While the US is flexing its military muscle in the Caribbean with warships and B-1 bombers, China is waging a more discreet battle in Latin America: The race to back the region’s most promising start-ups.
For Latin American entrepreneurs, the arrival of Chinese investors with deep pockets amid a severe funding drought is welcome news. Yet founders beware: In today’s overheated great-power rivalry, accepting Chinese money could complicate their ambitions to expand in the US in the future or eventually list on US exchanges.
Venture capital might operate largely out of sight, but if you talk to founders and investors across the region, a trend surfaces: Chinese firms are showing up to learn about local businesses and explore potential deals. They see in Latin America a new frontier for early-stage investing — a region that, in many ways, resembles China a few decades ago, with a rising middle class, markets ripe for disruption and much still left to build. Unlike at home, where they now face fierce competition and deflationary pressures, the playing field here remains wide open.
Chinese giants such as Didi Global Inc and BAI Capital are quietly prospecting for venture capital and investing opportunities, betting that Latin America’s next generation of entrepreneurs could produce another MercadoLibre Inc or NU Holdings Ltd, the region’s standout tech successes.
Didi has even set up an investment arm focused on getting deals in the region, hiring former executives from JPMorgan Chase & Co and McKinsey & Co to find opportunities, people familiar with the company’s strategy said, asking not to be named discussing private information.
Didi did not respond to an e-mail seeking comment.
The trend was underscored last week, when the international arm of Ant Group Co — the financial tech affiliate cofounded by Chinese tycoon Jack Ma (馬雲) — announced a capital injection into the embedded lending infrastructure firm R2, which operates in Mexico, Chile, Colombia, Peru and Brazil. The goal is to expand credit access for small and medium-sized businesses.
Beijing-based BAI Capital has backed Mexican fintech Stori, while launching MStar, a new auto finance company in Mexico. In March, Tencent Holdings Ltd participated in the latest funding round of Argentine fintech Uala.
Chinese investors are being drawn to the region partly as a way to diversify away from the constraints of their domestic market, including government and regulatory pressures. In Latin America, they could play to their strengths — particularly in artificial intelligence (AI) technology and their ties with China’s powerful original equipment manufacturers, which supply goods and components for global brands — to gain an edge in new markets. Many also aim to build entire ecosystems, as seen in the arrival of last-mile delivery firms such as J&T Express and iMile to serve Chinese online retailers, including Shein Group Ltd or PDD Holdings Inc’s Temu.
The renewed wave of Chinese interest — following an initial surge at the end of the past decade — comes as venture-capital activity in Latin America has collapsed from a record of about US$16 billion in 2021 to just about US$5 billion this year, according to the research firm PitchBook. That is fewer than 600 deals, putting this year on track for the fewest deals since 2018.
These new investors with access to cheap funding offer a much-needed lifeline to young companies, helping them expand, create jobs and generate wealth. Many can also tap into Chinese technology and know-how to scale up faster. For start-ups, it is a viable alternative, particularly when dealing with established companies that have a global footprint.
Still, the geopolitical undertones are hard to ignore. As Washington renews its focus on the region, partnerships with Chinese investors could draw political scrutiny, casting a shadow over access to the US market or even complicating plans to listing on US exchanges. Latin American entrepreneurs should weigh these risks before taking Chinese venture capital.
“The Trump administration is watching closely, especially around emerging tech like AI,” former National Security Council Western Hemisphere Strategy director Ramon Escobar said. “If US capital doesn’t move fast, founders will take Chinese checks — and with capital comes influence.”
Indeed, while Amazon.com Inc acquired a stake in Colombian delivery firm Rappi Inc and reportedly struck a similar deal with Mexico-based courier QualityPost, the potential for growth remains huge — and competition is heating up.
Ma’s Alibaba Group Holding Ltd in September announced that it would build its first data center in Brazil and expand operations in Mexico, adding to the facilities that Amazon, Microsoft Corp and Alphabet Inc’s Google have in the region.
For now, Washington remains absorbed by its two-headed effort to fight narcotraffickers and pressure Venezuela. However, soon enough, the geopolitical battleground in Latin America would be over technology — on what AI protocols and semiconductors countries adopt, what clouds, networks and submarine cables they operate, and, ultimately, which companies, industries and data they control.
That coming phase would test not only Latin American governments, but also investors and the private sector.
JP Spinetto is a Bloomberg Opinion columnist covering Latin American business, economic affairs and politics. He was previously Bloomberg News’ managing editor for economics and government in the region.
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