China’s quest to meet its natural resources needs has been largely concentrated on Africa, but its presence in Latin America has been creeping up over the past decade. Latam governments, however, are proving to be less co-operative than their African counterparts.
That China is not shy about securing its natural resources needs is well established. The country’s economy continues to grow at a jaw-dropping pace, and with it the demands of its population and businesses, but China is dependent on foreign lands for many of its requirements. It is estimated that soy bean import demand will rise from 37 million tonnes in 2008 to 83 million tonnes in 2020, and that crude oil imports will rocket from 179 million tonnes to an expected 1.74 billion tonnes in the same period – an increase of almost 1000%.
Luckily for China, many of the commodity rich countries of the world have welcomed it with open arms. However, the response to China’s growing appetite for the world’s resources is not always positive, and the country is beginning to discover that not every country is willing to hand over its riches easily.
The country’s corporates and state owned entities have for many years worked on a plethora of investment projects in Africa. In Angola, a staggering 300,000 Chinese people are employed in oil and infrastructure projects, says experts. China’s relationship with Africa is deep-rooted and long-standing, despite some
accusations of its colonial-style acquisition of resources.
LatAm is not Africa
But Africa is not the only natural resource-rich continent that China has its eye on. Central and South America are blessed with abundant resources, along with vast, fertile tracts of land. Unlike Africa, however, China does not have an established presence in Latin America – the country’s policy paper on investment plans in Latin America was only completed in November 2008 – and where the Americas are concerned, the relationship still needs fine-tuning.
While Latin America is reliant on foreign investments, it is unlikely to allow the huge influxes of capital and people that have characterised China’s presence in Africa.“To the Chinese, Latin America is more difficult [than Africa] to deal with,” says Erik Bethel, CEO of SinoLatin, a consultancy that advises Chinese firms on investing in Latin America. “Keep in mind that China has been in Africa for 40 years, initially for different reasons, helping the Africans with communism and socialism [programmes]. And for the past 40 years, China has invited African students to come to Beijing and to other cities to study. They learn Chinese and about petroleum engineering. The relationship between China and Latin America is still very new.”
A tense friendship
The relationship may be relatively new, but it is already causing tension. Growing interest in the purchase of agricultural land in Brazil, for example, has generated a wave of public resentment in the country, and has prompted the government to impose limits on such deals. Public officials point out, however, that this is not just a direct response to Chinese investments.
“[Land purchase] is sensitive in Brazil because there was a large movement of investments, but not only Chinese investments, it came also from the Gulf region, from Qatar and Saudi Arabia,” says Rodrigo de Azeredo Santos, the new head of UK commercial affairs for Brazil’s ministry of external relations, and its former head of investment promotion. “They were looking for opportunities to buy land and produce food for their countries. Although we still have lots of land, the increased interest turned on the [warning] lights.”
In August 2010, the interpretation of the current legislation that deals with foreign direct investment was altered to restrict single purchases of land to a maximum of 5000 hectares and no more than 25% of the territory of a single municipality. To put this into perspective, China National Agricultural Development Group Corporation initially intended to buy 100,000 hectares in Brazil to produce soy and corn in a $300m investment, and to then purchase an additional 250,000 hectares, according to Mr de Azeredo Santos.
“We are not against these investments but we would like to see more joint ventures with Brazilian companies in the agricultural business,” he says. “The new interpretation of the legislation was passed in August last year, so it is very new. Some new investment intentions might be revealed now, so we will see how [Chinese companies] plan to do them.”