A comprehensive collection of scholarly, personal, and editorial articles relating to the growth and development of economic / political ties between China and South America-- with a focus on commodity rich countries in South America and commodity/energy markets.
Showing posts with label China's rising influence in latin america. Show all posts
Showing posts with label China's rising influence in latin america. Show all posts
Apologies on the lack of updates and coverage as of recent. I've been in transit from NYC --> Belo Horizonte and was stuck a few days without net or rather without easy access to the net in San Paulo.
Will be publishing from Belo Horizonte for the next few days.
China's Claim in Latin America: So Far, a Partner not a ThreatMonday, 28 July 2008, 4:57 am Opinion: Council on Hemispheric Affairs by Jamie HeineBy light years, Washington traditionally has held the upper hand when it comes to foreign influence on Latin America. Its hemispheric power-advantage rests on decades of security, trade, investment, and ideological connections. However, the era of globalization is now tearing down many of the world's hemispheric divides.
Latin America is rapidly diversifying its international relations as major regional powerhouses, such as China, increase their presence in the region. Many view China's growing influence in the western hemisphere as a challenge to the U.S.'s historic regional supremacy.However, the struggle for power and influence need not automatically reflect a winner-take-all competition, as both outside megaliths can benefit from China's presence in Latin America.China's Economic ExpansionChina's phenomenal economic growth in the past quarter century has helped motivate Beijing to globalize its industries.
From 1990-1998, China's average annual economic growth rate was 11.2 percent, compared to the world's average rate of 2.4 percent during the same time frame (China's Average Economic Growth Rate in the 90s Ranked 1st in the World 2000) and the country's growth rate is projected to remain above 8.5 percent for the next five years (Erikson 2008). Beijing's economic ties to Latin America have witnessed comparable growth: from 1993 to 2003, China's trade with Latin America increased by 600 percent (Xinhua News Agency 2004).
Chinese president Hu Jintao set the mark for increasing trade with Latin America to $100 billion by 2010, a goal easily met when trade surged to $102.6 billion in 2007, which represents a 42.6 percent increase from 2006 (Erikson 2008).
Click here to access the remainder of this analysis prepared by COHA Research Associate Jamie Heine
June 21 (Bloomberg) -- Banco Santander SA, Spain's biggest bank, forecast profit will surpass 10 billion euros ($15.6 billion) in 2008, a record, as growth in Brazil and elsewhere in Latin America offsets an economic slowdown in its home market.
``Banco Santander has shown its considerable strength in the face of the abrupt change in financial markets,'' Chairman Emilio Botin, 73, told shareholders today at the bank's annual meeting in Santander, Spain. Santander earned 9.06 billion euros in 2007, or 8.11 billion euros before extraordinary items.
Santander, which makes about 80 percent of its profit from retail banking, has sidestepped much of the collapse in the U.S. subprime mortgage market that so far has caused almost $400 billion in losses. Santander is doubling its presence in Brazil with the acquisition of ABN Amro Holding NV's bank and Botin said today he expects Latin American profit to increase 20 percent this year in dollar terms.
Santander has ``performed well in this environment and that's admirable,'' said Peter Braendle, a fund manager who helps manage about $60 billion at Swisscanto Asset Management AG in Zurich. ``But make no mistake -- they're facing many challenges.''
** Apologies once again for the lacking analysis in the past two days of posting, i'm traveling at the moment and unable to spend much time at the computer. Will make up for in the days to come!
As described in my previous post... Latin America is sadly trapped within mass media as a mere "attention grabbing story." I in no way what so ever intend to make this sound as if I am criticizing, Reuters, I have nothing but the utmost respect for the organization which is why I use their video "embed" feature. They truely do strive to offer unbiased reporting and are represented by the best of the world's journalists.
This post is simply a effort to convey the particular and unique attention that is given to Latin America as a whole. Colombian cocaine seizures soar --- Reuters
June 17 (Bloomberg) -- The yuan extended gains to 20 percent since China ended a fixed exchange rate to the dollar in 2005, passing the milestone as Treasury Secretary Henry Paulson prepares to meet with Chinese officials.
