Over the past 10 years, China has loaned some $70.2 billion to Latin America for its energy sector alone, according to data from the Inter-American Dialogue’s China-Latin America Finance Database. How will Latin America’s energy sector be affected as China’s economic outlook and investment strategies evolve? How are low global oil prices changing China’s engagement with the energy sector in Latin America and the Caribbean? Is China responding to concerns about the environmental and social implications of the methods it uses when investing in the region’s energy sector? Will there be local unrest and pushback from the advances?

Guo Cunhai, associate research fellow at the Institute of Latin American Studies of the Chinese Academy of Social Sciences and founder and president of Comunidad de Estudios Chinos y Latinoamericanos (CECLA): "In the last two years, China’s sustainable economic growth faced pressure from structural reforms. The draft of the 13th five-year plan clearly emphasized that the driver of economic growth had to shift from investment to innovation. In the energy sector, the key to innovation is to promote energy structure optimization and to develop renewable energy. In the long run, China’s investment in the Latin American fossil fuels sector will fall, while investment will shift to renewables, but in the short term, China’s demand for Latin American energy will not wane. The fall in international oil prices provides a strategic window for China’s energy reform and will accelerate China’s transformation in investment in Latin America’s energy sector. Chinese authorities are increasingly concerned about the environmental and social issues caused by large investment in sectors such as energy, and one landmark was the 2015 Report on the Sustainable Development of Chinese Enterprises Overseas, jointly issued with the UNDP last November. The report aims to encourage Chinese companies to fulfill corporate social responsibility in the countries in which they’ve invested so as to make investment sustainable. The current economic difficulties in Latin American countries will be hard to turn around in the short term, and the associated increase in social risks may spill over to foreign firms, including Chinese ones."

Margaret Myers, director of the China and Latin America Program at the Inter-American Dialogue: "China’s energy security concerns still motivate much (though certainly not all) of what we see in the way of national oil company (NOC) and policy bank engagement in Latin America’s oil and gas sectors. Important elements of China’s energy bureaucracy continue to support a considerable presence in countries, such as Venezuela and Brazil, with abundant reserves. The China Development Bank (CDB) gave another $10 billion to Petrobras just last month. Uncertainty about Venezuela’s political and economic outlook could put a stop to CDB lending to Caracas in 2016. But China’s NOCs are staying the course in Venezuela, Brazil and Ecuador for the time being. Beijing has also focused more intensively on the region’s renewable energy and electricity transmission industries in recent years. The ‘1+3+6 cooperation framework’ encourages Chinese banks and firms to pursue deals in these and other strategic industries. Some Chinese firms have already done so successfully. Guodian (State Grid) is a veritable poster child in this respect, having expanded Brazil’s electricity transmission capacity while making good with local communities and promoting technology transfer. However, many other Chinese firms are deterred by the region’s complex and rapidly changing regulatory and investment environments. Future engagement depends, largely, on the state of China’s economy. Slowing growth at home has pushed some banks and firms to pursue even more opportunities abroad, including in Latin America. But a rapid decline in Chinese growth would have a dampening effect on economic engagement with the region’s extractive and other sectors."

Matt Ferchen, resident scholar at the Carnegie-Tsinghua Center for Global Policy in Beijing: "When looking at the China-Latin America energy relationship over the last decade and into the near future, one country stands out: Venezuela. No Latin American country has established a bigger, or more problematic, energy relationship with China than Venezuela. And in turn, China’s engagement with Venezuela stands out for its sheer scale, riskiness, and now, instability. In theory—and maybe at the beginning it approached this ideal—the relationship should have been simple and mutually beneficial: China needed oil and was willing to pay for a long-term energy partnership with Venezuela. And in turn, Venezuela sought to expand its oil export markets as well as to attract new sources of foreign energy investment; China fit the bill. What has gone wrong? Even before the dramatic drop in oil prices began in the middle of 2014, Venezuelan leaders’ politicization of the country’s oil resources and of PDVSA itself limited the expansion of oil flows to China. With the drop in oil prices contributing to the country’s steep descent into economic and political crisis, Venezuela is in an increasingly poor position to be the energy partner China had hoped it would be. Yet China has not been blameless, it’s banks and oil companies misunderstood and miscalculated the direction and instability of Venezuelan politics and economic management, and so failed to anticipate the inevitable and harmful effects on Venezuelan oil management and output. Going forward, the immediate future for China-Venezuela oil ties rests on whether China is willing and able to work with Venezuela and possibly other countries and institutions to help put Venezuela and its oil industry on a more sustainable path."

Ramiro Crespo, president of Analytica Securities in Quito: "Relatively lower economic growth in China will soften the demand for energy commodities over the coming years, which already has had important price consequences in specific markets. In an over-supplied oil market, the need to secure strategic sources of crude has diminished, and with that comes the reduced need for China to invest in certain countries in the region to guarantee future provision of energy commodities. For those countries receiving moderate-to-large investment/debt flows from Chinese sources, i.e. Ecuador and Venezuela, the scenario has deteriorated dramatically, evidenced by lower loan disbursements since 2014. Lack of transparency makes it very difficult to determine the real borrowers’ position with respect to China, particularly due to the ample use of oil-backed credit facilities that require the loan repayment with crude shipments. In terms of investment flows, Chinese companies have arrived in countries where a close relationship with the administration in power has sometimes resulted in less accountability and lack of respect for the rule of law. On the upside, the lack of interest from China could force some of China’s recipients to again focus on traditional Western companies, which frequently demand—unfortunately not always—higher transparency, environmental and human rights standards. On the policy front, lower Chinese inflows to some countries in Latin America could accelerate democratic transitions of power, many of which are long overdue. Chinese money has helped prolong the plight on the population of authoritarian regimes particularly in Ecuador and Venezuela."

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