Exploring Chinese outward foreign direct investment (OFDI) in natural resource sectors in Latin America, based on data covering aid, loans, and FDI, we find that similar to the case in Africa, the Chinese government builds relationships with countries in Latin America through loans and infrastructure projects, which, in turn, helps Chinese firms, especially state-owned ones, secure deals in the natural resource sectors. We also find that Chinese firms’ disputes with governments of Latin American countries are significantly lower than other firms’ disputes with these governments, indicating that the relationship building at the intergovernmental level serves to mitigate the opportunism of host governments, and minimizes political risk at the national level for Chinese firms. In addition, by investigating the social risk implications of the Chinese OFDI model for Chinese firms, we find that Chinese firms’ disputes with nongovernmental stakeholders are significantly higher than other firms’ disputes, indicating the limitation of the state-led Chinese OFDI model. Moreover, Chinese firms may lack firm-level capabilities to deal with the political and social risks arising from nongovernmental political forces.

Carlos Vecino, former industrial engineer, holds a Master of Science in Finance from the University of Illinois and a Ph.D. in Administration from the University of Montreal (HEC Montréal) with a focus in International Business and Finance. He is a full professor at the Escuela de Estudios Industriales y Empresariales – Universidad Industrial de Santander and has been a visiting professor of the department of Finance and the department of International Business at HEC Montréal. He has more than twenty-five years of academic experience as an undergraduate and graduate professor in Colombia and Canada. He’s also been a graduate program coordinator, a school director and a consultant for several organizations. Dr. Vecino is the author of several journal articles and papers in the business area, as well as books on topics such as the customs system in Colombia, Foreign Direct Investments in Latin America and Engineering Economy. Currently, he is an invited researcher at the Jack Austin Center of SFU.