The currency climbed to a post-peg high of 6.8918 per dollar today as the People's Bank of China seeks faster appreciation to curb the cost of imports and slow inflation. The so-called Strategic Economic Dialogue in Annapolis, Maryland today and tomorrow will focus on energy and the environment after the yuan's advance eased trade tensions with the U.S. that dominated previous meetings.
``Inflation remains the dominant policy issue in China,'' said Sue Trinh, a currency strategist with Royal Bank of Canada in Sydney. ``The focus will be on more rapid appreciation of the yuan.''
The currency climbed 0.12 percent to 6.8918 a dollar in Shanghai as of 1:03 p.m., from 6.9004 yesterday, according to the China Foreign Exchange Trade System. It's risen 1.7 percent this quarter compared with a 4.2 percent advance in the previous three months.
The yuan may rise to 6.5 by the end of 2008, Trinh said.
China's trade surplus, which rose to a record in 2007, narrowed in May, for the first time in five months, while foreign-exchange reserves surged 40 percent to $1.68 trillion in March, flooding the economy with cash and fueling inflation.
Trade-Weighted Index
Goldman Sachs Group Inc. said in a report yesterday that the yuan will gain about 10 percent in a year as China stems inflation that slowed to 7.7 percent in May from the almost 12- year high of 8.5 percent in April. To cool inflation, the central bank has ordered banks to set aside bigger reserves five times this year after raising interest rates six times last year.
The currency has strengthened almost 6 percent against the dollar this year, nearing the 7 percent gain for all of 2007.
The Westpac Nominal Effective Exchange Rate, a trade- weighted index for the yuan that includes the euro and the yen, has climbed 5.7 percent so far this year, compared with the 3.4 percent gain for all of 2007. Gains in the yuan may accelerate versus the euro as policy makers calm criticism from officials in Europe and the dollar rises against major currencies.
``We are expecting to continue to see trade-weighted appreciation,'' said David Mann, a senior currency strategist at Standard Chartered Plc in Hong Kong. ``So the moves in the yuan may be more dictated by the broad dollar than was the case previously.''
Reform is Critical
China needs to move ``more quickly'' on yuan appreciation and exchange-rate reform will be ``critical'' to the country's social stability, said Paulson on June 10 in Washington. China's central bank said on May 14 that it will further increase the exchange rate's flexibility to curb price increases.
Gains in the currency attract speculative capital, injecting cash into the financial system already awash with money from the trade surplus and foreign direct investment.
China will strengthen monitoring of money inflows after the surplus for the capital and financial account, a measure of investment flows, jumped more than seven-fold in 2007 to $73.5 billion from $10 billion a year earlier, the State Administration of Foreign Exchange said on June 5.
The People's Bank of China said yesterday in a report that investors' expectations for continued appreciation of the yuan are attracting inflows of ``hot money,'' and should such expectations turn around, a ``massive outflow'' of money will affect China's financial security.
Forward Rates
The central bank may ``unexpectedly adjust the pace of yuan appreciation, like the stagnation in April, to deter investors betting on one-way appreciation,'' said Yang Shengkun, a currency analyst in Beijing at China Citic Bank Co., a unit of China's biggest state investment company.
China slowed yuan gains to 0.35 percent in April, the smallest monthly advance in more than a year, prompting traders to pare bets for the extent of yuan appreciation in the next 12 months. Inflows of ``hot money'' into China may have reached $500 billion last year due to trade, investment and firms borrowing abroad, according to research by Shanghai Securities Co. published in the China Securities Journal.
One-year non-deliverable forwards contracts, agreements in which assets are bought and sold at current prices for future delivery, show traders are betting on a 6.6 percent rise in the yuan to 6.4680 in the next 12 months. The yuan will reach 6.65 per dollar by year-end, according to the median estimate of 23 analysts surveyed by Bloomberg News.
