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The Legal 500 - Shanghai roundtable

Doing business with Latin America

With foreign trade worth $4 trillion, China is the world’s most important trading country. Its trade with and investment in Latin America increased around the time of the great recession of 2008. Now, it has moved beyond trade to becoming a major investor, whose presence is felt in primary industry sectors such as mining, oil, construction, as well as in banking and utilities. Between 2015 and 2019, China plans to invest $250bn in direct investment in the region and about $500bn in trade. The Legal 500 in partnership with a Panamanian firm SUCRE, BRICEÑO & Co, hosted a roundtable in Shanghai to discuss the trends and development of the Chinese investments in the region.

Commercial banks such as Industrial and Commercial Bank of China (ICBC) are becoming increasingly active, and the Asian Infrastructure Investment Bank formed partnership with the Inter-American Development Bank (IDB) on projects in the region, such as roads, railways, ports or tunnels that could improve connectivity with Asia. On the venture capital side, China has increased its investments to more than $1bn in 2017, compared to only $30m two years previously.

Among the Latin American countries, Panama, a country that is strategically located between North and South America is seeking to attract new investment and boost re-exports of Chinese goods throughout the region, having cut its ties with Taiwan in 2017 to re-establish diplomatic relations with China. The investment from China has flowed in immediately, with Chinese contractors investing in a new container terminal, a liquefied natural gas terminal and a tourist terminal in the proximity to the Panama Canal. The stage is set for China to use Panama as a bridgehead for a surge of investment and trade deep into Latin America, with the new railway linking Panama with Costa Rica, and President Donald Trump’s ‘America-first’ strategy. On the heels of the recent $1.8bn infrastructure announcement by China-based Shanghai Gorgeous, Panama may now officially be on China’s radar as the new investment hub for Latin America. For a relatively small country like Panama to have a wave of new investment from Mainland China could have a tremendous impact. Those in attendance discussed the benefit of setting up corporate headquarters in Panama, including other factors such as immigration policies that are potentially of interest to such investors.

There are many challenges facing Chinese investors when they are considering investing in the region; including political uncertainty, legislative risk on foreign exchange control, investment protection and market access, tax revenue, as well as investment withdrawal, investment security and enforcement of intellectual property rights. With the recent trade war between the US and China, some argue that China’s investment poses a number of threats to the US, both politically and economically. Latin America now needs to both partner and compete with China, a country in which the public and private sectors work in unison, in which the line between public and private is blurred, and in which industrial policies and long-term planning take priority over the short-term.

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