Newswire: South America

[Brazil] -- Brazil strengthens state control over offshore oil reserves -- Xinhua
Brazil announced on Monday new oil exploration rules to increase state control over its recently discovered offshore oil reserves.

Under the plan, the state-owned oil and gas giant Petrobras will be the sole operator of the new oil reserves. It will also have a minimum 30-percent stake in all future projects in the pre-salt layer fields.

Brazil Tries to Maximize Offshore Oil Bonanza-- Latin America Herald Tribine
Brazilian President Lula revealed the government's plans to make Brazil one of the top 10 oil producers in the world and develop what he believes are the world's 9th largest oil reserves, but his announcement of increased state control and further equity sales shook markets, causing Petrobras to lose $7 billion in value in one day.

Petrobras Loses $7 Billion Value as Lula Seeks Stake -- Bloomberg
Brazilian President Luiz Inacio Lula da Silva’s plans for the development of the country’s offshore oil fields stripped Petroleo Brasileiro SA investors of $7 billion in a day.

The proposal, announced yesterday, may allow the state to boost its stake in the company and ensure most income from oil exploration “stays in the hands of our people,” Lula said at a press conference in Brasilia. Petrobras, as the Rio de Janeiro- based company is known, led the Bovespa stock index to the biggest drop in the Americas yesterday after the announcement.


[Venezuela] -- Chavez Says Venezuela Will Continue Oil Exports to U.S. -- Latin America Herald Tribine
Venezuelan President Hugo Chavez said that his country will continue exporting oil to the United States because it is in the Andean nation’s interest.

Chavez said in a statement published in the Lima daily El Comercio that “many people don’t know” that Venezuelan state oil giant PDVSA, through its Citgo subsidiary, has seven large refineries and more than 10,000 service stations on U.S. soil.

“Venezuela can’t take a decision against ourselves. We send the oil to our refineries and to our distribution systems in the United States,” he said.

Caracas Stock Market Up 3% for the Week -- Up 41% for the Year -- Latin America Herald Tribine
The Caracas Stock Index rose 3.16% for the week to close at 49,507 mostly on the back on the continued rise of Sivensa shares on continued optimism over the buyback of its shares to be considered at its shareholders meeting next week. Sivensa shares rose sharply, closing at Bs. 16.5 for a 37.5% rise.


[Peru] -- Two Wounded in Rebel Attack, Peruvian TV Reports -- Latin American Herald Tribine
At least two soldiers were wounded in an attack apparently mounted by Shining Path guerrillas Monday against a counterinsurgency base in central Peru’s Junin province, Canal N television reported.

The guerrillas opened fire around 3:30 a.m. on the Jose Olaya base in the strife-torn Valley of the Apurimac and Ene rivers, known as the VRAE region, Canal N said.


[Bolivia] -- Morales Named “World Hero of Mother Earth” by UN General Assembly-- Latin America Herald Tribine
The president of the United Nations General Assembly, Rev. Miguel D’Escoto Brockmann, on Saturday declared Bolivian President Evo Morales as “World Hero of Mother Earth” in a ceremony at the presidential palace in this capital.

With a medal and a parchment scroll, the General Assembly of the United Nations Organization named Morales “the maximum exponent and paradigm of love for Mother Earth” in the resolution for his decoration that was read during the ceremony.

Bolivia Cries Foul Over Peru Plans for Drilling in Titicaca -- Latin America Herald Tribine
Bolivian President Evo Morales’ government will present a formal complaint to Peru over its plans to drill for oil in Lake Titicaca without consulting La Paz, state-run news agency ABI reported.

Hydrocarbons Minister Oscar Coca sent Bolivia’s Foreign Ministry a note requesting that a formal complaint be made since the body of water straddles the border between the two nations, ABI said.

“Since Lake Titicaca is a bi-national area, it’s obvious that there can’t be unilateral actions” and therefore the matter requires a diplomatic solution, Coca said.


[Cuba] -- Cuba endeavors to raise farm output amid economic downturn -- Xinhua
Pressured by a global economic crisis and a stern U.S. economic blockade that has lasted nearly half a century, Cuba is actively seeking ways to boost its agricultural production.

