There has been a surge of recent interest in China’s impact on developing countries, but far more of discussion has focused on Africa than on Latin America. This is partly because the consequences of China's growth for Latin America are likely to be both more complex and less direct. Unlike Africa, the Latin American resource sector is dominated by large state-owned companies and how these will interact with new Chinese investment is hard to predict. A more developed infrastructure also means China will have less of a competitive advantage in the race to exploit Latin America’s natural resources.

 In Latin America, there are likely to be both winners and losers, as a recent report by the World Bank explains. On the one hand, countries that export commodities (South America) will benefit from China’s growing demand for commodities and raw materials and the related commodity price boom. However, on the negative side, this could lead to dependence on a small number of raw exports and Dutch Disease in resource rich economies, as well as potential mismanagement of enhanced fiscal resources. There are also potential political ramifications of this; in the case of Venezuela, Chinese demand for oil has helped to empower leaders like Hugo Chavez to adopt a more aggressive and anti-American, foreign policy and has also helped him to tighten his grip on power domestically, as described in a recent ODI blog by Lauren Phillips.

On the other hand, for countries with a large manufacturing base (Mexico, Central America and several Caribbean countries), China’s surge in manufactured exports means increasing competition for exports to the US and European markets. Mexico is particularly vulnerable to this because it exports similar products to the US market, such as electronics and auto-parts and has already been overtaken by Chinese exports on many of these products. Inevitably, there are increasing fears about ‘Chinese competition’ in several countries, although governments must ultimately pursue options in cooperation with China if are to overcome these challenges.

 As an investor, China provides a potential alternative to the US and Europe at a time when anti-American leftist leaders have swept to power in a number of countries. The implications of this are already being seen in Africa, where several leaders claim that Chinese investment offers them a new development model that eschews the tenets of western liberal market orthodoxy. Although westerners argue they should think again and voice concerns about Chinese governance and credit standards, these statements sound a little hollow given the commercial interests of many of the critics, as a recent article points out. Whatever the ethics of Chinese investors, this will definitely open up new options for Latin American governments, which should be a positive thing.

 China is also changing the balance of power within international institutions such as the WTO, IMF and the UN, complimenting the new power of other large developing economies such as Brazil. In the longer term, China will transform the international political order in ways that are hard to predict. This is something that westerners are struggling to come to terms with, many fearing either Chinese plans for global domination or a revision of the values of international society (as discussed in ODI’s recent meeting series on China).

Getting to grips with these changes will not be an easy task for Latin American governments. However, if they can make necessary adjustments, exploit opportunities and find ways of cooperating with China, they may even be able to enhance their own position within a changing global economy.