March 24 2015 image description
by: jmhumire 0 Comments

Is It Time to Rebalance China’s Latin American Portfolio?

China’s Prime Minister Li Keqiang recently told delegates at the National People’s Congress the country’s economy would grow at about 7 percent this year. The projection reflects a slowdown as China works to consolidate its gains over the past decade and build a stronger, more modern service and information-based economy. This is a good time to review China’s portfolio in Latin America.

Prime Minister Li’s report comes amid good news as China overtook the United States in inbound foreign direct investments (FDI) for the first time since 2003. With an impressive $128 billion invested in China and Hong Kong, the two placed first and second, while the U.S. came in third.

Equally important is China’s out bound investments, which set records in 2012 with the U.S. as the primary recipient in energy, transportation and the financial services. The countries of Asia, Africa and Latin American also benefited from inflows of Chinese capital.  In January, China announced its intention to invest $250 billion in Latin America over the next decade. While the figure is promising, the nature and distribution of investments is far more complicated…. (more…)

January 8 2015 image description
by: jmhumire 0 Comments

Dropping Oil Prices Reveal Failed Economic Policies in Latin America

As the global price of oil drops, the effects of this phenomenon are unveiling the failure of Latin America’s populist governments to generate sustainable prosperity while depending on oil-for-loans schemes, mainly with China.

In the last few months, the price of Brent crude oil has declined from a high of over $140 per barrel to under $60 a barrel as of the latest date. The reasons for the decline are manifold, but two stand out for many analysts. First, a technological revolution in energy extraction, known as “fracking” has substantially increased the supply of petroleum and natural gas in the U.S., making it less dependent on foreign sources of oil. Second, Saudi Arabia and other Gulf state producers have increased output in an attempt to drive out marginal producers, whose cost of production are highest. For instance, the on-shore unit cost of production in Saudi Arabia averages $18 while U.S. costs’ average $34 a barrel…. (more…)