Tags: china | latin | america

China Roars in Latin America; U.S. Not Listening

Monday, 27 Aug 2007 07:36 PM

By Joachim Bamrud

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China may be the powerhouse of Asia. But it now wants to become a power in Latin America, a region over which it has been steadily expanding its economic and political influence.

The Asian economic tiger is aggressively making inroads in South America, Central America, and the Caribbean as it seeks the resources to feed its super-heated economy. Some critics wonder if China's involvement will supplant the United States' near-hegemonic role in terms of trade and finance.

China's economy continues to grow at a dizzying speed - at rates of about 10 percent per annum over the past several years. With that enormous growth - typically three times U.S. GDP rates - the Chinese economy is in a global frenzy seeking raw materials to keep the juggernaut moving.

Today, Chinese companies are scouring Africa and Latin America and making huge investments, especially in the fields of oil, gas, and mining, to assure a stable supply of raw materials.

The numbers show the dramatic story. Trade between China and Latin America has soared, from a measly $2.29 billion U.S. dollars in 1990 to over $70 billion dollars in 2006.

With these economic ties, the People's Republic is also building military and political ties in the Latin world - especially with regimes like Venezuela's Hugo Chavez which are hostile to U.S. policies. As another sign of the growing ties between China and the region, Chile will host the first ever China-Latin America Business Summit this coming November.

"While the United States has been pre-occupied elsewhere, China has launched a diplomatic and economic offensive in the region, with uncertain intentions and outcomes," Sen. John McCain told the Florida Association of Broadcasters recently.

Meanwhile, an overwhelming majority - 83 percent - of Americans believes China's Latin American presence poses a threat to the United States, according to a recent poll by Zogby Interactive.

Here is a country-by-country overview of China's influence in Latin America.

ARGENTINA

China buys 23 percent of its soy from Argentina. During a visit to Argentina in November 2004, Chinese President Hu Jintao pledged about $5 billion in Chinese investments in the Argentine oil industry over five years.

Argentina has also cooperated with China on space projects, such as a satellite laser ranging project at Argentina’s San Juan University, and has discussed collaboration in designing a new-generation nuclear reactor.

BOLIVIA

Bolivia's air force has acquired two Chinese-made MA60 aircraft after getting a $35 million credit from Chinese authorities. The planes are scheduled to be delivered in October.

Chinese companies will participate in the exploration of El Mutun, Bolivia's largest iron ore deposit, Bolivian officials announced in August. Chinese companies may also invest in oil and gas in Bolivia.

In 2004, the Chinese companies Lutianhua Group - China's largest producer of urea for fertilizers and plastics - and China Chengda Chemical Engineering Corporation agreed to build an urea project in Bolivia with local partner, Iisa-Tum Par Group.

BRAZIL

U.S. officials are concerned about Chinese-Brazilian cooperation in satellite technology since it could lead to military applications associated with high-resolution satellite imagery.

Chinese-Brazilian trade is growing strongly. Brazil now accounts for 45 percent of China's soybean imports. Brazil-based CVRD (the world's largest iron ore producer) plans to build a steel plant in Brazil with Chinese steelmaker Baosteel.

Meanwhile, China-based Sinopec has signed several cooperation agreements with Brazil’s state-owned oil company Petrobras for joint oil exploration, production, refining, product sales, petrochemicals, pipelines, and technical assistance. They have also signed a memorandum of understanding regarding a $1.3 billion gas pipeline linking the southeast to the northeast of Brazil. And two other Chinese oil companies are in talks with Petrobras for similar joint operations.

In late 2004, Brazil gave China "market economy" status and opened up its economy to Chinese imports.

CHILE

China and Chile signed a free trade agreement two years ago and have boosted ties dramatically since then. There are now more than 5,000 Chilean businessmen in China and Codelco, Chile's state-owned copper company, is increasingly dependent on exports to China. Chile aims to become the key entry point for Chinese goods to Latin America.

COLOMBIA

Sinopec (and Indian company ONGC Videsh) last year paid $800 million to acquire a 50 percent share of oil company Ominex de Colombia.

