La presencia de China en Am¨¦rica Latina
Cable sobre los recelos de brasile?os y argentinos ante China
El c¨®nsul brasile?o en Shangh¨¢i afirma que China quiere controlar el suministro de materias primas. Su hom¨®logo argentino critica que en la relaci¨®n comercial entre China y Argentina hay "m¨¢s palabras que acciones"
| ID: | 202307 |
| Date: | 2009-04-15 03:25:00 |
| Origin: | 09SHANGHAI170 |
| Source: | Consulate Shanghai |
| Classification: | CONFIDENTIAL |
| Dunno: | 08SHANGHAI428 09BEIJING518 09SHANGHAI70 |
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C O N F I D E N T I A L SECTION 01 OF 05 SHANGHAI 000170 SIPDIS STATE FOR EAP/CM USDOC FOR ITA DAS KASOFF, MELCHER, OCEA TREASURY FOR OASIA - DOHNER, HAARSAGER, WINSHIP NSC FOR LOI E.O. 12958: DECL: 4/15/2034 TAGS: PREL, ECON, ETRD, EFIN, CH, XM, XL, XR SUBJECT: CHINA'S GROWING TRADE AND INVESTMENT TIES WITH LATIN AMERICA: VIEWS FROM SHANGHAI REF: A) BEIJING 518 (NOTAL); B) SHANGHAI 70 (NOTAL); C) 08 SHANGHAI 428 (NOTAL) CLASSIFIED BY: Christopher Beede, Pol/Econ Section Chief, U.S. Consulate, Shanghai, U.S. Department of State. REASON: 1.4 (b), (d), (e) 1. (C) Summary: Shanghai scholars said China's interest in Latin America remains primarily economic - securing natural resources and diversifying export markets amid the global economic downturn. China recognizes that it is facing an image problem in Latin America and is taking steps to address negative perceptions, said the scholars. China's strategy in Latin America is clear: it wants to "control the supply of commodities," said the Brazilian Consul General in Shanghai. Chinese investors, encouraged by the Chinese Government, are rushing to invest in Brazil's natural resources. The Argentinean Consul General in Shanghai, however, expressed frustration at the slow pace of Chinese investment in his country. Brazilian and Argentinean firms in East China are increasingly focused on manufacturing for the Chinese domestic market. End summary. 2. (SBU) Poloff held separate discussions in March with leading Shanghai scholars on China-Latin America relations and the Consuls General of Brazil and Argentina in Shanghai. The discussions focused on overall political relations and growth in bilateral trade and investment, including investment to and from East China. Need to Diversify Trade Partners --------------------------------- 3. (C) China's primary interest in Latin America remains oil and natural resources, said Shanghai scholars, but the global economic crisis is also forcing China to diversify its export markets. With exports to developed countries plummeting, China is looking to Latin America, which China thinks is still in relatively good shape, to pick up some of the slack, said Niu Haibin, Deputy Director of the Center for Latin American Studies at the Shanghai Institutes for International Studies (SIIS). Wu Chunsi, Deputy Director of the Department of American Studies at SIIS, said China sees the need to "pay more attention" to large emerging countries like Brazil and Mexico amid the changing global economic balance of power. For their part, Latin American countries view growing relations with China as a "gateway" to greater economic cooperation with other countries in East Asia, said Wu. 4. (C) These Shanghai scholars believe overall relations between China and Latin America are good but also recognize areas where interests do not overlap. For example, though China already has FTAs with Chile and Peru and began negotiating an FTA with Costa Rica in January 2009, Zhang Jiazhe, Vice Director of the Center for Developing Countries Studies at the Shanghai Academy of Social Sciences (SASS), believes other FTAs, especially with bigger countries in the region, are "unlikely" in the near future because many Chinese exports compete directly with exports from Latin America. Niu pointed to the "similar industrial structure" and overlapping exports of China and Mexico, adding that China should invest more in the Mexican oil industry to counter Mexican concerns about China's growing trade surplus with the country. Wu Chunsi said China is "realistic" that it can cooperate with the region on many things like climate change and energy but that they "do not have to agree on SHANGHAI 00000170 002 OF 005 everything," for example, the issue of expanding the number of permanent seats on the United Nations Security Council, a subject in which Brazil and China do not see eye to eye. China Facing Image Problem --------------------------- 5. (C) The bigger problem for China in Latin America right now, said the scholars, is its image among the local population. Zhang said competition from Chinese imports, like textiles and shoes, is creating negative feelings towards China among countries with large low-end manufacturing industries, mentioning Mexico as an example. There is also a perception in Latin America that Chinese investors are like "locusts," extracting minerals and natural resources and leaving very little of lasting value behind, said the scholars. Chinese companies, on the other hand, find it difficult to invest in Latin America, according to Niu. Chinese companies complain about strong labor unions and cultural conflicts in Latin America, including a "different work ethic" between Latin American workers and Chinese workers, said Niu. Chinese companies thus prefer to import workers from China for projects in Latin America, often at the cost of local resentment. 