Spain's waning Latin America influence may regain pace

Subject

Spain's political and economic involvement in Latin America.

Significance

In the two decades leading up to the 2008 crisis, Spain saw its economic presence in Latin America grow rapidly as a result of investments in sectors such as banking, telecoms and public utilities. However, the crisis resulted in Spanish investment stagnating along with its political influence. With China having pledged as much as 250 billion dollars in investment by 2025, it is unlikely that Spain will maintain its position as the region’s second most important economic partner after the United States into the medium term.

Impacts

• The unlikelihood of major divestments by Spanish companies will limit opportunities for domestic firms to acquire profitable assets.
• More market-friendly regional governments than in previous decades will help mitigate the risk of renationalisations.
• China’s abundant capital for state-to-state financing will give it significant political leverage which Spain will be unable to match.
• The scope of Chinese financing is likely to broaden beyond its currently limited destinations.