MUST READ ARTICLE – Obama / US Wake up! Look South for Opportunities

Finally, FINALLY… an article which logically presents the incredible opportunities for the US in Latin America… it’s neighbors — [ http://www.latinbusinesschronicle.com/app/article.aspx?id=4809 ]

Obama it’s time as we say in Peru to “ponte las pilas” and look South to your long ignored neighbors.

” For Obama, a New World to Discover — “The Americas will remain a new world of opportunity for U.S. workers and farmers if Washington is prepared to lead. There’s no time like the present for American business to get a piece of the action — or for President Obama to help open the door.” ~~ Latin America Business Chronicle

Latin American in 2011

I came across a few interesting articles today which attempt to outline what we can expect, for the better or worse, from the greater Latin American region this year.

Latin America in 2011: the year ahead – The Global Post

FACTBOX-Key political risks to watch in Latin America – Reuters

Latin America 2011: Expert Q&A – The Latin Business Chronicle

Stable Outlook for Latin America Oil and Gas Industry in 2011 – BUSINESS WIRE / Fitch Ratings

Enjoy

Interview with Dr. Kevin P. Gallagher, author of the “Dragon in the Room: China and the Future of Latin America”

Last week, China South America was fortunate enough to meet and interview, via a skype, Dr. Kevin P. Gallagher, author the new book   The Dragon in the Room: China and the Future of Latin American Industrialization (with Roberto Porzecanski).

Dr. Gallagher is a Professor at Boston University in International Relations and is faculty coordinator for Boston University’s Global Development Policy Program. Furthermore, In 2009 he served on the investment subcommittee of the US Department of State’s of the Advisory Committee on International Economic Policy. Professor Gallagher writes regular columns on global economic and development policy for The Guardian, Financial Times, and POLITICO.  He co-chairs the Triple Crisis blog.

In the roughly 30 minutes we talked, we discussed

What motivated you? Dr. Gallagher to write the Sino-Latin American dynamic and motivated him to write The Dragon in the Room: China and the Future of Latin American Industrialization

Mr. Gallagher’s inspiration emerged from the 3 years he spent living in Guadalajara, also known as Mexico’s Silicon Valley.  During his time in Mexico, it became very clear there was a “new kid on the block.”  When speaking with Mexican professionals, the US market and future significance for the Mexican economy had to Mr. Gallagher’s surprise taken a back seat to the emergence of China.

It was around this time in 2005, Dr. Gallagher began to investigate what the rise of China meant for both Mexico, and the greater Latin America region.  Would China’s high speed growth and fast rising competitiveness undermine Latin America’s capacity to develop their own competitive industries, or would China’s rise breed new possibilities and growth in Latin American countries?  This formed foundation for his book, which you can click here to purchase a copy of.

Next we discussed the general importance of the growth of Sino-Latin American relations and trade.

Similar to the perspectives often presented here at ChinaSouthAmerica.com, Dr. Gallagher feels the rise of China and its penetration in Latin America comes with a significant amount of uncertainty for the region, offering both opportunities and dangers.  The opportunities are clearer for some countries than others.

For major commodity producers down in South America; Venezuela, Peru, Chile and Argentina the rewards are being felt tangibly, and NOW.  China has presented itself as a new market for their raw materials exports, and Chinese demand has helped push the prices of raw materials to record highs.  However, the danger is that history may well repeat itself if the income generated from selling raw materials to China are not re-deployed efficiently and strategically to create sustainable, globally competitive industries.

The panorama for Mexico and Brazil, Latin America’s economic giants share some similarities because both countries have well a relatively broad range of developed, competitive industrial sectors.  In this case, China is a challenger to their own industries.  The positive and negatives effects of being forced to compete with their Chinese counterparts is debatable, but thus it seems Mexican and Brazilian companies have managed to meet the challenge and it seems Chinese competition will in the long-run catalyze innovation and economies of scale.