The measures include turning over land close to cities to residents to plow, replacing fuel-burning tractors with oxen, redistributing fallow land and raising the prices of state-regulated farm products.

Weekend Newswire: Latin America

OAS can’t agree on Cuba, while Havana ridicules the organization
The task force created by the Organization of American States, OAS, in an attempt to bridge different members’ proposals to consider the readmission of Cuba seems to have stalled with the main actors clearly underlining their stance.


Colombia Cuts Benchmark Lending Rate to Record Low 5% to Stimulate Growth
Colombia’s central bank cut its benchmark interest rate to a record today and signaled it’s ready to lower it further in an effort to ward off an extended recession as inflation eases


Braskem Taps Peru, Venezuela in $3.6 Billion Expansion Outside of Brazil
Braskem SA, Latin America’s largest petrochemicals producer, plans to invest $2.5 billion in a polyethylene plant in Peru, said Cleantho de Paiva Leite, Braskem’s director of international projects.

Sao Paulo-based Braskem, which holds a 50 percent share of Brazil’s resins market, also is working on engineering studies for a $1.1 billion petrochemical plant in Venezuela with state- owned Pequiven SA, de Paiva said in an interview in Lima.


Venezuela Expropriations: Chávez Talks Himself into Trouble with Argentina's Fernández de Kirchner
The spark for the conversation sought by Fernández de Kirchner was a remark Chávez is reported to have made in private to Brazilian President Inacio Lula da Silva. That remark, it’s said, was to the effect that Venezuela was on course to take over foreign companies except for Brazilian ones.

President Hugo Chávez’ strategy of nationalizing companies including foreign ones, and a remark he did or did not make in seriousness to Brazilian President Ignacio Lula da Silva, appear to have posed problems for him and his Argentine friend and colleague, Cristina Fernández de Kirchner.

Chávez has depicted Fernández de Kirchner as an ally and soulmate in his bid to build a regional alliance to counter what he sees as the undue influence and power of the United States in Latin America. But his peremptory takeover of steelmaker Sidor and his tendency to talk off the top of his head may well have put her in between the proverbial rock and a hard place at home.


Argentina May Be Sanctioned By Manhattan Judge in Bondholder Litigation
Argentina may be sanctioned for failing to comply with a U.S. court order to turn over to bondholders documents regarding its pension funds, a federal judge in Manhattan said.

U.S. District Judge Thomas Griesa ruled in October that Argentine pension funds nationalized by that country’s government and held in the U.S. may be used to satisfy bondholder judgments against the republic. Argentina has appealed. Griesa later ordered the South American nation to turn over documents related to its pension funds to bondholders.


Argentina's Construction Activity Declined 5.5% in April From Year Earlier
Argentine construction activity fell the most in five months in April, as Argentines delayed investment plans amid the global financial crisis and political concern ahead of next month’s mid-term elections.


Mexico GDP to Sink Most Since 1932 in Fall `Hard to Fathom,' Goldman Says
Mexico’s economy will contract this year by the most since 1932 as a slump in the U.S. curbs demand for exports and slows dollar flows from tourism and remittances, Goldman Sachs Group Inc. said.

Latin American fence mending - Reuters Video

Apr. 13 (Reuters) - President Obama heads south as part of an effort to establish a new relationship with Latin America.

South-South Cooperation -- Cuba and Panama Sign Trade Pact

HAVANA – Panama and Cuba signed a trade pact here Monday that will allow an increase in the trade of goods and services between the two countries.


Official Cuban sources told Efe that the accord was signed by Panamanian Foreign Minister Samuel Lewis and one of Cuba’s vice presidents, Ricardo Cabrisas.


Panama’s deputy minister of foreign trade, Severo Souza, who is accompanying Lewis on his visit to Cuba, described the agreement as a positive step in the constant strengthening of bilateral ties.

Click here to access the full story

What the news is reporting on Obama lifting some travel restrictions to Cuba

New US law eases Cuba sanctions -- BBC

Cuban-Americans will be allowed to travel to the island once a year and send more money to relatives there.

Curbs on sending medicines and food have also been eased.

The legislation was earlier approved by the Senate after clearing the House of Representatives last month.

The legislation overturns rules imposed by the Bush administration which limited travel to just two weeks every three years, and confined visits to immediate family members.

