Does China Have an Impact on Foreign Direct Investment to Latin America?

This chapter analyses empirically whether the emergence of China as a large recipient of FDI has affected the amount of FDI received by Latin American countries. For the longest possible period given data availability (1984-2001), it finds no diversion of FDI from Latin America to China when other relevant factors are taken into account. Concentrating on the last few years (1995-2001), however, when FDI boomed worldwide and negotiations for China’s WTO membership accelerated, the “Chinese effect” becomes highly significant. Assessing the impact country by country, China’s inward FDI appears to have hampered that of Mexico and Colombia, but not the other four large Latin American economies studied.