On the other hand, there are also major differences for Mexico and Brazil when considering China.  The major difference, and one that is impossible to overlook, is undoubtedly Mexico’s proximity to the United States.    Mexico competes almost directly with China’s manufacturing sector.  The major factor which will dictate how the future unfolds concerns how well Mexico can capitalize off the geographic competitive advantage of being at the door step of the world’s largest consumer market.  It will be important to monitor:

• Rising wages in China vs. Mexico.
• Raw material costs
• The total costs of producing increasingly sophisticated manufactured goods in both countries vs. total time it takes to produce and deliver the goods to the end buyers.

What’s next? Right now the majority of interaction between China and Latin America is occurring at a two levels—government to government, and major company to company.  What are your perspectives on the future of growth of a third level of exchange—that being personal ones between Chinese and Latin Americans down on the ground in both China and Latin America?  What types of opportunities does the future hold for the next generation that is able to form these links?

Like your author of ChinaSouthAmerica.com, Dr. Gallagher believes this to be the “million dollar question,” and one that is not easy to answer.  We will sadly have to wait for his next book which will focus on this question, and which your author hopes to help Mr. Gallagher answer when the time comes.

To conclude, I asked Dr. Gallagher about if he had any thoughts to share on the specific countries of Peru, Chile, Brazil, Argentina, Venezuela, Colombia– the countries which your author most closely follows.

“These are a very diverse set of countries, and I wouldn’t dare generalize across the entire set of them.  The one thing I can say about each of these is that in terms of copper (Peru and Chile), Iron (Brazil), soy (Brazil and Argentina), and crude oil (Brazil, Colombia, Venezuela) this particular set of Latin American nations and the respective commodities is very strategic for China.  China will continue to purchase imports of these commodities and to invest heavily in them.  These country’s governments should be strategic in return.  In order to get the broadest set of benefits from this new market player in China, Latin Americans have to see to it that they can also provide stable supplies over time, create jobs for their people, and manage their exchange rates so that commodities exports don’t crowd out more productive and employment creating activity.  If these nations see China as an opportunity, by bargaining hard with the Chinese and put in place parallel policies in terms of jobs, industrialization, and environmental policy, China may turn out to be a boon.“

As I am currently writing this post from China, where this book is not yet available, I unfortunately have not yet been able to get my hands on a copy of this book. In the 30 minutes I spoke with Dr. Gallagher he exhibited great insight on all that is the growth of Sino-Latin American relations and economic exchange.  I look forward to reading the book for myself after I get my hands on a copy in January when I travel to the US and South America.  If you the reader seek a rich and comprehensive analysis on the growth of China and Latin America’s relations, ChinaSouthAmerica highly recommends you pick up your own copy of The Dragon in the Room: China and the Future of Latin American Industrialization.

CLICK HERE to buy your own copy (hardcover) from Amazon.com of The Dragon in the Room: China and the Future of Latin American Industrialization

or, CLICK HERE for the soft cover edition

David Lowell, perhaps the greatest treasure hunter in the world

David Lowell - Bloomberg

In the snake-infested jungle of southeastern Ecuador, the American explorer David Lowell found himself sliding over a waterfall and heard his head bounce off a rock “like a melon being hit by a hammer,” he says.

Lowell was 72 and prospecting for copper that day in May 2000. He stepped into the slippery streambed for a vantage point free of vipers and vines. A broken rib and throbbing head diverted him to a nearby hamlet in search of help.

“There was one man in the village who was a combination chiropractor and mortician,” Lowell says. “We decided to just buy a little tin of liniment with the picture of a dragon on it.” The expedition carried on.

In the clear water of the stream, Lowell saw enough to help him find one of South America’s richest copper deposits. This May, a joint venture of Chinese state-owned companies paid $652 million to buy Lowell’s partner in the exploration, Vancouver- based Corriente Resources Inc. Lowell kept a stake there for himself, though local opposition has prevented mining.

In a career spanning six decades and 44 countries, Lowell has made 14 major discoveries, including the world’s largest copper deposit in Chile. He found treasures where others detected nothing worth mining. Lowell revolutionized exploration and unearthed metals that helped the U.S. build the world’s largest economy. He also made investors billions.

