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

China’s private sector ventures into Latin America

A private Guangdong based firm by the name of Rixin Development, has reached an agreement to buy a majority stack in the ownership of a Chilean iron ore mine.

Rixin Development will acquire a 70% stake in the Chilean property.  Such a deal shows the power of China’s up and coming company’s.  For starters,  Rixin Development is listed only on a local provincial enterprise information website,  sdwin.com.  The company does not have its own home page.  Officially it is a “trader for home appliances, textiles, auto parts and so on, and importer and exporter of various products and technologies.” However, I wish any readers the best of luck if they undertake the challenge to find any further information from a official company medium.

If you follow Alibaba.com’s 101 on how to avoid being scammed in China, such a deal should probably send alarm bells off.   Perhaps in the post, economic-recession world of 2010, the traditional elements which define a professional entity are no longer necessary.  Especially when your a developing Latin American country hungry for investment… or a private investor in China, STARVING for investment opportunities in a very over-saturated market with little options on where to park your capital and have it grow at the same time.  It is clear, the deal is going through and that the company is legitimate.

Li Zihao, president of Rixin was recently quotes saying, “privately-owned companies are in a better position to invest in overseas natural resources.” Time will tell if this is actually true, or if the central government is content with allowing such a dynamic to emerge.

Read a more comprehensive article on the facts (which are known) surrounding this deal via this article over at ChinaMining.org.

Sino-Venezuelan Cooperation; mining and energy in focus

CSA a bit late on bringing this news to you, but it’s no less the exact kind of newsbites this website scavenges the news world for.

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.

Little Demand for China Output

Airtime: Sun. Nov. 1 2009 | 6:31 PM ET – CNBC

Despite strong manufacturing data out of China, Jim Walker, founder and CEO of Asianomics, says there is little demand for the output produced. He gives his take on the Chinese economy, with CNBC’s Martin Soong & guest host Mark Kiesel of PIMCO.

Commodity Markets; weekly roundup

Rogers International Commodity Index

(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

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.

Newswire: China

China sovereign wealth fund speeding up investment – mining a target – Mineweb

China’s sovereign wealth fund CIC has been speeding up its investment programme spending as much each month this year as in the whole of 2008 – and mining and energy are important targets.

China takes tough ore stance – The Shanghai Daily

China won’t necessarily follow iron ore contract price agreements set by steel mills in other nations, a senior industry official said, as it fired the first salvo in the upcoming annual negotiations for the 2010-2011 fiscal year.

“We will not insist on other countries taking China’s iron ore price as a reference, and we will also not blindly accept prices agreed to by other countries,” Shan said. His remarks are not new because China has not formally settled a contract price with iron ore majors for 2009-2010, but “China’s intentions are important” as it’s the biggest buyer of the steel making ingredient, investment bank UBS noted.

China’s economy expands by 8.9 pct in third quarter – chinamining.org

China’s economic growth accelerated to 8.9 percent year on year in the third quarter, and 7.7 percent year on year in the first nine months, the National Bureau of Statistics (NBS) said Thursday.

China May Pare Economic Stimulus to Control Inflation – Bloomberg

Chinese officials may be preparing to reduce monetary stimulus that propelled growth to 8.9 percent in the third quarter and led the world out of recession.

The economic expansion the government reported yesterday exceeded the 7.9 percent gain in the previous three months and pushed stocks lower in Asia and Europe on concern the central bank may tighten monetary policy. On the eve of the release, the cabinet signaled that inflation concern will play a greater role in setting policy.

China launches Nasdaq-style market to spur small businesses – Xinhua

China held a launching ceremony Friday for its Nasdaq-style market, ChiNext, in Shenzhen, Guangdong Province. The first batch of 28 selected firms will make their debut on Oct. 30 on the Shenzhen-based exchange.

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.

New potential strikes looming for Peru’s mining industry

Shougang is not the only miner down in Peru for which trouble is brewing. Peru’s national federation of mine workers said on Friday (yesterday), it is planning to hold walkouts across the entire sector next week.

libcom.org

“The position of the workers is to go on strike on Monday starting at 9 a.m. (1400 GMT) and leave the mines,” Luis Castillo, the federation’s director, told Reuters.

Reuters reports some unions have agreed to stay on the job, but considering that Peru is the largest producer of silver in the world, #2 of zinc, #3 of copper, #4 of lead, and #6 in gold—such a walk out does have the potential ripple over into global spot prices for the above mentioned metals.

When miners held a similar strike in mid-2008 and the strike helped push copper prices toward a record high—although this was at the peak of bull markets, the market effect is no less noted. The underlying point; markets are watching and investors pay attention to these kinds of things.

Company’s which will be affected include, Volcan (VOL_pb.LM), Newmont (NEM), Freeport-McMoRan’s (FXN), Xstrata’s (XTA.L), Buenaventura (BVN), Southern Copper (PCU) and BHP Billiton (BHP).

Click here to access a more details story on this topic from Reuters.

As always, CSA will keep you up to date with relevant developments as they unfold.

~ Benito