Havana, Cuba

U.S. loosens restrictions regarding Cuba -- CNN International

Cubans applaud U.S. bill easing trade, travel -- Reuters

Cuba travel moves fall short of Obama pledge: group -- Reuters

Despite bill, Cuba trade rules mostly unchanged: Geithner -- AP

Showdown on U.S.-Cuba policy not over yet -- Miami Herald

Geithner Pledges Limits on Expansion of Cuba Travel (Update1) -- Bloomberg

Direct flights open between Peru and Cuba! -- Andina reports

Lima, Jan. 26 (ANDINA).- TACA Airlines will begin flying directly between Lima (Peru) and Havana (Cuba) in the first quarter of 2009.

Beginning on March 23rd, TACA will fly three times a week on the Lima-Havana route to meet the growing demand from travelers.

Click here to access the full article from Andina

Latin America in focus: Commodities, food and South-South Cooperation (delayed post from Oct 30)

1) Brazil Petrobras agrees to explore for oil offshore Cuba – Benito's take

Brazil frequently enjoys assuming the role as a leader in the developing world of promoting South-South Cooperation.  This time the nation has agreed to help Cuba explore for oil and gas. Brazil's Petrobras is expected to sign an agreement with Cuba for deep-water oil and gas exploration during President Lula da Silva's two day visit to the island this week.

Cuban media is reporting both sides will “sign a contract for the production of hydrocarbons.” No further details have been reported, but the Cuban Foreign Minister Felipe Perez Roque has stated he “anticipates Cuba will sign in the presence of Lula da Silva a very important agreement for oil exploration in deep water.”

Although the details are shady at best, it no less is a sign of Brazil further developing its reach in promoting economic cooperation among developing nations, with the pretext of mutual economic development.

To read more about this development check out this article published by Merco Press.



2) Petrobras Transpetro unit won't delay 49-tanker plan (update 2) courtesy of Bloomberg LP

Oct. 30 (Bloomberg) -- The transport unit of Petroleo Brasileiro SA will be able to maintain a 49-ship fleet expansion program because it has sufficient financing from a government fund and can ignore the world credit crunch, the unit's president said.

Brazil's Merchant Marine Fund, managed by state-development bank BNDES, has enough cash to pay the $2.5 billion needed for 26 tankers that have already been ordered, said Sergio Machado, president of Rio de Janeiro-based Transpetro, as the unit is known. The fund can also finance another 23 ships that will be ordered by the end of the year, he said.

State-controlled Petrobras, as Transpetro's parent is known, may delay some investments as oil prices fall and credit becomes scarce, Chief Executive Officer Jose Sergio Gabrielli said Oct. 20. The credit crunch may force the cancellation of 20 percent of the deepwater oil rigs under construction, Brian Uhlmer, analyst at Pritchard Capital Partners in Houston, said.

``Everything regarding our shipbuilding program is defined and is part of Brazil's strategic plan,'' Machado said in a phone interview from his office. ``The Transpetro program is fully financed.''

Click here to access the full article from Bloomberg LP



3) Favorable 2009 beef export prospects for Brazil and Argentina, courtesy of Merco Press

Beef exports are forecast to rise nearly 2% during 2009 as gains by Brazil, Argentina and the United States outweigh downturns in Australian and New Zealand shipments according to the US Cattle network.

As the world’s leading trader Brazilian exports are forecast to spring back nearly 5% to over 2.0 million tons. Shipments are projected to decline in 2008 for the first time since 1996. However, by overcoming sanitary barriers, it is now poised to regain sales to Chile, EU-27 and other key markets...

...

In Argentina exports are forecast to expand 20% to 480,000 tons in 2009 after plummeting an expected 25% in 2008.

The rebound stems from the Argentine government setting a higher export quota, cattle and beef supplies not expected to be limited by farmer strikes, and thermo-processed product to be exported outside of the quota.

Click here to access the full article from Merco Press



4) Venezuela books 10.252 billion barrels more in oil reserves, courtesy of Dow Jones Newswires

Venezuela said Wednesday it was adding 10.251 billion barrels of crude to its national reserves as part of an ongoing review of its hydrocarbon reserves.

