China Backs $12 Billion Argentina Rail Projects to Ease Commodity Supplies

China agreed to work on rail projects worth at least $12 billion in Argentina, boosting ties with South America’s second-largest economy.

The accord included a $10 billion refurbishment of the Belgrano Cargas and a $1.85 billion deal to upgrade the Ferrocarril Belgrano Norte y Sur, according to an e-mailed statement from the Argentine embassy in Beijing today. Argentine President Cristina Fernandez de Kirchner is visiting China with a trade delegation.

China has backed infrastructure projects in Africa and South America to ease shipments of oil and other commodities needed to support its booming economy. Argentina was China’s largest supplier of soybean oil until shipments were disrupted earlier this year by a trade spat.

China National Machinery & Equipment Import & Export Corp. will work on the Belgrano Cargas, the statement said. A group including Shaanxi Coal Group Investment Co. will lead the Ferrocarril Belgrano project.

The Belgrano Cargas, a freight network, connects the city of Buenos Aires to 13 of Argentina’s 23 provinces, including the main soybean producing areas, and to Chile, according to the national transport agency website. The oilseed is Argentina’s largest agricultural export and the main commodity shipped from the South American country to China.

The Belgrano Cargas has 150 locomotives, 39 of which are operating, according to agency data for 2006, the last year available. The railway has 7,347 kilometers (4,566 miles) of tracks, of which 5,069 were in use in 2006, according to the agency. The Belgrano Norte y Sur systems transport passengers in the Buenos Aires metropolitan area.

China Northern Locomotive & Rolling Stock Industry (Group) Corp. will also supply 220 carriages and 20 trains in a $330 million deal. China Citic Bank Corp. and China Development Bank Corp. will lend Argentina’s Ministry of Economy and Public Finance $273 million to help fund the purchase, according to a separate statement from China Citic.

A China Railway Group Ltd. unit also gave initial agreement for a possible $1.8 billion deal to build a subway in Cordoba and for a $1.5 billion order to extend a train line to Buenos Aires’ Ezeiza Airport.

China in April told traders to stop buying soybean oil from Argentina as it sought to force the South American country to scrap anti-dumping duties on goods including shoes, textiles and steel products. The countries can find a way to resolve the dispute, Qin Gang, a spokesman for China’s Ministry of Foreign Affairs, said on July 13.

To contact the reporter on this story: Neil Denslow in Hong Kong at ndenslow@bloomberg.net

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