Professor, School of Economics and Management, Tsinghua University

Director, Tsinghua University Latin America Center

Director, China-Latin America Management Research Center, School of Economics and Management, Tsinghua University

Professor Chen Taotao

First, the challenge of significant differences between China and the LAC region. Multi-level, multi-angular differences between the investing home country and the host country are challenges faced by all multinational enterprises. China and Latin America are geographically distant, with considerable differences in culture, history, politics, economy, and other aspects. Consequently, the systematic differences between us are inevitably more complex and profound. Chinese enterprises' investments in the LAC region began to accelerate after the first decade of the 21st century. Over the past decade or more, many pioneering enterprises have accumulated relatively rich investment experience. However, there is still a significant gap to achieving a deep and dynamic understanding and grasp of the host country's investment environment. Therefore, the challenge of significant differences persists and is long-term in nature.

Second, the challenge of the reversal of globalization trends. During the heyday of globalization, most countries firmly believed in the principle of "global distribution of industrial chains." Consequently, on one hand, they adopted an open attitude to attract foreign capital; on the other hand, they actively invested overseas, seeking optimal locations for industrial chain layouts. Currently, under the impact of the financial crisis, the pandemic, and the constantly changing world political landscape, countries are rethinking and adjusting their own development models and industrial chain layouts. How to more promptly and steadily adjust investment strategies in a context of dramatic changes in the world situation and developmental thinking, and continue to achieve good investment outcomes in the host countries of the LAC region, undoubtedly presents a severe test for our enterprises.

Third, the challenge of understanding the development orientation and re-industrialization trends in the LAC region. Most countries in the LAC region have followed the Washington Consensus and embraced globalization in their development processes, especially during the peak of globalization, when many countries experienced the out-transfer of industrial chains and concentrated on developing resource-based industries. However, after years of development, many countries are now keenly aware that they must lengthen their domestic industrial chains and possess industrial chain segments that create more added value to meet the needs of their national economic development and full employment for their people. Consequently, many governments have introduced policy initiatives to further develop their domestic industries. Simultaneously, based on their national resource conditions, industrial foundations, and years of experience with opening-up and development, some Latin American countries have also proposed clear development ideas for re-industrialization. For Chinese enterprises investing in the LAC region, timely understanding the changes in the host country's development thinking and strategies, and comprehending the underlying logic of its policy changes, are key to sustainable and effective investment and building a win-win situation with the host country.

Fourth, the challenge of achieving win-win development with host country societies. Here, what I emphasize is win-win with the host country's "society." This "society" includes many factors, but the most typical refers to "communities." During the process of undertaking investment projects in the LAC region, relationships with local communities are often involved. If considered only from the perspective that "if an enterprise causes impacts on a community during project execution, it is responsible for those impacts," this falls within the scope of Corporate Social Responsibility (CSR) as we generally understand it. However, within the atmosphere of Western democratic systems in the LAC region, the specific situations manifested vary greatly depending on government policies and regulations. Some countries have relatively clear government-guided policies or strategies, while others, due to weak government governance capacity, have a tendency to push enterprises to substitute for parts of local government responsibilities. How to respond to the corresponding situations in different countries directly affects the corporate image and reputation of Chinese enterprises in the host country, and in turn, affects the investment prospects of enterprises locally.

The above four challenges deserve high attention from all Chinese enterprises investing in the LAC region. Learning from local governments, enterprises, think tanks, and academia, and sharing experiences and jointly discussing with domestic partner enterprises, governments, and academia, are the current solution ideas and exploration directions for working together to tackle problems and collaborating. The Tsinghua University Latin America Center will conduct in-depth research on the challenges in the above aspects and strive to promote active discussions with colleagues from all sectors in China and Latin America.

March 2024