With this increase, the oil-rich country's total reserves now amount to 152.561 billion, making Venezuela the country with the second largest crude reserves, the Venezuelan oil ministry said in a statement.

Click here to access the full article from Rigzone
http://www.rigzone.com/news/article.asp?a_id=68576

5) Chile trims 2008 copper output forecast again, courtesy of the Mining-Journal

Chile on Wednesday trimmed its 2008 copper output forecast for the second time since July, this time to 5.45Mt, citing operational issues but not slumping prices for the metal.

Limited financing due to the global credit crisis may delay or cancel some new projects, said Eduardo Titelman, executive vice-president of Chile`s state copper commission Cochilco, one of the world`s leading copper think-tanks.

Copper prices rose above US$2/lb on Wednesday, but they remained less than half the record levels of over US$4/lb hit in July. A global credit crunch and fears the world could enter a recession have hit demand for metals like copper, heavily used in the auto and construction industries.

Click here to access the full article from the Mining-Journal

http://www.mining-journal.com/Breaking_News.aspx?breaking_news_article_id=5174

Chavez to expand Venezuela's oil pact

Venezuelan President Hugo Chavez is flexing the country's petroleum muscle once again, stating he seeks to expand Venezuela's oil pact to poor nations in the Caribbean.

Chavez stated "Nations taking part in Petrocaribe initiative will now be required to pay just 40% of the bill within 90 days - down from the current 50%. The rest can be paid over the next 25 years at a fixed rate of 1% percent as long as oil prices are above US$100 a barrel.

"That could compensate for the horrible curve of the jump in oil prices," Chavez said. He added that 70 percent of payments may be deferred if oil reaches US$150 a barrel.

AP Photo

In this photo released by Miraflores Press Office, Venezuela's President Hugo Chavez speaks during the opening ceremony of the Petrocaribe Summit in Maracaibo, Venezuela, Sunday, July 13, 2008. President Hugo Chavez sought to expand an oil-supply pact that is delivering fuel to 17 nations, calling it a tool against poverty and dismissing opponents' accusations that he is giving away Venezuela's oil wealth.

Sounds really generous to me... Venezuela is unarguably of the wealthier Caribbean nations in the Caribbean, however it does remain a country with many economic problems. Calculating if such a long-term donation is even feasible is difficult to do. So many variables could arise in the next 25 years which could cause the cash flow from its oil accounts receivable ledger simply stop...

New government could come into power who don't honor the repayment. Alternative energy could leap frog and bring the price of oil down substantially. A new government could come into power in Venezuela and re-arrange the terms, leaving small Caribbean contries with little bargaining power against Venezuela: their provider of energy and also regional political and economic power.

No less the gesture as it stands is a nice one, and in reality there is just so much domestic investment that is possible given Venezuela's limited FDI and internal domestic capacities. Oil drills may be in shortage, but so is the industry as a whole since the PDVSA strikes. Given the set backs, PDVSA remains a relatively vibrant operation, turns a profit and even manages to give Chavez some diplomatic barganing chips by making Venezuela into a gracious, oil rich country which cares about its region and the poor of world... unlike the United States, which is a underlying point Chavez hopes to make through such efforts.

Latin America Makes International News! & China continues strengthening its "free floated" currency... having risen 20% since 2005

As described in my previous post... Latin America is sadly trapped within mass media as a mere "attention grabbing story." I in no way what so ever intend to make this sound as if I am criticizing, Reuters, I have nothing but the utmost respect for the organization which is why I use their video "embed" feature. They truely do strive to offer unbiased reporting and are represented by the best of the world's journalists.

This post is simply a effort to convey the particular and unique attention that is given to Latin America as a whole.

Colombian cocaine seizures soar --- Reuters





Ellion joings young communists --- Reuters




High Altitude Training --- Reuters: Finally a bit of positive news... hehe - High Altitude Training for Olympics

Bloomberg LP

Yuan Extends Gains to 20 Percent Since End of Peg on Inflation

By Judy Chen and Kim Kyoungwha

June 17 (Bloomberg) -- The yuan extended gains to 20 percent since China ended a fixed exchange rate to the dollar in 2005, passing the milestone as Treasury Secretary Henry Paulson prepares to meet with Chinese officials.