Click here to read the entire article direct from Bloomberg

China’s Kerui Group chooses Peru as its base for greater South American market

President of Shandong Kerui Group Holding Corporation, Yang Xian - Andina

Andina News Agency reports Chinese corporation Kerui Group has expressed its interest in entering the Peruvian market by setting up an oil and gas equipment plant with an initial investment of US$10 million.

This supports my long standing opinion that Peru is perfectly positioned geographically, politically and economically to emerge as “China & Asia’s gateway to South America.”

The President of Kerui Group Holding Corporation, Yang Xian, seems to agree.

“This venture into our market aims to meet oil equipment demands of countries such as Colombia, Ecuador, Venezuela, Bolivia and Brazil.”

“Politics and economic activity in Peru is better than in other Latin American countries such as Venezuela. We can strengthen our presence in Latin America from there, that would be our next task.”

Yang made these comments during the visit of Peruvian entrepreneurs to 3rd China International Petroleum and Petrochemical Equipment & Technology Exhibition (CIPEE) 2010 taking place in Dongying.

Currently around 50% of Kerui Group’s annual production is exported to U.S. and other countries such as Canada, Saudi Arabia, India, Russia, Kazajstán as well as other 30 countries in Middle East, Asia and Africa.  This marks their latest move to expand their market reach.

Ecuador in focus; return to classic Latam volatility?

To all readers… I apologize for the time delay on posting about this story.  I was traveling for the past 4 days and literally out of touch with the world in the Chinese countryside.

CSA’s perspective?  The recent news from Ecuador does not necessarily translate into a  coup d’état, but rather a very well orchestrated protester with the help of both international players and Ecuador’s classic oligarchy.  Compared with the left-leaning politics in other countries, Correa is no crazy communist (to be frank), and is actually quite a clever well trained economist who knows that markets work.

He is Ecuador’s democratically elected official, and for better or worse, Ecuador’s democratic institutions stood their ground today and for that Ecuador deserves a pat on the back.

Oct 4 (Reuters) – A rebellion by police officers that ended with a fierce shootout to rescue President Rafael Correa revived memories of Ecuador’s volatile history and concerns about stability in the oil exporting nation.

The role of the military, a struggling economy, slow-moving oil negotiations and a possible move by Correa to dissolve Congress, rule by decree and call elections are all points to watch this year:

CORREA’S FIGHT WITH CONGRESS

Correa had threatened to dissolve Congress, rule by decree and call new elections shortly before the police rebellion. Although he appears to have since backed away from the move for now, it is still a clear policy option. It would allow the government to pass tough new rules for investors and increase its short-term financing options, although it would also anger Correa’s opponents and raise the risks of new protests.

…continue reading direct from Reuters

Oct 2 – Ecuador undergoes a shake-up after an alleged coup attempt.

October 1 – Ecuadorean President Rafael Correa stands defiant in the face of an

attempted coup,following unrest brought on by unpopular austerity measures.

Peru in focus; Pisco in asia, GDP, Cooperation with Ecuador

Andina News reported a few blog worthy news bites on Peru today. Visit their site to browse more stories, including the complete version of the excerpts posted below.

Peru prepares pisco promotional campaign in Asia

Lima, Jul. 12 (ANDINA). In a bid to boost pisco exports, Peru will launch a promotional campaign for increasing consumption of its national drink in the Asian continent.

“Pisco has enormous potential in the Asian market but we still have a lot to do. Commercial offices in the region are making progress and we must design an aggressive campaign,” said the director of the Commercial Office of Peru in Taipei, Gycs Gordon.

Peru’s GDP likely to post two-digit growth rate in second quarter

Lima, Jul. 12 (ANDINA). Peru’s Gross Domestic Product (GDP) growth rate would have registered a two-digit increase in the second quarter this year, Peru’s Minister of Economy and Finances Mercedes Araoz said Monday.

Peru, Ecuador discuss tourism cooperation

Lima, Jul. 12 (ANDINA). Peruvian Trade and Tourism Minister Martin Perez will meet Monday with Ecuador’s Tourism Minister Freddy Ehlers to address issues relating to tourism facilitation, investment, community-based tourism and handicrafts, among others.

