Chinese Investment in Latin American Resources: The Good, the Bad, and the Ugly

China’s need for vast amounts of minerals to sustain its high economic growth rate has led Chinese investors to acquire stakes in
natural resource companies, extend loans to mining and petroleum investors, and write long-term procurement contracts for oil
and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions. These efforts to procure raw materials
might be exacerbating the problems of strong demand; “locking up” natural resource supplies, gaining preferential access to available
output, and extending control over the world’s extractive industries. But Chinese investment need not have a zero-sum effect if
Chinese procurement arrangements expand, diversify, and make more competitive the global supplier system. Previous Peterson
Institute research (see Moran 2010) and new research undertaken in this paper, show that the majority of Chinese investments and
procurement arrangements serve to help diversify and make more competitive the portion of the world natural resource base located
in Latin America. For a more comprehensive analysis, we conduct a structured comparison of four Peruvian mines with foreign
ownership: two Organization for Economic Cooperation and Development-based, and two Chinese. We examine what conditions
or policy measures are most effective in inducing Chinese investors to adopt international industry standards and best-practices, and
which are not. We distill from this case study some lessons for other countries in Latin America, Africa, and elsewhere that intend
to use Chinese investment to develop their extractive sectors: first, that financial markets bring accountability; second, that the…. Read Article