The currency climbed to a post-peg high of 6.8918 per dollar today as the People's Bank of China seeks faster appreciation to curb the cost of imports and slow inflation. The so-called Strategic Economic Dialogue in Annapolis, Maryland today and tomorrow will focus on energy and the environment after the yuan's advance eased trade tensions with the U.S. that dominated previous meetings.

``Inflation remains the dominant policy issue in China,'' said Sue Trinh, a currency strategist with Royal Bank of Canada in Sydney. ``The focus will be on more rapid appreciation of the yuan.''

The currency climbed 0.12 percent to 6.8918 a dollar in Shanghai as of 1:03 p.m., from 6.9004 yesterday, according to the China Foreign Exchange Trade System. It's risen 1.7 percent this quarter compared with a 4.2 percent advance in the previous three months.

The yuan may rise to 6.5 by the end of 2008, Trinh said.

China's trade surplus, which rose to a record in 2007, narrowed in May, for the first time in five months, while foreign-exchange reserves surged 40 percent to $1.68 trillion in March, flooding the economy with cash and fueling inflation.

Trade-Weighted Index

Goldman Sachs Group Inc. said in a report yesterday that the yuan will gain about 10 percent in a year as China stems inflation that slowed to 7.7 percent in May from the almost 12- year high of 8.5 percent in April. To cool inflation, the central bank has ordered banks to set aside bigger reserves five times this year after raising interest rates six times last year.

The currency has strengthened almost 6 percent against the dollar this year, nearing the 7 percent gain for all of 2007.

The Westpac Nominal Effective Exchange Rate, a trade- weighted index for the yuan that includes the euro and the yen, has climbed 5.7 percent so far this year, compared with the 3.4 percent gain for all of 2007. Gains in the yuan may accelerate versus the euro as policy makers calm criticism from officials in Europe and the dollar rises against major currencies.

``We are expecting to continue to see trade-weighted appreciation,'' said David Mann, a senior currency strategist at Standard Chartered Plc in Hong Kong. ``So the moves in the yuan may be more dictated by the broad dollar than was the case previously.''

Reform is Critical

China needs to move ``more quickly'' on yuan appreciation and exchange-rate reform will be ``critical'' to the country's social stability, said Paulson on June 10 in Washington. China's central bank said on May 14 that it will further increase the exchange rate's flexibility to curb price increases.

Gains in the currency attract speculative capital, injecting cash into the financial system already awash with money from the trade surplus and foreign direct investment.

China will strengthen monitoring of money inflows after the surplus for the capital and financial account, a measure of investment flows, jumped more than seven-fold in 2007 to $73.5 billion from $10 billion a year earlier, the State Administration of Foreign Exchange said on June 5.

The People's Bank of China said yesterday in a report that investors' expectations for continued appreciation of the yuan are attracting inflows of ``hot money,'' and should such expectations turn around, a ``massive outflow'' of money will affect China's financial security.

Forward Rates

The central bank may ``unexpectedly adjust the pace of yuan appreciation, like the stagnation in April, to deter investors betting on one-way appreciation,'' said Yang Shengkun, a currency analyst in Beijing at China Citic Bank Co., a unit of China's biggest state investment company.

China slowed yuan gains to 0.35 percent in April, the smallest monthly advance in more than a year, prompting traders to pare bets for the extent of yuan appreciation in the next 12 months. Inflows of ``hot money'' into China may have reached $500 billion last year due to trade, investment and firms borrowing abroad, according to research by Shanghai Securities Co. published in the China Securities Journal.

One-year non-deliverable forwards contracts, agreements in which assets are bought and sold at current prices for future delivery, show traders are betting on a 6.6 percent rise in the yuan to 6.4680 in the next 12 months. The yuan will reach 6.65 per dollar by year-end, according to the median estimate of 23 analysts surveyed by Bloomberg News.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

Last Updated: June 17, 2008 01:21 EDT


Sneaking this in at the end of the post for all those out there who know what Bembos is--the Peruvian Fast Food Chain which competes quite admirably with Mc Donalds, KFC and other mainstream and international fast food names. The video is a bit long and can get boring, but here is the explanation of it from youtube. In short... a Peruvian fast food chain is expanding to India. It is simply incredible the exchange going on in today's globalized society, 20 years ago no one would have thought emerging markets like Peru and India would be cooperating in fast food among all else. The first video simply describes the deliciousness that is Bembos... sadly it's in Spanish, and I apologize for those of you out there who do not speak / understand it. There are subtitled videos available if you use either my search provided by google or go straight to youtube and simply type in "Bembos."