Sneaking this in at the end of the post for all those out there who know what Bembos is--the Peruvian Fast Food Chain which competes quite admirably with Mc Donalds, KFC and other mainstream and international fast food names. The video is a bit long and can get boring, but here is the explanation of it from youtube. In short... a Peruvian fast food chain is expanding to India. It is simply incredible the exchange going on in today's globalized society, 20 years ago no one would have thought emerging markets like Peru and India would be cooperating in fast food among all else. The first video simply describes the deliciousness that is Bembos... sadly it's in Spanish, and I apologize for those of you out there who do not speak / understand it. There are subtitled videos available if you use either my search provided by google or go straight to youtube and simply type in "Bembos."
The South American fast food chain Bembos opened its first outlet in Delhi NCR yesterday at the Great India Place Mall in Noida.
Bembos has been maintaining its leadership in hamburger sales in front of strong competitors in the international market like Mcdonalds & Burger King in South America and are now eying the Indian market.
"Our three Bembos outlets in Mumbai are doing exceptionally well & we are very excited at the proposition of catering to people in the Delhi NCR region," said an upbeat Anil Kapur, the master franchisee of Bembos in India.
So what makes bembos special? Apart from the colourful interiors, the size, taste & price points are the USP of the Bembos burgers.
"We are elated at Bembos coming to India," said Carlos A Yrigoyen, the acting Ambassador of Peru in India, who along with his wife Regina inagurated the outlet. "Nothing is as delicious as a Bembos grilled burger, " Yrigoyen said.
Also present at the inaguration were Rahul Mittra CEO Brandsmith with wife Sarina, Dimple Kapoor, Bharati Chajjed Associate Director Standard Chartered, apart from heavy print & electronic media.
"Brandsmith is very happy to be associated with such a premium brand from South America, " said Rahul Mittra who has been accredited with successfully managing international brands like Ceres juices from South Africa & Weetabix from UK." We will ensure it gives the big daddies a run for their money, "said Mittra.
William Ratliff is Adjunct Fellow at the Independent Institute, Research Fellow at Stanford University's Hoover Institution. Published by the Jamestown Foundation, China Brief, and reprinted with permission.
The explosive growth of China’s links to Latin America in recent years are but the latest developments in a history that reaches back to the Spanish colonial empire in the early-16th century. In some ways the perceived benefits and liabilities have not changed much over the centuries, though they are now on a far grander scale. A Spanish padre wrote in 1669 that “one cannot imagine any exquisite article for the equipment of a house which does not come from China.” At the same time, however, Spanish barbers in Mexico City petitioned the government to relocate Chinese barbers to the outskirts of the city because they worked too much and that constituted “unfair business practice." Only during the militant Maoist decade of the early-1960s to mid-1970s was China’s primary interest in Latin America, which was marginal, to overthrow existing governments.
REALISTIC ANALYSIS
Some in the United States and Latin America worry that this rapidly rising China poses or will pose a security threat to the United States and the region. Many also worry that the influx of Chinese, with their different culture and institutions, will reduce the prospects for Latin reforms that promote open markets, political democracy, and greater respect for human and civil rights, including the rule of law. Responses to these concerns depend on what the Chinese and Latin Americans want and get from their contacts and on a realistic analysis of Latin America and broader Sino-U.S. relations.
China’s interests in the region include the following: to buy raw materials and foodstuffs and to invest in the production and transportation of those products to China; to export manufactures and other products to the region; to promote stability there so that business contracts will be signed and honored by predictable governments; to support a subtle reduction of the “unipolar” position of the United States in the world; and to win political recognition from the cluster of Latin American countries that still recognize Taiwan as the “one China."
Latin American countries want to sell China raw materials and manufactures to guarantee their historically unstable economies a foundation of assured income; to receive foreign direct investment (FDI) in many fields, including infrastructure, without the “strings” that are attached to funds from Western sources; to reduce economic and political dependence on the United States; and perhaps to get some Chinese ideas on how to develop a national economy under effective elitist leadership.
CHILE-CHINA FTA
Drawing these interests together, Chinese Ambassador to Chile Liu Yuqin said in March that “Latin American countries and China … must make joint efforts to face the great challenge of the globalized world” (La Nacion [Santiago], March 2). Chilean President Michelle Bachelet, speaking for many Latin leaders, told President Hu Jintao during a visit to China in April that her country and people realize that the 21st century is in the hands of Asia, and especially China (China Daily, April 14). In 2006 Chile was the first country to sign a free trade agreement with China and in 2007 China replaced the United States as the major recipient of Chilean exports.
