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Chinese to continue Argentina investment wave

Source: Wall Street Journal, Market Watch
By: Shane Romig

BUENOS AIRES -(MarketWatch)- Chinese investment in Argentina is likely to continue to boom as the Asian giant seeks out commodities to sate the country's huge demand, Yang Shidi, economic and commercial counselor of the Chinese Embassy in Argentina, said Friday.

Currently investment is focused on agriculture and mining, but Chinese companies are interested in stepping into other sectors such as infrastructure development and finance, Yang said during a press conference with foreign correspondents.

The Chinese have invested $15 billion in Argentina over the past three years, primarily in oil and farming, but there are also big plans to provide the financing and know-how for major rail and sanitation works, Yang said.

The relationship "is not just about economic benefits, but also social benefits," he said.

Argentina is currently in talks with state-owned China Communications Construction Company Limited to clean up the fetid Riachuelo water basin. For decades, successive governments have sworn to clean up the toxic waterway which carries off industrial waste and raw sewage from the southern edges of Buenos Aires, but little progress has been made.

The Chinese company is currently conducting a feasibility study and is well prepared after successfully improving water quality in Shanghai, Yang said.

The Chinese are also moving forward with plans to invest $2.6 billion in financing for the purchase of Chinese railway equipment and technology to expand and update Argentina's dilapidated rail system.
Those big infrastructure projects come after a host of major investment announcements over the last year.

China's largest farming company, Heilongjiang Beidahuang Nongken Group, is spending $1.5 billion to lease and develop farms on 300,000 hectares in Argentina's Rio Negro Province. Heilongjiang has also signed a joint venture with one of Argentina's top agricultural firms, Cresud SA, to buy land and farm soybeans.

In February, Occidental Petroleum Corp. OXY +0.15% sold its local assets to China Petroleum & Chemical Corp. (SNP, 0386.HK, 600028.SH) for $2.5 billion. And last year, China's Cnooc Ltd. (CEO, 0883.HK), in partnership with Argentina's Bridas Corp., agreed to buy a 60% stake in Pan American Energy from BP PLC (BP, BP.LN) for $7.1 billion.

Earlier this year, Industrial and Commercial Bank of China Ltd., the largest commercial bank in China, said it would buy an 80% stake in Standard Bank Argentina SA for $600 million.

In addition, Argentina is in talks with Chinese investors to build a $750 million copper refinery, according to the Mining Ministry.

While investment and trade are booming, there have been tensions due to Argentine protectionist measures designed to shield local manufacturers from cheap Chinese imports.

Argentine trade barriers are worrying to Chinese businessmen, but mechanisms to smooth over the friction have been set up and "one must recognize the [Argentine] government efforts to deal with the issues," Yang said.

After a series of bilateral agreements and trade missions, the two countries "have laid the groundwork for the next steps," he added. China is the top buyer of Argentina's soybeans and soyoil, the country's leading exports.

In 2010, bilateral trade between China and Argentina totaled $12.9 billion, a 65% gain on the year Yang said. During the first half of this year trade was up an additional 12% on the year at $4.75 billion.

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