During a meeting with President Dina Boluarte, the Peruvian Association of Exporters (Adex) presented a series of proposals to prioritize citizen security and economic reactivation.

The Peruvian Association of Exporters (Adex) president, Julio Pérez Alván, reiterated the need for measures to promote economic reactivation to the Government. One of the new proposals presented in the meeting with the President of the Republic, Dina Boluarte, is the creation of special regimes for the Special Economic Zones in Peru (SEZs).

Income tax concessions need to be included as benefits to users of SEZs

The union representative highlighted the need for the Special Economic Zones in Peru to have a special tax and customs regime with 0% Income Tax and not 15% as recently approved by the Congressional Economic Commission.

“The new Agrarian Law and the regulations of Law No. 31969 are also pending, which promotes competitiveness and employment in the textile, clothing, agricultural and irrigation, agro-export and agro-industrial sectors and promotes their economic reactivation,” he added.

Previously, in November, the unions had already presented the ‘United Plan’ to promote economic reactivation. However,  Pérez Alván points out that, despite some progress, the sessions are pending to be held periodically, and the initiatives evaluated and adjusted.

He also indicated that investment in infrastructure is another critical aspect of economic reactivation. Therefore, he asked the President to implement an aggressive plan encouraging public and private investment, addressing the deficit in essential services.

Likewise, Pérez Alván reiterated the need to combat informality in the economy and strengthen the role of the Ministry of Economy and Finance (MEF) and the Sector Executive Boards, supporting competitive sectors such as forestry, aquaculture, tourism, and mining-energy.

Another request from Adex to the President is to resume coordination with business associations and unions to evaluate the proposals in the face of citizen insecurity and create a strategy.

“The continuous change of ministers and high command officers, the lack of resources, and other factors aggravate the situation. An immediate solution is required,” he said.

On this point, Pérez Alván pointed out that cases from other countries can be evaluated and adapted in our country.

Regarding the President’s next trip to China, which will take place from June 23 to June 30, 2024, where she will meet with her counterpart Xi Jinping, The leader of Adex described it as something positive, taking into account the importance of the Chinese market for the Peruvian economy and the upcoming creation of the Peru-China Business Council.

Special Economic Zones in Peru: Catalysts for Growth and Development

Special Economic Zones in Peru (SEZs), known as “Zonas Económicas Especiales” (ZEE) in Spanish, are designated areas that offer economic incentives and benefits to attract investment, promote exports, and spur regional development. These zones are part of the Peruvian Government’s strategy to stimulate economic growth, create jobs, and enhance competitiveness by providing an environment conducive to business operations.

Overview and Purpose

SEZs in Peru are established to foster industrial, commercial, and service activities. They provide a framework for companies to operate under more favorable economic conditions than those prevailing in the rest of the country. This includes tax incentives, simplified customs procedures, and infrastructural support. SEZs aim to attract domestic and foreign investments, stimulate technological transfer, and improve productivity by concentrating resources and creating a business-friendly atmosphere.

Locations and Number of SEZs

Peru has several SEZs strategically located across the country, each tailored to leverage the specific economic strengths of their regions. As of now, there are five major SEZs in Peru. They are:

Zona Franca de Tacna: Located in the southern city of Tacna, near the Chilean border. This zone capitalizes on its strategic position for cross-border trade.

Zona Franca de Ilo: Situated in the coastal city of Ilo, in the Moquegua region. It is strategically placed to benefit from maritime trade.

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Zona Franca de Paita: Located in the port city of Paita in the Piura region, it is designed to boost the export potential of the northern coastal area.

Zona Franca de Chimbote: Found in the city of Chimbote, in the Ancash region, this SEZ focuses on the fisheries and steel industries.

Zona Franca de Amazonas: Positioned in the Amazonas region, this zone aims to exploit the agricultural and ecological resources of the Amazon basin.

Types of Businesses Allowed in Free Zones in Peru

The types of businesses allowed to operate within these SEZs are diverse, reflecting their respective regions’ economic needs and strengths. Generally, they include:

Manufacturing Industries: These encompass various sectors, including textiles, electronics, automotive parts, and machinery.

Export-Oriented Companies: Firms engaged in the production of goods for international markets, such as agro-industrial products, seafood, and mining products.

