Politica de atraccion de inversiones del Peru frente a China: Comparacion con otros paises latinoamericanos: Comparacion con los paises de la Alianza del Pacifico Ponencia dada en la Universidad Nacional Mayor de San Marcos dada el 29 de setiembre, 2017 Conference given at San Marcos National University on September 29, 2017

1. Peru’s Foreign Investment Policy
towards China: Comparison with
other Latin American countries
Comparison with Pacific Alliance countries
Maria Osterloh
Master in Business Administration at Beijing Normal University
Faculty of Economics of San Marcos National University

2. Photo in Group after conference

3. Index
1. Introduction
2. Brief overview of the relation between China and Latin America
3. Situation of Chinese investment in the Pacific Alliance countries and state
policies.
4. Conclusions

4. 1. Introduction

5. 2. Brief overview of the relation between
China and Latin America

6. Latin America and the Caribbean: trade in goods with China,
2000-2015
(In billions of dollars)
Source: ECLAC

7. Latin America and the Caribbean: participation of selected
partners in trade in goods, 2000-2015 (Percentages)
A. EXPORTS
Source: ECLAC
EU (28 members) US

8. Latin America and the Caribbean: participation of selected
partners in trade in goods, 2000-2015 (Percentages)
B. IMPORTS
Source: ECLAC
EU (28 members) US

9. Selected countries in Latin America: China's share
of total exports, 2000 and 2014 (Percentages)
Source: ECLAC

10. Pacific Alliance countries trade with China
Elaborated by author.
Source: ECLAC, COMTRADE

11. Latin America (selected countries): changes in export structure
to China, 2000-2014
(Percentages of the total)
Natural Resources
Other manufacturing
Source: ECLAC

12. Loans of China to Latin America
Billion of US$
• China have lend lot of money to some
Latin American countries like Venezuela,
Ecuador and Argentina. One of the
reasons is that because of its economic
policies (they did not pay their debts) they
were cut off of the international finance
system and could not access to foreign
loans but from China
Source: The Dialogue

13. 3. Situation of Chinese investment in the
Pacific Alliance countries and state policies.

14. Situation of Chinese investment in Latin
America
• “Official data on China's FDI in Latin America and the Caribbean fail to
capture the real magnitude of these investments because of the
custom of Chinese companies to channel most of their investment
through third countries. This makes it very difficult to identify bilateral
investment flows. For example, the largest Chinese acquisition in the
region so far, the purchase of 40% of Repsol's operations in Brazil for
$ 7 billion was recorded as an investment by Luxembourg for having
channeled the operation through the subsidiary Luxembourg
company of the Chinese company. This is common practice among
companies around the world, but is particularly prevalent in China”.
ECLAC, 2016

15. Situation of Chinese investment in Latin
America
Source: OECD Development Center, Atlantic Council

16. Situation of Chinese investment in Latin America:
Chinese FDI in LA shifts towards the service sector
Source: OECD Development Center, Atlantic Council

17. Situation of Chinese investment in Latin America:
Chinese FDI in LA, by industry (2003 – 2016)
Source: OECD Development Center, Atlantic Council

18. Situation of Chinese investment in Latin America:
Chinese FDI Stock in LA, by country (2003-2016)
Source: OECD Development Center, Atlantic Council

19. Top Chinese FDI deals in LAC in 2016, by type
Source: China-Latin America Economic Bulletin 2017. Boston University

20. Pacific Alliance: Bilateral Investment Treaties
and Free Trade Agreements with China
Source: OAS - SICE
Signature Entry into force
Chile 23/03/1994 14/10/1995
Colombia 22/11/2008 03/07/2012
Mexico 11/07/2008 06/06/2009
Peru 09/06/1994 01/02/1995
Chile 18/11/2005 01/10/2006
Colombia -- --
Mexico -- --
Peru 28/04/2009 01/03/2010
BITs with China
FTAs with China

