Beyond Chile's Single Story » Latin America

The Chinese Revolution in Latin American Commerce: exports rise 12x + imports 8x in the past decade

Leslie — Fri, 16 Dec 2011 13:13:53 +0000

Today the Economía y Negocios section of El Mercurio has a special report on China-Latin America business. It’s by the Grupo de Diarios de América, and the whole text is here, via Mexican site El Universal.

Source: El Universal http://www.eluniversal.com.mx/graficos/pdf11/china.pdf

Here is my translation of the beginning of the report (emphasis mine):

Latin America exports cheap raw materials, energy and food to China, and China exports technology products, finished goods, textiles and cooperation projects to Latin America. In the past decade, exports from the subcontinent (LatAm) to the economic giant (China) have increased 12 times, while imports have grown 8 times, according to the American Economic System (SELA).The trade exchange exceeds that with the US and neighboring countries.

Economic observers see this relationship progressing in a way that can be compared with relations with Japan between 1960 and 1990. Then, Japan’s technological development fueled economic growth and per capita income increased from 15% to 70% of the US per capita income.

“China has become a strategic partner for Latin America and the Caribbean, there are many opportunities to reach agreement on export and investment in mining, engineering, agriculture, infrastructure, science and technology,” said Alicia Barcena, Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC).

The country has already displaced the U.S. as the main trading partner for Brazil and Chile. In Venezuela, China outpaced Colombia and Brazil to become the top trading partner. Mexico’s case is special because although its products compete with Chinese exports to the United States and Canada, bilateral trade grew 2000% between 1990 and 2010. In other countries, progress is evident: Uruguay’s trade increased 40% between 2010 and so far this year, and Ecuador will sell 54% of its oil to the Asian giant.

The importance of China to the region is concentrated in high demand for primary products. To maintain its 8% annual growth rate, China’s demand for food, energy and materials will continue to rise. And Latin America provides these.

The caption translates to: Clothing Industry. Generates 310,000 jobs in 8900 companies, although since the opening of the market to China, 400,000 jobs have been lost, and as a result of the triangulation have lost a lot of market share. Beginning on December 12, the big importers will be able to buy from China. For example, they will be able to buy sports outfits for $0.20 for 2 million units. Click here to see the rest of the graphic.

Source: El Universal http://www.eluniversal.com.mx/graficos/pdf11/china.pdf

If you’re at all interested in this topic, I highly recommend that you read the whole report!

How might shifts in China’s economy affect commodity prices in Latin America?

Leslie — Wed, 14 Dec 2011 13:07:35 +0000

This Wall Street Journal article , As China Goes, So Go Commodities, is the clearest explanation I’ve read about how trends in China’s economy might affect commodity prices.

You want to know where the global commodities markets are heading in the coming years? Then it’s probably best that you remember a single word: China.

Liam Pleven outlines three possible scenarios for China’s economic future and describes how these would affect the worldwide market for commodities like oil, copper, and soybeans. These three scenarios have huge implications for China-Latin America trade because Latin America is a major supplier to China, and this trade is a major component of Latin American economies. For example, Chile currently supplies 29% of China’s copper and this constitutes a very large percentage of Chile’s exports. When copper prices fluctuate, so does the dollar-peso exchange rate.

Source: The Wall Street Journal.

Here are the three forecast scenarios :

Full Speed Ahead

If China’s consumption of commodities continues to grow at the rate it has over the past 10 years, this is what the world would have to do to meet that demand in 2020, assuming that the rest of the world’s collective appetite doesn’t change at all:

[this would mean, among other things]

• Extract nearly three times as much new copper as the current annual production from Chile, which mines about four times as much as any other nation.

The Hard Landing

A growth rate of 4% to 6% would be a big leap forward for the U.S. economy and plenty of others. But not for China….

Demand for steel, copper and other industrial metals could drop significantly if China does stall, because those materials are heavily used in construction—which would be at risk from weakness in the Chinese real-estate market—and because China often accounts for some 40% of global demand for those materials. Coal demand could also tumble, she says, because the fuel is heavily used in China to generate power.