6. (C) The Chinese Government recognizes it faces a public relations challenge in Latin America, said the scholars. Chinese companies in Latin America, for example, are being encouraged by the Chinese Government to hire more local employees, according to Wu. Zhang noted that China became a donor member of the Inter-American Development Bank (IADB) in January 2009 and donated USD 350 million, which is "money that many Latin American countries need." He thinks China's outreach to the IADB, along with consecutive high level visits to the region by Chinese President Hu Jintao in November 2008 and Vice President Xi Jinping and Vice Premier Hui Liangyu in February 2009, highlight China's efforts to improve overall relations, including its image, in Latin America. (Ref A). The Brazilian View: China Focused on Securing Resources --------------------------------------------- ---------- 7. (C) Marcos Caramuru de Paiva, Consul General of the Brazilian Consulate in Shanghai, thinks the primary purpose of recent high-level visits by Chinese leaders was to "clear the road" for more Chinese investment in the region. For example, Vice President Xi visited Brazil to sign an agreement with Petrobras, in which China agreed to lend USD 10 billion for deep-sea exploration and extraction in return for Brazilian oil. "China's strategy is very clear: it is doing everything possible to control the supply of commodities," said de Paiva. Although Brazil exports some high-tech products, such as small commercial aircraft, to China, he sees a growing "imbalance" in bilateral trade, with China shipping higher value-added machinery to Brazil in exchange for Brazilian commodities. De Paiva does not think this situation will change anytime soon, stating "it is difficult to compete with Chinese manufacturers." However, he does not think this is necessarily a bad thing, as current bilateral trade creates a "win-win" situation with both countries capitalizing on their areas of comparative advantage. Easier for China to Invest in Africa ------------------------------------------- 8. (C) The Chinese Government is telling Chinese firms to invest in Brazil's mining and agriculture sectors, even providing 70 percent of the initial financing in some cases, said de Paiva. He sees several problems with this. First, SHANGHAI 00000170 003 OF 005 there is already significant investment by Brazilian firms in the country's well-developed mining and agriculture sectors, leaving less opportunity for Chinese investment. Second, the global economic crisis and consequent drop in the price of commodities has altered the calculation of investors. He mentioned the case of Baosteel, China's largest steel maker (headquartered in Shanghai), which was planning to invest with the Brazilian mining giant Vale to produce 10 million tons of steel in Brazil each year. (Note: For more on Baosteel, see Ref B. End note.) The deal fell through when demand for steel products plummeted amid the crisis. 9. (C) Another problem is that, according to de Paiva, Chinese investors "do not understand," nor do they try to understand, the local Brazilian market and regulations. Chinese firms "should first hire consultants" to navigate them through Brazil's tax codes, regulations, and bureaucracy, he said. Instead, spurred by easy access to government financing, they immediately jump into investments in sectors with which they have no experience. For example, de Paiva mentioned a furniture company in East China that recently went to Brazil to set up an agricultural company exporting soybeans. The Chinese investor did not understand the intricacies of the business - the importance of location, intermediaries, traders, transportation, and well-established competition - since he had never been in the agriculture business before, and so the venture failed. Chinese investors think Latin America and Africa are the same, said de Paiva, but it is easier for them to do business in Africa since Africa's institutions and regulatory environment are less well-developed than Latin America's. Brazilian Presence in East China ---------------------------------- 10. (C) According to de Paiva, there are approximately 1000-2000 Brazilian nationals in East China. Most are working in multinational or Brazilian firms, but there is also a small number in the entertainment industry (e.g., dancers). He also noted a large number of ethnic Chinese children born in Brazil, holding Brazilian passports, and currently living in East China. De Paiva said there was an initial wave of Brazilian investors setting up machinery, shoe, and textile factories in East and South China about 10 years ago, and