China Vets South American Free Trade Deal

By Almudena Calatrava, Debora Rey 26 June 2012

BUENOS AIRES, Argentina—Chinese Premier Wen Jiabao said the Asian giant is interested in a possible free-trade deal with the Mercosur [Argentina, Brazil, Paraguay and Uruguay] regional trade bloc.

Wen met Argentine President Cristina Fernandez in Buenos Aires on Monday as part of a South American tour that included visits to Brazil and Uruguay and will end in Chile this week.

In a video-conference with regional leaders, Wen said China should carry out feasibility studies on the possibility of a trade deal.

“We share ample common interests and we have great potential,” Wen said next to Fernandez in the video-conference that included Brazilian President Dilma Rousseff and Uruguayan President Jose Mujica.

China is Mercosur’s second-biggest trade partner, and Rousseff said strengthening ties could become a “strategy to keep the crisis contagion from reaching our markets and provoking unwanted consequences in employment and income that would hurt economic growth.”

Argentina is a major exporter of soybeans to China, and Fernandez said increasing links between China and Mercosur is “a historic opportunity to add value to our raw materials and create jobs.”

The free-trade deal could be discussed during Mercosur’s meeting in Mendoza, Argentina, this week. Paraguay is also part of the bloc but does not have diplomatic relations with China because it recognizes Taiwan, which Beijing considers a renegade province.

In the first visit of a Chinese premier to Argentina in almost three decades, Wen also signed accords in nuclear energy and for the export of Argentine horses and livestock, as well as fruits, honey, wine and other food products.

Argentina and China had announced in 2010 that Chinese banks would invest US $10 billion to restore a massive cargo rail system that once linked Argentina’s farming belt. The project, which would help get grains faster and cheaper to port, has been at a stalemate since then. The two leaders said the project is still on track but provided no details.

Most farm products in Argentina are transported by trucks, and farmers have long called for renovation of the dilapidated train system that was once one of the world’s best. The deal would be welcomed by Argentina, which is bracing for a nationwide truckers strike Wednesday that could cause food and fuel shortages.

The leaders also signed a separate letter of intent for a loan by the China Development Bank to the Argentine Foreign Investment and Trade Bank. Before the signing of the agreements, Wen visited the Argentine Congress and met with Vice-president Amado Boudou and Julian Dominguez, a senator and former agriculture minister. Argentina ships about 80 percent of its soybeans to China, with total trade between the two countries reaching $14.8 billion last year.