Slower but Steady

For many China watchers, including Barclays, the most probable scenario is an economy that keeps expanding strongly but at a less blistering pace, with annual GDP growth rates in the high single digits. That would mean continued upward pressure on most commodities prices, with some possibly rising substantially, but in most cases not the soaring prices that a red-hot economy would produce.

I took this photo at a wedding I attended in Beijing in 2009. I think it's an appropriate way to illustrate this rather technical post about Chinese economic trends because this is the real face of oil/gas/copper/soybean consumption. This wedding had mass amounts of meat (lamb but no pork since the bride's family is Huimin, part of a Muslim minority.) As China grows more prosperous, more people will be eating more meat and hosting ever-more-elaborate weddings.

Note: I’m curious to hear your feedback on this post because I am thinking about starting a whole new blog about China-Latin America relations, in both English and Spanish, perhaps in partnership with the small number of other people who blog about this emerging topic. Gracias!!

An Entrepreneurial Explorer’s Guide to Iquique, Chile: Awesome Hostel, Llama Trekking, and Gourmet Peruvian Food

Leslie — Tue, 29 Nov 2011 15:06:53 +0000

I visited Iquique a few weeks ago to speak at Start-Up Chile’s World Entrepreneurship Day Meetup, which simultaneously took place in 15 regions of Chile, all the way from Arica to Punta Arenas. The event was a smashing success.

Iquique is a city of about 350,000 in Chile’s far north. It’s a port city with a free trade zone (la Zofri) and a colorful history. The word Iquique means “place of rest” in Aymara.

About 70 people attended the Iquique Meetup next to the pool at the Hotel Terrado. Though I only spent about 24 hours in Iquique (busy, busy week also included trips to Concepcion and La Serena to speak at entrepreneurship events… good times!) I have a few enthusiastic recommendations for any other visitors to Iquique, especially explorers that share the entrepreneurial spirit.

1. Stay at Hostel 1920 La Casona.

This gorgeous hostel is in an old house in Iquique’s historic city center. The owner, Isabel Bussenius, is the most wonderful hostess. She has poured so much love into building and running this hostel. She seems to know absolutely everyone in Iquique, she speaks excellent English, and she will make sure to show you a good time.

After the Start-Up Chile Meetup, Isabel hosted an impromptu barbecue for about 20 people at the hostel. She served us maracuya sours (the region’s signature cocktail) and an abundance of chicken wings and choripan with all the fixins. Everyone had so much fun!

The hostel has a wide variety of gorgeous rooms, including singles, doubles, and shared 4 and 6-bed dorms.

If and when you visit Iquique, be sure to stay at Hostel 1920 La Casona. And say hi to Isabel for me!

2. Go Llama Trekking

At the Meetup, I met Matías Pinto Duk, founder of Llamatrekking. This is a unique opportunity to experience the ancient traditions of Aymara culture. Trips range in length from 1 day to 7 and full details are here on the Llamatrekking site.

Matías and his business partner, an older Aymara gentleman, explained to me that they had earned seed capital from Corfo (Chile’s economic development agency) to research all the trip routes, following traditional maps and legends.

I was really sad that I couldn’t stay in Iquique for long enough to experience one of their tours. Maybe next time.

3. Sample Gourmet Peruvian Food at Kiru

I traveled to Iquique with Francesca from the Start-Up Chile team, as well as Norwegian Start-Up Chile entrepreneurs Halvard and Sveinung, who are building Pick a Student.

The four of us enjoyed a delicious meal at Kiru, a gorgeous Peruvian restaurant located in a reed-covered courtyard, down a hidden pathway, not far from the beach. I had a pisco sour perked up with spicy green pepper, and an orange-flavored Asian-style fried fish dish with several tasty side dishes (sorry, I forgot the names of the dishes, and my camera was out of batteries. But trust me… it was good!)

Fran found this restaurant on TripAdvisor, where it’s rated #1 in Iquique.

