China shops for Latin American oil, food, minerals

FILE - In this April 9, 2008 file photo, Venezuelan President Hugo Chavez, right, shakes hands with Chinese Vice President Xi Jinping during a meeting at Diaoyutai State Guesthouse in Beijing. In recent years, China has agreed to lend and invest tens of billions of dollars around South America, outdoing many other traditional lenders such as the World Bank and the International Monetary Fund. In return, Chinese officials have signed long-term contracts in which borrowing countries pay back their loans through guaranteed shipments of precious commodities, particularly oil, that China needs to keep growing. (AP Photo/Minoru Iwasaki, Pool)

CARACAS, Venezuela—Latin America is blessed with a wealth of natural resources such as oil, copper and soy, and seeks investment and loans to capitalize on them. China needs the commodities to keep its economy growing and has about $3 trillion in reserves to burn.

Those interests have come together in a burgeoning and unorthodox partnership, as China lends and invests tens of billions of dollars in countries around Latin America in return for a guaranteed flow of commodities, particularly oil.

Recent deals have made China a key financier to the governments of Venezuela and Argentina. At the same time, Chinese companies have secured a decade's worth of oil from Venezuela and Brazil, and steady supplies of wheat, soybeans and natural gas from Argentina.

China is breaking new ground by aggressively locking down commodities around Latin America through large loans, investments and other financial arrangements, said Orville Schell, director of the Center on U.S.-China Relations at the Asia Society in New York.

"I don't know of any other government which has done this sort of securing of rights for commodities and natural resources so systematically around the Third World as China, and they've used a whole host of new financial instruments to do this," Schell said.

"China's been very, very prolific in spreading its investments around Africa and Latin America, even though the terms aren't ideal."

Ernesto Fernandez Taboada, director of the Argentine-Chinese Chamber of Production, Industry and Commerce, said China is simply making sure it has the resources it needs to continue growing its economy, which, by some accounts, is projected to surpass the U.S.'s by 2020.

"For China, this is a strategic, long-term investment," Fernandez Taboada said. "They're thinking in the future, not just in the moment. These oil investments, for example, are for 15 to 20 years."

 Some of the largest investments have gone to Brazil and Argentina, but China has extended even bigger loans to Venezuela, agreeing to provide more than $32 billion to President Hugo Chavez's government.

Venezuela will pay its debt in oil, and in increasing amounts of it during the next decade. The infusion of cash has swiftly made China Venezuela's biggest foreign lender, enabling Chavez to boost spending ahead of next year's presidential election.

"Viva China!" Chavez exclaimed during a televised meeting with business leaders from Beijing, thanking them for helping set up mobile phone factories and build railways and public housing in Venezuela. He gushed: "I'm in love with China."

The relationship is driven in part by Chavez's eagerness to form alliances that exclude the U.S. But it's also good business for Chinese companies: Venezuela says it has been exporting to China about 460,000 barrels a day, about 20 percent of its oil exports, according to official figures. It hopes to double that soon.Continued...