The Chile-China Paradox: Burgeoning Trade, Little Investment

Chile, a country that has been at the forefront of Latin America's growing links with China, embodies a paradox in terms of Chinese outward foreign direct investment (COFDI). On the one hand, bilateral trade has thrived, increasing fourfold since the signing of a free trade agreement in 2005, turning Chile into China's third largest trading partner in the region. On the other hand, Chinese direct investment in Chile has been low, much lower than in neighboring countries. In this article I explore the roots of this upsurge in bilateral trade while also explaining the reasons for the dearth of Chinese investment in a country traditionally considered to be attractive to foreign investors. Chile might be a victim of its own success as its economic accomplishments allow it to persist with investment policies that are currently daunting to Chinese investors.