China's Overseas Port Spending Spree

Eager to gain more control over international shipping, the Middle Kingdom is buying its way into Latin America

A few months ago, the government of Ecuador decided to change its laws and allow a Hong Kong-based company to bid for the port of Manta, one of the most important in the region.

After some delays and serious doubts over the whole process (Ecuador is one of the most corrupt countries in Latin America), the contract went to Hutchinson Whampoa, owned by Hong Kong mogul Li Ka-shing.

According to the deal - the details of which were thrashed out behind closed doors - Hutchison will take over management of Manta on February 1 and retain control for some 30 years.

In exchange, the company will pay about US$460 million and modernize the port, equipping it with the facilities to handle a million 20-foot-equivalent containers per year.

The ultimate impact is that a Hong Kong conglomerate will have control of one of Ecuador's economic lynchpins. But this is in fact just one of several strategic ports now dominated by Hutchison in Latin America.

The company's assets include: the Buenos Aires Container Terminal in Argentina; the Panama Ports Company, operator of the Cristobal and Balboa ports at each end of the Panama Canal; the Ensenada International Terminal at the international port of Manzanillo, one of the most important ports on Mexico's Pacific coast; a large operation in Veracruz, on Mexico's Atlantic coast; and two ports in the Bahamas.

These private logistical purchases in South America are coming during a time of huge state-backed deals involving natural resources. The last time President Hu Jintao visited the region he pledged vast sums of money to develop mines in Brazil, oil projects in Venezuela and railway lines in Argentina.

In return, China gets Brazilian iron ore, Venezuelan oil and Argentianean soya beans. In 2003, Latin America received close to half of the overall investments China sent around the world.

Beijing also wants control of the ships that bring these commodities back to China. Already the world's fourth largest shipbuilder with a 15% market share, the country wants to be number one by 2010.

Recently, Fujian province opened a cross-Pacific shipping route with Latin America, linking the ports of Hong Kong, Xiamen, Qingdao and Shanghai with Manzanillo (Mexico), Buenaventura (Colombia), Guayaquil (Ecuador), Callao (Peru), Iquique, Valparaiso and Lirquen (all in Chile).

With key issues like access to natural resources closely linked to security interests, China or companies with strong China links want to gain concessions at major ports around the world.

What's more, as the deal in Ecuador's Manta port shows, the terms can often be favorable enough that countries don't hesitate to change some of their most important laws to satisfy these demands.

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