4. Enjoy the beach and sand dune views.

Here’s my postcard shot, taken early in the morning, from the roof of the place where we stayed (edited with BeFunky, an app that I’m currently somewhat obsessed with. It’s better and easier to use than the other free photo apps I’ve downloaded.) Behind me are sand dunes as tall as hills.

And here I am with the Norwegians and two of the directors of the local Corfo. I bet you can guess who is who…

This photo is from El Boyaldia, a local news website that covered the event.

P.S. I wasn’t convinced or compensated in any way to write this post. The first three images come from the websites of the respective businesses. I hope this is useful for anyone dreaming of a trip to Iquique!

When Frida Kahlo came to my ESL class in China…

Leslie — Sat, 01 Oct 2011 14:21:12 +0000

Halloween has always been my favorite holiday. This is no secret. I included this information in the first line of the bio I wrote for this site, and last year I posted so many Halloween posts that my dad made fun of me. Since it´s October, that means I can start celebrating, right??

While searching for something else, I came across an email I wrote back in 2006, when I was a bright-eyed English teacher in Jiaxing, China. It feels very appropriate in the context of my current obsession with China – Latin America relations. What follows is an edited version of that note.

–

Our textbook contains a Frida Kahlo painting called El Camion, which has 6 people waiting for a bus, including Frida herself, a young boy, a mother with a baby. The relationships between the people are ambiguous, and there is a lot to discuss in the painting.

I chose 6 students to act out the painting.

I had the rest of the class interview the people in the painting. The funniest response was when one of the men (who in the picture wears a suit and holds a bag, presumably of money) explained that he was a professional murderer. Frida (who, as I explained to the students, was a very ill woman with an unhappy marriage) tried to contract his services to kill her husband. It was soooooooooooo funny! To add to the drama, Frida was on her way home from the supermarket and was carrying only eggs. So she wanted to know how many eggs it would cost for one quick murder.

And at that exact moment, “Frida”‘s cell phone rang from inside the bag that supposedly contained only eggs. It was absolutely hilarious.

Over the weekend I went to a Halloween party five hours away that the American teachers who led our orientation were hosting. I went as Frida Kahlo, inspired by my fabulous lesson!

Report from Sino-Latin Capital. How Do China and Latin America Fit Together in the International Energy and Commodities Markets?

Leslie — Tue, 23 Aug 2011 13:10:13 +0000

I just read this detailed report from SINOLATIN CAPITAL - ENERGY: WHY CHINA AND LATIN AMERICA?

SinoLatin Capital is the first advisory and principal investments firm focusing exclusively on transactions between Latin America & China.

With dozens of graphs, this report outlines the market for energy and commodities that connects China and Latin America. In short, China has a great demand for energy and commodities, and depends on imports to meet these needs. China is cash-rich, and has been investing more and more in the Latin America, especially to import oil, copper, iron, soybeans, and other soybeans.

I found slides #48-50 especially interesting, since these give a brief overview of the market for wind and solar energy in China and Latin America.

Here is my summary of these slides:

The worldwide capacity of wind turbines is currently 196Gw. 38Gw of this was added last year, and 18Gw of that was in China. Only 1.2% of these new installations were in Latin America. Chinese equipment is smaller, and a lot cheaper, and it is possible to get financing from from China Development Bank (CDB) and Export-Import Bank (Exim).

China currently controls 40% of the world solar energy market (up from 0% in 2005.)

Key considerations for new wind and solar projects include:

- Do you have a Power Purchase Agreement (PPA)?

- How far away is the grid?

If you’re at all interested in China-Latin America trade, I highly recommend reading the whole report. (Thanks T for the link!)

China’s Influence in Chile: Drums, Taxis, and a Must-Read Article

Leslie — Fri, 12 Aug 2011 20:41:41 +0000

This past Monday afternoon, T and I attended a Chinese culture show at the Plaza de Armas here in Santiago. A big crowd watched this group dance and drum with the dragon. Little children jumped up and down, and older men screamed “otra! otra!” and just about everyone had their cell phone out to take photos or videos. I’ve never seen this kind of enthusiasm for this kind of show!

