Peru-China FTA to induce 10,000+ Peruvian companies to pursue exports to China

Peru and China’s bilateral Free Trade Agreement became effective March 1st.   According to officials at Peru’s Foreign Trade and Tourism Ministry (Mincetur) the agreement could potentially prompt some 10,000+ companies to begin exporting to China.  Read more about it in this article from Andina

All in all, the official message expressed by major media is that trade with China = good. I personally this doubt this is the full story. I’m pretty sure a great many Peruvian industries are not so happy they will be competing with “made in China.”

For example, I’m sure the companies which make all the cloths sold at Lima’s Gamarra Market are shaking in their boots right about now.

On the other side, as Michael Reid explains in his book, The Forgotten Continent: The Battle for Latin America’s Soul, the rise of China and other countries which offer Latin America countries alternative markets for their exports has empowered Latin America with far more freedom to develop on their own terms than every before in history.  With new markets, Latin America is no longer as heavily dependent on the United States, and China is at the center of this shift.

There’s always two sides to the story and I’m barley scratching the surface here.  I’m sure readers from Peru to China have many other reasons to argue both sides of the equation.

China-Peru FTA goes into force this February

China’s second FTA with a Latin American nation will become active this February 2010. A mile stone for both country’s, the agreement seeks to boost bilateral trade to new levels.

Here are the basic facts and forecasts, provided via this article from Nasdaq.com. For the record, author Sophie Kevany, is a superb journalist who is actually based in Peru. This article does not do justice to her credo of true investigative journalism I have read in the past, but no less is always a good source for all that is Peruvian finance.

Check out her other articles on the WSJ, Decanter (yes she even writes about Peruvian wines and spirits), and well, just google her name and you’ll be greeted with a swarm of informative pieces about Peru and the greater South American region.

LIMA -(Dow Jones)- Peru’s free trade agreement with China is set to come into force early February, and it is expected to boost total trade values to an estimated $8 billion in its first year.

The treaty was ratified earlier this month by a supreme government decree, meaning Peru’s congress will not vote on it, state newspaper El Peruano said Wednesday.

The treaty excludes so called “sensitive products” such as textiles, shoes and clothing, Peru’s Vice Minister for Trade and Tourism, Eduardo Ferreyros, told El Peruano.

Trade between the two countries is expected to total about $5.5 billion in 2009. Of that, exports to China from Peru are expected to reach $3 billion, Ferreyros told state news agency Andina, while imports from China should total about $2.5 billion.

-By Sophie Kevany, Dow Jones Newswires; 51-198-903-8043; sophie.kevany@ dowjones.com

Newswire: Asia-Pacific

international.gc.ca

U.S.’s Treasury’s Geithner to attend Singapore APEC meeting – Reuters

WASHINGTON, Oct 23 (Reuters) – U.S. Treasury Secretary Timothy Geithner travels to Singapore to attend a meeting of finance ministers who are members of the Asia Pacific Economic Cooperation forum for one day next month.

China Minmetals eyes gold mines in Australia, Canada – Reuters

* Company to start construction at Peru copper mine next yr

* Production at Peru mine scheduled to begin in 2012 (Adds background, bylines)

By Rujun Shen and Joseph Chaney

TIANJIN, Oct 22 (Reuters) – Chinese state-owned metals trader China Minmetals Corp. [CHMIN.UL] is looking to buy gold mines in Australia and Canada, a senior executive said on Thursday.

Huang Dongmei, deputy general manager of China Minmetals Exploration and Development Ltd, made the remarks at an industry forum in China’s port city of Tianjin.

Separately, a Minmetals executive at the China Mining conference here said on Wednesday that the company would launch construction at its Galeno copper mine in Peru next year, with production due to start in 2012. [ID:nPEK200915]

Ecuador Seeks Cash to End Three-Year Oil Output Drop (Update1) – Bloomberg

Oct. 27 (Bloomberg) — Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, is seeking to attract investment from state-run companies in Latin America, Russia and China to reverse a three-year drop in crude output.

Ecuador is forging alliances to explore and produce crude as lower investment by privately-owned companies causes production to drop as much as 6.6 percent this year, Julio Gonzalez, undersecretary of hydrocarbons policy at the Ministry of Non-Renewable Natural Resources, said in an interview.

