Chinese firms expected to keep energy, infra M&A focus

China-led mergers and acquisitions in Latin America will remain focused on infrastructure and conventional energy in the medium term, but could shift toward green projects amid the regional and Chinese energy transitions.

“The question is whether China will be solely focusing on renewable energy investments helping with this transition or whether we will see a continuity in the investments on fossil fuels,” Fermín Koop, editor at Argentine news platform Diálogo Chino, said in response to a question by BNamericas at a Chinese investment webinar. 

During the commodity boom between 2002 and 2012, Chinese M&As in Latin America and the Caribbean amounted to US$34.7bn, 79% of which went to the extractive sector. But between 2013 and 2021, the amount rose to US$65.1bn and 60% were concentrated in the infrastructure and energy sectors. 

However, Koop told the webinar, which was organized by think-tank The Inter-American Dialogue, that big operations will become scarce in the current global economic scenario. “China will still be a significant player in the coming years, but we might not see these massive, large-scale investments that we saw a few years ago.”

During the same webinar, Rebbeca Ray, a researcher at Boston University, said Chinese investors have an advantage because they emphasize a long-term approach. While US and European investors operate on a quarterly profit basis, Chinese investors consider a five-year profit basis.

Likewise, many Western investors sold their assets in the region following the Odebrecht scandal and amid falling growth rates between 2017 and 2019.

“[Western investors] said ‘we don’t have room in our portfolios to carry out assets that pay out slowly over long periods of time. If regional economic growth is slower than our forecasts, it no longer makes sense to hold on to these assets,’“ Ray said.