The decision by the IADB to locate next year’s annual meeting in the South Korean port city of Busan might have annoyed investment bankers and international investors but the choice of venue is a clear reflection of the development bank’s desire to exploit an important and fast-growing trade connection for the region.
The meetings will further boost its presence and investment ties between the region and South Korea. While any discussion about the relationship between Latin America and Asia normally soon focuses on China, South Korea has been quietly making a name for itself in the region.
But holding the event in Korea has not been universally welcomed by the bank and investor community. One leading US investment bank that sent 10 executives to Brazil planned to send just two to Busan.
South Korea, which joined the IADB in 2005, has seen trade with Latin America and the Caribbean grow by double digits annually over the past two decades. Trade with the region was close to $60bn in 2012. It is still low, however, as an overall percentage of regional trade.
South Korea signed its third free-trade deal in the region with Colombia in February 2013. It also has trade pacts with Chile and Peru. A potential agreement with Mexico has been in the works for several years.
South Korean companies, both public and private, have big investment deals underway in the region. Several are as large as those signed with Chinese companies, but have received less attention. Mining and oil and gas dominate the portfolios in Brazil, Peru and Venezuela.
The Posco steel company has joined forces with Brazil’s Vale to invest more than $4bn in a steel plant in Brazil, and projects requiring more than $12bn have been signed with Venezuela’s state-owned oil company PDVSA.
In Peru, Korean National Oil Company is teamed with Colombia’s state-owed Ecopetrol in Savia, which holds the largest number of exploratory oil/gas blocks and is the second most important crude producer.
Savia will be investing more than $2bn in the coming few years in exploration. The private SK Innovation is partnered in Peru’s Camisea gas project and the downstream Peru LNG project. Peru LNG operates the only liquefied natural gas export facility on the Pacific coast of Latin America.
South Korean firms have infrastructure contracts in a large number of countries, such as Bolivia where they are building the nation’s first chemical fertilizer using natural gas as feedstock. A South Korean firm may also get the nod to develop Bolivia’s vast lithium deposits.