Copy/Pasted from Video Description on youtube.com

Bembos -- Best Burger in the World




The South American fast food chain Bembos opened its first outlet in Delhi NCR yesterday at the Great India Place Mall in Noida.

Bembos has been maintaining its leadership in hamburger sales in front of strong competitors in the international market like Mcdonalds & Burger King in South America and are now eying the Indian market.

"Our three Bembos outlets in Mumbai are doing exceptionally well & we are very excited at the proposition of catering to people in the Delhi NCR region," said an upbeat Anil Kapur, the master franchisee of Bembos in India.

So what makes bembos special? Apart from the colourful interiors, the size, taste & price points are the USP of the Bembos burgers.

"We are elated at Bembos coming to India," said Carlos A Yrigoyen, the acting Ambassador of Peru in India, who along with his wife Regina inagurated the outlet. "Nothing is as delicious as a Bembos grilled burger, " Yrigoyen said.

Also present at the inaguration were Rahul Mittra CEO Brandsmith with wife Sarina, Dimple Kapoor, Bharati Chajjed Associate Director Standard Chartered, apart from heavy print & electronic media.

"Brandsmith is very happy to be associated with such a premium brand from South America, " said Rahul Mittra who has been accredited with successfully managing international brands like Ceres juices from South Africa & Weetabix from UK." We will ensure it gives the big daddies a run for their money, "said Mittra.

H.S. Communication.

Assessing China-Latin Ties

BY WILLIAM RATLIFF
Jamestown Foundation

http://www.latinbusinesschronicle.com/app/article.aspx?id=2452

William Ratliff is Adjunct Fellow at the Independent Institute, Research Fellow at Stanford University's Hoover Institution. Published by the Jamestown Foundation, China Brief, and reprinted with permission.

The explosive growth of China’s links to Latin America in recent years are but the latest developments in a history that reaches back to the Spanish colonial empire in the early-16th century. In some ways the perceived benefits and liabilities have not changed much over the centuries, though they are now on a far grander scale. A Spanish padre wrote in 1669 that “one cannot imagine any exquisite article for the equipment of a house which does not come from China.” At the same time, however, Spanish barbers in Mexico City petitioned the government to relocate Chinese barbers to the outskirts of the city because they worked too much and that constituted “unfair business practice." Only during the militant Maoist decade of the early-1960s to mid-1970s was China’s primary interest in Latin America, which was marginal, to overthrow existing governments.

REALISTIC ANALYSIS

Some in the United States and Latin America worry that this rapidly rising China poses or will pose a security threat to the United States and the region. Many also worry that the influx of Chinese, with their different culture and institutions, will reduce the prospects for Latin reforms that promote open markets, political democracy, and greater respect for human and civil rights, including the rule of law. Responses to these concerns depend on what the Chinese and Latin Americans want and get from their contacts and on a realistic analysis of Latin America and broader Sino-U.S. relations.

China’s interests in the region include the following: to buy raw materials and foodstuffs and to invest in the production and transportation of those products to China; to export manufactures and other products to the region; to promote stability there so that business contracts will be signed and honored by predictable governments; to support a subtle reduction of the “unipolar” position of the United States in the world; and to win political recognition from the cluster of Latin American countries that still recognize Taiwan as the “one China."

Latin American countries want to sell China raw materials and manufactures to guarantee their historically unstable economies a foundation of assured income; to receive foreign direct investment (FDI) in many fields, including infrastructure, without the “strings” that are attached to funds from Western sources; to reduce economic and political dependence on the United States; and perhaps to get some Chinese ideas on how to develop a national economy under effective elitist leadership.

