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Mar. 17, 2014

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26 THE JOURNAL OF COMMERCE MARCH 17.2014 SOUTH AMERICA TRADE AND LOGISTICS SPECIAL REPORT FIFTEEN YEARS AFTER China initiated its "Going Global" strateg y, its trade with the major nations of South America has increased rapidly, and China has become an increasingly large purchaser of South American raw materials, and supplier of loans and investment capital. Bilateral trade between Brazil and China expanded aggressively between 1999 and 2011. Brazil's exports to China grew by a compound annual growth rate of 46.9 per- cent annually, while imports from China grew by a CAGR of 37.8 percent during the 12-year period. In 2009, China surpassed the United States as Brazil's largest trade part- ner. In 2009 and 2010, Brazil's trade surplus with China stood at $4.5 billion and $5.2 bil- lion, respectively. Economic ties bet ween China and South America aren't only stronger, but they are also more varied and complex. "After a decade of enhanced relations, the China-Latin American relationship has matured, and policies and practices have become more sophisticated and nuanced," according to a recent report by the Inter-Amer- ican Dialogue, a Washington-based think tank. "Chinese agencies and companies are today far more informed about the region, make use of a wider range of commer- cial instruments, and work productively throughout Latin America, adapting to the differentiated challenges of each coun- try," said Margaret Myers, director of the China-Latin America program at the Inter- American Dialogue. Given the sizable financial resources of the Chinese government, Myers added, there is strong "concern that Chinese firms are strongly supported by the Chi- nese government and are given access to lower interest rates" and other competitive advantages. Moreover, "the biggest risk may be the way many Chinese assistance deals and contracts are cut — behind closed doors, and motivated exclusively by Chinese commercial interest — which can breed pub- lic and private corruption," said Christo- pher Sabatini, senior director of policy at the Americas Society and Council of the Americas. China has become the largest trading partner of Brazil, South America's largest economy, thanks to steady demand for Bra- zilian iron ore, soy and other commodities. In Brazil's burgeoning oil sector, CNOOC and China National Petroleum joined forces last October with Royal Dutch Shell and Total to participate in the Petrobras-led consortium exploring Brazil's huge Libra oil field. In the world of financial services, China Construction Bank Corp. agreed that same month to purchase 72 percent of Brazil's midsize lender Banco Industrial e Comercial for $726 million. Yet according to a study by the Rio de Janeiro-based China-Brazil Business Coun- cil, many Chinese industrial, mining and agribusiness companies have found Brazil to be a more complex and messier place to do business than they had anticipated. After making a big push into Brazil's energy, iron ore and agribusiness sectors, and explor- ing Brazilian demand for labor-intensive Chinese-made consumer goods, some Chi- nese companies have become frustrated with Brazil's slow pace of economic growth (only 2.3 percent in 2013), its high costs of By Alan M. Field CHINA MAKES ITS MARK — IN BRAZIL China overtakes the U.S. as the leading trade partner of South America's largest economy

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