Hungry China Shops in Argentina

BY SHANE ROMIG

Chinese investment is flooding into Argentina as the Asian giant expands its global commodity hunt from the raw materials used in industry to the foodstuffs needed to feed its 1.3 billion citizens.

China's investment in Latin America hit $15.6 billion during the 12-month period through the end of May, nearly three times greater than the year-ago period, consulting firm Deloitte said in a report. Of that amount, Brazil received about 60% and Argentina close to 40%.

During the last three years, more than 70% of China's investment in the region went to energy and minerals, but farming is attracting more attention as the country seeks to fill its bowls from foreign fields.

China already buys the bulk of Argentina's soybean exports, its top crop and largest source of export revenue. Soybeans are mainly used as livestock feed in China, where meat consumption is rising along with personal incomes. At the same time, urbanization is shrinking the amount of arable land available in China.

Last week, China's largest farming company, Heilongjiang Beidahuang Nongken Group, signed a joint venture with Argentina's Cresud SA to buy land and farm soybeans.

Cresud is one of Argentina's top agriculture firms with control over more than one million hectares (2.47 million acres) of farmland that produce grain, cattle and milk.

Cresud didn't respond to requests for comment.

Heilongjiang Beidahuang Chairman Sui Fengfu told Dow Jones Newswires in March that the company plans to buy 200,000 hectares of overseas farmland this year, and that Latin America is a target area. The company is already farming two million hectares of land outside China.

Heilongjiang Beidahuang is also spending $1.5 billion to lease and develop farms on 300,000 hectares in Argentina's Rio Negro Province. Over a five- to 10-year period, the company plans to grow wheat, corn, soybeans, fruit, vegetables and wine grapes for export to China.

The deals with local partners such as Cresud and the province of Rio Negro appear aimed at avoiding a backlash against foreign ownership of farmland in Argentina, since Heilongjiang Beidahuang won't be buying the land outright.

President Cristina Fernandez has introduced legislation limiting land purchases by foreign individuals and companies to 1,000 hectares in rural areas, a move with popular support after a number of foreigners bought large holdings in recent years.

Heilongjiang Beidahuang's incursion in agriculture comes hot on the heels of heavy Chinese investment in Argentina's oil sector.

In February, Occidental Petroleum Corp. sold its local assets to China Petroleum & Chemical Corp. for $2.5 billion. Last year, China's Cnooc Ltd., in partnership with Argentina's Bridas Corp., agreed to buy a 60% stake in Pan American Energy from BP PLC for $7.1 billion.

Deloitte predicts that Chinese investment will continue pouring into Latin America but expects a diversification in the future into other industries such as manufacturing, infrastructure and finance.

See the original article >>