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Alex Pasternack

Alex Pasternack

Posted: April 17, 2009 08:05 PM

China Goes to Latin America For Oil, Minerals -- and Water

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While Obama meets with Latin American leaders this weekend to discuss US relations, he'll be doing so in the shadow of a newer growing player in the region: China. While the economic crisis unnerves Latin American leaders, the Chinese government is stepping in with money for the area's abundant natural resources. Among them: soybeans, which China used to export, but which its increasingly arid land can no longer support in large quantities.

The new links to Latin America might be viewed in parallel with China's ties to Africa, its major go-to place for natural resources. The loans that China makes to African countries like Sudan have drawn controversy, not least because, unlike loans from the IMF and Western countries, they often come with no strings attached. That amounts to condoning corrupt governments, some say; others praise China's engagement as non-paternalistic.

Though that approach may be changing, in Latin America, that policy may benefit leaders like Hugo Chavez of Venezuela. In the Times yesterday:

In February, China's vice president, Xi Jinping, traveled to Caracas to meet with President Hugo Chávez. The two men announced that a Chinese-backed development fund based here would grow to $12 billion from $6 billion, giving Venezuela access to hard currency while agreeing to increase oil shipments to China to one million barrels a day from a level of about 380,000 barrels.


Mr. Chávez's government contends the Chinese aid differs from other multilateral loans because it comes without strings attached, like scrutiny of internal finances. But the Chinese fund has generated criticism among his opponents, who view it as an affront to Venezuela's sovereignty.

"The fund is a swindle to the nation," said Luis Díaz, a lawmaker who claims that China locked in low prices for the oil Venezuela is using as repayment.

More details on China's Latin American moves from the Times:

China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil's national oil company $10 billion. The deals largely focus on China locking in natural resources like oil for years to come.


Meanwhile, China is rapidly increasing its lending in Latin America as it pursues not only long-term access to commodities like soybeans and iron ore, but also an alternative to investing in United States Treasury notes.

China has struck similar deals with South Korea, Indonesia and Belarus -- all for the oil it needs to feed a growing fleet of automobiles and for food crops that China's overtaxed land simply can't sustain.

Feeding the Dragon Soy -- and Water

Soy is in particularly high demand in China, needed to feed the cows, chickens and pigs that increasingly feed its growing middle class.

As China suffers through prolonged drought, the soy imports mask another import. As Richard Vogel, an ecological engineer said at a recent New York Times Institute conference I attended, "China's soybean imports from Brazil are really water imports."

These "virtual water" imports are quietly growing, despite China's dedication to self-sufficiency for food, which it views as crucial to national security.

China's other big soy importer? The US, where, as a result of China's demand, soy prices have shot up and stocks are at a five year low.

The effects of China's soy appetite on developing countries are more worrisome. Though Brazil still has room to grow its available cropland, environmentalists argue that the soy farming in Brazil -- alongside growing demand for sugar cane for ethanol, and other food crops -- is pushing farming northward into the Amazon rainforest and changing the quality of regional rivers. "We are basically changing nature for money in Brazil," conservationist Adalberto Eberhard told NPR.

In 2007, the Times reported on the impacts on Brazil of China's growing soy demand:

"All of a sudden you have a global market for land, a competition between several different products for the same amount of land," said Sergio Barroso, president for the Brazil operations of Cargill, the biggest grain trader in the world. Brazil's soybean industry is losing acres to sugar cane for ethanol production in some areas, he said, and is competing with corn, cotton and cattle.


"If you put it all together between feed and food," Mr. Barroso said, "it is going to be a tremendous challenge."

And, as the recent Times piece points out, growing ties between China and Latin America may be a sign of a new paradigm in global relations. As the Bush administration allowed the US's pull in its old sphere of influence to slightly fade, new south-south relationships have developed.

China's environment is already in need of serious repair. What effects its growing relationships with these countries will have not only on their economies but, just as crucially, on their ecologies, will, at the least, redefine China's global influence.

 

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