China wants the Silk Road to extend to South America
China thinks big when it comes to secure its food and energy future. Across the Pacific, a continent is rich in those resources, but to get to the ports of Shanghai, Ningbo and Shenzhen, commodities must first travel through South America and reach the Panama Canal. Chinese manufactured goods must travel the same reverse path to reach the more developed an populated Atlantic coast, where consumers live in the big Brazilian and Argentinian cities. In the last decade, the Asian powerhouse has been building thousands of kilometers of top-of-the-range railways, and it has the financial resources Latin America is badly in need of.
- Tuesday, 30 June 2015
This perfect alignment of economic and geopolitical factors now brought about one of the most ambitious railway projects ever planned: 5300 km of railroad tracks connecting the Brazilian to the Peruvian coast through the Amazon rain forest and the Andes ridge. It will extend over about 2000 kilometers through virgin forest and a mountain gallery at 2500 m over sea level.
The railway network makes up only a quarter of the current transport system in Brazil, a country whose economy depends on agricultural and mining products exports. Chinese Premier, Li Keqiang, and the leaders he visited in his South American tour a few weeks ago are betting now on extending the Silk Road between the Atlantic and the Pacific to accelerate shipping times and reduce the costs that lower the continent's competitiveness.
The project is gargantuan, but it all adds up: transporting food products per train between the port of Açu (Brazil) and that of Ilo (Peru) would, for instance, will lower the price of precious wheat by $ 30 per ton. And the system could soon up its capacity to 35 million tons from the 21 million planned initially. Furthermore, the railway will cross the agricultural heartland of Brazil which is the Mato Grosso state, as well as the state of Para, rich in mineral resources.
Opening new commercial corridors and connecting manufacturing chains combined with trade agreements and providing investment funds is proving a successful formula for China. Trade with the South American region could double to $ 500 billion or more in a timeframe of 10 years — more than a shot in the arm of growth in a continent struggling after the end of the high commodity prices bonanza.
Li Keqiang first shook hands with Brazilian president Dilma Rousseff, and it is no coincidence, because both sides agree that it's time for a new phase in their trade relations after that of an exchange of raw materials for manufactured goods (Brasilia is well aware of the importance of the low prices of Chinese goods in helping keep inflation under control). The Chinese medicine for Brazil's recession includes the purchase of 40 Embraer aircraft, a credit line of $ 11 billion to troubled oil company Petrobras and mining giant Vale, an electricity backbone system and other infrastructure.
Keqiang's second handshake was with President Ollanta Humala in Lima. Peru also wants its slice of the $ 250 million China plans to invest over the next 10 years in the region, and wants to benefit, especially, from the transcontinental railroad project contribution to the nation's industrialization.
Keqiang then flew to Bogotá, Colombia, to discuss details with this very important commercial partner north of the Equator. His tour ended in Santiago de Chile, because the Peruvian port of Ilo is not far from the country's northern border, and could become Chile's main port for its trade with the Asian behemoth.
The Chinese Premier skipped Buenos Aires, but for good reasons. Trade relations — and not only, between one of the top soybean producers and exporters and the world's main consumer are already thriving. Not without controversy in Argentina, China, is already financing a railway line that carries almost exclusively soybean with an investment of $ 2.5 billion by the Development Bank of China. This follows Beijing's proven successful scheme of financing infrastructure projects that require Chinese components, machinery, spare parts and design. The enthusiasm for this kind of projects is such that a governor of a southern province in Argentina wants to partner with China to build a railroad across Patagonia from the Atlantic through to the Pacific.
Premier Keqiang skipped also La Paz, but he will presumably be meeting Bolivia's President Evo Morales soon. If the Pacific side of the corridor crossed Bolivia, that would not only shorten the route, but would also send cargo trains across one of the richest countries in the region when it comes to underground raw materials — iron, lithium, magnesium, among many others. In addition, connecting the railway to the two main southern waterways, the Parana and Paraguay rivers, would serve not only Argentina, but also Paraguay, an important meat producer, and Uruguay, a heavy soybeans exporter.
The deadline for the feasibility studies is May 2016, and the environment is going to be one of the priorities. However, the authorities know, even if they do not say so, that the transcontinental railroad could be disastrous for that part of the 'lungs of the world' and to the habitat of the Amazon peoples. Once again, in the name of progress, the world could witness the destruction of the habitat of peoples with whom it decided not to have or seek contact, those "uncontacted peoples" that survived — until now — to civilization.