CHILE-CHINA FTA

Drawing these interests together, Chinese Ambassador to Chile Liu Yuqin said in March that “Latin American countries and China … must make joint efforts to face the great challenge of the globalized world” (La Nacion [Santiago], March 2). Chilean President Michelle Bachelet, speaking for many Latin leaders, told President Hu Jintao during a visit to China in April that her country and people realize that the 21st century is in the hands of Asia, and especially China (China Daily, April 14). In 2006 Chile was the first country to sign a free trade agreement with China and in 2007 China replaced the United States as the major recipient of Chilean exports.

Relations between China and Latin America today have progressed beyond commerce, though trade and FDI are still primary objectives on both sides. According to statistics reported by Jiang Shixue, deputy director of the Institute of Latin American Studies (ILAS) at the Chinese Academy of Social Sciences (CASS), one of the most important think tanks advising the Chinese government on Latin American policies, Sino-Latin American trade grew from $1.9 million in 1950—just after the People’s Republic of China (PRC) was formed—to $343 million in 1965. Trade expanded to $475 million in 1975, $2.572 billion in 1985 and $6.114 billion in 1995 (Nueva Sociedad 203, May/June 2006). In November 2004, addressing the Brazilian Legislature, President Hu predicted that Sino-Latin American trade would rise to $100 billion by 2010, but in fact it rose to $102.6 billion in 2007 with a surge of 42 percent over 2006. There are important differences, however, in the spread of benefits in Sino-Latin American trade. Some 60 percent is with Brazil, Chile and Mexico, and the latter has a large deficit (Latin Business Chronicle, March 24). The countries exporting raw materials and foodstuffs, from oil and copper to soya, are the ones with positive balances, while others—including Mexico and some Caribbean Basin countries that rely more on manufactures—are being swamped by Chinese goods, limiting this lucrative relationship for some to a traditional focus on only a few export products.

CHINESE FDI

In April a high-level Chinese official reported that by the end of 2006 almost $22.7 billion of China’s FDI had gone to Latin America (China Daily, April 16). While it is true that billions in FDI has been promised to Brazil, Argentina, Ecuador, Peru, Venezuela, Mexico and other countries, for exploration for and transportation of raw materials and foods that China wants to buy, and other projects, information on actual FDI paid out is “somewhat murky,” as Robert Devlin, a regional adviser for the UN Economic Commission for Latin America and the Caribbean, puts it. A major portion of Chinese FDI in Latin America appears to be “round-tripping,” that is the funds are invested in tax havens in the Caribbean and then sent back to China to take advantage of preferences given to foreign firms.

The most debated issues with respect to China’s expansion into Latin America are (1) the security implications for the United States and the region, with sub-set questions on Cuba and Venezuela, and (2) China’s potential anti-democratic impact on Latin American governments and social systems.

NO IDEOLOGICAL COLOR

For starters, unlike the United States and Europe, China has no history of invading and colonizing other countries beyond its immediate border, what is today called Greater China. Also, China has publicly tried to avoid alarming the United States because of the critically important Sino-U.S. relations. The deputy director of the ILAS has written that “China understands well that Latin America is the backyard of the United States, so there is no need for China to challenge the American influence” there (Nueva Sociedad 2003, May/June 2006). After U.S. Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon talked with Chinese counterparts in Beijing in 2006, a top Latin Americanist at the CASS in Beijing, Xu Shicheng, said Chinese policy “has no ideological color nor is it directed against the interests of any other country” (Nueva Sociedad 203). As analyst Gonzalo Paz has noted, China’s activity in the region “hasn’t sparked strong U.S. reactions yet. Washington has either shown indifference or has considered such activity relatively inoffensive” (Asian Perspective, No. 4, 2006). Indeed, in March U.S. Deputy Assistant Secretary for East Asian and Pacific Affairs Thomas Christensen said, “We believe that China can make positive contributions to economic growth [in the region]… through increasing both direct investment and foreign assistance, and can serve as an exemplar of how pragmatic economic policy and trade openness can lead to increased literacy, managed urbanization and poverty reduction” (Testimony to U.S.-China Economic and Security Review Commission, March 19).

