TCA Apr 2014


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In 2013, bilateral ties between China and Latin America continued to strengthen, exemplified by rising trade figures as well as the possible formation of a high-profile forum between China and Latin America, akin to the Forum on China- Africa Cooperation. In this edition, we review these evolving issues and highlight Costa Rica’s role as one of the most competitive economies in Latin America.


China-LatAm Briefing: China-CELAC forum proposed; Andean countries strengthen relations with China; and Latin America is recognised as a key food exporter to the Chinese market

➢ In February 2014, the “Going to Latin America” forum was held in Guangzhou by the Association of Public Diplomacy of China with support from the Ministries of Foreign Affairs and Foreign Trade and the NDRC. The forum was attended by officials, envoys and scholars from LatAm who introduced LatAm investment priorities and policies, their social and cultural characteristics and the path for Chinese enterprises to enter the region
➢ In January 2014, Ecuadorean Vice President Jorge Glas met with his Chinese counterpart, Li Yuanchao, in Beijing. Ecuador is seeking financial support from China for the USD 10 bn Refineria del Pacifico project, the most essential infrastructure project for President Rafael Correa’s administration. The Chinese government has indicated that a final financing deal for a 30% stake could be reached with CNPC and ICBC this year
➢ In January 2014, the Community of Latin American and Caribbean states (CELAC), a regional organisation comprised of the 33 countries in the western hemisphere minus the US and Canada, held its second summit in Cuba. One of the key outcomes of the summit was a special declaration of the establishment of a China- CELAC forum, the first of which is expected to be held in 2014
➢ Bolivian President Evo Morales visited Chinese President Xi Jinping in Beijing to further promote cooperation between the two nations in late December 2013. The two heads of state pledged to deepen cooperation in the mineral, high-tech and infrastructure sectors, with President Morales witnessing the launch of Bolivia’s first communications satellite at the Xichang Satellite Launch Centre in Sichuan province
➢ In December 2013, China’s Fifth Overseas Investment Fair was held in Beijing. Representatives from Argentina, Peru, Ecuador, Chile and Brazil participated and presented energy, tourism and telecommunications projects to potential Chinese investors. Looking to gain greater access to foreign markets, hundreds of representatives from Chinese companies attended, including the oil giants - CNOOC and PetroChina - and banks such as ICBC and China Development Bank
➢ In December 2013, Nobel prize-winning former chief economist for the World Bank, Joseph Stiglitz, stated that China’s demand for food and agriculture will help LatAm grow despite China’s economic slowdown. China’s maturing middle class and higher disposable income levels have led to greater demand for imports of meat and cooking oils, both of which LatAm has a comparative advantage in producing
➢ In November 2013, Mexico and China engaged in bilateral discussions between senior government officials and key business executives, including Mexico’s Secretary of Economy, Ildefonso Guajardo Villarreal, and Deputy Foreign Trade Secretary, Francisco de Rosenzweig, to help balance trade between the nations. In 2012, Mexico imported USD 56.9 bn from China while only exporting USD 5.7 bn, creating a trade gap of USD 51.2 bn
➢ The Seventh China Latin America and Caribbean Business Summit was held in Costa Rica in November 2013. The objective of the summit was to increase mutual understanding between Chinese and Latin American businesses and help facilitate an environment that would further increase trade. The Costa Rican Coalition for Development Initiatives, the China Council for the Promotion of International Trade and the Inter-American Development Bank collectively organised a separate investment forum, which presented information on Costa Rica to Chinese businessmen


China-LatAm Trade

Total Trade
➢ In 2013, China’s total bilateral trade with LatAm reached USD 261.6 bn, an increase of 7.4% y-o-y
➢ Brazil, Mexico and Chile were among China’s largest trading partners in LatAm, accounting for 32.7%, 14.1% and 12.7%, respectively, of China’s total trade with the region during 2013
➢ China registered a trade surplus of USD 6.9 bn with the region in 2013, an increase of 1.6% y-o-y Trade

China Imports from LatAm
➢ In 2013, China’s total imports from LatAm amounted to USD 127.3 bn, an increase of 7.5% y-o-y
➢ Approximately 69.2% of LatAm’s exports to China in 2013 originated from just three countries, namely Brazil (41.4%), Chile (16.3%) and Venezuela (11.5%)

China Exports to LatAm 

➢ China’s total exports to LatAm in 2013 reached USD 134.3 bn, an increase of 7.3% y-o-y
➢ In 2013, approximately 56.8% of China’s exports to the region were concentrated in Brazil (25.9%), Mexico (21.6%) and Panama (12.2%)


