China’s investments in Venezuela reflect the geopolitical significance of the Latin American country for the Asian giant, despite the ongoing Venezuelan crisis and tensions with the United States.
The economic and geopolitical relationship between China and Venezuela endures above circumstances, as the motivations that underpin the bond rise above the crisis.
Overall, China’s investment in Latin America has been growing over the past two decades, although the amounts vary depending on the sources and the years analyzed. However, it still does not equal the investment from the United States in Latin America and the Caribbean, which is substantial and positions it as the largest foreign investor in the region.
Chinese investment in Latin America
It is undeniable that China’s investment in Latin America has significantly risen over the last twenty years. Although data on this is not precise, it is known that Chinese Foreign Direct Investment (FDI) in the region was approximately USD 8.748 billion in 2023, accounting for nearly 10% of the total FDI received in Latin America and the Caribbean.
From 2000 to 2020, it is estimated that China invested around USD 160 billion in Latin America, primarily in mergers, acquisitions, and infrastructure projects.
However, compared to the U.S., regarding the sectoral and geographical distribution of investments from both powers, we see that the Chinese focus points towards natural resources and infrastructure, while the U.S. directs its investment towards services and manufacturing.
China’s actions in the region
It is necessary to note that, although it has increased, Chinese investment is concentrated in a limited number of countries and sectors, emphasizing natural resources, infrastructure, energy, and more recently, technology and renewable energies.
Thus, the main destinations include Brazil (34%), Argentina (22%), Mexico (15%), Peru (11%), and Chile (8.7%).
In Brazil, investments focus on energy, agribusiness, and technology.
In Peru, the Chancay mega-port and mining and renewable energy projects stand out.
Argentina receives investment in energy (nuclear, oil, and gas), infrastructure, and lithium mining.
Chile is key for copper and lithium, with investments in mining and renewable energies.
Mexico focuses on manufacturing, technology, and transportation.
Chinese trends over the last decade
Since 2010, there has been an observable decline in absolute terms of investment, with a shift from large infrastructure projects to smaller investments concentrated in sectors like electric cars, renewable energies, and technology (5G, Huawei).
Also, loans from Chinese institutions have decreased significantly, while resource-rich countries—such as Brazil, Peru, and Chile—remain important, but Mexico and Colombia are gaining ground in manufacturing and technology.
Compared to other investors, China represents a smaller percentage of the total FDI in the region (5.74% from 2000-2020) compared to the United States (70-80%) and the European Union.
The Belt and Road Initiative (BRI) is an ambitious Chinese strategy aimed at boosting global connectivity through infrastructure projects, trade, and economic cooperation. This has the main objective of strengthening global infrastructure, especially in Asia, Europe, and Africa, as well as promoting economic development in participating countries.
Twenty-two Latin American countries have joined the BRI, although Brazil does not formally participate.
U.S. investment in Latin America
The United States continues to profile itself as the largest foreign investor in Latin America and the Caribbean. It is significant that in 2023, U.S. Foreign Direct Investment (FDI) will be approximately USD 337.84 billion. In 2022, it represented 38% of the total FDI in the region.
The U.S. investment in Latin America also concentrates on key countries:
Brazil (41%): Financial services, technology, and agribusiness.
Mexico (17%): Manufacturing (automotive, electronics) and energy.
Chile (9%): Mining (copper) and renewable energies.
Colombia (8%): Oil, technology, and telecommunications.
Argentina (7%): Energy (shale gas) and agriculture.
Peru (5%): Mining (copper, gold) and infrastructure.
Key sectors of U.S. investment in Latin America include services (technology, finance, telecommunications), manufacturing, and natural resources (mining, oil).
Nearshoring—a strategy where part of the production is transferred to third parties located in other countries but close enough to share time zones—drives investment in Mexico and Central America.
U.S. investments in renewable energy target Chile, Brazil, and Mexico.
Bilaterial trade between the U.S. and Latin America reached approximately USD 1.4 trillion in 2023, significantly exceeding China’s trade with the region. Although Chinese presence has increased, the United States vastly outdoes it in investment and trade volume.
