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Chinese PM starts South American investment tour

Published:Wednesday | May 20, 2015 | 12:00 AM

China's Premier Li Keqiang's stop in Brazil will be his first on a four-nation South American tour that includes Chile, Peru and Colombia. It comes as the continent feels the pinch of lessening Chinese demand for its commodities.

He was expected to announce accelerated plans for an ambitious US$30-billion railway linking Brazil's Atlantic coast with a Pacific port in Peru, and announce billions in other investments and trade deals in Brasilia on Tuesday.

China remains the top trading partner for Latin America and the Caribbean, with US$112 billion of the region's exports heading to China in 2013, according to Gallagher. Li's trip is expected to herald big investments in infrastructure projects, though analysts caution such announcements don't always result in action.

Still, the timing for any influx of Chinese cash could not be better for Brazilians, whose economy is expected to shrink by at least one per cent this year.

Additionally, a sweeping kickback scandal at state-run oil company Petrobras has implicated Brazil's biggest construction and engineering firms, freezing them out of credit markets and severely hamstringing their ability to complete existing infrastructure works or start new ones that Brazil desperately needs to streamline its exports of soy, iron ore and other goods.

The railway from Brazil's Atlantic coast in Rio state to a port in Peru would pass through the Amazon jungle and over or under the Andes. It's expected that most of the labour would be carried out by Brazilian firms, though Chinese firms could bid on building some stretches.

Plans for the railway, along with construction that's already begun on a China-backed waterway canal cutting across Nicaragua, are part of China's push to ease the delivery of the continent's commodities to its market.

In total, Li and Brazilian President Dilma Rousseff were expected to announce some 30 projects worth over US$50 billion, according to Brazilian officials.

In Peru, where China has its longest-standing ties in Latin America, officials are expected to sign agreements on infrastructure, technology, communications and aerospace.

In Chile, the first country in the region that signed a free-trade agreement with China, the two sides will address double-taxation issues, attempt to further streamline their bilateral trade and sign finance and technology deals.

- AP