although new Brazilian investors are still coming to China, the number of firms has remained relatively stable. There are currently two Brazilian banks in Shanghai - Banco do Brasil and Banco Itau - facilitating bilateral trade and investment, according to de Paiva. Although he has not heard of major regulatory problems facing Brazilian firms in Shanghai, he has seen cases of IPR infringement, including a Brazilian shoe manufacturer which recently opened shops in China, only to realize that a Chinese firm had already registered the company's trademark locally. More and more Brazilian firms, such as this shoe maker, are coming to China to sell their products to Chinese consumers, said de Paiva. "The days of manufacturing cheaply in China are over," as Brazilian firms focus more on tapping China's domestic market, he added. The Argentinean View: Chinese Investors Taking Their Time --------------------------------------------- ----------- 11. (C) Eduardo R. Ablin, Consul General of the Consulate-General of Argentina in Shanghai, said Argentina exports USD 9 billion, or 10 percent of its total exports, to China. Three-quarters of its exports are soy, vegetable oils, and animal feed. The remaining one-quarter includes poultry SHANGHAI 00000170 004 OF 005 (Ablin thanked KFC for getting the Chinese hooked on chicken wings), wine, and non-agricultural products. Imports from China are primarily heavy industrial equipment and textiles. Ablin estimated there are 100,000 Chinese nationals and second generation ethnic Chinese in Argentina, with many of them working in local retail shops and restaurants. However, "real investment" from China only started five years ago and is only growing at a "modest pace," he said. Ablin knows of only one large Chinese investment project in Argentina, involving a subsidiary of Baosteel which had taken over a previously state-owned iron ore mine. Other Chinese investments in Argentina are in relatively new sectors, such as a Chinese motorcycle factory in Buenos Aires. The Chinese have looked at other projects, such as copper mining and the revamping of Argentina's ageing subway system, but so far, there has been "more talk than action," said Ablin. He thinks China sees Argentina as a "sustainable, long-term supplier" of natural resources, but has been slow to turn ideas into concrete investment. Argentinean Presence in East China ---------------------------------- 12. (C) According to Ablin, there are only 300 Argentinean nationals in East China, more than half of them working in Argentinean and multinational companies, while one-third are ethnic Chinese children born in Argentina but currently living in East China with dual passports. He said there are only six large Argentinean investors in East China, all of whom have formed joint ventures (JV) with local Chinese companies. He mentioned, for example, a JV in Anhui Province producing agricultural pesticides, and another JV engaged in pharmacology and antibiotics. Ablin said Ningbo, a large port city in Zhejiang Province, is becoming an increasingly important center for Argentina's soybean and other agricultural imports into China. Ablin has not heard complaints from Argentinean firms about regulatory and legal difficulties in East China. Ablin said Argentinean firms in East China, like Brazilian firms, are increasingly focused on manufacturing for the Chinese domestic market. Comment ------- 13. (C) De Paiva lamented how the Brazilian Consulate in Shanghai has only two officers (including himself) and has not been able to keep up with the rapid growth in bilateral trade and investment, particularly given Shanghai's significance as a trade and financial hub. "We are behind the curve," he said. Ablin of the Argentina Consulate said they currently have three officers in Shanghai and are hoping to add a fourth in the second half of 2009. He also mentioned plans to open a small Consulate in Guangzhou in the near future. 14. (C) Despite burgeoning trade between China and Latin America in recent years, there has been a dearth of interest in the subject among academics and university students in Shanghai. Zhang Jiazhe of SASS said it is difficult to get university and government funding for research on Latin America as opposed to research on the United States or Japan, for example. However, the situation may be gradually changing, as SASS has recently started discussions with universities in Brazil, Argentina, and Mexico to set up educational exchanges. According to Zhang, the Shanghai Municipal Government is also backing plans to set up Confucian Institutes (Chinese language and cultural training centers) in collaboration with Shanghai's Fudan University and SHANGHAI 00000170 005 OF 005 the Shanghai Foreign Language Institute in Peru, Argentina, Venezuela, and Brazil. Even with these efforts, however, academic interest among Shanghai scholars on Latin America is lagging and has not been commensurate with the growth in bilateral trade and investment. CAMP |
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