Logistics and Distribution: Companies focusing on warehousing, distribution, and logistics services benefiting from the zones’ infrastructure and proximity to major transport routes.

Service Providers: This includes call centers, IT services, and other back-office operations that support global businesses.

Research and Development: Facilities dedicated to innovation, product development, and technological advancements.

Benefits for Companies located in SEZs in Peru

Companies operating within Peru’s SEZs enjoy many benefits designed to enhance their competitiveness and operational efficiency. Key advantages include:

Tax Incentives: Businesses benefit from reduced corporate income taxes, exemption from value-added tax (VAT) on imports and local purchases, and other tax reductions.

Customs Advantages: Simplified and expedited customs procedures, along with duty-free imports of raw materials, machinery, and equipment.

Infrastructure Support: Access to well-developed infrastructure, including transportation networks, utilities, and telecommunication services.

Labor Benefits: Easier hiring processes and more flexible labor regulations than the rest of the country.

Administrative Simplification: Streamlined bureaucratic processes, reducing the time and cost associated with regulatory compliance.

Conclusion

Special economic zones in Peru are critical catalysts for economic growth and regional development, offering various benefits that attract domestic and foreign investment. By providing tax incentives, simplified customs procedures, and robust infrastructural support, these zones create an environment conducive to business operations, fostering industrial, commercial, and service activities. The strategic locations of Peru’s SEZs, such as Tacna, Ilo, Paita, Chimbote, and Amazonas, enable them to leverage regional strengths and boost export potential. These zones accommodate diverse businesses, from manufacturing and export-oriented companies to logistics, service providers, and R&D facilities, all of which enjoy significant competitive advantages. The proposals by the Peruvian Association of Exporters to enhance the tax and customs regimes further underscore the importance of optimizing these zones to maximize their impact on Peru’s economic reactivation and growth. Therefore, special economic zones in Peru represent a pivotal element in the nation’s strategy to stimulate technological transfer, improve productivity, and secure a prosperous economic future.

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Brazil’s public policy seeks to align the country with practices of a new international landscape.

The Action Plan for Reindustrialization, known as the Nova Indústria Brasil plan (NIB), is not just a step but a significant leap in Brazil’s industrial development. Unveiled in January 2024 by the Brazilian federal government, it stands out for its unique political, historical, and contextual factors. In a world where industrial policies are making a comeback, the Nova Indústria Brasil plan is set to revolutionize Brazil’s industrial landscape.

The geopolitical tensions, particularly the deepening commercial and other conflicts between the US, China, and Russia, have created a crisis and served as a catalyst for Brazil’s urgent reindustrialization efforts. This underscores the pressing importance of the situation.

Geopolitical change requires strengthened domestic value chains

Of that geopolitical change, a new paradigm of relationships between international institutions is established, slows down globalization, and imposes central countries to adopt several internal policies, including industrial resumption for the recovery of supply chain production and technological development capacity, with less dependence on other markets due to of that instability in the relations between countries.

The nation’s industry, which will be revitalized in Brazil through NIB, has the potential to rejuvenate industrial segments that are far more complex and technological than what can be seen today. This new policy is not just a revival but a strategic move of great significance, aiming to re-establish the processes lost over time and steer Brazil’s industrial development in a new, more competitive direction.

It is an industrial policy that tries to stop deindustrialization, interrupting the process that disrupts supply chains in critical productive sectors in the country, as was the case with electronics. This state of affairs was mainly due to the inability of Brazilian domestic companies to compete with suppliers internationally, which is very competitive due to the cost of international capital and subsidies.

Reindustrialization is the goal of the Nova Indústria Brasil plan

The  Nova Indústria Brasil plan has two key objectives. First, it aims to halt the deindustrialization process that has disrupted essential manufacturing sectors in the country, such as electronics. Second, it seeks to connect Brazil with recovering its industrial fabric by supporting productivity and digital transformation for micro, small, and medium-sized companies through the Brasil Mais Productive Program.

The third objective focuses on international opportunities from an environmental point of view, as Brazil has an advantageous positioning in the face of the climate crisis and related issues.

Therefore, industrial policy becomes a decisive instrument of economic progress related to social demands and does not separate the worker class, as happened in past industrial policies.

