China, facing shortages in Asia, aims at South American suppliers
By Larry Rohter The New York Times
Saturday, November 20, 2004
SANTIAGO No matter that the United States has traditionally regarded Latin America as its backyard, source of many of the raw materials it requires and the main market for its finished products. Suddenly, China's presence can be felt everywhere in the region, from the backwaters of the Amazon to mining camps in the Andes.
Driven by one of the largest and most sustained economic expansions in history, and facing bottlenecks and shortages in Asia, China is increasingly turning to South America as a supplier.
It is busy buying vast quantities of iron ore, bauxite, soybeans, timber, zinc and manganese in Brazil.
It is vying for tin in Bolivia, oil in Venezuela and copper here in Chile, where last month it displaced the United States as the leading market for Chilean exports.
Regionwide, the door is opening enthusiastically to China's knock.
During a visit to South America that began on Nov. 11 and brought him here Thursday for this weekend's annual meeting of the Asian-Pacific Economic Cooperation conference, President Hu Jintao has announced more than $30 billion in new Chinese investments and signed long-term contracts that will guarantee China supplies of the vital materials it needs for its factories.
Though President George W. Bush arrived here Friday to attend the same conference, the United States, preoccupied with the worsening situation in Iraq, seems to have attached little importance to China's rising profile in the region.
If anything, increased trade between Latin America and China has been welcomed as a means to reduce pressure on the United States to underwrite economic reforms, with geopolitical considerations pushed to the background.
"On the diplomatic side, the Chinese are quietly but persistently and effectively operating just under the U.S. radar screen," said Richard Feinberg, who was the chief Latin America adviser at the National Security Council during the Clinton Administration. "South America is obviously drifting, and diplomatic flirtations with China would tend to underscore the potential for divergences with Washington."
Chinese investment and purchases are seen as vital for economies short on capital and struggling to emerge from a long slump.
In Argentina earlier this week, for example, Hu announced nearly $20 billion in new investment in railroads, oil and gas exploration, construction and communications satellites, a huge boost for a country whose economic vitality has been sapped ever since experiencing a financial collapse and debt default in December 2001.
But political relations also seem to be advancing rapidly, most earnestly with Brazil, Latin America's most populous nation, where the left-leaning government has in recent months repeatedly floated the idea of a "strategic alliance" with Beijing.
The Brazilian government has made clear that it views closer ties with China as a card that can be played to offset American influence and trade dominance. While not suggesting that China could soon replace the United States as Brazil's main customer and partner, the aim is to force trade and other concessions from the United States and rich industrialized nations.
"We want a partnership that integrates our economies and serves as a paradigm for South-South cooperation," President Luiz Inácio Lula da Silva said during a state visit to China in May in which he was accompanied by nearly 500 Brazilian businessmen. "We are two giants without historical, political or economic divergences, free to think only about the future."
Before his visit, da Silva even hinted at negotiating a free-trade agreement with China, a step that Chile this week announced it will take.
But China's impact in Brazil is already felt so strongly that the idea was quickly shelved after São Paulo business groups expressed fears of being overwhelmed by state-owned Chinese companies in their own domestic market.
In 2003, China became Brazil's second-largest individual trading partner, and in recent months the Chinese have been seeking joint ventures that would lift trade even further and give them a significant investment stake here. Brazil is one of the few countries that enjoys a trade surplus with China, and last year alone, exports to China nearly doubled, to $4.5 billion.
"Over the past three or four years, the growth in trade has been explosive," said Renato Amorim, formerly a diplomat in Brazil's embassy in Beijing and now the executive director of the Brazil-China Business Council.
"China is trying to assure reliable sources of supply of raw materials to deal with the shortages it faces, and since there are no conflicts on the political agenda, Brazil fits the bill."
Many of the minerals that will supply China come from a part of the Amazon known as Carajas, which has the largest, purest reserves of iron ore and other strategic minerals in the world.
At a complex at the mouth of the Amazon near Belem that produces alumina, the white powder that is refined from bauxite to make aluminum, production may soon double, with the bulk of it expected to go to China over the next decade.
Farther down the coast, China's Baosteel and Brazil's Companhia Vale do Rio Doce, the world's largest iron ore producer, are partners in a $1.5 billion steel venture that aims to manufacture up to eight million tons of slab a year. Upriver in Manaus, meanwhile, Chinese delegations are busy negotiating long-term deals to obtain timber. To the south, in the state of Mato Grosso, similar missions are trying to lock up supplies of soybeans and cotton.
The same is happening elsewhere, especially in agriculture. All across the South American heartland, from the Amazon to the pampas of Argentina, a boom in the cultivation of soybeans, used mainly as animal feed, has been propelled in recent years by the emergence half a world away of a Chinese middle-class with more income and a desire for more pork, chicken and beef.
Concerned by what they see as Chinese advances, Japan and South Korea are also stepping up their efforts to secure their own supplies of raw materials in the region. Prime Minister Junichiro Koizumi of Japan visited Brazil in September and President Roh Moo Hyun of South Korea has also scheduled trips to Argentina, Brazil and Chile, sandwiched around the Chinese visits.
"Within a few years there is likely to be a 'war' to develop raw materials," Park Yang Soo, president of state-run Korea Resources, told Reuters last month. "China is challenging aggressively," he added, leading to supply shortages and higher prices.
The few Brazilian analysts who have experience dealing with China are also urging their government to be cautious. Ideological sympathies or some vague notion of Third World solidarity, they say, should not get in the way of the national interest.
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