21. FDI regulatory restrictiveness Index, 2017
Source: OECD Development Center, Atlantic Council

22. Chile
• FDI in Chile has been historically low.
Stock of Chinese FDI in Chile (2009 – 2015)
Millions of US$
Source: Central Bank of Chile
2009 2010 2011 2012 2013 2014 2015
China 7 10 18 42 98 92 141

23. Chinese FDI in Chile (2005-2016)
Millions of US$
Source: China Global Investment Tracker, BN Americas, Carey Chile
Year Month Chinese Entity
Quantity in
Millions
Share
Size
Transaction Party Sector Subsector Status
2005 February Minmetals $ 550 50% Codelco Metals Copper successful
2009 December
Shunde Rixin
and Minmetals
$ 1.910 70% Metals Steel successful
2012 February
Xinjiang
Goldwind
$ 190
Mainstream
Renewable Power
Energy Alternative successful
2013 January Skysolar $ 1,360 Energy
Solar
Energy
successful
2016 September Chengdu Tianqi $ 210 2% SQM Metals successful
2008 September Minmetals $ 1.450 25% Codelco Metals Copper troubled
2010 June State Grid $ 1.200 10% Quadra Mining Metals Copper troubled
Total 2861 USD

24. …FDI in Chile has been historically low.
• As we have seen in the regulatory restrictiveness index graph, even
though Chile is one of the Latin American countries with less
restrictions to foreign investors, having a propitious environment
even better than Peru and Mexico, until recent years, Chinese
companies went to countries that have more natural resources
(Brazil, Argentina, Peru) that in the case of Chile is almost only
copper. Besides this, when Chinese companies wanted to buy a
share of CODELCO (a Chilean state company) in 2008, there was
great opposition from the union and the copper’s employee’
federation. So this makes Chile a saturated country for investing in
copper because the state have a big presence and there are already
others foreign companies operating there.

25. Chile have BIT and FTA signed with China
• Chile has both BIT and an FTA signed with China. Regarding the FTA, in
Chapter XIII named “Cooperation”, there is a short article number 112
named “Promotion of investments”, where compared to Peru FTA
with China, this country has a whole chapter dedicated to investment.
• Currently Chile is going to update its FTA with China to include more
details.

26. Sectorial Structure of Chinese FDI in Chile
(1974 – 2014)
• According to the
Committee of
Foreign
Investments of
Chile, Chinese FDI
is concentrated
mainly in Financial
services (37%),
forestry (32%) and
mining (29%).

27. Other sectors …
Agroindustry:
• There have been acquisitions by Chinese companies of less than 100
million US$ in vineyards and farms of blueberries, kiwi, walnuts, grapes and
cherries.
Finance:
In may of 2016 the China Construction Bank (CCB) opened a branch in
Santiago. It works as the first RMB clearance bank in South America. Its aim
is to give loans in the Chinese currency. In March of 2017 its general manager
said that the bank wants to help the Chilean companies oriented to the
Chinese market so that they become global. They are interested in
companies or projects of mining, retail, clean energy and agribusiness as
well as financing infrastructure for their great experience in these areas. The
bank has a capital of 200 million US$ for its branch in the country.*
In August of 2017, Bank of China got permission to install a branch in Chile.
*http://impresa.lasegunda.com/2017/03/27/A/VN34LRQ2/all

28. Other sectors …
• Telecommunications: in June of 2017, the Chilean government
announced that is working with China to install an fiber optic cable
that will pass underwater the Pacific Ocean to connect the two
countries. The cable begins in the city of Valparaiso, passing New
Zealand, Australia and French Polynesia to end up in China's
Shanghai.

29. Why has been historically low?
• According to some statements of some chinese experts and
enterpreneurs, it is not easy for chinese companies to invest in Chile,
they find limitations like “ the estrict labor protection, the regulation
in matter of environment and security, the language, the limitated
domestic market (17.91 million inhabitants) compared to other
neighbor countries”

30. However there is a lot of interest by the Chilean
government to attract Chinese FDI by doing the
following:
• Since 2016, Chile announced the creation of the promotion agency
InvestChile. The aim is to put representative offices in strategic
countries like USA, Japan and Germany, etc. It was announced that for
2018 there will be a representative office of this agency in China. This
will allow Chileans to give specialized direct advice to Chinese
investors in this way to attract them and then support them in their
process of prospecting and installation. As until now the Chilean
commercial agencies overseas were the responsible for this task.