COSTA RICA

China and Costa Rica are planning to negotiate a free-trade agreement following the formal establishment of diplomatic ties in June, five days after the Central American nation broke its long-standing ties with Taiwan. "Promises of closer trade and economic ties essentially lured Costa Rica into the diplomatic switch," U.S.-based consulting firm Global Insight said.

Trade between China and Costa Rica reached $2.1 billion in 2006, an increase of 87 percent from 2005. Trade has grown another 65 percent during the first half of this year. On August 22, Taiwan's President Chen Shui-bian accused China of buying Costa Rica's diplomatic relations with an offer to give up to $500 million.

CUBA

China played a key role in upgrading Cuba's air defense system and has a presence at Cuban military facilities at Bejucal and Santiago, which can potentially be used to collect intelligence data on the United States.

ECUADOR

Hong Kong-based Hutchison Port Holdings, which has close ties with the People's Liberation Army, plans to open a new terminal at the Pacific port city of Manta this year. Manta is home to a U.S. Air Force base through 2008, when its lease runs out. Hutchison received a 30-year concession for the terminal last year and plans to invest $523 million to build it. The Chinese presence could be used in the future by the Chinese state for intelligence collection or other activities, experts warn.

In March, Chinese officials included Ecuador on a list of nine countries that its oil companies should target for investments. A Chinese partnership invested $1.4 billion in 2005 to acquire the Ecuador assets of Encana and Chinese companies are currently operating oilfields previously owned by Occidental Petroleum, which was forced to leave in May 2006.

EL SALVADOR

Grupo Poma, a Salvadoran conglomerate, expects to sell 100,000 Chinese-made Cherry cars in Central America this year and another 300,000 next year, company officials said in August.

MEXICO

China has become the second-largest exporter to Mexico after the U.S. But in Mexico, China is seen more as a rival than a partner. Credit Suisse estimates Mexico lost a total of $15.7 billion in exports to the United States between 2002 and 2006 thanks to Chinese competition. Despite the tension, Mexico currently supports China's bid to formally join the Inter-American Development Bank.

PANAMA

Hutchinson-Whampoa has a 50-year lease on management of the ports on each side of the strategic Panama Canal. The port operations allow it to monitor military and commercial traffic transiting the canal, and potentially to deny transit through this strategic chokepoint, experts say.

Another Chinese company, Cosco Pacific, is among the bidders for the development of a rival port on the Pacific side of Panama. China may also participate in the $5.2 billion expansion of the canal.

PARAGUAY

Paraguay, the only country in South America still allied with Taiwan, has been looking for a free-trade agreement with China since 2005. An increasing share of Paraguay's soybeans are ending up in China via Argentina, Brazil or Uruguay.

PERU

The Chinese National Petroleum Corporation (CNPC) owns 45 percent of Pluspetrol Norte, the largest foreign oil operator in the country. CNPC subsidiary Sapet is also exploring for oil in an area near Peru's Camisea gas fields.

VENEZUELA

Venezuela is China's closest political ally in South America and has the most extensive military cooperation with the Chinese in Latin America outside of Cuba. It has bought three JYL-1 mobile air defense radars and is looking at also buying fighter jets from China.

Chavez has visited China four times, most recently in August 2006, when the two countries signed $11 billion in energy and transportation accords.

As U.S. oil giants ExxonMobil and ConocoPhillips were leaving their oil production in Venezuela's Orinoco belt this summer, CNPC was one of several foreign oil companies that reached an agreement with the Chavez government to continue their operations there. Sinopec plans to explore in the Orinoco area as well.

China and Venezuela also have a joint venture that plans to manufacture wireless phones in Venezuela.

In March, China and Venezuela signed various agreements that translate into investments worth more than $6 billion in Venezuela, of which the Chinese will provide $4 billion. The agreements included creating several joint venture companies that would explore for oil in Venezuela, produce oil in the Orinoco belt, provide maintenance for oil wells, transport oil and build ships.

China will also participate in the construction of three refineries in Venezuela for oil found in the Carabobo bloc, while Venezuela guarantees uninterrupted deliveries of oil to China. Those agreements come on top of a strategic energy plan that commits Venezuela to increase oil exports to China through 2011.

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