June 21, 2011

 

 

Chinese investment is flooding into Argentina in its global commodity hunt for raw materials, with farming attracting growing attention.

 

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

 

China already buys the bulk of Argentina's soy exports, its top crop and largest source of export revenue.

 

Soy is mainly used as livestock feed in China, where meat consumption is rising along with personal incomes. At the same time, urbanisation is shrinking the amount of arable land available in China.

 

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

 

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

 

Heilongjiang Beidahuang Chairman Sui Fengfu said 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 US$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, soy, 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. Heilongjiang Beidahuang will not 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. The move has popular support after a number of foreigners bought large holdings in recent years.

 

Heilongjiang Beidahuang's purchases in agriculture come 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 US$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 US$7.1 billion.

 

Analysts predict 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.