Friday, November 18, 2011

The enormous new trading routes forming between Asia and Latin America, the “Southern Silk Road.....”

The enormous new trading routes forming between Asia and Latin America, the “Southern Silk Road.....” South Americans have learned their lesson well: No More Gringos....

An ambitious plan to create an overland trade route in South America will allow for the movement of goods from Pacific to Atlantic....

A Southern Silk Road connecting Asia, the Middle East, Africa and Latin America will lead to turbocharged growth between emerging economies this century, according to HSBC.

“We’re talking about an absolute revolution in terms of world trade,” Stephen King, chief economist at HSBC, ....

The bank believes that these “South-South” connections will revolutionize the global economy and create a new Silk Road.

The renminbi may replace the dollar as the world’s most important reserve currency if the new trading relationships develop as HSBC envisages.

King believes that the growth will be driven first and foremost by China, which is already the largest foreign investor in Brazil, Laos, Myanmar, Iran, Mongolia and Afghanistan.

Its progress will be helped by its increasing power at sea. China now accounts for five of the world’s top ten biggest container ports, although twenty years ago, not one Chinese port was in the top twenty.

New infrastructure such as proposed railways coast-to-coast across Colombia and from China through to Turkey alongside new port construction in the Indian Ocean will help alter trading relationships, according to HSBC.

Trade borders are still relatively high between many of these countries, according to King.

“When you look at the kind of (trade) borders they’re still very high. That’s one of the reasons for optimism because if they weren’t so high there wouldn’t be as much room for expansion,” he said.

“All this change will happen in the near future.”

“The other side is the urbanization of countries in Asia. There’s still a huge amount of opportunity for the growth of rural income in China and the growth of trade,” he added.

“There are other countries around the world that will do really well including Indonesia.”

As China and India develop new products for their increasingly wealthy populations, they may be exported to other emerging markets.

Chinese and Indian cars, such as the Tata Nano, the world’s cheapest car, are cheaper, lighter and simpler than their Western counterparts, so may appeal to consumers in other emerging markets.

China will expand trade with developing states in the Southern hemisphere in the coming years, boosting outward investment and allowing imports to double, a senior Chinese diplomat said on Wednesday.

"China will increase trade with other developing nations, striving to build a Southern Silk Road in the future," Yi Xiaozhun, China's ambassador to the World Trade Organization, told diplomats and trade experts in a speech.

China has strong trade ties with western powers,much as that conducted along the so-called Silk Road across Asia in previous centuries, but has been making increasing inroads into the markets of resource-rich developing nations.

China's booming exports since joining the WTO ten years ago and its economic growth are worrying Western nations struggling with a financial crisis as well as developing states concerned about their industries' competitive edge -- concerns China is attempting to quell.

"We will encourage more Chinese enterprises to go out to bring capital, jobs and growth to the host countries, especially developing ones," he said.

China's overseas investment will grow to match the volume of inward-bound investment by 2017. At the same time, booming domestic demand will lead to a doubling of imports by 2016, he said.

"We will shift our economy to the consumption-driven pattern, which means more demand for imported products and technologies," Yi said.

There will also be an Energy Silk Road as the demand from China and India for commodities such as oil and gas helps build relationships.

The building of these relationships could be threatened if the Chinese clash with the United States at sea, King said.

“One threat is if China builds its relationships with Latin America and needs to protect them. To protect them you need a Navy and the question is whether you will have room on the high seas for both a Chinese and American Navy,” he added.

If you want to move a ship's cargo from the Atlantic Ocean to the Pacific or vice versa, the Panama Canal still has few rivals in the business. But that hasn't stopped ambitious entrepreneurs from dreaming up alternatives over the years. The latest scheme is to create a route across South America, along a chain of ports and highways, and river ways. Supporters say the plan could spur trade between Brazil and Asia. Critics say it’s a foolish idea.

"The World" reporter Melaina Spitzer filed this story from the Pacific port city of Manta in Ecuador.

