Economy

Latin America, A Perfect Fit For China's Global Trade Strategy

Peru, in particular, has had a key role since 1992, when it became the site of China's first foreign investment. China also likes the fact that Lima puts so few 'controls' on commerce.

A Peruvian miner at the Toromocho Project, run by Chinese owners.
A Peruvian miner at the Toromocho Project, run by Chinese owners.
America Economia

SANTIAGO — When China began opening its economy in 1979, approximately 30% of its population lived in cities. Today, urban areas are home to half the population. The demographic shift, involving some 350 million internal migrants, is not only unprecedented — it is still going strong. Chinese authorities expect the numbers to double within 25 years.

It is little wonder, then, that China needs so many resources and is investing so much in every corner of the world to obtain them. Latin America — and Peru in particular — are no exceptions.

Eduardo McBride Quirós, a lecturer at Peru's ESAN business school, says that with the recent purchase of the Bambas mine by a consortium led by China Minmetals Corporation, the amount invested in the mining and energy sector, or committed for investment in coming years, now stands at $20 billion. That includes sums Chinese investors have already paid to buy mines.

"Chinese investments in the mining sector are increasing and represent today more than 30% of the sector total. And there are no signs, at least in the medium term, of this trend stopping," says McBride. "China has a tremendous need for minerals, especially copper, zinc and iron. They will keep looking for opportunities here and in other countries to ensure they depend not on the market but on their own resources."

Carlos Aquino Rodríguez of Peru's Universidad Nacional Mayor de San Marcos (UNMSM) says Chinese investors are drawn to his country because of how few "controls" are in place and because economic ties between the two countries are longstanding.

"We should recall that China's first investment outside Asia was in Peru. That was in 1992 when Shougang won the privatization tender for Hierro Perú," says Aquino. "We also have the largest Chinese community in the region and were the third country in the world to establish diplomatic ties with China. These are factors that make Chinese investors feel very comfortable and make them prefer us over countries with the same resources."

That's not so say China is ignoring the rest of the region. Far from it. "Venezuela is a partner by default, having no access to international loans but badly needing investment. And China is one of the few countries ready to oblige, obviously with production guarantees," the UNMSM lecturer says. "The Chinese also have a lot of interest in Brazil and Argentina." Overall, 90% of Chinese investments in Latin America are in natural resources, according to Aquino.

Controlling product and price

Cynthia Sanborn of the Universidad del Pacífico says Chinese investments in Venezuela, Brazil, Argentina and Ecuador are focused in large part on hydrocarbons. China is also developing related infrastructure projects in those countries. Its main interest in Peru, in contrast, is mining.

"Chinese mining investment is diversified around the world and includes countries ranging from OECD members like Australia, to developing states like Burma and Zimbabwe," she says. "In fact Chinese mining firms are present in 17 Asia-Pacific states, at least eight African countries and six in Latin America and the Caribbean. They also have mining operations in Russia and Saudi Arabia."

ESAN's McBride notes that Chinese investments can take different forms, from buying shares in energy sector firms in Argentina and Brazil, to carving out a stake in Bolivia'a Mutún, the world's largest iron deposit. "Colombian and Ecuadoran oil are other examples of Chinese interests," he says. "China does not want to depend on the commodities market to acquire its raw materials, and wants to assure both the product and the price."

McBride says China is also trying through investments and loans to challenge European and U.S. hegemony in the world of foreign exchange and international financing. "We should bear in mind that China, alongside Brazil, Russia, India and South Africa, have just announced the creation of a $50 billion fund to function as a paralllel body to the IMF," he says. "Guess which country will run it?"

Professor Sanborn says Chinese firms want the same as those from any country: good projects, quality natural resources, low extraction costs and relatively stable social and political settings.

She also notes that the Chinese state (which owns most of these firms and finances all of them), has a strategic interest in accessing resources to help develop its enormous economy and diversify its presence in the world.

"So it helps its firms become more competitive and also meet global industry standards," Sanborn explains.

José de Echave, an NGO researcher who formerly held a post in the Peruvian Ministry of the Environment, agrees that China is now one of the main players in Peru's mining sector. "Looking at China's investment portfolio we see a country with the highest proportion of new investments," he says.

He also notes how important it is that these firms are public and follow a strategy set out by the Chinese state, unlike Western firms that follow their own strategies.

"Behind Chinese investment," de Echave says, "lies the strategy of an entire country."

