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Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

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Bridas is controlled by the wealthy Argentine businessman Carlos Bulgheroni who also owns a nice 40% stake in Pan American Energy LLC, Argentina’s largest crude oil exporter.  Pan American Energy LLC also owns energy assets in Chile and Bolivia–which China may eventually like a piece of as well.

As the worlds second-biggest energy consumer, after the United States, China is searching for oil assets across the world.  This however, would be the first major purchase by CNOOC, China’s biggest offshore oil explorer in Latin America.  Since 2008 Chinese companies have spent around $13 billion usd on energy acquisitions and are currently bidding for assets in countries ranging from Ghana, Nigeria and Uganda.

Analyst, Neil Beveridge of Sanford C. Bernstein & Co., told Bloomberg in this article, “This seems like a relatively attractive valuation and the acquisition is entirely in keeping with the Chinese government’s policy of increasing oil reserves.”

Once again, China is on the move people.  As I sit here typing this post I can feel the cold air blowing back into Shanghai and I am thinking to myself how if this entire country had two space heaters running like I do right now the world might self-implode… (just a bit of sarcasm incase you didn’t catch it).

Mining Deal

China Development Bank Corp has agreed to provide a $1 billion usd credit line to Corp Venezolana de Guayana, a.k.a, Venezuela’s state owned mining giant and aluminium producer, in exchange for a guarantee of access to any newly discovered mining resources in the future.

China’s rolling the dice on this one.  Most of the mining world knows Venezuela is sitting atop abundant mineral wealth, nonetheless, the country has always lagged its South American neighbors like Chile, Peru and Argentina when it comes to exploiting its mineral wealth.

Dishing out $1 billion usd, in a moment when China is searching for world to secure new sources of commodities and Venezuela is desperate for dollars/ cash this is a logical investment which could pay dividends if Venezuela can provide the institutional framework to develop a robust mining industry using Chinese capital.

Energy Deals

Dec 22 (Tuesday) – Caracas and Beijing sign a framework agreement to set up and manage a new JV (joing venture) to develop the Junin 8 Block in the Orinoco Belt.  The set goal is to produce 200,000 barrels per day of extra-heavy crude, according to an official report.

Dec 23 (Wednesday) – China National Offshore Oil Corp signed agreements with PDVSA to assist with deep water and ultra-deep water drilling and to evaluate reserves in the Orinoco Belt block known as Boyaca 3.

What is China getting in exchange for this “olive branch,” it is offering Venezuela?

According to this Chinamining article,

The agreements included a one-year contract – signed by Venezuela’s PDVSA and Petro China – that calls for Venezuela to ship 500,000 barrels per day of crude and related products to China.  As for the mining agreement, China will receive supplies of iron ore for their generosity.

~ Gavin Coates

BEIJING (Reuters) – Barely a month goes by without some new energy or mineral deal being struck between China and an African nation. These deals have transfixed the West, but China gets far more from the relationship than raw resources.

Africa offers China two important things — a chance to earn the global respect it believes it deserves in recognition of its growing economic clout, and friends who do not judge it, or who at least have little reason to directly fear China’s rise.

China’s friendly relations with Africa go back decades, to when Beijing backed newly independent states as well as liberation movements. The continent’s backing was vital in getting China into the United Nations in 1971.

“You could argue that the contemporary driver is economic, but they’ve always had a political interest in Africa, from the mid-1950s onward,” said Chris Alden, an Africa expert at the London School of Economics.

“As China becomes a more active player in multilateral affairs, it recognizes it needs partners, and Africa in many ways is a very suitable partner.”

In 2006, President Hu Jintao promised a leap in investment, trade and aid at Beijing’s first summit with African leaders. At the G20 summit of big developed and developing economies last November, he raised Africa’s needs during the global economic turmoil.

Click here to read the complete article written by Reuters reporter Ben Blanchard

Wang Xinhua, chief financial officer (CFO) of the oil firm  said “the good overseas assets of the Sinopec Group, the parent company of Sinopec Corp., would be injected into the listed company before the end of the year.”

CSA smell’s a bid to strengthen the traded shares, especially once Chinese investors jump on the bandwagon.

The assets in question are found in countries ranging from Russia, Australia and Canada.   Company data indicates that by the end of 2008, Sinopec’s overseas recoverable reserves reached 160 million tons.

According to this ChinaMining.org article Sinopec Groups oil equity production in 2008 was 9.01 million tons, accounting for up about one-third of Sinopec’s total output.  This year overseas oil equity output will rise to roughly, 17.40 million tons, almost double the previous year.

Qiu Xiaofeng, an analyst with Merchants Securities, reckon that the Sinopec Group’s overseas assets are able to generate about 11.2 billion yuan of profit or 0.13 yuan EPS, if the oil price stays at 75 US dollars/barrel.  On the news, Founder Securities maintains its rating of “overweight” on Sinopec Corp.  A-stock.

Here’s a look at the two year performance of this growing Chinese energy giant’s shares on the NYSE.

SHI - NYSE

(Oct 26-30, 2009)

*metals commodity prices obtained via Kitco Metals
*energy commodity prices obtained via Yahoo Finance
*agriculture commodity prices obtained via Yahoo Finance
*wheat futures via Bloomberg

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.”

CNN Video — Militants agree to stop attacks. Nigeria’s oil minister tells CNN China and U.S. are vying for their oil.

Brazil Soybean Growers Speed Up Planting on Rains, Safras Says – Bloomberg
Soybean growers in Brazil, the world’s second- largest producer, are speeding up planting of the oilseed as above-average rains improve soil conditions, Safras & Mercados analyst Flavio Franca Jr. said.

Soybean planting was 17 percent complete as of Oct. 16, compared with 8 percent a year earlier and an average of 5 percent in the past five years, said Franca Jr., who is based in Porto Alegre, Brazil.

Brazil Bank Keeps Rate, Signals No Increase Imminent – Bloomberg
Oct. 22 (Bloomberg) — Brazil’s central bank kept its key interest rate at a record low last night and said its level was “consistent” with a non-inflationary recovery, signaling that no increase in borrowing costs is imminent.

The bank, in a statement accompanying the board’s unanimous decision to keep the benchmark rate at 8.75 percent, repeated word-for-word the communique issued Sept. 2 when it paused after five straight cuts this year.

Colombian drug lord gets 45 years – Reuters

Cocaine kingpin, Diego Montoya, the former head of Colombia’s Norte del Valle cartel is sentenced in a Miami court to 45 years in prison.

Pemex May Renegotiate Oil-Service Accords, Minister Kessel Says – Bloomberg
Oct. 22 (Bloomberg) — Petroleos Mexicanos, Latin America’s largest oil producer, may seek to renegotiate oilfield-service contracts with companies such as Halliburton Co., Schlumberger Ltd. and Weatherford International Ltd. to try and boost output.

New laws allow state-owned Pemex, as the company is known, to offer performance-based contracts, Mexican Energy Minister Georgina Kessel said yesterday in an interview in Mexico City.

Peru’s BCP to Sell Benchmark Dollar Bonds in Overseas Markets – Bloomberg BCP, as the bank is known, hired Bank of America Corp. and JPMorgan Chase & Co. to arrange the bond sale, said the person, who declined to be identified because terms aren’t set. The company will begin marketing the offering Oct. 26. A benchmark issue is typically for at least $500 million.

Uruguay’s presidential election next Sunday too tight to call – MercoPress
Uruguay’s coming Sunday presidential election is proving to be more nerve-racking and difficult to forecast than anticipated, with the ruling coalition just a few inches away from repeating in spite of the falling performance of the main opposition candidate.