“The government’s priority is to do this with state companies,” Gonzalez said yesterday at the ministry in Quito.

Kevin Rudd’s vision for Asia-Pacific community evolves – The Australian

KEVIN Rudd’s concept of an Asia-Pacific community by 2020 has been canvassed at the weekend’s East Asia summit in Thailand together with a rival vision from new Japanese leader Yukio Hatoyama.

East Asian leaders meeting in Hua Hin yesterday discussed the broad regional architecture, with the Prime Minister promoting his plan both at the formal leaders’ meeting and in a series on bilateral discussions.

“What I detect across the region is an openness to a discussion about how we evolve our regional architecture into the future,” Mr Rudd said yesterday.

“It’s important that we are in a conscious discussion and a conscious process to evolve options for regional institutions in the future rather than just sitting back and waiting for big problems to emerge.”

Former President of Peru, Alejandro Toledo criticizes FTA with China

AgenciaPeru.tv — Spanish news bite of former President Alejandro Toledo of Peru.

Toledo comments on Peru’s FTA with China

Former President Alejandro Toledo criticized the free trade agreement that Peru and China signed in April this year. Toledo was at the Club de la Banca in San Isidro, Lima this afternoon after talks with a group of businessmen on the financial crisis and opportunities for Peruvians.

Remember, Toledo was instrumental in rebuilding Peru’s market economy and in promoting the signing of the Free Trade Agreement between the United States and Peru. It is curious as to why a man who was once labeled a lap dog of US policy in promoting free trade and free market economics is now expressing concern about Peru’s FTA with China.

If you can understand Spanish I suggest watching this short video to get his full commentary. If not, the general gist of his message is that Peru simply needs to be careful and help empower Peru’s micro-enterprises with the skills necessary to compete Chinese labor and cheap manufacturing.

Second, in the midst of this crisis, Peru can not forget the pains and ills of the everyday Peruvian on the street. Although the agreement with China is something which can potentially bring long term investment and growth in trade, it is important to not forget about the Peruvians which will be affected (economically) by the growth in exchange with China.

China Minmetals to begin production in Peruvian copper mine by 2012

The China Daily reported yesterday,  China’s Minmetals Corp., has announced plans to begin construction of the Galeno copper mine in Peru next year and have the mine operational by 2012.

The mine is jointly owned by China Minmetals and Jiangxi Copper (0358: HK). early last year, is believed to have 20 years of mine life and an annual production estimate of 144,000 tonnes concentrate.

As the chart below exhibits, Jiangxi Copper seems to be riding the upswing in copper markets.  Year to date (YTD), Jiangxi’s shares (traded in Hong Kong) have jumped from around 3 HKD to about 20 HKD as of its close today.

According to the the assistant president of China Minmetals, Zhang Shoulian “The company is increasingly looking to the South American markets for mine resources investment. Copper was its main focus, apart from other metals like iron, zinc, nickel and lead.”

Click here to read a more on this topic from a related article at chinamining.org.

Peru; good news flowing in from both east and north

Please see links below to access the original articles in Spanish from Andina News.  All translated excerpts from the greater articles have been provided by CSA.

[Peru & China] – China highlights the growth in Peru and believes in a bright future for the country

Peru “has a good future in today’s international economic environment,” and one of the few which maintained growth during the international financial crisis, said Chinese Ambassador to Peru, Zhao Wuyi…

Zhao also went on to say “relations between Peru and China are very good at present and exchange between member economies of APEC has also consolidated in the culinary field, education and culture.”

[Peru - United States] – U.S. Ambassador: “Peru has established a good foundation for long term growth”

The U.S. ambassador in Lima, Michael McKinley, said today that Peru has established the foundation for strong long-term growth by developing a strategy of integration into world markets…

“In addition, McKinley said after the signing of NAFTA, the U.S. and Peru have entered into a more mature stage in bilateral relations.”