China to create $5 billion fund to invest in Latin America

In line with China’s outbound investment strategies in Africa and Asia, China is now planning to create a $5 billion usd investment fund for Latin American investments.

The funds target investments will include, infrastructure (probably to help the Chinese get commodities out), agriculture, mining and energy.

Read more in Spanish from Argentinean DERF Agencia de Noticias.

Ecuador, China to set up oil joint venture

China’s latest foray into Latin America hit the presses on Thursday when Ecuador announced it would initiate a new joint venture with the China to explore for oil in the South American country.

China’s Sinopec International Petroleum will invest $1 to $1.1 billion to form a joint venture to exploit oil from block with proven reserves of 120 million barrels of crude in eastern Ecuador.  The joint venture will between Ecuador’s state-owned Petroecuador and China’s Sinopec, according to Germanico Pinto, Ecuador’s minister of nonrenewable natural resources.

Sinopec will hold a 40 percent stake in the joint venture, with Petroecuador holding the remaining 60 percent.

Ecuador, OPEC’s smallest oil producing country, can pump out 500,000 barrels of crude each day.

“Sinopec could improve its supply chains through investing in the South American country, because in the past, the company has always concentrated on processing,” Lin Boqiang, deputy director of the China Center for Energy Economics Research at Xiamen University, said Thursday.

“The reserves of 120 million barrels of crude are small, but many countries are eager to invest and explore oil overseas,” he added. “Sinopec has the technical know-how and capital to complete the project.”

Beijing’s direct investment in Ecuador has reached $2.2 billion, making it one of the top targets of Chinese investment in Latin America, Jia Qinglin, chair of the National Committee of the Chinese People’s Political Consultative Conference, told reporters when he was paying a visit to Ecuador.

Trade between the two countries reached $2.4 billion in 2008, a 50 percent increase from the previous year, he said.

South America: An Analysis of Arms Races and Regional Geopolitics

A insightful analysis on the ongoing arms build up occurring in South America was released on Tuesday, October 20 by Council on Hemispheric Affairs (COHA). You can access the full analysis, written by research fellow Alex Sanchez if you sign up to be a (free) member of MercoPress.

Img: MercoPress

MercoPress is an independent news agency based in Montevideo, Uruguay focused on delivering news related to South America, Mercosur-member countries and covering an area of influence which includes the South Atlantic and insular territories.

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In mid-September, Secretary of State Hillary Clinton critiqued Venezuela’s leader Hugo Chavez for his ongoing purchases of mostly Russian military equipment, arguing that this could trigger an arms race in South America. The statement has added fuel to the ongoing discussions about what form South America’s rearmament is taking and what this could come to mean for the security of the region.

The aim of this paper is to discuss the major arms purchases now going on in South America and the likelihood of inter-state war breaking out as the result. Ongoing reports about major purchases by Venezuela, Brazil and Chile tend to blur the actual geo-security situation in the region, as several countries, with Argentina as the most prominent example, have carried out only limited military acquisitions. The common perception is that an arms race raises the possibility of inter-state war; however, the reality in South America (and Central America as well) is that inter-state warfare has seldom occurred since World War II. Additionally, regarding the arms race in South America, it is misleading to assume that all South American countries are carrying out their arm purchases with the same gusto as Brazil, Chile and Venezuela.

It is generally assumed that South America is either already engaged in an arms race or is about to enter one. This is somewhat inconsistent because the start of an arms race is not easily defined. It could also be argued that what is occurring is not so much a general arms race as it is a product of certain militaries capitalizing on weak civilian governments (an updated version of former Uruguayan President Bordaberry in 1973) to increase their defense budgets. Furthermore, in spite of domestic security issues in several South American countries, most notably the insurgent movements in Colombia and Peru as well as occasional inter-state tensions, the reality is that inter-state wars in the region have been notably scarce in the past few decades, which raises the question: is interstate warfare necessarily the future of South America? The final section of this article will discuss whether an arms race could lead to general warfare.

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Click here to access the full analysis from MercoPress