A 3x3 model for China-Latin America production capacity cooperation.
Each year route 163, in the Brazilian State of Mato Gross, becomes one of the busiest roads in South American during February and March, as it links soybeans, the country's most important agricultural export commodity, to their biggest market - China.
Numerous big trucks, fully loaded with soybeans, run thousands of kilometers from Route 163 to the ports along the Atlantic Ocean. The soybeans will be shipped to China, 20,000 kilometers away, and then processed into tofu, soy milk and soybean oil. As Brazil's largest soybean-producing area, this region exports 90 percent of its soybeans to China. Local farmers don't know much about China, but they know that China is their biggest buyer
These links between China and Brazil mirror the growing relations between the two peoples, which have been nurtured and consolidated by the strong growth of the agricultural trades between the two nations. During the last decade, the Sino-Brazil agricultural trade has increased six fold.
According to Brazil's Ministry of Development, Industry and Foreign Trade, in 2014, soybeans remained its biggest agricultural export product, with 45.69 million tons in volume and 23.27 billion U.S. dollars in value. Of this total, 33.17 million tons were shipped to China and this number is expected to reach 46 million in 2015. China surpassed the European Union (EU) in 2013 as the biggest market for Brazil's agricultural exports.
Sino-Brazil trade is just a part of the wider Sino-Latin America agricultural cooperation, as China has also made huge progress in agricultural collaborations with other countries like Argentina, Chile, and Peru over the past decade: Sino-Latin American agricultural trade increased from 5.28 billion U.S. dollars in 2003 to 35.33 billion U.S. dollars in 2013, with an annual growth rate of 21 percent.
Latin America has become a crucial source of agricultural products for China, currently making up 19 percent of China's total agricultural imports. To date, China has signed memorandums on agriculture cooperation with 16 Latin American countries, and formed joint committees or working teams with 12 of them. However there now needs to be an evolution in the relationship.
Since the start of the year a fund of 50 million U.S. dollars for Sino-Latin American agricultural cooperation had begun to finance joint projects. Chinatex has begun to provide financial services to Brazilian farmers and is also considering expanding into fertilizers, pesticides and machinery financing. COFCO, has established a strategic cooperation relationship with Nieddera (by purchasing a 51% stake in the Dutch company) and entered the Latin American market with the latter's logistics and warehouse networks in Brazil, Argentina and Uruguay.
Against the backdrop of falling commodities prices, Chinese Premier Li Keqiang has proposed a "3x3" model for China-Latin America production capacity cooperation: the first "3" refers to cooperation in building three arteries for Latin America in the fields of logistics, power and information; the second "3" refers to sound interaction among businesses, society and the government; the third "3" refers to the expansion of the three financing channels of funds, credit and insurance.
China increasingly provides a source of financing and export markets without pressures to adhere to the practices of transparency and open markets principals to Latin America. It is also filling a vacuum left by decreasing interest from US companies in the region.