Double Handshake

In the wake of Saturday’s devastating 8.8-magnitude earthquake in Chile, the internet is already abuzz with a curious “law” linking the event to both the quake in Haiti earlier this year and 2008’s Wenchuan earthquake in Western China. Hecaitou (和菜头), an influential Chinese blogger, claims the phenomenon has been noted, albeit in different forms, in all three countries. He credits Chinese netizen googlor for the following formulation:

The black numbers represent the month and day of the three earthquakes – ie. 5/12 Wenchuan quake, 1/12 Haiti quake, 2/27 Chile quake. The red characters are the place names – 汶川 = Wenchuan, 海地 = Haiti, 智利 = Chile. You can see that the row and column marked for each location read the same either way you read.

It’s unclear what “law” is really supposed to imply. Hecaitou himself says he finds the coincidence “interesting” but dismisses the would-be numerologists, arguing there have been hundreds of earthquakes over the past three years, and finding number patterns wouldn’t be difficult. I’ll add that had Chile’s earthquake struck anytime from February 20 through 28, the table above still “works.”

Nevertheless, number patterns are compelling stuff and easy to understand. I expect this “law” to linger in the Chinese blogosphere and media while Chile stays in the world’s news.

At the beginning of the new year, I was drawn to headlines touting China “opening its doors to ethanol imports.” The government had decided to drop its import tax on ethanol – a sugar-based biofuel typically used in vehicles – from 30% to 5% starting January 1st.

In December, the two countries’ state-owned oil and gas companies PetroChina and Petrobras signed an MOU to build ethanol production projects in Brazil. The project was specifically aimed at exporting ethanol from Brazil to China, though no numbers were given.

Was China getting more serious about developing its biofuels industries? Would Brazil, the world’s biggest ethanol success story, have a giant role to play? I smelled a scoop.

For Americans like myself, the word “ethanol” brings to mind the US’s controversial foray into corn ethanol production, which began in earnest about 10 years ago. I’m not too interested in rehashing the arguments and data for and against the corn ethanol industry in the US (though, file me under ‘naysayer’). However, Brazil’s sugarcane-based ethanol industry (second to the US by production but far more sustainable, carbon-efficient and wide-spread) is probably worth a paragraph, if not a glance at its Wikipedia page.

Brazil, with abundant land resources and heavy rainfall, is an ideal place for growing lots of sugarcane. It is grown sustainably and not on deforested Amazon land. Sugarcane’s higher sucrose content makes it much more efficient than corn, and government subsidies were phased out completely in the 1990s. Cars (92% of new ones) in Brazil run on a mix of ethanol and petrol. The system has been invested in and promoted for about 30 years. By pretty much all measures, it works.

China’s ethanol industry also has its roots in the 1970s and 1980s, from grain overproduction in certain years. With tons of rotting grain on their hands and no good way to store it, the authorities decided fermenting it and turning it into fuel was a feasible option. Things progressed slowly but steadily (China was even a net ethanol exporter in 2006) until five years ago when the use of food crops for ethanol was banned because of rising food prices and concerns over scarcity.

The same fuel-vs-food debate that made ethanol so contentious in the US had delivered a major blow to China’s industry.

I recently interviewed Rob Earley, an expert on biofuels in China for iCET, for my day job. He brought me up to speed on China’s present ethanol industry (and the serious structural challenges impeding its development). You can read the full interview here (need to first register for free). Here is the exchange relevant to the Brazil-China ethanol connection.

Q: As of the first of the year, China lowered its import tax on ethanol. Do you expect this move to affect the ethanol landscape in the country?

A: You have to look at the fundamental question: Why is China interested in biofuel? The answer, at least in my experience, is completely based on energy security. If they’re importing ethanol, it doesn’t improve their energy security greatly considering that the (world’s) supply of ethanol is probably more limited than the supply of oil at present. In terms of diversifying sources of energy, it’s not a bad thing. But realistically, the biggest source of ethanol is from sugarcane in Brazil, and if China and Brazil aren’t getting along, that supply gets cut off. Since there is no policy push for low carbon fuels in China right now, then there is no carbon rationale for using biofuels in China. I don’t think the import tax is going to make a big difference, but anything is possible.

So, this begs the question: Why do it, then? Earley said he couldn’t offer an explanation.

