For China and Russia, investments in Latin America bring new alliances

For China and Russia, investments in Latin America bring new alliances
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China and Russia, seeking to strengthen their global economic footprint and forge new and renewed political alliances, have increased their presence in Latin America. 

When talking about emerging markets, its impossible not to think about the five major national economies: the BRICS. It’s interesting to see how these emerging economies impact trade all over the world.

On that note, what stands out most is the work that China has been doing to integrate regions around the world into their trade web. For many years, we have seen China stare at the world with interest in global integration, but in these tough economic times, this attitude has increased even more.

Recently, the Chilean minister of Finance, Alberto Arenas, said that after eleven years of negotiations, a treaty to avoid double taxation between China and the South American country has been made. The treaty allows both countries to engage in commerce while avoiding double taxation and preventing tax evasion.

“This agreement will strengthen the business environment between Chile and China, helping to deepen the economic and trade relations, providing a stronger feeling of certainty in the tributary field to companies in both countries”, said the minister.

Chile’s main exports to the Asian giant are composed primarily of copper, steel, chemicals, and produce, adding up to 19 billion dollars in 2013. Chinese and Chilean relations have become stronger, especially since 2005 when both governments signed a free trade agreement to promote integration.

Last November, Michelle Bachelet, the president of Chile, visited the Chinese capital to hold meetings with investors to promote business between both nations. Chinese investments in Chile are considerably on the lower side compared against bilateral trade.

On the other hand, the Spanish government has been promoting better commercial relations with China, as well. Spain has even offered itself as a facilitator of trade between China and Latin countries like Mexico, Perú, Colombia, Ecuador and countries in Central America.

Russia increases its presence in Latin America

The Chilean government has been very involved in promoting trade relations between Latin America and Russia, as well, primarily through the Latin American Nations Community, or CELAC. There is an existing mechanism today for relations between China and the CELAC together with EU.

In order to balance trade between the countries, both governments agreed that the current 800 million dollars in trade between Russia and Chile should be increased, especially considering that only 100 million dollars from that correspond to Russian exports to Chile.

Through the Eurasian Economic Union, which is currently led by Russia, Chile is expecting to begin bigger commercial relations with countries like Kazakhstan, Belarus, and Armenia. Víctor Jristenko, chief of the EEU, met last week with Chilean chancellor Heraldo Muñoz to move forward with a trade agreement.

Russia has an interest in deepening relations with Argentina, as well, President Cristina Kirchner signed several agreements last week with President Vladimir Putin regarding trade and investments in Argentina. The one that stands out the most is the investment agreement between Gazprom and YPF, Argentina’s biggest energy company, to work jointly at the Vaca Muerta shale formation in the south of the country.

After many years of political approach in Latin America, Russia is evidently not only looking for business in the region. Following the frozen relations with the US, Russia intends to strengthen political relations with socialist countries in order to gain support in the international arena.

Categories: Economics, International

About Author

Miguel Ferreyra de Bone

Miguel is a guest lecturer of Macroeconomics at the Universidad del Salvador in Buenos Aires, Argentina. His past experience includes an advisory role at Banco Galicia, the largest private bank in Argentina by AUM, and as a commodities analyst at both Cargill and Ledesma. Miguel is proficient in Spanish, English, and Portuguese.