Russia follows China in Bank move
GlobalMarkets, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Emerging Markets

Russia follows China in Bank move

IDB membership mooted as BRIC Latin investment soars

IDB chiefs are working to bring in China and Russia as members, at a time when investment flows from those countries – as well as India and Brazil – are rising across south America.

IDB secretary Hugo Eduardo Beteta said yesterday in Miami that the bank hopes to welcome China to membership at next year’s meeting in Medellin, Colombia. And this evening the bank starts talks with Russia which could lead to it becoming a shareholder.

Although reaching agreement on new member countries on the IDB board and with member governments takes time, “with China we feel confident we can announce something for Medellin,” Beteta told Emerging Markets. IDB officials are discussing the issues of voting shares and funding with the Chinese finance and foreign affairs ministries, and the central bank.

The idea has been floated that China might join not only the bank itself, but also the IDB group that includes the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF), arms of the bank that focus on financing for medium and small businesses and microfinance and microenterprises, respectively. It is understood that China has informally accepted this proposal.

The talks with Russia – which has sent a delegation of 12 to Miami – are preliminary. No formal request for membership has yet been made.

The background to the talks is the substantial increase in cross-border investment, including in south America, by the BRICS countries (Brazil, Russia, India and China).

The trend was highlighted by a $450 million investment in Venezuela’s oil sector by India’s Oil and Natural Gas Corp (ONGC), announced on Saturday.

ONGC’s announcement that it will take 40% in a hydro block is indicative, coming just one day after Venezuelan president Hugo Chavez said he would nationalize the country’s cement industry, and on the heels of the Venezuelan National Assembly’s initial approval of a windfall tax on hydrocarbon companies.

“There are many companies that recognize that what we are doing is fair and to benefit the Venezuelan people. We are certain that investment will continue,” said deputy finance minister Gustavo Hernandez.

Chinese investment in the region, despite pledges by President Hu Jintao in 2004 that investment would be close to $100 billion over 10 years, is roughly the same as India’s, but is starting to move up quickly. Investment by Indian companies in the south American region is approximately $7 billion and the Indian Ministry of External Affairs expects this to double in the coming years.

The BRICs have focused collective attention on Bolivia, despite the state’s vastly increased participation in the hydrocarbon sector and moves in mining sector that have raised concerns.

Brazil’s Petrobras is considering big increases in its investments in Bolivian gas; Russia’s Gazprom signed an investment agreement in mid-March with the state hydrocarbon company YPFB; India’s Jindal is set to invest $300 million this year – one third more than all foreign direct investment in 2007 – in the Mutun iron ore project; and China is pressing for investment opportunities.

“China has expressed particular interest in Bolivia. They want to invest now, especially in the other half of the Mutun deposit not being developed by Jindal,” Bolivian Finance Minister Luis Arce told Emerging Markets.

Chinese companies are also making numerous moves in Peru, where the government is negotiating a free-trade agreement that could be signed as early as November. Peru’s southern neighbour, Chile, already has a trade pact with China.

Four Chinese mining companies have bought into Peru, with state-owned Shougang announcing in early April that it would investment $700 million in the coming two years in its iron ore mine. If projects hold true, the other three companies will invest approximately $4 billion by 2011 in copper and gold mines.

Chinese oil companies are exploring in Peru, as are the Russian companies Siboil and Samaraneftegaz, a Rosneft subsidiary. India’s Reliance is involved in due diligence on a number of hydrocarbon blocks. India’s Reliance already has invested $500 million in Colombia and has investments in ethanol and hydrocarbons in Brazil. ONGC also has invested in Brazil and has partnerships in Cuba.

Gift this article