It’s worth remembering that China and Brazil are already closely intertwined when it comes to energy. Last May, China loaned Petrobras US$10 billion to secure a steady supply of oil. The Asian country also overtook the US as Brazil’s largest trading partner for the first time the month previous. Ethanol will probably never replace oil as a primary fuel source in China nor will it likely even surpass oil in importance in the China-Brazil trade relationship. However, it’s not impossible to imagine ethanol trade significantly changing the two countries’ current energy trade relationship (oil produced in Brazil, exported to China). Consider the following:

Diversifying energy sources – As Earley mentions above, it is in China’s interest to diversify its energy sources. Yes, importing ethanol from Brazil does not change China’s dependence on a foreign country for energy, but ethanol does offer much better price stability.

The table is set – The same energy giants (PetroChina and Petrobras) that are responsible for Brazil-China oil trade would be the ones taking on ethanol. Ramping up ethanol trade would not require new companies cutting in on entrenched state-owned interests. Ethanol would simply become a new stream of business for those already involved.

Oil already ties the two together – It’s true that China (and all countries) would rather not depend on foreign countries for energy, but the reality is China has little choice right now. Compared with China’s other oil suppliers (the Middle East, Russia, Central Asia, Africa, Venezuela), Brazil looks pretty good stability-wise. If importing ethanol from Brazil could displace some oil imports from, say, Sudan or Iran, wouldn’t this make China’s fuel portfolio a bit more stable, which is the stated goal?

The cars are a-comin’ – The number of cars on China’s roads is set to sky-rocket in the coming decade. If the country is to realize its goal of cutting energy intensity by 40-45% by 2020, it must keep vehicle emissions within reason. Costs for setting up the infrastructure for ethanol-fueled cars would be significant, but would pay for itself economically and environmentally.

Jump-starting things back home – China’s domestic ethanol industry is not dead, mind you. It’s just not a big priority right now. Working closer with Brazil on ethanol could result in China gaining the technology and experience necessary to revitalize its own ethanol industry, which is all but certain to miss its 2010 production target.

Image: Wired

Venezuela is in serious economic trouble. Production of oil – the backbone of the economy – dropped by 400,000 barrels/day last year due to reduced demand. “Indefinite” four-hour-per-week rolling blackouts have begun in big cities as hydroelectric dams have been hit hard by a drought. And then last week, Hugo Chávez announced last Friday he will devalue the country’s currency, the bolivar, for the first time since it was introduced in 2003.

The Venezuelan people are (rightly) afraid that even more serious inflation will set in. Many rushed out last week after the announcement to buy electronics and other durable goods that would hold their value. Merchants raise their prices as a result – the exact opposite effect a currency devaluation should have.

Chávez is not amused. “‘There is no reason for anybody to be raising prices,’ Chávez said Sunday on his national television show. He explained to listeners that the ‘bourgeois’ in Caracas society would plan price increases but that they would fail. ‘People, do not let them rob you,’ he said. ‘Denounce it,’” the Washington Post reported.

But if that approach doesn’t inspire a lot of confidence in the country’s stability, consider this idea:

A shipment of Chinese home appliances will be sold cheaply in Venezuelan government stores to stop speculation by retailers after the country’s currency was devalued last week, President Hugo Chavez said Wednesday.

“A boat is coming from China. It brings refrigerators, television sets and washing machines we’ll be selling at low prices, as we already do with food products in the Mercal chain,” Chavez said of the government-owned supermarkets opened in 2003.

A single appliance-laded boat from China? Well, that should do the trick for country of 28 million people.

I was reading about the weird and intriguing (and for purposes of this blog, not so relevant) theory of geological hot spots in Al Gore’s great climate change primer Our Choice, and it got me thinking. The (still unproven) idea is that areas of the earth’s surface that are unusually hot, such as Old Faithful at Yellowstone National Park in the US, can be explained by large asteroid strikes in the ocean at the corresponding place exactly on the opposite side of the world. This point, 180 degrees away, is called an antipode.

This made me remember growing up in the US and occasionally hearing grownups say “if you dig a hole straight through the earth to the other side, you’d be in China.” This, I can confirm with this nifty Antipode Map, is not the case. America’s whole collective anitpode is out in the south Indian Ocean (exception: Hawaii – you’re in Botswana!)