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Spencer Tunick Nude Installation in Israel

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Salam!*

Welcome to Monday, where the UK pays homage to slain MP David Amess, Myanmar frees thousands of prisoners, and Facebook gets ready to build its "metaverse." Please fasten your seatbelts: Worldcrunch also takes stock of the long-lasting effects — good and bad — the pandemic has had on the air travel industry.

[*Azeri - Azerbaijan]

🌎  7 THINGS TO KNOW RIGHT NOW

Myanmar to free political prisoners: Myanmar's junta chief Min Aung Hlaing has announced the release of 5,636 prisoners who had been jailed for protesting the coup that ousted the civilian government in February 2021.

• Powerful Haiti gang behind the kidnapping of U.S. missionaries: The notorious 400 Mawozo gang is believed to be behind the kidnapping in Haiti of a group of Christian missionaries, including 16 U.S. citizens and one Canadian. The brazen kidnapping on Saturday comes as crime is spiking since the killing of President Jovenel Moise in July.

• UK to pay tribute to David Amess: British lawmakers will pay homage in parliament to colleague David Amess, who was stabbed to death Friday in what was described by the police as a "terrorist incident." Officers arrested a 25-year-old suspect whose father, Harbi Ali Kullane, worked as a media adviser to a former prime minister of Somalia.

• COVID update: Russia has registered more than 34,000 cases of new infections in the past 24 hours, a new record since the start of the pandemic. Meanwhile, police in the northeast Italian city of Trieste used water cannons to clear striking dockworkers protesting Italy's new requirements that all employees be vaccinated.

• At least 26 killed in floods in India: Torrential rain has triggered floods and landslides in India's southern coastal state of Kerala, killing at least 26 people.

• Facebook to hire 10,000 in EU to develop "metaverse": The U.S. social media giant plans to hire 10,000 workers in the European Union over the next five years to build a "metaverse," a virtual reality version of the internet that the company touts as the future.

Punishing parents for children's bad behavior: After limiting gaming hours for minors, China is now considering legislation to reprimand parents if their children exhibit "very bad behavior" or commit crimes.

🗞️  FRONT PAGE

Colombian daily El Espectador dedicates its front page to Alex Saab, "owner of the secrets" of Venezuelan President Nicolas Maduro. The Colombian businessman, wanted by U.S. authorities for allegedly laundering money on behalf of Venezuela's government, has been extradited from Cape Verde to the U.S. where he is scheduled to appear in court today.

#️⃣  BY THE NUMBERS

4.9%

China's economy registered its slowest pace in a year as the country faces a looming energy crisis with power shortages and increasing pressure on its property sector. Gross Domestic Product (GDP) for the period between July-September rose 4.9%, the weakest numbers since the third quarter of 2020 and significantly lower than forecasts. The world's second-largest economy faces a debt crisis linked to the China Evergrande Group debt crisis, while energy shortfalls have dropped factory output to its weakest since early 2020, when heavy COVID-19 curbs were in place.

📰  STORY OF THE DAY

7 ways the pandemic may change the airline industry for good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

⛽ Cleaner aviation fuel: With air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel. In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials

.🛃 Smoother check-in: The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

✈️ The billion-dollar question: Will we fly less? At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel, in particular, is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.


➡️ Read more on Worldcrunch.com

📣 VERBATIM

"The crimes committed that night are unforgivable for the Republic."

— Emmanuel Macron became the first French president to commemorate the killing of as many as 200 Algerian independence protesters by Parisian police in 1961. For 40 years, French officials ignored the massacre, which took place a year before Algeria gained its independence from France after an eight-year war. In 2012, French President François Hollande acknowledged the killings for the first time on a visit to Algeria, and Macron took it further by attending Sunday's commemoration at the site where the events happened in the French capital. Still, many had hoped the French President would go further and take responsibility for a "state massacre," for a crime many historians consider the most violent repression of a peaceful demonstration in post-War Europe.

📈💥  IN OTHER NEWS

​Low trust, high risk: The global rise of violence targeting politicians

The deadly stabbing of British Parliament Member David Amess confirms an ongoing study on trust and governance in democracies around the world: It's bad. In The Conversation, James Weinberg — the study's author and a lecturer in Political Behavior at the University of Sheffield — writes:

⏪ The assassination of Amess, who was stabbed to death in his constituency on Friday, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councilor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

☝️ Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

🇬🇧🇳🇿🇿🇦 Not only are these experiences of abuse or threats of physical violence felt across both sides of the political aisle in the UK — they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile, from New Zealand to South Africa.


Read the full piece from The Conversation, now on Worldcrunch.com

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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