In late July, Ambassador Cecilia Nahón and a delegation of Argentine business leaders and policy-makers attended a conference in Shanghai aimed at promoting Chinese investment in Argentina, as well as increasing access to Chinese markets for Argentine businesses. During the visit, Chinese business leaders from companies like Huawei, which has invested heavily in the Argentine telecom sector, testified to the country’s competitiveness.
On the sidelines of the conference, Nahón spoke with China Economic Review about her country’s push to diversify Chinese investment in Argentina, and explained what Argentina’s membership in Mercosur, the South American regional free trade bloc, means for Chinese firms.
Q: Did Argentina receive much Chinese investment during the global economic downturn in 2008 and 2009?
A: Investment in 2009 was relatively low, but 2010 was an important year. In spite of the global economic downturn, Chinese companies accelerated their investments in Latin America in general and Argentina in particular. A lot of prospective investments were made in Argentina in those years [2008-2009], which were then finalized and announced in 2010. Last year, around US$13 billion worth of Chinese investments were announced in Argentina – that’s a lot. Various Chinese firms are still analyzing new and more investment opportunities. So, though Chinese investment in Argentina has been growing since 2004, 2010 was definitely the big year. We are now beginning a new phase for Chinese companies in Argentina.
Q: There has been concern as well as excitement about Chinese investment in Latin America. Some are worried that Chinese investment is merely focused on natural resources, on energy. What is your take on this?
A: Chinese investments have been mainly directed at sectors like mining, oil and gas. But we are also seeing Chinese firms increasingly diversify their investment portfolios in Argentina. Today at the conference we talked about the successful case of Huawei, a global telecommunications provider that has operations in Argentina. Chinese companies have also made important investments in the agro-industrial sector, for example in bio-diesel production. Basically we are seeing Chinese investments gradually follow the pattern of other countries’ investments in Argentina – looking to take advantage of natural resources, sure, but also moving toward investments that add value to those natural resources, as well as manufacturing. Actually, the Chinese government is also encouraging Chinese companies to export from Argentina, not only food products, but other manufactured goods too, using Argentina as a platform to access the region.
Q: In terms of using Argentina as a platform for exporting to the Americas, how do Argentina’s trade agreements influence Chinese investment?
A: Argentina is part of Mercosur, the common market with Brazil, Uruguay and Paraguay that has around 240 million consumers with rapidly growing purchasing power. It is a very dynamic market. So producers in Argentina have three potential markets. There’s the domestic market, which has been very dynamic in recent years and is, in many cases, the first place Chinese companies look. For example, yesterday we met with executives from an important Chinese company in Beijing who are looking into a possible investment in Argentina to produce urea for fertilizer, just to satisfy the demand of the Argentine market. The local market for fertilizer is a big one, so they consider that investment to be attractive and profitable, and have identified the opportunity to substitute imports that are currently supplying the Argentine market. Mercosur is the second potential market. Argentina is closely integrated with Brazil, particularly in some industrial sectors like auto parts and automobiles, so several companies produce in one or the other country to satisfy the whole regional market, which is nearly 5 million vehicles per year. So the regional market is an interesting alternative. Third, Argentina has economic trade agreements with Chile and other Latin American countries, and with Mexico for certain products, for example in the automotive industry. Argentina also has access to many sectors of the US market through the GSP [general system of preferences] protocol.
Q: What about with China? Are any negotiations underway for a free trade agreement?
A: The Secretariat for Trade and International Economic Relations, part of the Ministry of Foreign Affairs, is leading ongoing negotiations to further open the Chinese market to Argentine products. Argentina is very competitive in many products that are currently not allowed into the Chinese market. The Secretariat is carrying out active negotiations to expand market access for Argentine products around the world, and China is a particularly attractive market because of the size of its economy and the huge potential for Argentine products to meet the growing demands of Chinese consumers and firms. Recently, the Chinese beef market was opened for Argentine exports, which is great news. We are working on other food products like lemons, of which we are a very competitive producer. Argentine food products have outstanding sanitary conditions, and this is one of the many factors Chinese authorities are taking into account. They are evaluating our products, and gradually opening more and more markets for Argentina. We will sign a protocol in a few months on the export of semen and ovaries from cattle from Argentina to China to improve cattle production in China. So we are working very well with the Chinese Ministry of Commerce.
Q: Chile requires investors in its country to employ a certain percentage of Chileans. Can you tell us about the employment footprint of Chinese firms in Argentina?
A: Foreign companies that invest in Argentina tend to hire mostly local workers because we have many well-trained professionals. Employers can find most of the qualifications that they require within the local population, not only in the capital city, but all over the country. But there is not a regulated limit.