Relations between China and Latin America today have progressed beyond commerce, though trade and FDI are still primary objectives on both sides. According to statistics reported by Jiang Shixue, deputy director of the Institute of Latin American Studies (ILAS) at the Chinese Academy of Social Sciences (CASS), one of the most important think tanks advising the Chinese government on Latin American policies, Sino-Latin American trade grew from $1.9 million in 1950—just after the People’s Republic of China (PRC) was formed—to $343 million in 1965. Trade expanded to $475 million in 1975, $2.572 billion in 1985 and $6.114 billion in 1995 (Nueva Sociedad 203, May/June 2006). In November 2004, addressing the Brazilian Legislature, President Hu predicted that Sino-Latin American trade would rise to $100 billion by 2010, but in fact it rose to $102.6 billion in 2007 with a surge of 42 percent over 2006. There are important differences, however, in the spread of benefits in Sino-Latin American trade. Some 60 percent is with Brazil, Chile and Mexico, and the latter has a large deficit (Latin Business Chronicle, March 24). The countries exporting raw materials and foodstuffs, from oil and copper to soya, are the ones with positive balances, while others—including Mexico and some Caribbean Basin countries that rely more on manufactures—are being swamped by Chinese goods, limiting this lucrative relationship for some to a traditional focus on only a few export products.
CHINESE FDI
In April a high-level Chinese official reported that by the end of 2006 almost $22.7 billion of China’s FDI had gone to Latin America (China Daily, April 16). While it is true that billions in FDI has been promised to Brazil, Argentina, Ecuador, Peru, Venezuela, Mexico and other countries, for exploration for and transportation of raw materials and foods that China wants to buy, and other projects, information on actual FDI paid out is “somewhat murky,” as Robert Devlin, a regional adviser for the UN Economic Commission for Latin America and the Caribbean, puts it. A major portion of Chinese FDI in Latin America appears to be “round-tripping,” that is the funds are invested in tax havens in the Caribbean and then sent back to China to take advantage of preferences given to foreign firms.
The most debated issues with respect to China’s expansion into Latin America are (1) the security implications for the United States and the region, with sub-set questions on Cuba and Venezuela, and (2) China’s potential anti-democratic impact on Latin American governments and social systems.
NO IDEOLOGICAL COLOR
For starters, unlike the United States and Europe, China has no history of invading and colonizing other countries beyond its immediate border, what is today called Greater China. Also, China has publicly tried to avoid alarming the United States because of the critically important Sino-U.S. relations. The deputy director of the ILAS has written that “China understands well that Latin America is the backyard of the United States, so there is no need for China to challenge the American influence” there (Nueva Sociedad 2003, May/June 2006). After U.S. Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon talked with Chinese counterparts in Beijing in 2006, a top Latin Americanist at the CASS in Beijing, Xu Shicheng, said Chinese policy “has no ideological color nor is it directed against the interests of any other country” (Nueva Sociedad 203). As analyst Gonzalo Paz has noted, China’s activity in the region “hasn’t sparked strong U.S. reactions yet. Washington has either shown indifference or has considered such activity relatively inoffensive” (Asian Perspective, No. 4, 2006). Indeed, in March U.S. Deputy Assistant Secretary for East Asian and Pacific Affairs Thomas Christensen said, “We believe that China can make positive contributions to economic growth [in the region]… through increasing both direct investment and foreign assistance, and can serve as an exemplar of how pragmatic economic policy and trade openness can lead to increased literacy, managed urbanization and poverty reduction” (Testimony to U.S.-China Economic and Security Review Commission, March 19).
U.S. policy itself has sometimes thrown the door open to China’s still restrained entry into military contacts in the region, prompting National War College Professor Cynthia Watson to remark, “If Washington is not interested in having a sustained, deep and satisfying, mutually respectful relationship with Latin America, the latter will turn elsewhere” (Testimony to U.S.-China Economic and Security Review Commission, March 18). The security issue must of course be investigated constantly by intelligence agencies and other researchers, but conclusions must be drawn with balance and knowledge of broader issues of Chinese and Latin American history and politics.
