billion<\/a> in Latin America \u2013 the bulk of which has gone to big natural resource exporters Venezuela, Argentina, Ecuador and Brazil \u2013 and now plays a major role in the region\u2019s development. But according to Iglesias, China must invest more in Latin America\u2019s services and manufactures.<\/p>\n Iglesias told Di\u00e1logo Chino<\/em>; \u201cWe need to have more reciprocity in the sense that we don’t want to have China only importing commodities.\u201d<\/p>\n China\u2019s trade with Latin America has been dominated by the export <\/a>of raw materials from Latin America in exchange for the import of value-added goods from China. Now, Iglesias said; \u201cwe are simply aiming to have a new balance, equality\u2026 and this is something we have to work for. Investment from China is very important in Latin America.\u201d<\/p>\n Loans with strings<\/strong><\/p>\n Colombia\u2019s former finance minister Guillermo Perry expressed dissatisfaction with China\u2019s lending to Latin America. Chinese loans to Latin America to develop sectors such as infrastructure have often been conditional on the use of Chinese contractors, workers<\/a> and construction materials<\/a> such as steel and cement, of which China has a huge surplus. Industry representatives in Latin America claim<\/a> that this is leading to job losses and creating a dependency on natural resource extraction.<\/p>\n Yet these lending conditions also run contrary to China\u2019s own interests since its investors now find themselves exposed to struggling commodity export-dependent economies, such as Venezuela, which have few options but to accept them, according to Perry.<\/p>\n \u201cThey have basically limited themselves to working with three or four countries,\u201d he said, referring to Venezuela, Argentina, Ecuador and Brazil.<\/p>\n Some of China\u2019s closest partners in the region are now on the brink of economic collapse and are undergoing seismic political changes. According to official figures, China has lent US$56 billion to Venezuela<\/a>, which is struggling with a 141%<\/a> rate of inflation and widespread shortages of consumer goods . The majority of Chinese loans have served to prop up the country\u2019s oil sector which has been hit hard by the crash in global oil prices. As a consequence of its mismanagement of the economy, the ruling United Socialist Party of Venezuela (PSUV<\/a>) suffered a bruising defeat in recent legislative elections at the hands of the main opposition Democratic Unity Party (MUD<\/a>), which claimed a two-thirds \u2018supermajority\u2019.<\/p>\n Perry admitted that his Chinese counterparts were concerned that their short-term self-interest in acquiring commodities had now increased their exposure to high-risk countries, but stressed that they were not as uncommunicative about the problem as people think.<\/p>\n