China-LatAm Investment

Major Recent Deals and Developments
➢ In February 2014, ICBC officially commenced operations in Lima, Peru, becoming the first Chinese-owned bank to enter the country’s financial sector. ICBC will initially provide financing to Chinese corporations operating in Peru, especially in the mining sector, as well as Peruvian exporters looking to do business
in China. Peru has been a key mineral supplier to the Chinese economy. ICBC also has a presence in Brazil and Argentina
➢ In January 2014, Chinese automaker, BYD, announced that it was considering making what would be its largest overseas investment in two manufacturing plants in Brazil. The USD 100 mn investment would involve the purchase of an existing plant and the construction of a new one, which would enable an annual production of 4,000 electric buses. BYD is currently in negotiations over the land-purchasing agreements with local authorities
➢ In December 2013, China’s Shuanghui International Holdings established a joint venture with Mexican frozen food company, Sigma, to purchase Campofrio, a Spanish meat processor. The USD 957 mn joint venture will combine Shuanghui’s previous 37% stake in Campofrio with Sigma’s 45% stake and a EUR 6.9 per share bid for the remaining shares
➢ In December 2013, China launched Bolivia’s first communications satellite into orbit. The satellite, built by China Great Wall Industry Corp., will improve telecommunications, radio, television and Internet access in isolated rural areas of Bolivia. The USD 302 mn projectwasfinancedprimarilybyaloanfrom ChinaDevelopment Bank and included the training of 80 Bolivian personnel who will control the satellite from two ground stations in Bolivia
➢ In November 2013, CNPC acquired the Peruvian subsidiary of Brazilian state-owned oil company Petrobras for USD 2.6 bn. Petrobras Energia Peru was sold to CNPC as part of a move to liquidate USD 9.9 bn in assets to offset the company’s high level of debt. The subsidiary owns 3 oil and gas blocks in Peru, which currently produce 800,000 tons of oil equivalent annually
➢ In November 2013, China Construction Bank acquired a majority stake in Brazilian bank Banco Industrial and Comercial SA, known simply as BicBanco, for USD 723 mn. The 72% stake in BicBanco was the easiest way for the Chinese bank to obtain a licence in Brazil and marks its first acquisition outside mainland China since 2009
➢ In October 2013, the exploration rights to the Libra oil field, the largest in Brazil, were auctioned off to a consortium of 5 international oil companies, including 2 Chinese oil giants. CNOOC and CNPC both acquired 10% stakes in the oil field for USD 700 mn each. The acquisition is essential for China’s growing need for energy security, particularly considering its interest in reducing its reliance on the Middle East for oil
➢ In September 2013, engineering and construction companies China CAMC Engineering, China Railway Corp and Spanish firm Yapilo were awarded a USD 250 mn contract to construct a railway through the landlocked nation of Bolivia. The project is considered a crucial upgrade of infrastructure in Bolivia and will help facilitate trade through connections to existing railway networks that extend to Atlantic and Pacific Ocean ports


China-LatAm Country Watch: Costa Rica

Brief Country Profile
➢ Costa Rica is a small, stable and progressive Central American nation with a GDP of USD 45.1 bn in 2012. With a population of 4.8 mn people, Costa Rica’s GDP per capita was USD 9,392 in 2012
➢ Costa Rica’s manufacturing sector produces 15.4% of its GDP, primarily producing electronics, but the economy also has strong tourism and agriculture industries

China-Costa Rica Trade
➢ Total trade between China and Costa Rica has grown at a CAGR of 21% since 2008, reaching USD 6.2 bn in 2012. Chinese imports of Costa Rican products have accounted for the majority of the increase, more than doubling in value since 2008—from USD 2.3 bn to USD 5.3 bn. Chinese imports from Costa Rica are comprised almost exclusively of electronic integrated circuits, accounting for almost 95% of imports in 2011. China exports mainly textiles and consumer goods such as mobile phones and shoes to Costa Rica
➢ After the free trade agreement (FTA) came into effect in 2011, total trade between Costa Rica and China increased by 62.6%. Chinese exports in 2010 (before the FTA) were USD 688.0 mn and have grown to USD 901.8 mn in 2012, increasing by 31.1%. Chinese imports from Costa Rica grew by USD 2.2 bn, increasing by 69.6% in the same period


China-Costa Rica Bilateral Ties
➢ In 2007, Costa Rica became the only Central American country to establish diplomatic ties with the PRC. In turn, China gifted Costa Rica with a USD 100 mn National Stadium, which was constructed entirely by Chinese workers and completed in 2011
➢ China and Costa Rica signed a FTA in April 2010, which came into effect in August 2011. Under the FTA, the two countries immediately allowed 60% of product categories, ranging from China’s manufactured and agricultural goods to Costa Rica’s minerals and processed foods, to enter each other’s markets duty-free. The gradual removal of tariffs will result in 90% of product categories to be duty-free by 2026. The FTA also liberalised services, as Costa Rica opened trade in services to 45 sectors including telecommunications, construction, education and IT. China allowed free trade in seven service subsectors such as IT, real estate, market research and translation
➢ In June 2013, Chinese President Xi Jinping met with his Costa Rican counterpart Laura Chinchilla, engaging in bilateral talks that resulted in the signing of 13 agreements, including upgrades to oil and transport infrastructure. China also agreed to fund a USD 400 mn upgrade of a key highway connecting the capital, San Jose, to the key port town of Limon
➢ Negotiations to establish a special economic zone (SEZ) for China in Costa Rica could be completed by late 2014. A SEZ would boost Costa Rican exports to China, create new jobs and enable greater technology transfer
➢ Chinese investment in Costa Rica is focused in bilateral agreements between the nations that fund key infrastructure projects for Costa Rica. Following President Xi’s visit in June 2013, China agreed to finance a USD 1.5 bn upgrade of an obsolete oil refinery in Limon. Once complete, the refinery will currently be capable of processing 65,000 barrels of oil per day that China purchases from other Latin American countries such as Venezuela and Ecuador



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