On the contrary, workers organized in Brazil’s largest trade union, the Central Única dos Trabalhadores (CUT), a forum that brings together the confederations of the metallurgical, chemical, clothing, food, civil construction, and wood industries with the participation of the Labor, and the Industry and Development Institute debated and created the Industry 10+ Productive, Technological and Social Development Plan. This effort was organized by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese) with the contribution of different social actors, including teachers, university students, representatives of industrial segments, economists, sociologists, and scientists.

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Industry 10+ Plan is a component of Brazil’s efforts to reindustrialize

Industry 10+ Plan, a set of guidelines for the reindustrialization of Brazil, was delivered in 2022 to the then campaign coordinator​ of Inácio Lula da Silva, Aloizio Mercadante, and the coordinator of the Transitional Government, Geraldo Alckmin, vice-president and current minister of Development, Industry, Commerce and Services.

In April 2023, the National Industrial Development Council, CNDI, was recreated, and with the participation of workers, it was ensured that the essence of the 10+ Plan was included in the NIB.

An update of the Industry 10+ Plan adopted the concept of missions, developed by Professor Mariana Mazzucato, which establishes that public policies to encourage industry must be linked to social and human development, being able to resolve issues that improve people’s lives or that is, that industrial policy is aimed at solving problems that society faces, such as hunger, lack of basic sanitation, housing deficits, and health, education, and transport issues.

NIB is ensuring a floor of R$300 billion for industrial policy, of which R$250 billion will be mobilized by the National Bank for Economic and Social Development (BNDES) and the remainder by the Studies and Projects Financier, Finep until 2026.

A comparison is the Safra Plan, which made rural resources available to agricultural producers for approximately R$651.38 billion over the last two years. More than double the forecast for the industry.

Organizations such as Embrapa, in the case of agriculture, and Embrapii, Apex, and ABDI, in the case of industry, are fundamentally important for creating solutions and strengthening the Brazilian economy’s capacity to reinvent itself and innovate.

The Action Plan for Neoindustrialization needs to maintain and expand dialogue with society, including interested actors who can collaborate with proposals and concerns regarding and transforming the NIB into long-term state policy.

It is hoped that in a short time, the results will materialize, productivity will improve, industrial complexity will increase, and direct investments in the industrial sector will expand so that it is possible to confront new challenges by bringing together government, industry, and workers in a functioning policy continuum.

Over the coming decades, the Nova Indústria Brasil plan could be improved and expanded, calling for new challenges independent of government, with the industrial sector committed to building the policy and demonstrating its results to the Brazilian populace.

The Nova Indústria Brasil plan is a central plan that addresses macroeconomics, political disputes, commercial agreements, international relations, and Brazil’s positioning in the world because the country cannot concede the economic sector that has contributed the most to the nation’s economy.

What Brazil has today materialized during the industry’s period of greatest boom. The country’s economic growth, education, and health advances emerged in this industrial cycle. The Reindustrialization of Brazil has to be considered and valued.

The Nova Indústria Brasil plan is a transformative initiative to reindustrialize Brazil by addressing historical challenges and contemporary geopolitical tensions. It seeks to halt the deindustrialization process, enhance productivity, and promote digital transformation across key sectors, especially for micro, small, and medium-sized enterprises. By integrating environmental considerations and aligning industrial policy with social development goals, the plan aims to create a resilient and competitive industrial landscape. The active involvement of various social actors, including trade unions and academic institutions, ensures a comprehensive and inclusive approach. With substantial financial commitments and strategic guidance from the Industry 10+ Plan, the Nova Indústria Brasil plan positions the country to navigate future challenges and sustain long-term economic growth and development, reaffirming Brazil’s vital role in the global economy.

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The delegation comprised Foreign Minister Eduardo Enrique Reina, the Private Secretary of the Presidency, Héctor Zelaya, and the Honduran Ambassador to the United States, Javier Bu. Has presented the Honduran interoceanic train project to several countries. It is estimated that the project will require an investment of 20 billion dollars

A Honduran delegation visited the United States

An official delegation from the Honduran government recently conducted a tour of the United States to present the project of a Honduran interoceanic train, which seeks to connect the Pacific Ocean with the Atlantic to promote the development of Central America.

