The electricity transmission and distribution sector in Latin America was recently revolutionized by the irruption of the Chinese state conglomerates State Grid and Three Gorges in the markets of Chile and Peru and by the continuous expansion of their businesses in Brazil, writes the portal, Dialogo Chino.

According to the media, 60% of the State Grid’s investment outside of China was made in Brazil, reaching an amount of $ 12.4 billion. These investments assured State Grid 10% control of the high voltage networks and 14% of the distribution segment in the Brazilian market.

For its part, Three Gorges has assets in Ecuador, Bolivia, Chile and Brazil, where it participates in the operation of 17 hydroelectric plants and 11 wind farms.

In April 2020, the Chinese company bought the assets of the American Sempra Energy in Peru for an amount of $ 3,590 million, thus becoming 83.6% of the Luz del Sur company, which distributes electricity to more than one million customers, as well as a construction company, reports the platform.

The replacement of US capital by Chinese in Latin America indicates China’s willingness to pay for energy assets at levels that no other competitor has shown willingness to disburse. At the same time, China’s strategy has “an undeniable geopolitical component” and “takes place in the context of the trade war between China and the United States,” the authors of the publication note.

However, the director of the Center for Latin American Studies at Anhui University, Fan Hesheng, does not believe that the purchase of US assets is part of China’s strategy to withdraw US capital from the region.

“There is no such strategy in China, it is not part of the plans of the Chinese government or Chinese companies. The real objective of Chinese companies is to expand their commercial interests in Latin America,” says the analyst.

The expert considers that Chinese investment is mutually beneficial cooperation for the Asian giant and Latin America.

“I don’t think Chinese investments are meant to increase influence in Latin America. (…) Latin American countries are trying to attract Chinese investment, especially those that are now in pandemic conditions. (…) It is mutually beneficial cooperation for companies and recipient countries,” he stressed.

Chinese investments in Latin America have accumulated $ 386.8 billion in 17 years, says Fan Hesheng.

Meanwhile, the transfer of US shares is due to its economy contracting, according to the analyst. “By the will of the US government, its foreign investments are transferred to the interior. This is due to a US initiative.”

“But because some of the US capital has gone, there are still gaps for investment. And it is not clear that China will occupy that place. Maybe they are companies from Europe or other countries,” he adds.

The analyst points out that the US continues to be the largest investor in Latin America. If the trade volumes of China and the US are compared with Latin America, the difference is still very large, he says. 

At the same time, Fan Hesheng acknowledges that “China has a strong presence in Latin America. There is real pressure on the United States. It seems to them that China is infringing on their interests in Latin America. But in fact, China does not even have that in mind.”

“There is no rivalry between the US and China in Latin America,” the expert underlines, adding that Chinese investment in Latin America is beneficial not only for China but also for the US itself: if it sells assets, it needs a buyer. According to Fan Hesheng, “It is a mutual need and there is no competition.”

“Our investments in Latin America, on the other hand, promote US interests because they contribute to the development of Latin America. And its development, in turn, is in the United States’ interest. If the US invests in a growing market, it will obtain a greater benefit,” concludes the analyst.