A second gold rush is under way in Latin America, officials from Asia and Latin America said. The selling of soybeans, iron and copper ore, as well as other commodities to Asian countries has transformed Latin America over the past decade, stabilizing economies despite worldwide crises and lifting tens of millions of people into the middle class.
Asian investors flush with hundreds of billions of dollars in cash now see Latin America as a top business opportunity, and they are pouring into manufacturing, construction and other industries, particularly in up-and--coming countries such as Brazil, Peru and Mexico. This is transforming the lucrative trade relationship that was based primarily on exporting raw materials to Asia, an arrangement that frustrated Latin governments eager to stimulate their own manufacturing.
Government and business officials meeting this week at the World Economic Forum in Mexico said the investment surge means Asia is poised to overtake the US and the EU as Latin America’s top trading partner over the next decade. Asian representatives have been an unmistakable presence at the forum, with South Korean, Chinese and Japanese investors making the rounds in the convention hall.
“We’re talking about tens of billions of dollars in just Korean banks looking for a destination,” said Kevin Lu, Asia-Pacific regional director of a World Bank Group agency that insures foreign investments against political risk.
“When I meet with investors, Latin America is in every conversation,” Lu said.
Already, Chinese investment in Latin America has jumped from a few million dollars a couple of years ago to about US$15 billion in 2010, with most of the money going into mining and other extractive industries in Brazil, Peru and other nations, said Alicia Barcena, executive secretary for the Chile-based UN Economic Commission for Latin America and the Caribbean. Chinese investment in the region jumped again last year to about US$23 billion, Barcena said.
Meanwhile, Japan surpassed that figure last year and displaced China as the region’s top Asian investment and trade partner, Barcena said. She did not provide a precise number for Japan’s total.
China already ranks among the top three trading partners of Peru, Brazil, Chile and Argentina, while Asian investment in auto and other manufacturing in Mexican industrial cities has greatly expanded the middle class.
“I don’t have any doubt that Asia will soon become the region’s top trading partner,” Mexican Secretary of Economy Bruno Ferrari Garcia de Alba said.
“In Mexico, we believe we need to get closer and closer to Asia,” he added.
According to the UN Economic Commission, 17 percent of Latin America’s exports went to Asian-Pacific countries in 2010, more than tripling from 5 percent in 2000. Over the same span, the share of the region’s total exports that went to the US dropped from 60 percent to 40 percent.
Asia-Pacific countries buy 31 percent of Mexico’s total exports, Ferrari said, amounting to US$110 billion, with that number growing by an average of 20 percent annually in the past five years.
Lu said raw material industries in Latin America are getting only between 40 percent and 50 percent of total Asian investment in the region, while the rest goes to manufacturing, construction and other businesses.
Foreign money flowing into a new region often first goes into buying natural resources because it is a simpler business than making things, which requires dealing with labor, setting up supply chains and complying with various government rules, he said.
Hanwha, a South Korean petrochemicals company, is considering manufacturing in Latin America rather than continuing to concentrate its production in China, said Sang M. Lee, chief executive officer of the company’s US operations.
At the same time, the company is eyeing the Latin American market, especially as it moves into solar energy, Lee said after a Wednesday morning at the World Economic Forum dedicated to the future of Asian-Latin American relations.
“We need that new production because there are a lot of resources in Latin America, and we need more markets,” Lee said. “We’re just at a beginning stage with this.”
Yet to be seen is whether the rising Asian investment will quiet concerns in Latin America that exporting commodities while importing manufactured Asian goods will ruin domestic companies and leave the region vulnerable. Brazil, in particular, has raised import tariffs on manufactured goods to protect its own industries.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure