A Tale of Should Be but Is Not: the Political and Economic Drivers of Limited Chinese Investments in Colombia

Chinese outward foreign direct investment (FDI) has been one of the economic tools China has used to engage South America. Although Colombia has been attracting inward FDI in quantities similar to other key regional states, its macroeconomic and sectoral features and investment attraction policies positively correlate with many of the factors known to attract Chinese outward FDI (OFDI), and both the Colombia and Chinese governments are committed to increasing Chinese OFDI (COFDI) flows to Colombia, COFDI volumes to the Andean nation have yet to live up to expectations. This puzzling case highlights the need for a better understanding of the political-economic factors that drive COFDI. My case study show that Colombia’s political and economic traits have been hindering COFDI. Regarding the former, Colombia’s local politics regarding extractive activities and bidding on infrastructure projects and its close relations with the United States function to create an adverse environment for increased COFDI. With respect to the latter, the international economic environment, especially regarding commodities’ prices, has impaired Chinese investment in Colombia. Overall, Colombia’s case underscores the delicate interplay of international, national, and subnational factors on COFDI flows.