The first meeting in Washington was conducted with the Undersecretary of Economic Growth, Energy and Environment of the United States Department of State, José W Fernández.

The objective was “to advance bilateral issues with the United States and especially to discuss and present the scope and details of the interoceanic mega project that will transform the country,” said the Foreign Minister of Honduras, Eduardo Enrique Reina, who headed the delegation. He was accompanied by the private secretary of the Presidency, Héctor Zelaya, and the Honduran ambassador to the US, Javier Bu.

Fernández said he feels “deeply grateful” to the Honduran Foreign Minister for visiting and presenting the Honduran interoceanic train project.

The project “promises to be an engine of growth for Honduras and the entire Central American region. The United States greatly values its relationship with Honduras, and we look forward to finding new ways to improve our bilateral ties,” Fernández stressed on the X social network.

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The Honduran interoceanic train project is a long-term effort

According to Honduran authorities, the project, which has already been presented to other countries, will have an estimated investment of US$20 billion, and its construction will take between 10 and 15 years.

He added that the development scheme of this “megaproject will be through the creation of a transnational company.”

The National Commission for the Construction of the Interoceanic Railway (Confi), headed by Héctor Zelaya, is in charge of executing the Honduran interoceanic train project that aims to connect Puerto Castilla, in the Caribbean department of Colón with Amapala on the Isla del Tigre, Gulf of Fonseca, in the Pacific. Honduras, El Salvador, and Nicaragua share the Gulf of Fonseca.

The president of Honduras, Xiomara Castro, said in October 2023 that the Honduran interoceanic train project seeks to link the Atlantic with the Pacific. “It is a project to promote the economic and social development of the Central American region.

The Economic and Trade Benefits of the Honduran Oceanic Train Project

The Honduran Oceanic Train Project presents a transformative opportunity for the country’s economy by fostering increased international trade, job creation, foreign direct investment, and overall economic growth. This ambitious infrastructure initiative is poised to deliver significant benefits across various economic dimensions.

Increased International Trade 

The Oceanic Train Project is set to bolster Honduras’s position as a vital logistics hub in Central America. The railway will facilitate more efficient movement of goods by connecting the Atlantic and Pacific coasts. This will reduce transportation costs and transit times, making Honduran exports more competitive globally. Additionally, the project is expected to attract more maritime traffic to Honduran ports as shippers seek quicker and more cost-effective routes for their cargo. The enhanced connectivity will likely lead to increased trade volumes with neighboring countries and global markets, fostering economic integration and diversification.

Job Creation

The construction and operation of the Oceanic Train will generate substantial employment opportunities. The project is expected to create thousands of jobs in engineering, construction, and related sectors during construction. This employment surge will reduce unemployment rates and stimulate local economies through increased demand for goods and services. Once operational, the railway will require a maintenance, operations, and administration workforce, providing long-term job stability for many Hondurans.

Foreign Direct Investment resulting from  the Honduran interoceanic train project

The scale and scope of the Oceanic Train Project are likely to attract significant foreign direct investment (FDI). International investors and multinational corporations may view the project as an opportunity to establish a foothold in a growing and strategically positioned market. FDI inflows can bring in capital, technology, and expertise, which are crucial for the successful completion and operation of the railway. Moreover, the presence of foreign investors can enhance the country’s business environment and boost investor confidence, encouraging further investments in various sectors of the economy.

Economic Growth and GDP Enhancement

The cumulative impact of increased trade, job creation, and foreign investment will contribute to the overall economic growth of Honduras. The Oceanic Train Project is expected to enhance productivity by improving infrastructure, a critical component for sustainable economic development. The project’s multiplier effects will extend to various sectors, including manufacturing, agriculture, and services, leading to higher GDP growth rates. Enhanced trade routes and reduced transportation costs will also lower the price of goods, increase disposable income and consumer spending, and further drive economic growth.

Conclusion

The Honduran interoceanic train project, presented by a delegation including Foreign Minister Eduardo Enrique Reina and other key officials, aims to connect the Pacific and Atlantic Oceans to boost Central America’s economic development. With an estimated investment of $20 billion and a construction timeline of 10 to 15 years, the project promises to transform Honduras into a crucial logistics hub, enhancing international trade, job creation, and foreign direct investment. The initiative, spearheaded by the National Commission for the Construction of the Interoceanic Railway, is expected to generate significant economic growth by improving infrastructure, reducing transportation costs, and fostering regional economic integration.