CHINA AND CUBA
China has become deeply involved in Cuba as the island’s second most important trading partner after Venezuela, but also to some degree in intelligence gathering, at a level, however, that does not seem to greatly upset Washington. Without pushing, it also offers an adaptable model for carrying out productive post-Fidel economic reform while leaders retain their political power (China Brief, May 10, 2006). Yet in the words of Mao Xianglin, an ILAS Cuba specialist, “Socialist Cuba can catch up with and surpass others only by moving rapidly to break out of its intellectual straitjacket and intensifying its reforms” (Latin American Perspectives, November 2007). Venezuela’s Hugo Chavez has tried without success to get China to join an anti-American front. Though it is exploring oil and other matters, on balance China has more to lose than gain from Venezuela’s efforts to destabilize the region and promote economic ideas that will certainly only make countries poorer and more unstable (China Brief, March 15, 2006).
Does or will China undermine democracy in Latin America? This is a hard case to make because Latin Americans have had almost 200 years of independence to establish truly representative democratic governments and productive market economies if they wanted them, but they have only rarely and incompletely come close to doing so. Even though a slight majority of Latin Americans say democracy is the best system of government, a considerable majority say it does not work for them (Latinobarómetro, November 2007). Thus, much of Latin America today is again flirting with caudillo (strong-man) populism, exemplified by Chavez in Venezuela, but also by his acolytes in Bolivia, Ecuador and Nicaragua. When one recalls that Mexico and Peru also very nearly went “Chavista” in their last elections, and Argentina is semi-Chavista today, you see the strength of this Latin love affair with paternalism and Messiahs who promise to right the innumerable “wrongs” that have characterized Latin society since even before colonial times. China’s preference lies with governments that succeed, and thus their relations have developed most rapidly and smoothly with Chile, and secondarily with Brazil.
POLITICAL TIES
Word has seeped out of Washington that at the Shannon meetings in 2006 the Chinese promised not to meddle in Latin politics. Last year the author asked a top Chinese Communist Party (CCP) official working in international affairs if China wanted to get involved changing political systems in Latin America. He said “No. Why should we? We are perfectly happy with a system controlled by elites that keeps real popular involvement to a minimum, so long as they do not crash and continue to enforce the agreements made with us” (personal communication, April 10, 2007). If Latin leaders, however, ask the Chinese for ideas, Chinese leaders will certainly accommodate them. Indeed, the Chinese make it a point of developing party and legislative connections with leaders of all political inclinations in all countries, if possible. As Jiang Shixue has noted, Chinese and Latin political leaders “exchange views on strategies to improve governance, the management of party affairs, political modernization and socioeconomic development.”
The challenges for Latin American countries in the years ahead include investing the profits from China trade and FDI, and using the inspiration of the Chinese example, to lay a long-term foundation for national well-being, cultivating whatever traditional cultural and civic values do not prevent the development of broadly based economic progress. This will mean both rejecting the temptations of hopeless and disruptive Chavista populism and carrying out more than half-hearted reforms, both changes that would also benefit China and the United States. China needs to reduce logistical problems of long distances, perhaps in part by more joint Latin ventures for the United States and Latin markets, cultivate greater common cultural ground, not least by increasing cultural institutes, and the like. Assuming the continuation of something like China’s current development trajectory, and a lasting major U.S. role in the Western Hemisphere, the two large nations could work together to promote a more stable and prosperous region that would benefit themselves and Latin Americans as well.
Traditionally it has been easier to blame someone else for the region’s seemingly intractable and widespread poverty and inequalities and today many Latin Americans have made the Chinese their "favorite villain," as Korean analyst Won-ho Kim wrote in a Mexican paper in 2004 (Reforma, June 20, 2004). In the end, Latin America’s failure to develop more responsive political—and more productive economic—systems was not Britain’s or America’s fault in the past, and it is disingenuous at this stage to suggest that it will be China's fault in the future.