On the docks of Manta's harbor, fishermen heave a catch of giant Dorado out of a rustic boat. Manta has long been a fishing port, but down the harbor lies a symbol of the city's future, a huge ship packed with cars from Asia. Manta hopes to become a major hub for Asian imports to South America.

Patricio Padilla is the Manager of Manta's Port Authority. He was at a recent gathering to discuss a bold idea for Manta, to make this harbor a competitor with the Panama Canal.

"Manta is really the nearest port of South America to Asia," said Padilla. "The idea is to have some cargo -- that right now is crossing the Panama Canal and going around South America, and that cargo will go from Manta to Manaus."

Manaus is a Brazilian city almost 1500 miles to the east. It has a major port that's connected to the Atlantic by the Amazon River. The idea to link these cities by land is part of a 70 billion dollar plan for a web of trade routes across South America.

Here's how the Manta-Manaus Project would work: Ships from Asia would dock in Manta and unload their cargo onto trucks. The trucks would carry the cargo up the highway to Quito, over the Andes, and down the other side to the Ecuadorian Amazon. From there, they would go by riverboat, through Peru, to Brazil. A key link in the chain is the Ecuadorian river port town of Coca.

Coca's marina on the Napo river is currently a quiet docking point for canoes and small petroleum boats, but if the Manta-Manaus project goes forward, it will become a major shipping hub.

Carlos Torres is with Coca's Ministry of Agriculture. He says the project could provide a big help to area farmers. He says local farmers would be able to ship their produce to distant markets and reap more of the benefits without middlemen calling the shots. But many in Coca say putting a major trade route through the jungle is just asking for trouble.

Carlos Sierra spent twenty years navigating the Napo River in large petroleum ships. He says cargo boats heading for Brazil may never make it out of Ecuador because the water is too shallow.

"With this type of boat it's really risky. They've hired me many times to rescue international boats, Brazilian and Peruvian boats that had gotten stuck because of water levels," said Torres through a translator.

The engineers of Manta-Manaus are hoping that dredging the river will keep boats from getting stuck. The Ecuadorian government has already bought up land along the Amazonian route and paid contractors to clear forests and farms. But those who make their home along the river say dredging and logging will threaten their communities and the area’s plant and animal life. The Manta-Manaus route runs through or alongside 4 national parks in Ecuador.

Coca's mayor, Anita Rivas, says this shows the government is only interested in one thing, "They’re not thinking about the communities, or the river or the biodiversity in the river. They’re only thinking about making money for the country. We are tired of being the milking cow while others are being served the milk, and we are always the ones to lose out."

Others are concerned about threats the project poses to human health. Indigenous groups in Ecuador have already seen cancer rates shoot up, including among children. Many scientists blame the contamination of fish and water supplies by oil extraction.

Manuela Ima, President of the Association of Huaorani Women fears that pollution from the Manta-Manaus project will bring similar risks, "For me this means pain of the ugliest sort. It can bring sickness, vomiting, cancer, flu. There are so many problems caused by contamination," said Ima through a translator.

Many indigenous groups intend to fight the trade route, and they say they've got the law on their side. Ecuador's new Constitution protects the rights of nature and requires the government to consult indigenous groups before beginning infrastructure projects that affect their territory. The Manta-Manaus project, many say, violates these rights. Money could also be a problem for the project. It's estimated that the route will cost as much as two billion dollars to build. International lenders have been reluctant to put out money for the project. And some question if this project could ever really make money. They say this complex system of shipping by truck and riverboat won't be able to compete on cost with the Panama Canal.

Among the skeptics is Manta's mayor, Jorge Zambrano, "Manta-Manaus is not even a project, it's an idea. I can have an idea right now, I wanna construct a big mall, but I don't have the money to do it. It's just an idea, an illusion, a dream."

Still, South America seems ready to dream big, with many infrastructure projects across the continent already underway. Zambrano just hopes that dream doesn't turn out to be a nightmare for Ecuadorians and for the Amazon...

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