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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!
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!!
Over time I’ve learned several super-convenient Internet tricks. This is the first post in an occasional series.
A quick overview of this long, detailed (and useful, I hope) post:
- Use Google Alerts to monitor your favorite topics.
- If your topic is international in scope, set up Alerts in multiple languages.
- Add the Google Translate plugin to your Gmail for easy skimming.
- Set up automatic message filtering, to keep your Inbox relatively clear.
I think Google Alerts are absolutely the most useful Internet research tool. Here’s how they work, straight from the Google Alerts homepage:
Google Alerts are email updates of the latest relevant Google results (web, news, etc.) based on your choice of query or topic.
Enter the topic you wish to monitor, then click preview to see the type of results you’ll receive. Some handy uses of Google Alerts include:
- monitoring a developing news story
- keeping current on a competitor or industry
- getting the latest on a celebrity or event
- keeping tabs on your favorite sports teams
I wrote a detailed post about How I Use Google Alerts to Follow Niche News in China. My friend Jaclyn Schiff wrote this useful post with tricks for finding niche news from big news sites: How to Get the News You Really Want Delivered to Your Inbox.
Now I use Google Alerts to follow the latest developments in renewable energy in Chile.
My initial Alerts sent me articles in English. These were useful, but they didn’t seem to tell the whole story. I needed to set Alerts in Spanish. But how?
Continue reading »
image via Forbes.com
This Financial Times piece, “The limits of a Superman,” gives the best explanation I’ve seen so far. Emphasis mine.
Mr Piñera is highly intelligent – he holds a Harvard PhD. He speaks several languages. He is energetic, technically competent, socially enlightened and fantastically wealthy - the former businessman has a fortune estimated in 2010 by Forbes at $2.2bn. When he’s not busy running a country or making a fortune, he sets aside large amounts of money for conversation. For Godsakes, he can even fly: this Master of the Universe has a helicopter pilot’s licence (and is a certified deep sea diver too).
Yet almost everyone in Chile, and even some allies, agrees Mr Piñera is doing a lousy job. Yes, the Chilean economy is growing great guns. Unemployment is near record lows. Mr Pinera is also well on his way to eliminating poverty in Chile . Everyone should love him. But they don’t. His approval poll rating, at 26 per cent, is the lowest for any Chilean president, ever (and, while the figures are a bit fuzzy, that includes the dictator Augusto Pinochet). Low poll ratings are not only galling; they compromise Mr Piñera’s ability to govern and do the the things his brilliant mind wants to do.
So what is going on? The answer – outlined in a fascinating new book called Why don’t they love me? by the Chilean sociologist Eugenio Tironi – is precisely that Mr Piñera runs Chile like a corporation and not a state. [more]
One Chilean friend told me that it seems like Piñera ran for President to achieve the next personal benchmark. He’d already become a CEO and billionaire, so President would be the next step up.
Also, Piñera brought the credit card to Chile. The vast indebtedness of Chile’s population is one of the main sources of the anger that has propelled the student protests.
A few weeks back I spotted this article in El Mercurio and started to translate it.
This is how far I got before the newspaper disappeared into the recycling bin. (And Chilean newspapers don’t make it that easy to look things up.)
From Saving to Debt: the paradigm shift in Chilean society
Honoring a personal debt has always been valued here in Chile, but it is more uncertain when it refers to promises assumed with public and private institutions. Living in a consumerist society changes habits and values. We consult sociologists and historians about the topic.
Basically, the main idea behind this article is that people think banks, stores (like the notorious department store La Polar) and universities are putting them in endless, usurious debt, in an unjust and unfair way.
It kind of reminds me of this article I wrote a few years ago about anger against microfinance in Nicaragua.
I know there are people reading this who know a lot more about Piñera and debt in Chile than I do. I look forward to hearing what you think!
Yesterday I wrote about failure, and how it could be one of the keys to success. This connects to the recent controversy over Solyndra’s failure, as well as to energy and innovation in general.
Solyndra headquarters. photo via totalsolarenergy.co.uk
I found this brilliant paragraph by Matthew Nordan, whose bio reads “I’m a venture capital investor at Venrock focused on energy and environmental technologies. Earlier, I co-founded and led Lux Research and forecasted technology futures at Forrester. I really do live and breathe this stuff.”
