The ups and downs of Latin adventure

Updated: 2012-07-24 03:10

By Zhou Siyu in Rio Grande, Argentina (China Daily)

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It wasn't supposed to be like this.

Lin Peifeng, a Chinese engineer, points at a blueprint that shows a giant fertilizer chemical plant, along with two electric power plants, several warehouses and workers' dormitory buildings.

But outside the window of his container-turned temporary office, battered by the howling winter wind, stretches a tract of land thickly covered with withered yellow grass, dotted with occasional piles of coal in the distance.

In reality, there is only wilderness.

This construction site in Rio Grande — a northern city in South Argentina's Isla Grande de Tierra del Fuego — is no ordinary one.

It dates back to early 2010, when, in a bid to meet the South American country's growing demand for fertilizers, three Chinese companies from the country's energy and coal chemical sector — Shaanxi Coal & Chemical Industry Group Co Ltd, Shaanxi Xinyida Investment Ltd and Jinduicheng Molybdenum Group Co Ltd — made a joint investment worth $1 billion, to deliver a plant that could produce 450,000 metric tons of ammonia and 800,000 tons of urea per year.

It is so far the largest Chinese investment in the whole Latin American region.

With the promise of fantastic prospects and support from both governments, agreements for the investment were signed to huge media fanfare on both sides of the world.

But the initial enthusiasm soon cooled and strains began to show.

Tension came to a head in April when a shipment of vital construction equipment and machinery was barred from entering a port in Argentina, due to the country's import restrictions.

Lin works for Tierra Del Fuego Power & Chemical Co Ltd, known as TEQSA in Spanish, a company set up by the three Chinese companies to take charge of the project.

The Argentine government has declined China Daily's repeated requests for comments on the issue, but lacking the necessary machinery, the construction work, supposed to have been finished by April, was also halted.

"There's not much to do here," added a Chinese construction worker at the site.

"I have put on 10 kilograms in weight."

Two years after the agreement was signed, the project is still no further than at the preliminary stage.

"There are troubles, troubles everyday," said Li Dacan, TEQSA's general manager, as he describes his work over the past three years.

TEQSA is only one of a wave of Chinese investments that has flowed to Latin American countries in recent years.

In 2011, the outflow of Chinese investments in the region stood at $10.1 billion, accounting for 16.8 percent of the country's total overseas investment volume, according to official data.

The Latin American region has now emerged as China's second-largest overseas investment destination, second only to Europe.

The headline figures might look like a massive success story on paper, but for many companies the reality is very different.

China is currently the region's third-largest trading partner — but there has been growing criticism in recent years of what is now a growing imbalance in trade between the two parties.

In 2011, total trade volume between China and Latin America jumped 31.5 percent from the previous year to $242 billion, according to official Chinese data.

Some 60 percent of China's imports from Latin American countries are made up of natural resources, while its exports to the region are dominated by processed or manufactured products.

Latin American producers have reacted badly to the influx of cheaper Chinese goods.

The Brazilian National Confederation of Industry, an industrial lobby, for instance, announced in January the establishment of a bilateral body with its counterparts in Argentina, as a way to combat import competition.

Several big names in Brazilian business have taken an active part, including Mafrig, the third-biggest Brazilian food processing company.

According to information from the Economist Intelligence Unit, participants in the body have prioritized the need to urgently tackle growing imports from China.

But growing investments being made in South America might be the key to helping ease the situation, and the imbalance, suggested economists and trade experts.

"One of the main reasons for the trade imbalance is that the manufacturing sector in Latin America is not very competitive," said Yue Yunxia, a Latin America specialist from the Institute of Latin American Studies at the Chinese Academy of Social Sciences.

Investments, especially to help improve the industrial infrastructure in certain sectors and upgrade the quality of products and their manufacturing efficiency, are seen as especially favorable, Yue said.

Yet, there remains a strong reluctance toward foreign investments in many Latin American countries, said analysts and experts.

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