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Javier Milei, Argentina’s new president, has called for reforming the country’s foreign policy and reducing ties with China. Transforming relations between Argentina and China won’t be that simple.

Since taking power in December, Argentina’s new government, led by the libertarian Javier Milei, has signaled a sharp turn in its foreign policy that could reconfigure the relationship with China.

Following the strengthening of the bilateral bond over the past two decades, which led to growing trade exchange, diplomatic cooperation, and more significant investment and financial assistance from China, President Milei and members of his team have now expressed their desire to raise greater alignment with the United States and at the same time the weakening of relations with China.

Analysts say that Argentina’s new positioning under the Milei government has raised alarm bells, given China’s great importance in the national economy: the Asian country is Argentina’s second trading partner and the destination of about 10% of its exports. At the same time, the structural and long-term nature of the trade and investment relationship allows us to anticipate a certain inflexibility of the association between both countries.

Milei’s decisions and gestures towards China

The most outstanding political event regarding the relationship with China since the Milei era began has been the refusal to join the BRICS group of emerging economies, a bloc of which China is a member along with Brazil, Russia, India, and South Africa. Argentina planned to join in January after being invited in 2023, thanks to the push from Brazil and China in the candidacy. In a letter sent to the group at the end of December, Milei maintained that the current foreign policy axes differ from those of the previous government of former President Alberto Fernández.

Asked about the situation in Argentina, Chinese Foreign Ministry spokesperson Wang Wenbin commented that China is ready “to work with Argentina to cement mutual political trust, enhance high-quality Belt and Road cooperation and take advantage of our complementary advantages.”

After this series of ups and downs in the first months of Milei’s government, Mondino and Chinese Foreign Minister Wang Yi met in February on the sidelines of the Munich Security Conference. Both took advantage of the occasion to reiterate their commitment to maintaining solid relations between Argentina and China.

In mid-January, Foreign Minister Diana Mondino met with the Chinese ambassador to Argentina and noted that “there is no doubt about the importance of commercial exchange between both countries.” In turn, the ambassador stated that she hopes that “the friendship and cooperation” between both countries will continue with the Milei government.

The commercial relationship between Argentina and China

Last year, China represented 7.9% of Argentine exports, totaling 5.3 billion dollars. It was the third largest buyer, behind Brazil and the United States. In addition, it represented 19.7% of imports, a total of 14.5 million dollars, only behind Brazil.

Among the main export products are soy derivatives, beef, grain barley, shrimp, prawns, and lithium carbonate. Meanwhile, among the imports from China are components for cell phones, televisions, and other electrical appliances, cars and auto parts, fertilizers, and electric generators.

Despite the bumps since Milei’s rise, it seems unlikely that the agricultural relationship between both countries will be affected, given its importance for both parties, suggests Mario Quinteros, a former Argentine diplomat in China: “Milei has had unconstructive attitudes in relationship to China. However, it is necessary to remember that China operates with a long-term perspective and that on a commercial level, there is mutual benefit: Argentina’s agricultural exports improve its trade balance but are also important to ensure China’s food supply.”

For his part, Gonzalo Ghiggino sees the relationship between Argentina and China as necessary. “Milei will most likely keep the relationship on autopilot. In the trade issue, there are certain risks, since although China can find new suppliers of soy and meat in Brazil, Australia, and the United States, Argentina would not find an alternative buyer to China.”

Economist Julio Sevares, author of the book “Clash of Giants: US vs. China and Reglobalization,” adds a vital point linked to the trade issue: “There are negotiations for the entry of products into China, such as wheat, which has just been approved after 25 years of negotiations. A possible commercial impact of the deterioration of political ties could occur on this side.”

A “cooling” of the relationship between Argentina and China?

Maria Francesca Staiano, coordinator of the Center for Chinese Studies at the University of La Plata, remembers that former president Mauricio Macri (2015-2019) also proposed prioritizing the alliance with the United States and Europe and campaigned politically with a speech that put into doubt Argentina’s ties with China. However, it was not as aggressive as Milei, who has called China a “murderer.”

