Chinese Investments In Latin America Lagging Trade Flows, Says Vincent Li, Diaz Reus & Targ, LLP Attorney

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China’s investments in Latin America have lagged behind the surging growth of trade goods primarily because of difficulties in assessing the risks and rewards in these ventures, according to Vincent Li, resident attorney in the Shanghai office of Diaz Reus & Targ, LLP, a global law firm based in Miami, Florida. Risk assessment a key issue for companies and state-owned entities says Li.

China’s investments in Latin America have lagged behind the surging growth of trade goods primarily because of difficulties in assessing the risks and rewards in these ventures, according to Vincent Li, resident attorney in the Shanghai office of Diaz Reus & Targ, LLP, a global law firm based in Miami, Florida.

“Investment lags behind trade growth because it entails long-term commitment, long-term involvement, and greater exposure to risks,” said Li at a recent conference, “China and Latin America,” in Beijing. Diaz Reus attorney Chad Purdie also moderated the session.

“Without effective professional assistance, historically risk-averse Chinese entities may hesitate before investing in Latin America,” Li added. “They need professionals to guide them through the Latin American jungle.”

In his talk, Li noted that the aggregate amount of Chinese investment in Latin America was US$30.6 billion through 2009, far below robust trade totals. In 2004, Chinese President Hu Qingtao predicted that China-Latin America trade would exceed US$10 billion a year within ten years. But that figure was eclipsed in just three years as annual trade volume surpassed US$10 billion from 2007 through 2009.

“China and Latin America need each other,” said Li. “China is looking at Latin America for its rich energy and mineral resources. At the same time, Latin America has a large demand for China-made electronic products, machinery, garments and home appliances. The large domestic markets and lower labor costs provide additional benefits from cooperation between China and Latin America.”

Li noted that Diaz Reus is assisting a number of Chinese state-owned entities (SOEs) that are investing in Latin America and representing mineral owners to Chinese investors interested in acquiring these resources. “Speaking from experience, Chinese companies looking to invest in Latin America should be aware of the key legal risks, including fraud and breach of contract, protectionist laws, as well as the political, regulatory, economic and operational risks,” Li said.

He suggested that Chinese investors carefully assess the credit and transactional history of potential business partners; fully understand Latin America’s laws; carefully draft contracts to include a choice of law and forum selection clause; and require arbitration in a neutral third country as a dispute resolution mechanism.

Miami-based Diaz Reus & Targ, LLP, is a full-service international law firm focusing on litigation, trade, customs, financial, commercial and corporate transactions, tax, immigration, and arbitration matters. The firm operates offices in Miami, and Orlando, Florida; Shanghai, China; Mexico City, Mexico; Frankfurt, Germany; Caracas, Venezuela; Dubai, U.A.E.; Bogota, Colombia; Buenos Aires, Argentina; and Sao Paulo/Belo Horizonte, Brazil. For more information, visit http://www.diazreus.com.

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