31. Chile Week in China and the Belt and Road
Initiative …
• Chile has been organizing Chile week in China since 2015.
• This is a activity where the public and private sector participates together to promote not
only trade and tourism but also attract Chinese investment.
• Chile brought a delegation of 200 people including ministers and others state
representatives, private companies and scholars.
• In the version of 2017 held from 29 August to 8 September (11 days), the delegation
visited 6 Chinese important cities (Beijing, Chengdu, Hong Kong, Guangzhou, Shenzhen,
Wuhan).
• Chilean president Michelle Bachelet participated In the forum of the Belt and Road
Initiative in may held in Beijing. This is a infrastructure and connectivity mega project
that not only will connect Asia, Europe and Africa but also is extended to Latin America.
To embrace the Chinese proposal, during Chile week 2017 it was organized the seminar:
“Chile y China, La Franja & La Ruta: oportunidades de comercio, inversiones y
conectividad financiera”, being the first time that a latin american country realices a
seminar exclusively to the insertion of the Belt and Road initiative showing the great
interest that Chile has in this project.

32. Colombia
1994 1995 1996 1997 1998 1999 2000 p 2001 p 2002 p 2003 2004 2005 p 2006 p 2007 p 2008 p 2009 p 2010 p 2011 p 2012 p 2013 p 2014 p 2015 p 2016 p
Chinese FDI 0.04 0.06 0.43 0.90 0.11 -0.03 4.52 0.72 0.63 3.87 1.7 2.1 7.9 1.7 -1.4 -3.3 0.7 23.2 34.6 8.7 34.9 3.3 56.8
Total FDI 1,446 968 3,112 5,562 2,829 1,508 2,436 2,542 2,134 1,720 3,116 10,235 6,751 8,886 10,564 8,035 6,430 14,647 15,039 16,209 16,164 11,632 13,726
-2,000.00
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
18,000.00
AxisTitle
Total FDI Flow and Total of Chinese FDI Flow to Colombia (1994-2016)
Millions of US$
Note: A negative flow means that capital repayments are greater than the new investment
p/: preliminary data
Source: Central Bank of Colombia. Elaborated by author

33. • According to the previous data taken from the Central Bank of
Colombia, the stock of Chinese FDI in Colombia from 1994 to 2016
was of 182 million US$.
• But it seems to be more. In the following chart, we can see data from
the China Global Investment Tracker where from 2006 to 2015 there
have been Chinese investment for an amount of 1910 million US$.

34. Chinese FDI in Colombia (2006-2015)
Millions of US$
Year Month Chinese Entity
Quantity in
Millions
Share
Size
Transaction
Party
Sector Subsector
2006 September Sinopec $ 430 50% Omimex Energy Oil
2011 October Sinomach $ 240 Energy Coal
2012 February Sinochem $ 980 Total Energy Gas
2015 September China Communications Construction $ 260 30% Transport Autos
Total 1910
Source: China Global Investment Tracker

35. Colombia
• So far Colombia is not much interested in China because it has put more
emphasis in the relations with Europe and the United States.
• Currently Colombia has no Free Trade Agreement with China. This is mainly
because of the strong opposition of the industrial sector who are afraid of
Chinese competition. It only has a Bilateral Investment Agreement that was
signed in 2008 and entered into force in 2012, after almost 4 years.
• Besides its infrastructure to do business is not competitive and present
problems. For example its Buenaventura port in the Pacific lacks special
machinery to download and transport the containers.
• As Colombia is not a member of APEC its relation with China are not as strong
compared with other member of the Pacific Alliance like Peru, Chile and
Mexico
• Colombia is part of the Pacific Alliance, bloc which has the main objective to
increase its relations with the countries of the Asia Pacific. Through the joint
activities, events, organized by the 4 country members, Colombia has been
trying to promote its country in China.
• Colombia has 3 commercial offices in China: Shanghai, Guangdong and Beijing
where it dedicates more to attract Chinese investment.
Investment cases in
Colombia by country of
origin in 2016
Source: PROCOLOMBIA