U.S. policy itself has sometimes thrown the door open to China’s still restrained entry into military contacts in the region, prompting National War College Professor Cynthia Watson to remark, “If Washington is not interested in having a sustained, deep and satisfying, mutually respectful relationship with Latin America, the latter will turn elsewhere” (Testimony to U.S.-China Economic and Security Review Commission, March 18). The security issue must of course be investigated constantly by intelligence agencies and other researchers, but conclusions must be drawn with balance and knowledge of broader issues of Chinese and Latin American history and politics.

CHINA AND CUBA

China has become deeply involved in Cuba as the island’s second most important trading partner after Venezuela, but also to some degree in intelligence gathering, at a level, however, that does not seem to greatly upset Washington. Without pushing, it also offers an adaptable model for carrying out productive post-Fidel economic reform while leaders retain their political power (China Brief, May 10, 2006). Yet in the words of Mao Xianglin, an ILAS Cuba specialist, “Socialist Cuba can catch up with and surpass others only by moving rapidly to break out of its intellectual straitjacket and intensifying its reforms” (Latin American Perspectives, November 2007). Venezuela’s Hugo Chavez has tried without success to get China to join an anti-American front. Though it is exploring oil and other matters, on balance China has more to lose than gain from Venezuela’s efforts to destabilize the region and promote economic ideas that will certainly only make countries poorer and more unstable (China Brief, March 15, 2006).

Does or will China undermine democracy in Latin America? This is a hard case to make because Latin Americans have had almost 200 years of independence to establish truly representative democratic governments and productive market economies if they wanted them, but they have only rarely and incompletely come close to doing so. Even though a slight majority of Latin Americans say democracy is the best system of government, a considerable majority say it does not work for them (Latinobarómetro, November 2007). Thus, much of Latin America today is again flirting with caudillo (strong-man) populism, exemplified by Chavez in Venezuela, but also by his acolytes in Bolivia, Ecuador and Nicaragua. When one recalls that Mexico and Peru also very nearly went “Chavista” in their last elections, and Argentina is semi-Chavista today, you see the strength of this Latin love affair with paternalism and Messiahs who promise to right the innumerable “wrongs” that have characterized Latin society since even before colonial times. China’s preference lies with governments that succeed, and thus their relations have developed most rapidly and smoothly with Chile, and secondarily with Brazil.

POLITICAL TIES

Word has seeped out of Washington that at the Shannon meetings in 2006 the Chinese promised not to meddle in Latin politics. Last year the author asked a top Chinese Communist Party (CCP) official working in international affairs if China wanted to get involved changing political systems in Latin America. He said “No. Why should we? We are perfectly happy with a system controlled by elites that keeps real popular involvement to a minimum, so long as they do not crash and continue to enforce the agreements made with us” (personal communication, April 10, 2007). If Latin leaders, however, ask the Chinese for ideas, Chinese leaders will certainly accommodate them. Indeed, the Chinese make it a point of developing party and legislative connections with leaders of all political inclinations in all countries, if possible. As Jiang Shixue has noted, Chinese and Latin political leaders “exchange views on strategies to improve governance, the management of party affairs, political modernization and socioeconomic development.”

The challenges for Latin American countries in the years ahead include investing the profits from China trade and FDI, and using the inspiration of the Chinese example, to lay a long-term foundation for national well-being, cultivating whatever traditional cultural and civic values do not prevent the development of broadly based economic progress. This will mean both rejecting the temptations of hopeless and disruptive Chavista populism and carrying out more than half-hearted reforms, both changes that would also benefit China and the United States. China needs to reduce logistical problems of long distances, perhaps in part by more joint Latin ventures for the United States and Latin markets, cultivate greater common cultural ground, not least by increasing cultural institutes, and the like. Assuming the continuation of something like China’s current development trajectory, and a lasting major U.S. role in the Western Hemisphere, the two large nations could work together to promote a more stable and prosperous region that would benefit themselves and Latin Americans as well.

Traditionally it has been easier to blame someone else for the region’s seemingly intractable and widespread poverty and inequalities and today many Latin Americans have made the Chinese their "favorite villain," as Korean analyst Won-ho Kim wrote in a Mexican paper in 2004 (Reforma, June 20, 2004). In the end, Latin America’s failure to develop more responsive political—and more productive economic—systems was not Britain’s or America’s fault in the past, and it is disingenuous at this stage to suggest that it will be China's fault in the future.