China’s search for food in Latin America: grabbing headlines not land

Brazil and Argentina are, respectively, the top and third largest exporters of soybeans to China (image: Bruno Gamioni/ Flickr)

China’s search for food in Latin America: grabbing headlines not land

Faced with rapid urbanisation, polluted or degraded arable land and a desperate need to feed its enormous population, China has resorted to “grabbing” thousands of hectares of overseas soil in order to guarantee supplies of crops like sugar and soya – or so the story goes.

But new research by US-based think tank the Inter-American Dialogue (IAD) exposes some of the inaccuracies in reports of China’s overseas agricultural investment, which include inflated stories of state-led land acquisitions. China’s Agricultural Investment in Latin America: a critical assessment also highlights that there are diverse motivations driving China’s relatively few land purchases or leases in Latin America.

Estimates suggest that around a third of farmland in China is degraded or polluted. And the government admits that 2.4%, some 3.3million hectares, is too degraded to support any agricultural activity. The Chinese government is trying to tackle widespread soil pollution with tougher penalties on banned chemicals and industry-wide monitoring standards introduced earlier this year. But this will likely take time to yield results and food security remains an urgent priority.

The report explains that China’s approach to food security focuses less on foreign direct investment (FDI) and more on trade; aiming to control prices and supply chains by supporting investment in logistics and processing rather than buying farm land.

Grabbing headlines

“The amount of land supposedly purchased by China in Latin America is often exaggerated,” said Margaret Myers, director of the China and Latin America programme at the IAD and co-author of the report.

Despite reports of dozens of ‘land-grabs’ in the Latin American media, Myers says that after “extensive research” they could confirm only 10 examples of successful Chinese land purchases in the region. And only few of these were for the purpose of crop production for export to China. Most reported deals have either fallen through or stalled.

“Chinese agricultural investors have not been able to get around local laws preventing them from acquiring land,” Myers told Diálogo Chino.

Media reports often point to Chongqing Grain Group’s acquisition of 200,000 hectares of land in Bahia, Brazil, as indicative of China’s territorial aspirations. But after a reinterpretation of the law in 2010, the deal stalled. And although Chongqing Grain and the Brazilian government eventually reached an agreement, as of 2015 the site has still not been developed.

The largest confirmed Chinese land deal in Latin America which has led to significant development was made by Chinese state-owned logistics technology company COMPLANT, which bought 27,000 hectares of land from the Jamaican government for US$ 774million in 2011 to develop sugar cane farms and factories. But the deal pales in comparison to the 300,000 hectare ‘land-grab’ in Rio Negro province, Argentina, as reported by Argentine daily La Nación – another deal which failed to materialise.

And previous research reflects these discrepancies. GRAIN (1 million hectares), the International Institute for Sustainable Development (800,000 hectares) and Land Matrix (500,000 hectares) have greatly differing estimates of how much land China actually owns or leases in Latin America. The IAD could confirm leases or purchases amounting to only 70,000 hectares.

No ‘Chinese characteristics’ are responsible for all land purchases in Latin America, the report says. In fact, those that drove the first purchases of land in Cuba and Mexico in the 1990s which were misunderstood as land-grabs and were actually a form of overseas development which successfully increased rice crop yields. However the benefactor, China’s Suntime Group, also reported ‘handsome profits’.

And agricultural firm Zhejiang Fudi Agriculture Group, which had a mere 3,000 hectares of land available for cultivation in its home province of Huafeng according to the report, purchased 16,000 hectares of arable land in the Brazilian state of Tocantins in 2009. The IAD report characterises Zhejiang Fudi as self-motivated and profit-seeking, and suggests that this drives their overseas land purchases.

Myers points out that Chinese companies and even China’s sovereign wealth fund have also been successful in purchasing some major foreign agricultural firms, such as multinational distributor Nidera, which has assets across the agricultural value chain in Latin America and worldwide.

This focus on controlling supply chains is more typical of China’s agricultural investments – and companies like state-owned COFCO, which acquired a $1.5 billion majority stake in global distributor H.K. Noble in 2014, could one day challenge the big Western distributors, says Myers.

COFCO president Patrick Yu, indicated in a 2011 interview that the big four Western companies ADM, Bunge, Cargill, and Louis Dreyfus (referred to as ABCD) now control almost the entire raw material base in North and South America and offer a useful example for COFCO to follow.

Supply chain impacts

The IAD’s research recognises that environmental challenges are a big factor in in determining the success and sustainability of China’s agricultural engagement with Latin America, without expanding on this element. The impacts of the soya trade remain a great concern for environmentalists.

Soya, which feeds into the meat industry’s supply chain in the form of soymeal for livestock, is at the heart of China’s agricultural interest in Latin America. Over 40% of China’s imported soybeans come from Brazil, some 33 million metric tonnes per year. Argentina is China’s third largest soybean supplier after Brazil and the US.

And soya is the exception to China’s rule of imposing high import tariffs and self-sufficiency targets on grains.  In 2002, China slashed the duty levied on soya from a prohibitively costly 114% to just 3%, causing imports to shoot up from around 3 million metric tons to nearly 60 million last year.

But a recent assessment by The Forest 500, an index which scores firms on their efforts to minimise environmental impacts along their supply chains, singles out Chinese companies such as the Shandong Sunrise Group Co Ltd, the top importer of Brazilian soya, as the worst performers. Shandong Sunrise Group scored no points for good practice on any of the assessment criteria that include ‘overall forest policy’ and ‘reporting and transparency’. Chongqing grain and COFCO perform only negligibly better. In contrast, the ABCD firms, with the exception of Louis Dreyfus, scored much higher. They signed up to a moratorium on forest conversion to soya plantations in 2006 which yielded a dramatic reduction in levels of deforestation.

But could Chinese firms be persuaded to follow suit?

“We believe that there is potential for change, especially for food products, due to the increasing concern of the public on the food safety and climate change impacts,” says Rose Niu, chief conservation officer at the Paulson Institute.

Niu is leading an initiative encouraging China’s food importers to source from producers listed on Brazil’s Rural Environmental Registration (CAR in Portuguese). CAR forms part of  the framework of Brazil’s Forest Code, the legislation governing the Amazon, Cerrado and other biomes, and listed producers’ land use is monitored by a satellite cooperation program with China, no less.

“The Chinese government has also been putting stricter policies and monitoring efforts in place for the safety of food products, we believe this can be used to push the sustainability agenda,” Niu added.

 

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