The dancers, both Chinese and Chilean, included employees of the Chinese Embassy here in Chile, and other members of the Chile-China business community.

“Venimos por una causa, la causa de la amistad entre China y Chile!”
said one of the speakers.

Next to the Plaza de Armas stood several shops filled with fake Louis Vuitton and Prada purses, which would have been right at home in the basement at Yashow in Beijing.

In other news on the China-Chile front, I spotted a BYD Taxi in the city center. BYD (which stands for Build Your Dream) is a Chinese car brand, famous worldwide because Warren Buffett has backed its efforts to build hybrids. This morning we did a non-scientific survey and noticed that the majority of the taxis are Nissans, with a handful of Toyotas, Hyundais, and Chevrolets. What does this say about Chile’s position in the world economy? Not sure.

If you’re at all interested in the emerging field of China – Latin America trade, I highly recommend this article from Business Insider, which is based on an interview with Eric Bethel, of Sino-Latin Capital:

… unsurprisingly, he’s got fascinating stories.

Such as how foreign businesses get into trouble in Ecuador because they often don’t realize they need to check to make sure their purchased mine isn’t in a drug-trafficking corridor (drug lords are known to hire protestors to picket sites). Or how most Peruvians have no idea that their traditional Peruvian corner restaurants, named chifas, are actually descendants of Chinese restaurants (chifa is from “chi fan”). Or how California-based environmental groups have become very effective at shutting down Chinese projects in places like Brazil. And so on. Eric has become the guy every Chinese company wants on their team when heading to Latin America.

Click here to read the rest.

Tear Gas and #TED: My take on the Student Protests in Chile

Leslie — Sat, 06 Aug 2011 18:04:49 +0000

I decided to delete this post. It’s not really my story to tell. I haphazardly cobbled together photos and ideas from other places, and for that I am very sorry.

Here is a pretty amazing New York Times slideshow showing photos of the protests.

More soon. Happy Monday to you!

Leslie

Chile’s Renewable and Non-Conventional Energy (ERNC) Law – Translation and Notes

Leslie — Tue, 19 Jul 2011 20:50:29 +0000

If you read my blog for the fun travel photos (you know who you are ) please feel free to skip this rather nerdy post and go straight to My 7 Links.

If you’re interested in the laws that regulate and incentivize renewable and non-conventional energy in Chile, read on!

I’ve recently landed in Chile to work on a solar energy project, and one of my tasks is to learn about the legislation that guides this emerging industry. On March 20, 2008, President Michelle Bachelet signed Law 20.257 to encourage the development of renewable energy in Chile.

Photo of wind turbines in Coyhaique by Amanda Maxwell, Latin America Advocate for the Natural Resources Defense Council. Amanda's blog ( http://switchboard.nrdc.org/blogs/amaxwell/ ) is an incredible resource for anyone researching renewable energy in Latin America.

I translated the first page of the law from Spanish to English. The full text (in Spanish) is here: Ley_ERNC_LEY-20257.

Quick disclaimer: I am not a lawyer, and it’s been almost six years since I took a Spanish class, and the following translation is based on my initial read of the law. However, I think that translating it has been a useful exercise, and I’d like to share it with anyone that’s interested. The indented boxes below are notes to explain some technical terms in the text.

–

Introduction of Modifications to the General Law of Electrical Services, with Respect to the Generation of Electrical Energy from Sources of Energy that are Renewable and Non-Conventional

April 1, 2008

This law obligates the companies that generate electricity, with a capacity of more than 200 MW, to make sure that 10% of the energy sold comes from renewable and unconventional sources or from hydroelectric plants with less than 40,000 KW. This energy must be produced or procured, starting from January 1, 2010.

This law will apply to the generators that supply energy to the Sistema Interconectado Central (SIC) and the Sistema Interconectado del Norte Grande (SING).

