South America round-up: Ecuador's trade deal with China, Brazilian meat and Chilean metals

Tue 23 May 2023
Posted by: Phillip Adnett
Trade News

South American continent

The IOE&IT Daily Update covers the latest in Latin American trade news, including a new trade deal that pulls Ecuador into China’s Belt and Road initiative, more chicken imports from Brazil into the UK and potential blockages facing Chile’s lithium exports.

Ecuador-China deal

China has deepened its influence in South America through a free trade deal with Ecuador that could be worth $4bn to the Latin American country over the next 10 years.

As reported by the FT, the Ecuadorean trade ministry is expecting non-oil exports to be boosted by as much as a third over this period. The deal would allow preferential access for 99% of its exports to China.

The agreement is not guaranteed to be ratified by the Ecuadorean national assembly, as domestic politics is currently entering a tumultuous period.

President Guillermo Lasso was facing impeachment charges but has used a constitutional clause to dissolve the national assembly and rule for six months before returning to the polls.

If the deal is approved, Ecuador would become part of China’s Belt and Road investment strategy, joining Peru, Costa Rica and Chile in having agreed free trade deals with Beijing.

Some 21 countries in Latin America are now signed up to Beijing’s initiative, which was introduced by Chinese president Xi Jinping in 2013 to win power and influence by funding global infrastructure projects, notes the Daily Mail.

Brazil chicken imports

The UK is considering expanding imports of poultry meat products from Brazil following a review of the control system for beef and poultry meat products undertaken last year.

DEFRA secretary Thérèse Coffey discussed the issue with Brazil’s agriculture minister Carlos Favaro last month, according to Food Safety News.

In April, the UK published updated poultry meat quotas for Brazil to enable an additional 16,600 tonnes to be imported into the UK, bringing the total to 96,500 tons annually once it comes into force.

Merco Press reports that Brazil’s vice president, Geraldo Alckmin, said the UK’s endorsement for the de-bureaucratisation of chicken exports from Brazil will feature a new digitised procedure to reduce costs and stimulate the economy.

Peru port work halted

Construction stopped at a major new Asian-facing port in Peru following a landslide at a connecting tunnel.

The incident at the mega-port of Chancay damaged at least four houses near the tunnel and forced work to pause, reports Merco Press.

Peruvian prosecutors have launched a preliminary investigation after the accident, according to Hellenic Shipping News.

China’s COSCO Shipping Ports Ltd is building the $1.3bn project, the first stage of which is set to be completed by the end of next year.

The port is about 80km north of Lima and aims to become a crucial outpost for international trade along the Pacific basin.

Soaring inflation in Argentina

Argentina has raised interest rates by six percentage points to 97% to tackle inflation that has reached 30-year highs.

According to the FT, the government is desperate to avoid a big devaluation before elections in October but is low on foreign exchange as Argentine citizens embrace the US dollar.

The country recently announced it would pay for Chinese imports in yuan to save its dwindling dollar reserves, reports Foreign Policy.

Any issues around devaluation could threaten the mooted idea of a joint Brazilian-Argentinian currency, proposed by both countries earlier this year.

Chile nationalises lithium

The world’s second-largest lithium producer, Chilean company SQM, is set to start talks with state miner Codelco as the industry faces nationalisation, threatening global supply lines.

In April, Chile's president Gabriel Boric revealed his plans for stronger state control of the metal, a key component for electric vehicle batteries, reports Reuters.

Some analysts believe the strategy could erode the attractiveness of the Chilean industry and benefit competitors in Australia, Argentina and Africa.

The value of the country’s two largest lithium miners has slumped by $8.5bn since the announcement, reports the FT.

Lithium prices crashed from $80,000 to below $30,000 a tonne this year after weak Chinese demand for electric vehicles met growing raw material supply.