Category: Regions

Despite overall bullishness about growing trade links between LatAm and China continuing to drive LatAm growth, many countries in the region are not wholly dependent on it. “For the most part, countries are much more reliant on their own growth than on China’s growth,” says Doug Smith, economist at Standard Chartered. He explains a slowdown in China’s growth means commodity prices could suffer, and there would be less reserve accumulation, but most countries are net creditors. Brazil’s growth is particularly tied to domestic consumption, which would shield it from any drop in Chinese demand. “I’m quite pessimistic about the long-term outlook for China,” says Michael Pettis, professor at Beijing University, noting that the current investment boom is unsustainable, as trade balances readjust in the deleveraging following the crisis. Pettis notes, however, that even if the likely bumps ahead mean Chinese GDP growth of 5%-6% per year instead of 8-9%, that is still better than most economies. Both spoke on a panel at the LatinFinance Latin America China Investment Forum last week in Beijing.

As Chinese lenders, corporates, and investors ravage the globe for healthy returns and fresh resources, Chinese officials insist politics are low on the list. “We don’t put much consideration into political issues. Our direction depends on where there are local projects, instead of paying too much attention to policies,” says Zhu Hongjie, vice president of the China Eximbank, which along with the China Development Bank is the main means by which China’s government lends abroad. Zhu sees similar lending opportunities to Africa, though he notes that LatAm’s generally more advanced development would help facilitate projects. Chinese companies have received criticism for their operations in Africa, which are viewed as extracting much but giving little in return to local economies. “Our main purpose is to expand scale, to make a healthy sustained development. Many countries say we are only interested in profits instead of people’s interests. We are not like this. We care about both,” says Chen Zhong, deputy general manager at China Harbor Engineering. He says his firm is active in 10 LatAm countries including Mexico and Brazil, and has just committed to a $70m project in Santiago, Cuba. “We are open-minded with our targets. It depends on the project itself and the returns,” he says. Chen and Zhu spoke at the LatinFinance Latin America China Investors Forum this week in Beijing.

Echoing the sentiments of many Latin corporates attending the LatinFinance Latin America China Investors Forum in Beijing this week, Pemex is optimistic about increased Chinese involvement in the region, specifically in the oil sector. “We can certainly gain expertise from the Chinese oil companies,” Mauricio Alazraki, managing director of finance at Pemex, tells LatinFinance. “I think they could be very good procurement contractors for us. Working with those companies we could have some interesting financing packages, as we do with other companies in other parts of the world,” he adds. According to Alazraki, such collaboration with Chinese entities could bring financing from the China Development Bank and the China Exim Bank, possibly even a funding package similar to the $10bn Petrobras got from the CDB earlier this year. “In terms of international bonds, we would of course love to have an investor base in mainland China,” he adds, noting a presence already from Singapore and Hong Kong. As for the possibility of competition from Chinese oil companies, Alazraki does not view them as competitors. “I think there is room for cooperation in Mexico, not only with Chinese companies but with all international companies,” he says.