Shougang Hierro strike approaching its end as an agreement is reached

Progress is being made down in Peru between Chinese miner Shougang Hierro and the workers who have been protesting for weeks now against unfair wages and treatment by their Chinese owners. Nothing new… for the record, there are few international companies which invest in the Peruvian mining industry and thereafter roll out the red carpet for their workers. It’s mining, not investment banking…

The 1200 striking workers have begin working again according to manager Julio Ortiz, who said they returned to work because the company said it would commit to some of the workers demands.

Currently workers earn a salary of 1,770 ($614) Peruvian soles a month and the company has released a statement saying Shougang is willing to raise the daily salary by 5.50, or 165 soles a month—bringing the new total to 1935 soles ($677).

According to this Reuters article (in Spanish), Shougang earned a solid 417 million soles last year ($144.7 million dollars), a increase over the year before of 50%.

All in all, it seems Shougang won this battle… CSA will continue to bring you updates on this matter in the weeks to come.

Reuters Update: Strike at Shougang Peru mine enters fifth day

A strike of some 1,200 workers at Shougang Hierro Peru (SHP.LM), a unit of China’s Shougang Group, entered its fifth day on Friday with no end in sight, union leaders said.

“We don’t see a solution, there’s no dialogue with the company,” said Julian Sulca, a union official.

Click here to access the full article from Reuters

Protests erupt in Peru at Chinese owned miner Shougang

Reuters reported a few days back that workers at the Chinese owned Shougang Hierro Peru (SHP.LM), which happens to the only iron producer in the country of Peru, were planning a strike.

Well today the workers took action. A leader of the workers union told Reuters reporters “that all 1,200 workers at the mine had joined the labor action.”

More updates to come in the days to come. Click here to access the Reuters wire on this story directly.

Newswire: China South America

[Peru - China] — Peru, China relations “at best moment”

Chinese ambassador to Peru, Gao Zhengyue, said that relations between his country and Peru “are at their best moment” in history.

According to him, both countries have deepened the confidence in the political, economic, technological educational, cultural, tourism and justice areas, among others.

The Chinese diplomat noted the increase of the economic, trade flow and bilateral investments, and highlighted the increase of the Chinese investments in Peru, with over seven billion dollars.

“I am convinced that with joint efforts the relations between our two brotherly countries will enter a new stage of development and reach a higher level in the two peoples’ benefit,” said Zhengyue.

[Latin America - China - Africa] — China’s new frontier

Chinese telecom-gear makers Huawei and ZTE have already conquered Africa and Asia. Next stop: Latin America.

(Fortune Magazine) — At phone operator Movistar’s sales offices in Buenos Aires, customers line up to buy high-speed wireless services to access the web on their mobile phones. Most Argentines don’t realize, though, that the company providing the gear for their broadband connections isn’t a longtime supplier to Latin America like Alcatel-Lucent, Ericsson, or Motorola, but a relative newcomer called Huawei.

China’s telecom suppliers are coming to the Americas. Pursuing the same formula they’ve used to win business throughout Asia and parts of Africa (selling cheap gear in low-income countries), equipment makers Zhong Xing Telecommunication Equipment (also known as ZTE) and Huawei are now getting a foothold in countries such as Argentina, Chile, and Colombia. Says Leandro Musciano, project director at Movistar Argentina, a unit of Spain’s Telefónica: “Price is important.”

[Caribbean - China] — China’s expanding relations with Latin America and the Caribbean

Commentary
By Odeen Ishmael

The recent visit of Brazil’s President Luiz Inacio “Lula” da Silva to China in May 2009 reflected the Asian nation’s expanding economic and political influence in Latin America and the Caribbean (LAC). One year ago, the Brazilian government had announced that China would surpass the United States as its major business partner. The results of da Silva’s visit verified this after the two nations signed 13 agreements, including a $10 billion loan from the China Development Bank to Brazil’s state oil company Petrobras. Petrobras also concluded a deal with a subsidiary of China’s oil refiner Sinopec for the export of crude oil. A major commercial agreement will also see the beginning of huge poultry exports to China.

Brazil’s two-way trade with China, one of the few economies still growing despite the global crisis, reached US$3.2 billion in April, surpassing the $2.8 billion trade total with the US. So far this year, Brazilian exports to China grew 65 percent over the same period in 2008, rising from $3.4 billion to $5.6 billion.