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China’s premier seeks big deals in Brazil

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Note: ChinesePremierLiKeqiangarrivesinBrazilonMondayforhisfirstofficialtriptoLatinAmericabearingtensofbillionsofdollarsworthof
Chinese Premier Li Keqiang arrives in Brazil on Monday for his first official trip to Latin America bearing tens of billions of dollars worth of trade and investment deals in the latest sign of China’s rising influence in the continent.

During his three-day visit, Mr Li is expected to witness the signing of at least $50bn in Chinese investments in Brazil’s infrastructure, a senior Brazilian official said last week.

Brazil is trying to speed up the overhaul of its creaking infrastructure as it gears up for the Olympic Games next year amid a sharp economic slowdown exacerbated by slowing commodity demand in China.

Mr Li will then continue his eight-day South American tour with visits to Colombia, Peru and Chile.

The four countries account for 57 per cent of China’s booming trade with Latin America and Beijing is increasingly interested in boosting its direct investment in the region, particularly in the roads, bridges and railways it has already built across its own country.

A proposed agreement on a cross-Andes railway linking Brazil’s Atlantic coast to Peru’s Pacific coast is expected to be a centrepiece of this visit.

If built, it would allow China to increase direct imports of commodities such as soy and iron ore from Brazil and Argentina while avoiding the Panama Canal, which Beijing regards as a US-controlled strategic choke point.

China’s rising influence in a region once considered America’s “backyard” is seen by some as a challenge to the two-century-old “Monroe Doctrine”, which Washington established to discourage foreign (particularly European) influence in the region.

Some policy makers in Beijing have argued that China should ramp up its involvement in Latin America as a counterbalance to the continued enormous US diplomatic, military and economy presence in Asia.

In January Chinese President Xi Jinping pledged $250bn of investment in Latin America over the next decade, highlighting China’s strong economic interest in the region.

By the end of last year, China’s direct investment in Latin America totalled $99bn, according to Chinese government figures.

Bilateral trade between China and Brazil increased 13-fold in value terms between 2001 and 2013, according to Brazilian statistics, and China has been Brazil’s biggest trading partner since 2009.

But a pronounced slowdown in China, led by sliding construction and weakening demand for commodities, meant annual trade between China and Latin America as a whole increased by just 0.8 per cent in 2014 from a year earlier.

As a result of the slowdown at home, China’s enormous state-owned construction and infrastructure companies are looking overseas for opportunities to build the roads, ports, railways and airports that are overly ubiquitous in China.

Chinese loans to Latin America last year increased more than 70 per cent to $22bn, eclipsing the combined lending of institutions such as the Inter-American Development Bank and the World Bank, according to estimates from the Inter-American Dialogue, a think-tank.

Before heading to Brazil, Mr Li stopped on Sunday for an overnight “transit visit” (rather than a formal state visit) in Ireland, where he met his Irish counterpart at a dairy farm in the town of Shannon.

“With great interest, Li visited the cow farm and enquired in detail about the various operations at the 107-hectare farm, such as cow-raising, agro-product processing and quality management and monitoring,” Chinese state media reported.
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