36. Mexico
• Given that Mexico have a big base manufacturing sector that compete with
Chinese goods in the US market and already have a big trade deficit with China (it
is around 60 billion US$ per year), Mexico have not been interested in signing a
FTA like Peru and Chile.
• Besides China makes similar goods that Mexico mostly export with cheaper
prices.
• Mexico have not many natural resources to export like Peru, Brazil, etc. Mexico
has Oil but up to some years ago, investment in this sector was a monopoly of the
State (PEMEX). Even though Mexico have not an FTA with China, it is a member of
APEC making easier for Mexico to strengthen economic ties with China.
• Since Enrique Pena Nieto has been president of Mexico (2012) he has visited
China for 4 times and his government has achieved to raise the relationship to an
Integral Strategic Partnership in 2013.
• Following in 2014, both governments agreed to create a $ 2.4 billion binational
investment fund for companies from both nations to invest in areas as energy,
mining, infrastructure, high-tech manufacturing and tourism.

37. • According to the Economic Secretariat of Mexico, until 2015 the stock of
Chinese FDI was of 2.4 billion dollars.
• According to a study of ECLAC of November of 2016, some Chinese
companies started to venture in Mexico with the aim to export its products
to another markets, specially US. Like Lenovo in electronics and Nexteer in
auto parts that have arrived to Mexico through the purchase of US
companies that had plants in that country.
• Until last year, no Chinese oil company have been present in Mexico. On
December of 2016, China National Offshore Oil Corporation (CNOCC) was
awarded 2 oil blocks by the Mexican government. According to media
sources, it is the largest investment made by a Chinese firm in Mexico. In
the next 35 years this company will make an investment of 8 billion US$.

38. Chinese FDI in Mexico (2007-2017)
Millions of US$
Year Month Chinese Entity
Quantity
in
Millions
Transaction
Party
Sector Subsector
2007 Lenovo Group $40 Lenovo Group
Technolog
y
Computers
2007 July Golden Dragon $ 100 Metals Copper
2008
China Hengtian Group
Corp.
$ 57
Sinatex AS de
CV
Textiles
2008 January Jinchuan Group $ 210 Tyler Resources Metals
2011 September
China Communications
Construction
$ 220
International
Container
Terminal Services
Transport Shipping
2014 October Risen Energy $ 600 Energy Alternative
2015 January Power Construction Corp $ 390 CFE Energy Hydro
2016 May Envivsion Energy $ 100 Vive Energia Energy Alternative
2016 December GNOOC $ 1.110 Energy Oil
2017 February JAC Motors $ 110 Giant Motors Transport Autos
Total $2.937
Source: China Global Investment Tracker, Chinese Investment in Mexico: The Contemporary Context and Challenges by Enrique
Dussel Peters

39. Peru
• Chinese investment in Peru is very big compared to other LA
countries because of several reasons:
• Peru has plenty of natural resources like copper, oil and natural gas
and fishmeal that are precisely the sectors which Chinese have
invested greatly.
• Secondly, Peru began in the 1990’s a policy to open more the country
to foreign investment and began the privatization of state owned
companies. Chinese took advantage of that. For example Shougang
bought Hierro Peru in 1992 (the first Chinese foreign investment
abroad outside Asia), and in 1994, China National Petroleum
Company bought oil blocks in the north of Peru.

