Dilogo Chino | Why are Chinese agricultural firms so active in Latin America and the Caribbean?

China, Latin America and the environment

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Why are Chinese agricultural firms so active in Latin America

and the Caribbean?

Cargill's massive soy processing plant in Santarm, Brazil. Chinese

companies are seeking to replicate the logistics of multinational
companies such as Cargill in order to secure products such as soy and
fishmeal to feed livestock (image: Matt Hintsa ).

10 Mar

by R. Evan Ellis
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From the perspective of the Peoples Republic of China (PRC), the ability to
feed its 1.35 billion population is a matter of existential strategic
importance. Growing Chinese prosperity and associated meat consumption
has exponentially increased the demand on a Chinese agricultural system
constrained by limited arable land, industrial contamination and drought.

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Dilogo Chino | Why are Chinese agricultural firms so active in Latin America and the Caribbean?

While China has sought to maintain self-sufficiency in the production of

food for human consumption, it has increasingly turned abroad to acquire
animal feed to produce that meat, including soy to feed pigs and fishmeal
for chickens. As a result, from 2000 through to 2012, Chinese agricultural
trade with Latin America expanded from $2.0 billion to $26.2 billion, and
is projected to exceed $40 billion by 2017. With the blessing of the
Chinese government, Chinese agricultural firms have increasingly
developed relations abroad, including with Latin America, to obtain vital
foodstuffs.
A glimpse at five countries (Argentina, Brazil, Peru, Jamaica and Mexico)
sheds light on the diversity of Chinese agricultural activity in the region and
on the challenges it brings.
Argentina. During the past decade, high international soy prices, driven in
part by Chinese demand, have led Argentine farmers to dedicate land
previously used for other crops, to soy production. Although Argentinas
growing soy exports to China also stimulated interest by Chinese investors
in acquiring land in the country, an Argentine land law passed in December
2011 restricted such acquisitions.
Generally unable to acquire land, Chinese companies turned to a strategy of
seeking to build a farm-to-port logistics infrastructure to guarantee delivery
of these much-needed goods, mirroring that of the established agroindustrial companies such as ADM, Bunge, Dreyfus and Cargill.
In August 2011, for example, the Heilongjiang-based Chinese Beidahuang
Nongken Group announced a proposed project in which it would invest
$1.5 billion in the Argentine province of Rio Negro for the growing of
soybeans, including the installation of irrigation systems and the
construction of storage, crushing, and other facilities. The project was
derailed, however, when the provincial governor who had opened the door
for the project Csar Barbeito, was beaten in regional elections by Carlos
Soria the candidate of the national ruling party, the Victory Front, which
opposed the project.
In a similar fashion, in 2012, the Chinese agricultural conglomerate

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Dilogo Chino | Why are Chinese agricultural firms so active in Latin America and the Caribbean?

Chongqing Grain, in conjunction with an Argentine partner, Molinos

Cauelas, was reportedly seeking to establish a soy production facility in
the province of Cordoba.
In the end, however, the inability of Chinese companies to construct such
logistics networks led them to turn to purchasing companies with an
established presence in the sector, including the $1.2 billion acquisition of
controlling interest in the agricultural firm Nidera, and the $1.5 billion
acquisition of a majority stake in H.K. Noble in 2014.
Brazil. As in Argentina, the Brazilian government has acted to block
Chinese and other foreign investors from acquiring land in the country,
including a restrictive ruling by the Attorney Generals office in 2010
blocking such acquisitions, reinforced by further administrative decrees in
2011.
Again paralleling the Argentina experience, in the face of such restrictions,
Chinese investors in Brazil sought to create infrastructure in the country for
acquiring, storing processing and exporting soybeans and other agricultural
products to the PRC. Announced projects included a $7.5 billion
investment by Sanhe Hopeful in the state of Goais, and $2.5 billion in
projects by Chongqing Grain in Bahia, although to date neither project has
gone forward.
Peru. In Peru, Chinese agricultural investment has centered on the
fisheries sector. Over the past decade, Hong Kong based China Fisheries
Group, has acquired a significant portion of the Peruvian fishing fleet, and
associated on-shore fishmeal processing facilities, conferring rights to an
ever greater portion of the Peruvian offshore fishing quota. By November
2011, the group had six processing facilities on the Peruvian coast, and
rights to 12% of the countrys fishing quota. Its most significant advance,
however, came in June 2013, when it virtually doubled its presence by
acquiring the fishing company Copeinca for $783 million.
Jamaica. Chinese agricultural activities in Jamaica were relatively limited
until 2010, when the Chinese state owned enterprise China National
Complete Plant Import Export Corporation (Complant) purchased the
national sugarcane processing facility being divested by the Jamaican

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Dilogo Chino | Why are Chinese agricultural firms so active in Latin America and the Caribbean?

government for $774 million.

From the beginning, however, Complant experienced continuous difficulties
both with its labor force and local sugar producers, forcing the company to
replace the plant manager that it initially sent from China.
Mexico. Chinese agricultural engagement with Mexico has historically
been limited. By contrast to Brazil and Argentina, there is little land in
Mexico which can be diverted to grow agricultural goods for export to the
PRC. As a part of the North American Free Trade Agreement (NAFTA),
most of that agricultural production which Mexico exports is absorbed by
the United States.
Under President Enrique Pea Nieto, Mexico has nonetheless sought to
expand agricultural exports to China to offset the countrys enormous trade
deficit with the PRC in manufactured goods. In 2013, Mexico and China
reached accords to expand Mexican pork exports to the PRC, yet to date,
such initiatives have produced only limited results.
Chinas growing role
In general, the focus of Chinese agricultural engagement in the countries of
Latin America and the Caribbean has depended on the predominant
agricultural sectors in the host country, and those which fulfill particular
needs within the PRC. Thus, in Peru, the Chinese focus on the fishing
sector is a coincidence between the existence of an important fishing sector
in the country and Chinas voracious demand for fishmeal for chicken feed.
Chinese agricultural initiatives in the region have also regularly generated
political resistance in the countries in which they have occurred. Typically,
such objections have not been framed in terms of the Chinese identity of
the company or businessmen, per se. Opposition to the Beidahuang project
in Rio Negro, for example, focused on whether the state government had
the constitutional authority to commit Argentine territory to a foreign
enterprise, while in Jamaica, critics of the governments sale of its sugar
refinery to Complant simply questioned whether it was getting a good deal.
In virtually all of the cases, Chinese agricultural engagement in the region

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Dilogo Chino | Why are Chinese agricultural firms so active in Latin America and the Caribbean?

reflects an ongoing learning process; Chinese companies doing business in

the region will tend to become more effective with time.
The activities of Chinese agricultural companies today are transforming
Latin America and the Caribbean. The process of learning and adaptation of
those companies will only enhance the effects of their engagement with the
region, both positive and negative, in the years to come.

This article is an abridged version of R. Evan Ellis chapter in the recently

released Poltica Exterior China: relaciones regionales y cooperacin
published by the Benemrita Universidad Autnoma de Puebla (BUAP).

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TAGS:
agriculture , argentina , Brazil , farming , fishing , food

security, infrastructure , Jamaica , Mexico , Peru , soya , transport

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