“Power generation in Chile is organized around four grid systems: 1) Sistema Interconectado del Norte Grande (SING), the northern grid, which accounts for about 19% of national generation; 2) the Central Interconnected System (SIC), the central region’s grid, which accounts for 68.5% of national generation and serves 93% of Chile’s population; 3) the Aysén Grid in southern Chile (0.3% of total generation); and 4) the Magallanes Grid, also in southern Chile (0.8% of total generation).” (Source : Global Energy Network Institute)

Chile's SIC Electrical Grid. The SING is in Chile's northernmost regions, which are not shown on this map. Source: GENI

This law signals that the percentage required of the electricity companies will increase gradually: 5% from 2010-2014, then +0.5% each year stating in 2015, until it reaches 10% in 2024.

The generators that fail to comply with this obligation will have to pay a charge of 0.4 UTM per megawatt hour (MWh) that does not meet the standard, and this will increase to 0.6 UTM in the cases of companies that continually fail to comply with the requirement.

UTM stands for Unidad Tributaria Mensual. According to Wikipedia it is a unit used in Chile for taxes and fines, which is updated based on inflation. It was created on December 31, 1944. Initially it was used by the Chilean tax authorities for fines and payscales, but since then its use has been extended to the payment of fines, debts, customs duties, and more. A chart showing its value every month for every year on record is here.

It is further provided that such charges arising from the breach of a distribution intended to end users (of the distributors whose suppliers have complied with the requirement) will help to establish a system of incentives that encourages competition in the electricity market.

The law indicates that the label “renewable and non-conventional energy (ERNC)” will correspond to small hydroelectric centers (with a capacity of less than 20 MW), and to projects that utilize energy from biomass, hydraulics, geothermal, solar, wind, tidal, and others.

The law goes on to describe modifications to specific articles, and I decided against translating that part. The full text (in Spanish) is here: Ley_ERNC_LEY-20257.

–

President Sebastian Piñera just nominated a new Minister of Energy, Fernando Echeverría. In his new role. Echeverría plans to double the production of energy in the next ten years to meet Chile’s skyrocketing energy demand, lower the costs of energy, and strongly increase the participation of ERNC in the electrical grid. Read more here in La Tercera.

–

Excerpt from Obama to Piñera: Make Renewable Energy and Energy Efficiency the Base Case Scenario for Building Chile’s Energy Future. By Doug Sims, NRDC. March 17, 2011.

The conventional thinking about energy in Chile is that new coal, gigantic dams and nuclear are the only possible base case scenario given expected increasing demand requirements over the next 20 years. This way of thinking pushes renewables, or “non-conventional renewable energy” (defined under Chilean law to include wind, solar, geothermal and other renewables but to exclude large dams over 20MW) to the margins – right now the goal for renewables is a pretty anemic 10% of annual generation by 2024.

But this is exactly the wrong way to think about Chile’s energy future given its world class renewable resources, its potential to reduce energy demand and intensity through efficiency measures and the declining cost curves and improving performance of renewable technologies, solar in particular. In addition to a solar resource that exceeds that of the American Southwest, Chile is particularly fortunate to have excellent geothermal and sustainable biomass resources. These non-conventional renewable energy technologies are mature and can provide cost effective power at reliability levels (known as “capacity factors”) comparable to coal, gas, hydro and nuclear.

–

Useful resources for further research on Renewable Energy in Chile:

First Impressions of Chile – In Photos!

Leslie — Thu, 14 Jul 2011 21:02:09 +0000

Hola! Saludos desde Chile!

Yesterday, our plane descended through the clouds…

… over the Andes…

… and we landed in Chile!

One of my stated purposes in Chile is to learn about cleantech here. This is the first evidence of cleantech I found, in the ladies’ room in the airport.

Not quite what I was expecting in terms of cleantech discussions. More on that later….

Rafael, our company’s Chilean partner, picked us up at the airport and delivered us to the home of Roberto Edwards, who is generously hosting us. Roberto Edwards is a famous art photographer and publisher, who recently has presented this Painted Bodies exhibit.

