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China on course to be Latin America’s biggest trading partner by 2017

09th January 2013
Helena Powell

Helena Powell covers Sino-Latin American relations for the online news link Pulsamérica. She has a BA in History and an MSc in Latin American Studies from Somerville College, Oxford. Helena is particularly fascinated by Latin America’s role as an emerging market and the way in which it is forging an international identity, both as individual countries and as a region. You can follow Helena on Twitter (@HelenaPowell3).

9th January 2013
China’s investments in Brazil’s oil and gas sector are granting sustenance to reports that the Asian nation will become Latin America’s largest foreign investor before the end of the decade. Helena Powell reports
BRIC markets
China looks set to become Latin America's biggest trading partner sooner than expected

In late October the Agência Nacional do Petróleo, Brazil’s National Petroleum Agency (ANP), approved the purchase of a 10 per cent stake in five blocks, located in the offshore Espirito Santo Basin, by China’s state-owned oil company Sinochem.

This approval formalises a deal which was initiated in January 2012, when Sinochem bought the stakes from Perenco, a French oil and natural-gas company.  Details of the final deal can be viewed on ANP’s website, according to the website Energy-pedia.

The deal marks the latest step in the ever-increasing presence of Chinese companies in Brazil’s untapped and potentially lucrative oil frontier.

Sinochem is offering a multi-billion dollar development programme for these blocks as part of China’s ongoing policy to secure sufficient natural resources for the economy’s fuel needs, and to create a foothold for future trade with Latin America as a whole.

The Sinochem purchase is one of several billion-dollar deals brokered by China in order to capitalise on Brazil’s rising crude oil production.

In the last 12 months the company Sinopec paid USD 5.19bn for a 30 per cent stake in the Brazilian arm of Galp Energia and USD 7bn for a 40 per cent stake in the Brazilian arm of Repsol YPF.  Furthermore, Sinochem acquired 40 per cent of Statoil’s Peregrino field for USD 3.07bn in 2011.

As a result, it comes as no surprise that a recent study by the Economic Commission for Latin America and the Caribbean (ECLAC) confirmed the likelihood that China will become the region’s most important trading partner in the next five years.

This forecast comes in the wake of the persistent financial problems troubling the EU, which has long been a major market for Latin America.  The decline of the EU is rapidly clearing the way for China to consolidate its economic presence in the region, and the latter is already the primary trading partner of Brazil, Peru and Chile.

ECLAC also flagged up the need to ‘balance the scales’ of the relationship between China and Latin America, which is currently characterised by high exports of raw materials from Latin America to China, and manufactured imports to Latin America from China.

The anticipated increase in Sino-Latin American trade is also part of an expected general boom in South-South trade, which economists predict will outstrip North-North trade within five years for the first time ever.