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Dec
17

Gulf states to build Latin America links

From: Financial Times

By Michael Peel

Gulf states have built modest but growing ties with Latin American countries,  in an emerging economy powerplay that supporters hope will exploit shared  commercial goals and complement both blocs’ existing links to Asia.

Big Arab petro-state wealth funds have already taken stakes in leading South  American companies, with the two regions sharing interests in areas such as  energy, infrastructure and food security.

Arab and Latin American countries gathered in October in Peru for their third  inter-regional summit in seven years, the latest stage of an official embrace  that dates back at least to the founding of the Opec oil cartel in 1960 but has  been slow to develop.

“The two regions are emerging regions that are opening up to the world,” said  Hassan Abdel Rahman, executive director of the Arab-Latin American Forum, a  non-governmental group that promotes the relationship between the two blocs. “The Arab world doesn’t know Latin America – and Latin America doesn’t know the  Arab world.”

The push for a closer partnership between Gulf states and Latin America is  part of wider geopolitical shift, as western countries founder financially and  emerging economies rise.

Latin American and Gulf nations have prioritised building strong relations  with Asian countries, led by China, that are hungry consumers of the oil and  minerals they produce.

But delegates at a conference in Abu Dhabi this week on Arab world-Latin  American relations said Gulf countries were becoming more alive to previously  neglected opportunities offered in South America.

In perhaps the most eye-catching individual deal so far, Eike Batista,  Brazil’s richest man, announced in March that Mubadala, the Abu Dhabi state  investment company, would take a $2bn stake in his EBX  energy, mining and logistics group.

Qatar’s Al Gharrafa Investment raised its stake last year in Adecoagro, a  farmland venture in Argentina, Brazil and Uruguay backed by billionaire investor  George Soros, while Doha and Abu Dhabi have taken stakes in the Brazilian arm of  Santander, the Spanish bank.

Kuwait and Brazil set up a joint committee to increase trade and investment,  while Qatar’s state-owned Hassad Food has been eyeing possibilities in Latin  America.

Further food security investments in South America’s wide open spaces are an  obvious attraction for Gulf states, which are also a potential source of funds  for badly needed infrastructure building deals around the continent.

Commentators say the two regions also share an interest in developing new  technologies – and academic co-operation – in fields such as renewable energy  and environmental protection.

“We have problems in our countries, like problems of aridity, that are the  same in the Arab countries,” said Anibal Jozami, president of Argentina’s Tres  de Febrero University.

While the cultural affinities between the two regions are less obvious, an  estimated 20m people in Latin America are of Arab descent – Shakira, the singer,  and Carlos Slim, the Mexican telecommunications billionaire, have Lebanese  ancestry. Mr Abdel Rahman of the Arab-Latin American Forum pointed to the Arab  lineage of characters scattered through the novels of Gabriel García Márquez

On a political level, analysts say the two regions can work together as a  pragmatic counterweight to other power blocs – and have previous experience of  doing so.

“The first and most important co-operation between Latin America and this  part of the world was the creation of [Opec],” said Abdullah al Kuwaiz, chairman  of Saudi Arabia’s ICD Food and Agribusiness fund, referring to an oil cartel  membership that includes Venezuela and Ecuador, as well as Kuwait, Saudi Arabia,  Qatar and the United Arab Emirates. “This was when no one was taking about  economic development and solidarity between developing countries.”

Yet big obstacles to a broader relationship across the Atlantic Ocean remain,  including inadequate transport and logistical links. Some Arab investors also  complain that legal systems in some South American countries are untransparent  or unfair.

Politics may also prove a constraint, given the way many Latin American  states have emerged painfully from a state autocracy that is still the norm in  the Gulf. While such existential differences have hardly been a bar to links  between Gulf states and other countries, notably the US.

Sergio Bitar, senior fellow at the Washington, DC-based inter-American  Dialogue, suggested a deeper relationship between the Gulf and Latin America  would require “some sort of understanding” about democracy.

“It’s not just dollars and dirhams,” he said. “The problem is that those who  are less democratic have more money – and the opposite [is true].”

Even the most enthusiastic backers of closer ties between the Arab world and  Latin America admit the relationship is in its earliest exploratory stages. Yet  there seems to be sufficient to interest both sides to suggest the partnership  will expand from its low base. “The level of trade and investment flows between  the regions is very low,” said Osvaldo Rosales, a senior official at the UN  Economic Commission for Latin America and the Caribbean. “But right now I think  it’s a good time to think about new alliances.”

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