As it stands, a “new economic order” is emerging as a global re-balancing of international economic power and influence occur. This “new economic order,” to be described in this working paper can be largely attributed to the increasing importance and presence of emerging markets in the world economy and inter-emerging market cooperation. Accounting for only the populations of the four largest developing nations; Brazil, Russia, India and China (BRIC countries), roughly 2.7 billion economic agents have become active competitors in the global economy. This research study focuses on the growth and cooperation of the emerging markets of China and the South American commodity exporting countries of Peru, Chile, Colombia, Brazil, Argentina and Venezuela, and, how to understand their cooperation the ramifications in the field of international investing..
Chinese expansion in the fields of trade and investment in South America, the general growth in Sino-South American relations and in particular, the countries of focus in this paper, has greatly altered the expectations of many economist and investors around the world. Economists and international investors have responded through creating new international models for their respective fields. For instance, many within the investment community have developed alternative investment strategies and portfolio diversification strategies with a international focus. Strategies, typically consider international factors such as market volatility, political risks, growth forecasts, and or advancements in technology—all of which are important indicators which help investors identify a strategic mix of investments in which to construct an international portfolio.
A unique aspect behind China's emergence as a global economic power, is that China remains (by western standards) a developing country, home to over 350-400 million people living below the international poverty. Never the less, China has managed to achieve global recognition while still being classified as an emerging market. With hundreds of millions in China yet to benefit, the country's economic growth and development is far from complete. Furthermore, China's recent materialization as the world’s second largest economy (in PPP terms) provides a clear message; no developed or developing country can afford to ignore or marginalize the affects of China's rapid economic growth (Colombia Futures Group; 2005). Referred to by many as; “the work shop of the world,” China has is now a major center of economic activity with ample capacity to further expand its influence and position.
Emerging markets such as China and India, both of which have over a billion people, evolve and become new engines of global growth—much like North America and Western Europe. Additionally, in light of globalization and ever increasing levels of international commerce and production matrices, emerging market cooperation has developed into its own respective engine of growth for developing countries—facilitating the rise of commercial exchange between regions which may have previously had little or no connections with one another, as China and South America have (Estevadeordal; 2006).
In response to the ever-increasing interconnectivity of economic activity in the world economy, emerging markets have managed to develop both their domestic capacities and establish significant levels commercial exchange with other emerging markets. When the global credit crises of late 2007-2008 emerged, it led to world-wide market corrections in developed countries real estate, banking, and financial sectors. The developing world, including the countries in this research, in part, where able to use their domestic and regional economies to compensate for the adverse effects of economic slowdown or recession in the US.
Despite problems which need to be addressed in the global economy, emerging markets discussed here show signs they will achieve favorable growth in 2008 and for the next few years to come. The countries of focus in this research all managed to achieve very positive growth rates in 2007. GDP growth rate data from 2006 and 2007, has been adquired from Bloomberg L.P reports. China achieved avg GDP growth of 10.7% over 2007. While, in South America GDP growth were calculated as: Peru 9%, Chile 5.2%, Colombia 7.8%, Brazil 4.8%, Argentina 8.7% and Venezuela 8.4%.
In 1970, two-way trade between China and all of Latin America, which includes Central America and the Caribbean region, was reported to be a meager $150 million. Additionally the majority of this exchange occurred between China and Cuba, largely because of ideological. In 1980, the figure had begun to change drastically, increasing 1000% o ver ten years to $1.5 billion (Li; 38-39). From 1984-2004, Chinese commodity imports from Latin America surged by a factor of 20. By 2005 two-way trade between the regions had increased another 900%, growing to over $50 billion. Trade data from 2004, provided by the International Monetary Funds direction of trade statistics estimates the total value of Chinese commodity imports at $200b USD (Santiso; 2007).
This blog will be a resource for all those interested in participating in exploring this new dynamic relationship.
Up to date news and relevant developments from reputable news agencies will be posted when they pertain to this growing cooperation and the emerging markets of South America and China.
Captivated observer and active participant in the growing exchange between countries in the Americas and East Asia.
Exhilarated by the process of identifying and growing local and international business opportunities.
Committed towards expanding my reality and nurturing a network of like-minded individuals and organizations from across the globe. Including but never limited to -- entrepreneurs, creative talent, educators, students, innovators, investors and new media journalists.
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