However, Macri could only detach himself a little from the relationship between Argentina and China due to the deep economic interdependence and the current cooperation agreements. In fact, in 2017, he participated in the Belt and Road Forum in Beijing (although Argentina would not join the initiative until 2022, under his successor Fernández). “With Milei, the same thing is going to happen: after a first cooling phase, the situation is going to be recomposed,” says Staiano.

Jorge Malena, director of the postgraduate course in China Studies at the Argentine Catholic University (UCA), considers that although there were statements by Milei during the presidential campaign and at the beginning of his government that indicated a weakening in the relationship between Argentina and China, reality shows that during the start of the administration, a modification of the position vis-à-vis Beijing has taken place.”

An example of the change occurred when China suspended a tranche of the $6.5 billion currency swap negotiated under the previous Argentine administration.

Without this section of the swap, it would have been impossible to contain the fall in GDP to 1.1% and for unemployment to be at its lowest levels since 1991, given the historic drought,” explains Jorge Carrera, former vice president of the Central Bank of Argentina, referring to the three years of drought that seriously affected the country’s agricultural production. It would be a mistake for this government to neglect the relationship between Argentina and China and for this to affect this source of financing.

Investments

China has a growing investment impact in Argentina’s mining sector. Seven of the 12 projects with Chinese capital in the country are lithium, two gold-silver, one silver-copper-lead, one copper-gold, and one iron. For Ghiggino, “those operations are unlikely to be endangered because lithium has a strategic nature.”

Among the main investment commitments in lithium is that of Ganfeng Lithium, the Chinese mining giant, to develop the Mariana project and the agreement between Lítica

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 Resources and Ganfeng to acquire the Pozuelos Pastos Grandes project, both in the province of Salta.

Argentina has a currency swap line with China worth 18 billion dollars, allowing it to pay part of its international debts. During 2023, Argentina was able to use 5 billion dollars from the swap.

In turn, the Chinese company Shandong Gold has a 50% stake in the Veladero gold deposit, Zijin Mining is carrying out the Tres Quebradas lithium project in Catamarca, and the French mining group Eramet partnered with the Chinese steel company Tsingshan to develop the lithium plant in the Centenario-Ratones salt flat.

For the former Argentine ambassador to China, Diego Guelar (2015-2019), “China is not going to be tempted by short-term statements, and instead, the long-term vision will prevail. However, political ups and downs will affect the dynamics of infrastructure investments.”

The uncertainty surrounding infrastructure works with financial contributions from China takes on a very relevant dimension in the context of the abrupt decline in public works announced by the Milei government to carry out its strong fiscal adjustment plan. “Financing for infrastructure investments could fall in a context where it is more necessary than ever,” warns Gonzalo Ghiggino. At the same time, Guelar highlights the potential that Argentine provinces have to make cooperation agreements with their counterparts in China.

China’s most significant infrastructure investment project is the construction of two hydroelectric dams on the Santa Cruz River in the province of the same name. Although it began in 2015, political and macroeconomic instability delayed the progress to the point that the work still needs to be completed.

In renewable energies, China is also a central player for Argentina. Among the most relevant national projects financed by China are the Loma Blanca (Chubut) and Miramar (Buenos Aires) wind farms, operated by the firm Goldwind, and the Vientos del Secano project (Buenos Aires), by Envision Energy. In solar energy, the most relevant project is the Cauchari Park, the largest in the country, for which the province of Jujuy has agreed with the company Shanghai Electric Power to construct a new expansion by 2024.

Another important chapter of the relationship between Argentina and China is transportation. Among the most critical projects is rehabilitating the Belgrano Cargas railway line, which the Chinese company CMEC has been carrying out. The company has already spent almost $2.5 billion. CMEC also showed interest in financing the reactivation of the Norpatagónico Train.

The investment projects are part of the political agreements reached with China during the previous government, which include financing of 14 billion dollars under the mechanism of the Strategic Dialogue for Economic Cooperation and Coordination (DECCE) and a second package of 9.7 billion dollars that the country would present in the framework of its accession to the Belt and Road Initiative.

“Concerning investments, those originating from agreements between States or public organizations, which include a contribution from the Argentine State, have had difficulties for years and suffered delays and cancellations due to the lack of local funds, a situation that will worsen in the immediate future due to the fiscal adjustment program that the current government is carrying out,” says economist Sevares.