Furthermore, U.S. investment is more diverse and encompasses technology, manufacturing, and services, while Chinese investment is focused on natural resources and infrastructure.
It is essential to highlight that U.S. investments are viewed as more transparent and less conditional than those from China, although the lack of large-scale infrastructure projects compared to the BRI has been criticized.
Chinese investments in Venezuela
China’s investments in Venezuela illustrate a relationship marked by substantial loans collateralized with oil, which faces challenges due to the Venezuelan economic crisis. However, Venezuela remains strategically important for China in its competition with the United States.
Since 2007, China has made significant investments in Venezuela, primarily through oil-backed loans, which exceeded USD 60 billion by 2017. However, these loans and investments have decreased since 2014 due to Venezuela’s economic crisis.
The Chinese motivation for investment in Venezuela is directed at energy resources. It is crucial to remember that Venezuela has the largest proven oil reserves. “Venezuela has the largest proven oil reserves in the world (over 300 billion barrels). China, with its growing energy demand, sees Venezuela as a strategic source to diversify suppliers, ensuring shipments through the oil loan model.”
Reasons behind the investments
Venezuela is strategic for China
Despite the severe economic crisis in Venezuela, China’s interest in the country remains, primarily due to geopolitical and multipolarity interests, as the Asian giant views the Latin American nation as an anti-hegemonic ally against the U.S.
“Since Chávez, Venezuela positioned itself as an anti-hegemonic ally against the U.S., aligning with China’s vision of a multipolar world. This allowed China to challenge U.S. influence in Latin America, using Venezuela as a gateway to the region.”
In this action by China with Venezuela, the economic opportunities provided by the oil boom led Chinese investment to focus on infrastructure and energy.
Similarly, the ideological and political support played a fundamental role through the “21st-century socialism” promoted by Hugo Chávez, which resonated with the Chinese state development model.
Geopolitically, Venezuela is strategic for China, representing a counterbalance to the U.S. in Latin America and serving as a gateway to other countries in the region.
Venezuela is, for China, a potential source of energy security, although shipments have decreased.
Additionally, Venezuela provides support in multilateral forums, such as the UN. “As a key actor in Latin America, Venezuela allows China to challenge U.S. influence, especially in a context of sanctions and tensions.”
It cannot be overlooked that China is also interested in recovering the estimated pending debt of USD 19 billion in 2023, particularly through oil shipments.
Protecting existing investments in energy and mining.
Maintaining Venezuela as an anti-U.S. ally to consolidate its influence in the Global South.
Preserving the image of a reliable partner.
China will not abandon Venezuela
It is considered unlikely that China will abandon Venezuela. There are no signs that Xi Jinping will withdraw his support for the Venezuelan regime to appease the U.S. due to:
Significant economic and strategic interests amounting to over USD 60 billion, as the Asian giant seeks to recover its debt and maintain access to energy resources. Abandoning Venezuela would mean substantial losses and weaken its position in Latin America.
The current strategic competition with the U.S. under the Trump administration makes it improbable that China will yield without significant benefits.
It would go against China’s policy of non-interference and support for national sovereignty, damaging its credibility with other allies.
It is likely that China will continue with pragmatic support, reducing financial exposure but maintaining political relations, unless the U.S. offers substantial concessions like relief from technological sanctions.
Conclusions
The competition for influence in Latin America between China and the United States will continue to be a key factor in regional dynamics.
The economic and political crisis in Venezuela presents challenges for both actors, but China seems determined to maintain its strategic presence despite the risks.
The nature of each country’s investment—more diversified for the U.S. and more focused on resources and infrastructure for China—has different impacts on local economies.
Future investment decisions by China in the region will likely be more centered on profitability and strategic sectors in the long term, like technology and renewable energies.
The relationship between China and Venezuela, although tense due to the crisis, remains a significant element in China’s geopolitical strategy in the Western hemisphere.