CHINA AND LATIN AMERICA - PARTNERSHIP FOR A NEW WORLD

Brazil's huge new port highlights China's drive

into South America

Investments guarantee Chinese access to soy, oil and other badly

needed resources

The Guardian

Wednesday 15 September 2010

The 'super port' in Sao Joao da Barra is the largest port investment

in Brazil and will have capacity for the largest ships in the world.

Photograph: Douglas Engle/Australfoto Blades slicing through the

morning heat, the helicopter rose from the tarmac and swept into a

cobalt sky, high above Rio's Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic

rainforest and fishing boats that bobbed lazily in the ocean below.

Then finally, 80 minutes on, the destination came into view: a

gigantic concrete pier that juts nearly two miles out into the South

Atlantic and boasts an unusual nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up by dozens

of 38-tonne pillars, this vast concrete structure is part of the

Superporto do Acu, a £1.6bn port and industrial complex that is being

erected on the Rio coastline, on an area equivalent to 12,000

football pitches.

Reputedly the largest industrial port complex of its type in the

world, Açu is also one of the most visible symbols of China's rapidly

accelerating drive into Brazil and South America as it looks to

guarantee access to much-needed natural resources and bolster its

support base in the developing world.

When Acu opens for business in 2012, its 10-berth pier will play host

to a globetrotting armada of cargo ships, among them the 380-metre

wide ChinaMax – the largest vessel of its type, capable of ferrying

400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of barrels of

oil are expected to pass along the "Highway" each year on their way

east, where they will alleviate China's seemingly unquenchable thirst

for natural resources.

"This project marks a new phase in relations between Brazil and

China," Rio's economic development secretary, Julio Bueno, said

during the recent visit of about 100 Chinese businessmen to the port

complex, which is being built by the Brazilian logistics company LLX

and should receive billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America, is part

of China's "going out strategy" – an economic and, some say,

diplomatic push for Chinese companies, many of them state-run, to

invest abroad, snapping up access to minerals, energy and food by

pouring the country's colossal foreign reserves into overseas

companies and projects.

China is expected to overtake Japan as the world's second largest

economy this year and may already be the world's greatest energy

consumer. Now it is set to become Brazil's top foreign investor, with

its companies plowing $20bn into the country in the first six months

of 2010, compared with $83m in 2009. A recent study by Deloitte

predicted that Chinese investments in Brazil could hit an average of

about $40bn a year between now and 2014, with companies throwing

money at sectors ranging from telecommunications, infrastructure and

farming, to oil, biofuels, natural gas, mining and steel

manufacturing.

"Relations with Brazil in all areas have entered a new era," Qiu

Xiaoqi, China's ambassador in Brazil, recently told the state news

agency Xinhua.

The surge in China's South American spending is not just a Brazilian

phenomenon. Ecuador has already signed around $5bn of bilateral deals

with China this year, including $1.7bn to help build a hydro-electric

dam and $1bn investments for oil exploration and infrastructure

projects. That compared with Chinese investment of just $56m in 2009.

Chinese companies have sunk $1.4bn into mining operations in Peru

this year, while in April Hugo Chávez announced that the Chinese,

already major sponsors of Venezuelan oil exploration, had agreed to

open a $20bn credit-line for the "Bolivarian revolution".

Michael Klare, author of Rising Powers, Shrinking Planet, a book

about the growing tussle for global resources, described today's

China as "the shopaholic of planet Earth".

"The Chinese authorities understand that to sustain the country's

continued growth, they will have to ensure that its industries are

provided with adequate supplies of energy, minerals, and other basic

raw materials," he said. But the "going out" strategy went far beyond

business transactions, he added.

"They seek to fashion a multipolar world in which no single power –

read the United States – plays an overwhelmingly dominant role. To

this end, they seek to bolster ties with rising regional powers like

Brazil and South Africa."

In Sao Joao da Barra, the city nearest to Acu and one of Rio state's

poorest regions, the Chinese presence is being felt even before

Brazil's Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water and

Mandarin interpreters for visiting Chinese dignitaries. Sao Joao da

Barra's town hall, meanwhile, has started offering free Mandarin

lessons to locals interested in working with the wave of Chinese

guests that is anticipated.

"You should see a 10-year-old boy saying, 'I understand … the Chinese

are coming and when the Chinese industries come I want to work for

them and if I speak Mandarin I'll have a competitive advantage on the

others'," beamed Eike Batista, the billionaire entrepreneur behind

the superport and one of the most vocal cheerleaders for Chinese

advances into Brazil. "[It is] wonderful."

Leonardo Gadelha, LLX's CFO, said during a recent tour of the port:

"This is part of a Chinese strategy of going to the market more and

more. They are already a very considerable presence in Africa and we

are now going through this moment in Brazil."

The Highway to China lay "in the middle" of this blossoming

relationship with China, he said, adding: "We are betting that … this

will continue growing."

Not all Brazilians, or indeed western governments, share such

enthusiasm.

"There are many in Washington who worry about China's growing

presence in Africa and Latin America and claim that this poses a

threat to America's long-term strategic interests," said Klare,

noting, however, that the US' "fixation" with Afghanistan and the war

on terror meant there had been virtually no reaction.

In Brazil meanwhile China's arrival has prompted cries of

neo-colonialism. "The Chinese have bought Africa and now they are

trying to buy Brazil," the prominent economist Antônio Delfim Netto

complained in a recent interview with the Estado de Sao Paulo

newspaper, warning that it was a "grave mistake" to allow a foreign

state to buy "land, minerals [and] natural resources" from another

sovereign power.

Batista, Brazil's richest man, rejected such criticism, saying: "The

association between Brazil and China is a two-way highway." Chinese

companies such as Wuhan Iron and Steel had committed to helping build

a $5bn steel mill at the port complex, rather than always shipping

out primary resources to process at home, he pointed out. "You want

to get three tonnes of raw iron ore, [so] produce one tonne of steel

in Brazil," he said. "That philosophy is sinking in and is great for

both sides."

Neither would Chinese companies be allowed to flood the complex with

hordes of foreign workers as had happened in Africa, said Gadelha,

the CFO.

"If it was up to them they would bring lots of Chinese workers as

they are used to doing," he admitted. "[But] Brazil's legislation is

very strict in this sense."

Batista suggested that rather than complaining about China's

courtship of Brazil, western powers should urge their own companies

to pay more attention to the region themselves.

"In the last 15 years or so the [American and European] CEOs have

stopped coming here and that is why they are a little bit behind," he

said. "We are pushing European companies and saying: 'You're not

really understanding what is happening in Brazil'."

"Don't put Brazil in the same bag as our neighbours," he added. "We

are not Central America. We are not Venezuela. We are not Argentina."

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Beijing's deals

Brazil In November 2009 Brazilian energy giant Petrobras signed a

$10bn loan deal with China's Development Bank. As part of the deal

Petrobras will guarantee the supply of 200,000 barrels of oil per day

to China over the next 10 years. Chinese companies and state banks

pumped around $20bn into Brazil in the first half of this year

Venezuela Hugo Chávez, pictured, unveiled a $20bn credit line from

China's Development Bank to fund the "Bolivarian revolution" in April

Ecuador The country has already signed around $5bn of bilateral deals

with China this year, including $1.7bn to help build a hydro-electric

dam and $1bn investments for oil exploration and infrastructure

projects. In 2009 direct Chinese investment in the country was just

$56m

Peru Chinese companies invested $1.4bn in mining operations in Peru

during the first four months of this year, making China the country's

second largest trade partner