SinoLatin Capital Explains Why China Needs Latin America

Erik Bethel, Managing Partner of SinoLatin Capital addressed the SuperReturn Latin America Private Equity & Venture Capital Conference

RIO DE JANEIRO–()–Erik Bethel, Managing Partner of SinoLatin Capital an investment firm focused on natural resource transactions between China and Latin America, addressed the 3rd Annual SuperReturn Latin America Private Equity & Venture Capital Conference, March 4th – 6th, 2013 at the Windsor Barra Hotel in Rio de Janeiro.

“The country has 20 percent of the world’s population, but only 7 percent of the world’s arable land. If people in China don’t have enough to eat, or if food inflation reaches unsustainable levels, it becomes a very serious sociopolitical problem.”

In his presentation, Mr. Bethel highlighted the socio and economic trends that continue to fuel China’s rapid ascension as a leading economic power. One of the main drivers fueling the country’s economic growth has been the largest urbanization drive in world history with 650 of its cities’ collective populations exceeding 600 million people. “China has a serious need for many natural resources like copper, soy, and oil. The need borders on national security,” noted Bethel. “The country has 20 percent of the world’s population, but only 7 percent of the world’s arable land. If people in China don’t have enough to eat, or if food inflation reaches unsustainable levels, it becomes a very serious sociopolitical problem.”

This rapid urbanization, coupled with China’s limited natural resources has lead it to expand its trade relationship with Latin America, which has an abundance of natural resources that China needs and whose growth is inexorably tied to the sale of those resources. Highlighting the growing symbiotic relationship, trade between China and Latin America increased 30% per year for the last decade to reach US$240 billion last year. China is the #1 trading partner of Brazil, Peru, Chile, Venezuela, and #2 in most of the rest. In terms of investing in the region, China has provided US$85 billion of debt financing to Latin America between 2005 and 2012 – surpassing the World Bank (US$53 million) and the IDB (US$67 million).

One of the questions posed at the conference is whether China’s perceived GDP slowdown will affect Latin American commodities. “Whether or not China slows by 1 or 2% this year (or not) misses the more important medium and long-term picture,” noted Bethel, “The longer-term China story is about demographics and urbanization. Despite a possible short-term expected drop in China’s GDP growth rate, the Chinese government has been facilitating the largest wave of human migration in the history of the world. For the last twenty years, hundreds of millions of people have moved from rural to urban areas, and there is still a long way to go. China is 50% urbanized, therefore there are still 700 million people living in the Chinese countryside. People that move to the cities buy cars, apartments, and white goods; their consumption patterns change. This factor – urbanization – is a much greater longer-term predictor of commodity consumption than GDP.”

In order to address, promote and expand this fledgling trade relationship, the Inter-American Development Bank (IDB) last October announced that it had selected SinoLatin Investment Advisors (SLIA), a joint venture between SinoLatin Capital and EMP Global, to manage a Latin America-focused Natural Resources Fund as part of an investment platform for Latin America and the Caribbean that is being created in partnership with the Export-Import Bank of China (China Exim). The Fund will focus on mid-sized projects and companies engaged in agribusiness, mining and energy.

“As the world’s most populous country and second largest economy, China has a vital strategic interest in accessing natural resources from global markets in order to keep fueling its economic growth. Given the region’s abundance of natural resources, Latin America has become an increasingly important investment destination. We are uniquely positioned to bridge this relationship through targeted acquisitions, providing our investors with strong and steady returns on their investments,” said Mr. Bethel, who will assume the role as one the Partners the SLIA Fund.

About SinoLatin Capital

SinoLatin Capital is the leading investment platform focused exclusively on China and Latin America. It generates long-term value for its clients and stakeholders through alternative investments management and financial advisory. With deep roots in Latin America and China, SinoLatin Capital has developed a unique understanding of the interrelationships between the two regions. SinoLatin Capital creates value through investment products that benefit from these regional complementarities.

 

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