Failure is a fact of life in venture investing – and energy innovation. VCs provide capital to high-risk businesses that can’t be funded any other way. Most venture investments either fail completely or deliver mediocre returns. Cases like Solyndra come with the territory, and they say no more about all the other VC-backed energy start-ups than Webvan said about Amazon: The whole point is to risk failure, because you have to take on many (informed, balanced, and uncorrelated!) bets for a shot at a big outcome. Those outcomes, in turn, pay for the failures many times over – while improving lives and creating jobs. There’s a legitimate argument about whether taxpayer money should be deployed in this pursuit, but to treat even a very costly cratering like this one as anything other than de rigeur seems silly. [more]
Below are some several excerpts from reports about Solyndra’s failure.
First, the company’s original announcement. Emphasis mine. Solyndra Suspends Operations to Evaluate Reorganization Options
August 31, 2011 – Solyndra LLC, the American manufacturer of innovative cylindrical solar systems for commercial rooftops today announced that global economic and solar industry market conditions have forced the Company to suspend its manufacturing operations. Solyndra intends to file a petition for relief under Chapter 11 of the U.S. Bankruptcy Code while it evaluates options, including a sale of the business and licensing of its advanced CIGS technology and manufacturing expertise. As a result of the suspension of operations approximately 1,100 full-time and temporary employees are being laid off effective immediately.
I think it’s interesting that the press release emphasizes the macroeconomic nature of the problem, as well as the specific shutdown of manufacturing operations, since other operations could continue.
But this won’t be easy. This Greentech Media post distills Solyndra’s situation into a clever subhead: For sale: factory. In Fremont. Little used. IP portfolio as well. Serious inquiries only. Here are my favorite lines:
Any potential acquirer would also inherit a titanic-sized bookkeeping and public relations headache. Solyndra has received more than $1 billion from VC partners and over $535 million in loan guarantees from the Department of Energy. Congressional opponents of green policies like Michigan Congressional Representative Fred Upton regularly hold up Solyndra as an example of why the U.S. shouldn’t support green energy policies.
The only green jobs that have been created, one wag told me today, have been ones for accountants and bankruptcy attorneys. [more]
Well, Obama and other politicians do always tout “green jobs,” and accountants and bankruptcy attorneys need work, right?
Solyndra’s failure has become a political football, which is a valid debate but not without some misconceptions. In a Washington Post piece, “Five myths about the Solyndra collapse,” Brad Plumer writes:
the fact that China hurls money at solar isn’t necessarily a bad thing, since cheaper solar prices can benefit the United States too. The Energy Department seems to have recognized that going toe-to-toe with China on direct subsidies may be futile and is instead trying to focus on complementary efforts to bolster innovation, through programs like its Sunshot Initiative. Also, for all China’s subsidy frenzy, the United States still exported$1.9 billion of solar products last year and actually has a trade surplus in solar with China. [more]
Also, a lot of the controversy has focused on the loan guarantees that the Obama Administration gave to Solyndra. Bryan Walsh, writing for TIME’s Ecocentric blog, says the Solyndra “Scandal” is Washington Business as Usual.
My response: meh. TIME’s Michael Grunwald has covered this from the start, and while he’s unhappy—to say the least—with executives at Solyndra for misleading the government on its financial health, the solar industry more broadly is doing well, thanks in part to the money the Obama Administration has channeled towards more successful companies. And it’s worth noting that in addition to government loan guarantees, Solyndra also scored over $1 billion in private capital—including from GOP-friendly investors like the Walton family of Wal-Mart. Solyndra turned out to be a bad investment—the company failed in part because it made the wrong bet on solar technology, failing to foresee that silicon prices would drop drastically. Bad investments are a part of business, especially a cutting-edge industry like renewable energy, and failure is a necessary ingredient for innovation. (Just ask the famously fired Steve Jobs.) The idea that the collapse of one solar company discredits the entire solar industry is absurd. [more]
What do you think? What does Solyndra’s failure mean for the future of solar energy in America and beyond?
I'm Leslie and I connect entrepreneurs in Chile, China, California, and beyond — especially through translation, training, and trade. More about me.