Conclusion

The future of the relationship between Argentina and China under President Javier Milei’s administration remains uncertain but complex. Despite Milei’s intention to shift Argentina’s foreign policy alignment towards the United States and reduce ties with China, the deep economic interdependence between the two nations presents significant challenges to any drastic policy changes.

China is Argentina’s second-largest trading partner, a vital export destination, and a significant source of imports and investment. This economic relationship encompasses key sectors such as agriculture, mining, and infrastructure, making a complete severance impractical. Furthermore, Argentina’s reliance on Chinese financing and investment for infrastructure projects and economic stability underscores the structural inflexibility of the bilateral relationship.

While Milei’s initial gestures, such as rejecting Argentina’s planned entry into the BRICS group and expressing strong rhetoric against China, signal a potential cooling of relations, the mutual benefits derived from trade and investment suggest a more nuanced evolution. Analysts predict that after an initial phase of political tension, the relationship between Argentina and China will likely stabilize, driven by long-term economic interests and practical necessities.

China’s strategic investments in Argentina’s mining sector, particularly in lithium, and its involvement in critical infrastructure projects like hydroelectric dams and renewable energy initiatives highlight the ongoing importance of Chinese capital. Despite Milei’s fiscal adjustments and potential reductions in public works, these investments are expected to persist due to their long-term nature and strategic importance.

The relationship between Argentina and China will likely experience periods of tension and realignment under Milei’s presidency. However, the deep-rooted economic ties and mutual benefits will compel both nations to navigate these changes pragmatically, ensuring that their potentially altered partnership remains robust and essential for Argentina’s economic stability and growth.

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Despite the challenges of low growth, weak expansion, and institutional instability in some countries, Spanish investment in Latam remains robust. Companies plan to significantly increase their investments in 2024, a region that already holds significant weight, accounting for more than 58% of large national Spanish companies and 38% of SMEs.

Cuba, Nicaragua, and Venezuela lag behind

This year, Spanish firms strategically directed their interest toward Mexico, Chile, Colombia, Peru, Brazil, Panama, and the Dominican Republic. These countries are perceived as the most attractive destinations, reflecting the current market conditions and geopolitical factors. In contrast, Cuba, Nicaragua, and Venezuela, while still part of the region, are not the primary focus due to their unique challenges.

According to the ‘XVI Spanish Investment Report in Ibero-America’ from IE University, Spanish companies plan to increase their investments in Latam in 2024 and express robust confidence in the region’s economic future. A significant 82% of these companies expect their turnover in the area to increase in the next three years, a clear indication of their positive outlook and belief in the growth potential of Ibero-America. This optimistic view is a strong endorsement of the region’s economic prospects.

Among SMEs, 80% plan to increase their investments in 2024. Of these, 60% will focus on organic growth, while 38% will combine organic growth with strategic purchases. Only 2% plan to reduce their investments, indicating a strong belief in the growth potential of Ibero-America.

Most Spanish companies (73%) anticipate a similar economic situation in 2023, a year that performed better than initially predicted. This positive outlook is solid for Mexico, which, despite the institutional stoppage due to the presidential elections, is ranked first in both valuation and as the best investment destination. Such optimism reflects the resilience and confidence of Spanish companies in the face of challenging economic conditions.

Companies with Spanish investment in LATAM believe that Mexico, Chile, Colombia, the Dominican Republic, Uruguay, Brazil, Peru, and Panama will have the best economic performance in 2024. On the contrary, they believe that Bolivia, Nicaragua, El Salvador, and Cuba will be the countries with the most complicated situation. Argentina leaves the last positions due to the expectation created by Milei, and Ecuador drops due to violence, despite the change with its president Noboa.

Spanish companies foresee more investment in 2024 in 7 of the 19 Ibero-American countries, mainly in Mexico and Colombia. Chile, Peru, Brazil, the Dominican Republic, and Panama are positively viewed. The investment will be maintained in the rest of the markets, including Argentina, Ecuador, Uruguay, and Paraguay.