40. • Third, from the last decade, Chinese investment in those sectors (iron, copper, oil,
natural gas and fishmeal) increased a lot. For example in the year 2014 a Chinese
group led by Mineral and Metal Group (MMG) bought the copper project Las
Bambas, paying 7 billion US$ (the biggest foreign investment in Peru up to now).
• As a result Chinese companies investment in copper mines will allow them to
produce of 1/3 of the copper production in Peru. Besides this, in the first 8
months of 2017, Peru exported more tons of copper to China than Chile (3.22
million tones from Peru compared to 2.72 million tons from Chile).
• Also the Chinese oil company China National Petroleum Company produces about
40% of all the natural gas produced in Peru.
• Shougang has the only iron mine in Peru.
• Also Chinese participation in the fishmeal sector accounts for around 25% of the
national production.

41. Chinese FDI in Peru (2007-2017)
Millions of US$
Year Month Chinese Entity
Quantity
in
Millions
Share
Size
Transaction
Party
Sector Subsector
2007 February
Zijin, China
Nonferrous, and
Xiamen C&D
$ 190
45%,
35%,
20%
Monterrico Metals Copper
2007 June Chinalco $ 790 100% Peru Copper Metals Copper
2007 December
Minmetals and
Jiangxi Copper
$ 450 100%
Northern Peru
Copper
Metals Copper
2008 May Chinalco $ 2.160 Metals Copper
2009 February Shougang $ 990 Metals Steel
2009 May Najinzhao $ 100 100% Cardero Metals Steel
2010 June Three Gorges $ 210 Utilities
2010 October Minmetals $ 2.500 Metals Copper
2012 March
China Energy
Engineering
$ 900 Energia Azul Energy Hydro
2013 November CNPC $ 2.890 Petrobras Energy
2014 April
Minmetals, Suzhou
Guoxin, and CITIC
$ 6.990
63, 22,
15%
Glencore Metals Copper
2017 March Nanjinzhao $ 1.500 Metals Steel
Total $ 19.670
Source: China Global Investment Tracker

42. • In recent years, China has showed interest in investing in other sectors like
infrastructure and energy. For example, China proposed the construction of
the Bi-oceanic Railway, a project that is in stand by.
• Also a Chinese company has showed interest in buying the Chaglla
Hydroelectric Plant that is selling Odebrecht.
• In July of 2017, PROINVERSION awarded the project Hidrovia Amazonica to
SINOHYDRO (China) and Construcción y Administración S.A. - CASA (Peru)
that will improve the navigability conditions of Peruvian Amazonian rivers
for cargo and passenger transportation, and regional and national trade,
reducing user connectivity costs, as well as risks to passengers and cargo.

43. • The reasons why Chinese investment in Peru is big, besides the fact
that we have plenty of natural resources and a very open foreign
investment policy it is the fact that we have an FTA with China, and
thanks to the largest Chinese community in Latin America that exists
in Peru, the country is very welcome to Chinese.
• The fact that there is very little investment in the manufacturing
sector in Peru is that we have very limited protection to the
manufacturing sector like in Colombia and Mexico and very little
incentives policies to invest in this sector.

44. Conclusions
• Chinese investment in Chile has been historically low but this is changing
with all the measures and initiatives by the Chilean government to
promote its country in China in recent years like the event of Chile week in
China that have already 3 editions, the participation of Chilean president in
the Forum of Belt and Road initiative and the soon installation of an office
of InvestChile in China.
• Chile is not only focused in attracting investment for mining. It is
diversifying its attraction of Chinese FDI to its country in sectors like
agroindustry, financial services, renewable power, infrastructure, etc.
• As we have seen, Chinese investment is more strong in Peru because of its
open foreign investment policy, its abundant natural resources and its old
time relations. Up to now this investment has been in the natural resources
sectors but from now on China have showed interest in investing in other
sectors.

45. Conclusions
• In the case of Colombia Chinese investment is low mainly because it
has been more interested in the relations with Europe and the United
States.
• In the case of Mexico even if the Chinese investment there is very low,
the current president is very actively seeking to strengthen this
relations specially in investment.
• Of the 4 members of the Pacific Alliance, Chile, Peru and Mexico are
the more active to strengthen economic relations with China.

46. Bibliography
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48. Bibliography
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49. Bibliography
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