China shops for oil, food, minerals in Latin America
Beijing lends and invests tens of billions of dollars in countries in return for a flow of commodities
Associated Press in Caracas 20 June 2011
Latin America is blessed with a wealth of natural resources such as oil, copper and soy, and needs financing to capitalise on them. China needs commodities to keep its economy growing and has about US$3 trillion in reserves to burn.
Those interests have come together in a burgeoning and unorthodox partnership, as China lends and invests tens of billions of dollars in countries around Latin America in return for a flow of commodities.
Recent deals have made China a key financier to the governments of Venezuela and Argentina. At the same time, Chinese companies have secured a decade’s worth of oil from Venezuela and Brazil, and steady supplies of wheat, soya beans and natural gas from Argentina.
China was breaking new ground by locking down resources around Latin America through large loans, investments and other financial arrangements, said Orville Schell, director of the Centre on US-China Relations at the Asia Society in New York. “I don’t know of any other government which has done this sort of securing of rights for commodities and resources so systematically around the [developing world] as China,” Schell said.
Large investments have gone to Brazil and Argentina, but China has extended even bigger loans to Venezuela, agreeing to provide more than US$32 billion to President Hugo Chavez’s government. Venezuela will pay its debt with increasing amounts of it during the next decade. The infusion of cash has made China Venezuela’s biggest foreign lender, enabling Chavez to boost spending ahead of next year’s presidential election.
“Viva China!” Chavez exclaimed during a televised meeting with business leaders from Beijing, thanking them for helping set up mobile phone factories and build railways and public housing in Venezuela. He gushed: “I’m in love with China.”
While the relationship is driven in part by Chavez’s eagerness to form alliances that exclude the US, it is also good business for Chinese companies: Venezuela says it has been exporting to China about 460,000 barrels a day, about 20 per cent of its oil exports, according to official figures.
“Venezuela has what we need,” said Chen Ping, political counsellor at the Chinese Embassy in Caracas. “And we also have what they need, for example technology ... Therefore we can help each other mutually.”
Chinese oil company PetroChina also agreed in 2009 to lend US$1 billion to state company PetroEcuador in exchange for oil deliveries. And the China Development Bank agreed to lend US$1 billion last year to Ecuador’s government, to be repaid through oil shipments.
In some cases, such as in Venezuela and Argentina, loans appear tied to hiring Chinese companies to carry out public works projects. Venezuela had become the China Development Bank’s biggest borrower, said Erica Downs, an expert at the Brookings Institution think tank in Washington.
Direct Chinese investments totalled more than US$15 billion in Latin America and the Caribbean last year - 9 per cent of the region’s foreign direct investment, according to a report by the UN Economic Commission for Latin America and the Caribbean.
The US is still Latin America’s largest investment source, but China has climbed to third place, behind the Netherlands.
In Argentina, Chinese companies have replaced US and British corporations in controlling stakes in lucrative natural gas and oil resources.
“Clearly, the US remains the significant actor in Latin America and will remain so for the foreseeable future,” said Eric Farnsworth, vice-president of the Council of the Americas, a US-based business group. “But China’s a huge part of the scene now. It was commodities exports to China over the last five years that allowed Latin America to weather the economic turmoil.”
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China shops for oil, food, minerals in Latin America
Beijing lends and invests tens of billions of dollars in countries in return for a flow of commodities
Associated Press in Caracas
20 June 2011
Latin America is blessed with a wealth of natural resources such as oil, copper and soy, and needs financing to capitalise on them. China needs commodities to keep its economy growing and has about US$3 trillion in reserves to burn.
Those interests have come together in a burgeoning and unorthodox partnership, as China lends and invests tens of billions of dollars in countries around Latin America in return for a flow of commodities.
Recent deals have made China a key financier to the governments of Venezuela and Argentina. At the same time, Chinese companies have secured a decade’s worth of oil from Venezuela and Brazil, and steady supplies of wheat, soya beans and natural gas from Argentina.
China was breaking new ground by locking down resources around Latin America through large loans, investments and other financial arrangements, said Orville Schell, director of the Centre on US-China Relations at the Asia Society in New York. “I don’t know of any other government which has done this sort of securing of rights for commodities and resources so systematically around the [developing world] as China,” Schell said.
Large investments have gone to Brazil and Argentina, but China has extended even bigger loans to Venezuela, agreeing to provide more than US$32 billion to President Hugo Chavez’s government. Venezuela will pay its debt with increasing amounts of it during the next decade. The infusion of cash has made China Venezuela’s biggest foreign lender, enabling Chavez to boost spending ahead of next year’s presidential election.
“Viva China!” Chavez exclaimed during a televised meeting with business leaders from Beijing, thanking them for helping set up mobile phone factories and build railways and public housing in Venezuela. He gushed: “I’m in love with China.”
While the relationship is driven in part by Chavez’s eagerness to form alliances that exclude the US, it is also good business for Chinese companies: Venezuela says it has been exporting to China about 460,000 barrels a day, about 20 per cent of its oil exports, according to official figures.
“Venezuela has what we need,” said Chen Ping, political counsellor at the Chinese Embassy in Caracas. “And we also have what they need, for example technology ... Therefore we can help each other mutually.”
Chinese oil company PetroChina also agreed in 2009 to lend US$1 billion to state company PetroEcuador in exchange for oil deliveries. And the China Development Bank agreed to lend US$1 billion last year to Ecuador’s government, to be repaid through oil shipments.
In some cases, such as in Venezuela and Argentina, loans appear tied to hiring Chinese companies to carry out public works projects. Venezuela had become the China Development Bank’s biggest borrower, said Erica Downs, an expert at the Brookings Institution think tank in Washington.
Direct Chinese investments totalled more than US$15 billion in Latin America and the Caribbean last year - 9 per cent of the region’s foreign direct investment, according to a report by the UN Economic Commission for Latin America and the Caribbean.
The US is still Latin America’s largest investment source, but China has climbed to third place, behind the Netherlands.
In Argentina, Chinese companies have replaced US and British corporations in controlling stakes in lucrative natural gas and oil resources.
“Clearly, the US remains the significant actor in Latin America and will remain so for the foreseeable future,” said Eric Farnsworth, vice-president of the Council of the Americas, a US-based business group. “But China’s a huge part of the scene now. It was commodities exports to China over the last five years that allowed Latin America to weather the economic turmoil.”
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