China Latin trade links poised to expand

23/03/2010 | Lucien Chauvin

China’s economic links with Latin America will continue to expand as Beijing seeks to guarantee its supplies of raw materials, observers believe

China’s economic links with Latin America will continue to expand as Beijing seeks to guarantee its supplies of raw materials, observers believe.

The China National Offshore Oil Company (CNOOC) earlier this month announced the $3.1-billion acquisition of Argentina’s Bridas Corporation. The Marcobre copper deposit in Peru was acquired by China’s Sci-Tech Holdings from Canada’s Chariot for $244 million, with approximately $800 million more expected in capital investment.
Roberto Porzecanski, a Uruguayan expert on trade, told Emerging Markets this weekend: “I would expect the demand for commodities to continue ... there will certainly be demand from China for raw materials for construction, as well as soy, beef, etc., from Latin America.”

Porzecanski, who is completing a book on China and future of Latin American industrialization, said China’s incorporation into the IDB and the decision to sign free-trade agreements (FTAs) with countries in the region “makes perfect sense as part of a strategy to increase Chinese influence in Latin America”.

The FTAs “have an added layer that opens the way for preferential treatment for China and does give small countries more leverage,” he added.

Peru is the latest Latin American country to reach an agreement with China: a trade pact signed on March 1. China is now Peru’s second largest trading partner and has taken the number one spot from the US several times in the past 18 months. Peru’s government expects the agreement to add around 1% to GDP growth.

Mercedes Araoz, Peru’s economy and finance minister, said: “The agreement with China establishes solid rules of the game with safeguards, controls and conditions for investment and competition.”

Chinese companies continued to commit big investments to Latin America throughout the economic crisis, and are developing major mining projects in Peru and have invested in hydrocarbons in Colombia and Ecuador. China last year pledged oil investments of $10 billion in Brazil and $16 billion in Venezuela.

China is negotiating actively with the government of Argentina’s Rio Negro province on a range of investments that shows the breadth of its interest in the region. China’s Metallurgical Group Corporation acquired an iron ore mine, Sierra Grande, in Rio Negro four years ago and is now looking to diversify.

Rio Negro governor Miguel Saiz told Emerging Markets: “The experience with the mine has been positive and we are looking at other opportunities with China,”.

Among the possibilities are the construction and operation of two hydroelectric plants by Chinese companies, modernization of ports to dispatch higher volumes of grains, and the incorporation of lands through irrigation for soy bean plantations.

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