The risks perceived by companies with Spanish investment in LATAM  have increased significantly for the second year, and a growing number of firms see political instability (84%) as a significant risk or threat to their businesses. Citizen insecurity is becoming more and more worrying (45%). Among the challenges, companies also point out the weight of inflation and exchange rate instability and their impact on sales (49%), as well as legal uncertainty (40%), the economic slowdown (35%), and the deficiency in infrastructure. (18%). Political instability is worrying for companies with Spanish investment in LATAM. This is the case, particularly with countries such as Ecuador.

Regarding the competitive attractions to investing in the region, 67% of the firms highlight, by far, the internal markets (especially Brazil, Mexico, and Colombia) ahead of qualified labor (33%), highly valued in Colombia, Argentina, and Chile. Also, access to raw materials (27%), free trade pacts (27%), the competitiveness of the area (24%), and an advantageous geographical location (22%) are investor considerations. On the other hand, China, apparently the most feared for its penetration in Latam, is not considered a ‘risk’ by Spanish firms since 70% do not consider it a significant competitor.

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Tax frameworks affecting Spanish investment in LATAM

Brazil, Argentina, Venezuela, Colombia, and Bolivia are identified as the countries with the most complex fiscal environments for investors and, in the case of the first, are added protectionist policies that deter many SMEs despite the possibilities that the country offers. Panama, Paraguay, Uruguay, the Dominican Republic, El Salvador, and Honduras stand out as destinations with a more ‘friendly’ tax framework. However, for more than 50% of the firms, taxation in the area does not sufficiently encourage their expansion there.

In terms of presence in Ibero-America in 2023, Mexico was once again where the most prominent companies (82%) and Spanish SMEs (62%) have investments. Colombia has 75% and 62% in second place, respectively. The list is completed by Chile (63% and 44%). Peru and Brazil have 53%. In Central America, Costa Rica and Guatemala are the countries with the most significant presence of Spanish firms. In contrast, Cuba has a percentage of Spanish investment focused on tourism only 2%. Companies put the brakes on investment there in 2023 due to the economic crisis and poor infrastructure.

Mexico City is the investors’ favorite

Mexico City is the metropolis Spanish companies prefer for the ninth consecutive year to locate their central operations in the region. But this year, Bogotá surpasses Miami in second place for the first time, although when deciding where to live, Miami remains the preferred place, followed by Santiago de Chile. Fifty companies with a presence in the region have collaborated in the IE University report, including Santander, BBVA, CAF, Abertis, Iberia, Mapfre, Ríu, and Telefónica.

The report was released shortly after the World Bank (WB) lowered Latam’s growth expectations for this year from 2.3% to 1.6% (2.2% in 2023) due to the economic situation in Argentina and violence and insecurity, which hinders macro progress in several countries in the area and makes Spanish investment in LATAM difficult. By 2025, the World Bank forecasts growth of 2.7%.

Brazil will grow 1.7% this year and 2.2% next year; Mexico will do so at a rate of 2.3% and 2.1%; Chile, 2% and 2.2%; Colombia of 1.3% and 3.2%; Costa Rica of 3.9% and 3.7%; Ecuador, 0.7% and 1.7%; Peru of 2.7% and 2.4% and Uruguay of 3.2% and 2.6%. For its part, Panama will advance by 2.5% and 3.5%; Dominican, 5.1% in 2024 and 5% in 2025; Guatemala, 3% and 3.5%; Nicaragua 3.7% and 3.5%; El Salvador, 2.5% both years; Honduras, 3.4% and 3.3%; Paraguay, 3.8% and 3.6% and Bolivia 1.4% and 1.5%. Argentina will see GDP fall 2.8% this year and grow 5% in 2025.

In conclusion, Spanish investment in LATAM remains robust and optimistic despite the region’s challenges, including political instability, citizen insecurity, and economic volatility. Both large and SMEs, Spanish companies are significantly increasing their investments, particularly in Mexico, Colombia, and Chile, while strategically avoiding higher-risk countries like Cuba and Venezuela. The favorable outlook is driven by solid internal markets, access to qualified labor, and advantageous trade pacts, with Mexico City remaining a key hub for Spanish operations. As economic forecasts indicate modest growth for many LATAM countries, Spanish firms are poised to capitalize on the region’s potential. This underscores the enduring confidence in Spanish investment in LATAM’s economic future.

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