As far as global infrastructure projects go, the Chinese Government’s Belt and Road Initiative (BRI) is perhaps the most ambitious plan to reshape global trade for a generation, or more. In sum, the BRI seeks to significantly improve bi-lateral trade links, increase regional cooperation and bolster capital flows worldwide. All of this will be done by the Chinese government and related parties, as well as Chinese private enterprises, financial institutions, and cooperatives.
This is not just about economics, though. Through the investment in and linking up of several continents, and the previously less-accessible topographies and economies that link them, China is proactively asserting its influence worldwide. The longer-term objective, it can only be assumed, is for China to position itself as the world’s leading economic, political and military superpower.
Global commodity trades, and shipping, are central to China’s soft-power strategy. This may sound concerning, but the benefits of the Initiative, and China’s more pronounced interest in inward investment across emerging economies presents significant opportunities for players across the shipping industry, and their customers. It is important therefore that shipowners, operators, traders, maritime and logistics service providers start to plan ahead to ensure they are well placed to seize upon the right opportunities.
Where does the road end?
The BRI is (broadly) made up of two different ‘paths’. Until recently, the overland ‘Belt and Road’ route sought to connect Europe and the Middle East to China through Central Asia, across China’s hinterland and onwards through Southern Asia. The plan for the ‘Maritime Silk Road’ aspect was to simultaneously connect China, South East Asia, India and Africa through a network of strategic sea-lanes, ports, terminals and supporting infrastructure. Already, numerous projects have been completed and are now operational, are under construction, or soon to be underway.
In a marked expansion of the Initiative, both overland and sea routes will now be extended to include Latin America and the Caribbean States. This significant extension of the BRI follows an official invitation from Chinese Foreign Minister Wang Yi who formally invited the Community of Latin American and Caribbean States (CELAC) at a China-CELAC Forum meeting in Chile in January this year.
With this formal invitation, this regional bloc of 33 states will benefit from an additional US$250 billion in Chinese investment promised for infrastructure and related projects across the region over the next ten years. By any measure, this is a hard offer to turn down. So, while it may be early days here, we know from the rapid roll-out of the project elsewhere, that change will come quickly. It would be prudent for shipowners, operators and managers as well as port authorities and shipping service providers to start thinking about what this will mean for their own operations.
A bright path ahead
The impact of this extension means that significant opportunities should be on the horizon for any shipowner, operator, trader or maritime service provider with strategic interests in Latin America. The aim of the BRI, after all, is to better connect China and Latin America across the Pacific Ocean through a network of ports, terminals, industrial zones, storage facilities and the adjoining logistics infrastructure, facilities and communities that connect them.
Longer-term, these investments will affect commodities including, for example in the bulk segment in which WaterFront Maritime Services specialises – agribulk exports, including sugar, grains, petroleum, iron and steel as well as oil and gas. This also presents opportunities for providers of wider support services in the maritime space, such as IT, education or crewing for example; services for which Latin America provides significant untapped potential.
This is not to characterise Latin America as some latent resource. China is already the top trade partner for Brazil, Chile and Peru, but the prospects for the wider region are quite considerable and provide a positive indication for commodity markets for longer-term stability in the region. According to the Economic Commission for Latin America and the Caribbean (ECLAC), China is also the second main source of imports into the region, and overall third main export destination.
Shifting trade dynamics
The real significance of the invitation to extend the BRI across the region is that it will act as a catalyst for the already positive developments underway across the region. The finance offered by China under the BRI is in addition to the reported $150 billion in loans already extended to countries in the region. This has been provided by the Chinese state (through the China Development Bank and China Export-Import Bank) since 2005, according to economic think-tank the Inter-American Dialogue.
What the BRI fundamentally changes is the ability to encourage greater collaboration between Latin American nations towards building a better-connected regional network of key infrastructure, and opportunity. Perhaps more importantly in terms of trade dynamics, is China’s assertiveness in filling the increasing gap of influence and investment being left by the United States of America and its retreat from key trade agreements. This includes the Transpacific Partnership (TPP) and NAFTA agreements upon which Latin and South American countries – and many ship operators – so heavily rely upon. For the shipping community, then, this shift could mark a sizeable change in how we trade, with whom.
Counting on constants
As a global port agency business with a local representation in more than 400 offices across more than 60 countries including Chile, Peru, Ecuador, Panama, Colombia, Argentina and Brazil. WaterFront Maritime Services (WaterFront) are critically aware of the impact that unreliable infrastructure across the region has on the ability to move dry bulk commodities efficiently and cost-effectively. This is supported by an article published in The Economist in March this year, reporting that more than 60% of the roads across Latin America are unpaved, compared with 46% in emerging economies in Asia and 17% in Europe.
This is why having people on the ground in every key port, with reliable facilities and access to real-time data and intelligence is so important. WaterFront’s network of stringently vetted and highly reputable agency partners specialises in the handling of dry and liquid bulk cargoes and each brings with them unrivalled local market expertise and connections. This network structure enables us to anticipate problems and make tangible improvements across the supply chain. It also means that we will be on the front foot in helping customers to seize on emerging opportunities across Latin American in years to come.
This article was contributed by Terry Gidlow, Chief Executive Officer, WaterFront Maritime Services, exclusively for Sea News.
Sea News Feature, April 30