After a nap, Brent and I set out for a late lunch (Chile’s famous sandwiches) then joined a Start-Up Chile meetup at a bar called…

As if we already missed California! The Portuguese entrepreneurs behind schooooooooooools.com presented their platform to connect schools around the world, and we met some Chilean entrepreneurs.

Then, this morning, we strolled past the Universidad de Chile, where students are on strike…

… to Startup Chile orientation, where we joined entrepreneurs from all these countries…

… for an enthusiastic, clear, and energetic introduction to the program. This incredibly committed group of professionals is working so hard to empower entrepreneurs to change the world, and in the process build the entrepreneurial hub of Latin America, and an example for the rest of the world.

Compared with the last time I was in Chile (as a student for all of 2005) I’m absolutely amazed that almost everyone we’ve met has spoken English. I know this is not a representative sample of the Chilean population, but it’s definitely striking.

Words I’ve heard more times today than ever before in my life:

- “bootstrap”

- “platform”

- “… so we called the Minister of ____ and, basically, changed the law…”

So far, so good. We’ve truly been treated like royalty. Gracias por todo, Chile!

On Apples, White Collars, and China-Chile Cooperation

Leslie — Tue, 28 Jun 2011 07:24:58 +0000

I ate this Chilean apple in the taxi on the way to the airport, as I left Beijing. It cost 7 RMB (slightly more than one dollar). It tasted decent — not amazingly crisp and juicy, but also not too mealy and gross. I probably should have peeled it.

This is just one of the fruits of this increasingly important bilateral relationship (pun intended).

Here is a good description of the recent developments in China-Chile relations, as summarized by Pacific Trek, a “a transpacific consulting, research, and training enterprise focused on establishing transpacific links between both East Asia and Latin America with strong networks in both regions.”

China-Chile Cooperation

by Bernardita Gonzalez

In recent months there has been a tremendous increase in cooperation between Chile and China, which has emerged as a consequence of years of bilateral friendship and later partnership.

According to ECLAC, China and Latin America’s economic exchange grew more than 1000% between 2000 and 2010.

Chinese interest in Latin American markets is on the rise; Chile aims to become a platform from which china could access Latin America generally and the southern cone region specifically.

In November 2005, Chile became the first Latin American country to sign a Free Trade Agreement with China. Since then, China has become the first destination for Chilean exports, as of 2010.

Today, China is increasingly seen as one of the major world powers with the economic potential to overtake the United States in the next few years. This is the time to tighten the ties between the Chinese and the Chilean economies.

Recently, Chinese Vice President Xi Jinping visited Chile in a gesture intended to increase cooperation between the two countries. Mr. Xi stated an expectation that “Strategic cooperation” between China and Chile in various areas would enhance trade and partnership.

Chile’s President Sebastian Piñera and Vice President Xi Jinping signed nine agreements in different areas, including banking and telecommunications, in order to increase specific agreements and cooperation. Chile’s state mining company Codelco signed a Memorandum of Understanding with China Minmetals Corp, which will boost cooperation in that area.

One of the most interesting announcements was a cooperation agreement between Banco Estado (Chile’s State Bank) and Development Bank of China.

Overall, this seems to be a good year for Chileans interested in investing in China and for Chinese entrepreneurs interested in broadening their market by opening branches in Chile and Latin America. The road is paved to increase and strengthen economic cooperation.

I first encountered evidence of China-Chile relations in an elevator in Shanghai in 2007:

After spotting this sign in the elevator, I did some research. ProChile, the government agency that focuses on export promotion, sponsored a campaign from 2005-2007 to introduce white-collar Chinese to Chile. I found a fascinating presentation from a company called BraiNet Communications, that showed the results of its research on how the Chinese viewed Chile. Here’s my favorite slide:

Apparently Chile seems more like like a “Mature Male, Mid-aged” than “an outspoken young man full of vitality.”

Call in the nation branding makeover team!? Or do you think a mature, middle-aged male of a country could make some reliably good wine, the kind you’d love to buy at one of those fancy downstairs-in-a-mall supermarkets in Beijing? Curious to hear what you think.