China’s influence in South America is exemplified by its trade and investment in Uruguay

The meteoric economic ascent of the People’s Republic in recent decades is incontrovertible, with its burgeoning influence in South America epitomized by its trade and investment endeavors in Uruguay.

China’s metamorphosis from an agrarian-based economy to an industrial and technological behemoth propelled its share of the global GDP from a mere 3% in 1990 to a staggering 18%, cementing its status as a dominant regional force.

However, a study by Ernesto Talvi and José Pablo Martínez questions this perception for Latin America, especially Uruguay, citing a lack of empirical evidence.

Despite the increase in trade with South American countries, China’s economic impact in the region, particularly in Uruguay, is limited to trade exchange and does not extend significantly to investments or high-value services.

China tops global trade in exports (18%) and imports (14%), surpassing the EU and the USA.

In South America, China emerged as the primary export destination, outpacing the EU and the USA, with countries like Chile, Brazil, and Peru exporting over 30% of their goods to China.

Uruguay is no exception.

In 2022, sales to China accounted for 28% of Uruguay’s total exports and 21% of total imports, despite a slowdown due to China’s economic deceleration.

The trade primarily involves natural resources, primary products exported to China, and medium and high-tech industrial goods imported from China.

However, in service exports like tourism and global services, the importance of China diminishes.

Although China’s foreign direct investments (FDI) have surpassed Europe, they are still behind the USA and barely exceed 1% of the regional GDP in Latin America.

In Uruguay, the most significant FDI inflows in 2021 came from the USA (48%) and Europe (35%), while China accounted for only 1% of total investments.

In summary, China’s influence in South America and Uruguay is predominantly in primary and industrial goods trade.

It is limited to high-value products, tourism, global services, and investments. Contrary to some perceptions, China is not the main actor in South America, nor Uruguay.