But it turns out that China and Latin America have some serious antipodean matching going on. John at the great Sinosplice blog apparently figured this out three years ago:

So you can see that China mostly just overlaps with Argentina, and most countries don’t overlap with any land at all. According to another website, China gets these exciting antipodes match-ups:

1. Beijing – Bahia Blanca, Argentina
2. Taipei – Asuncion, Paraguay
3. Shanghai – Buenos Aires, Argentina
4. Wuhan – Cordoba, Argentina
5. Xi’an – Santiago, Chile

Some of them are give-or-take a few hundred kilometers according to the map but still cool approximations to know.

Back in October, I posted a snippet of a Shanghai Daily article relating to Chile’s pavilion preparation for this year’s Shanghai Expo:

At the Shanghai event next year, Chile will attract visitors with three special wells. People will be able to look into the wells in the pavilion in Shanghai to see scenes and hear the sounds of some Chilean cities on the opposite side of the earth.

It still sounds hokey, but I guess now more credible than the “digging a hole to China” silliness I thought of when I first heard about it – even if those scenes and sounds are technically coming from Argentina.

Image: Sinosplice

Writing a blog about China and Latin America, some news stories seem just too good to be true. This is one of them: Real, live bullfighting may be coming to Beijing as early as next year. CAS International, a Dutch anti-bullfighting organization, reports:

According to pro-bullfighting websites, bullfighter Manolo Sánchez made a deal with the local government of the Huairou District in Beijing (Peking) to build a bullring and a bull breeding farm close to the Chinese Wall, as part of a Spanish amusement park (also with tapas bars and flamenco shows).

…

In January, they want to import 100 bulls and 100 cows from Spain and they also want to start building the bullring. The bullring will be finished in October 2010 and will be inaugurated with two bullfights. From 2011, they want to organize 16 bullfights a year, 4 in June, 4 in July, 4 in August and 4 in September.

Wow. Where to start on this one?

It’s worth remembering that China has toyed with this idea before. In 2004, Beijing almost allowed the city’s Wild Animal Park to hold a fight, but eventually scrapped the idea. City council members complained that bullfighting was cruel and had “the potential to tarnish Beijing’s and China’s image” ahead of the Olympics.

However, that same year in October, Shanghai successfully held two days of bullfights. Organizers imported bulls from Mexico, matadors from Spain, and converted a city stadium into a bullring, spending US$605,000. Bulls were taunted and stabbed with spears, but not killed.

Not all fell under the spell of “a bullfight with a truly Spanish flavor.” The editorial board of China Daily called the event a “mistake.”

While animal protection and anti-violence is becoming more fashionable in society, Shanghai’s “bravery” in staging this kind of bloodsport betrays itself as one of China’s most modern cities.

Rather than a milestone in its bid to become a much-coveted international metropolis status – indeed, the bullfighting episode is more like a slap in the face.

Will this time be any different?

Worldwide, times are tough for the industry. Spain’s northeastern Catalonia region recently banned the sport, and other regions may soon follow suit. In Latin America, bullfighting can be found in Mexico, Colombia, Ecuador, Peru and Venezuela and may survive there a bit longer. Still, anti-bullfighting sentiment is on the rise in Latin America too. Many people see exporting the sport to China and other foreign countries as a last-ditch strategy to save a dying industry. Pro-fighting optimists may believe China to be bullfighting’s last great hope.

But don’t count on it. Organizations like CAS International are already circulating petitions and mobilizing efforts to stop the sport from coming to China. On top of that, it will only take one top cadre deciding there is something decidedly “uncivilized” about the bloodsport before this plan gets scuttled like the last. Don’t get me wrong, I think most Chinese could stomach the blood to watch for the “mystery” and “passion,” as this account can attest.

My guess is this project becomes something much more benign and tourism-friendly – more “Spanish amusement park” and less bullfighting. Bloodless “bullfighting demonstrations,” perhaps. Tourists dressed up as matadors. Tours of the stables and photos with the bulls. Chinese copies of Death in the Afternoon, plastic banderillas, magnets and other tchotchkes – these all seem likely.

An authentic bullfight in Huairou? Not so much.

Image: China Daily

Peru’s defense minister Rafael Rey said his country is in talks with China to purchase “a fleet” of tanks made in China to replace its current 1970s Soviet-era line-up. The country is also planning buy Super Tucano planes from Brazil’s Embraer to fight drug trafficking in the Amazon.

Both Rey and Prime Minister Javier Velasquez were quick to dismiss any notion of a budding military arms race with arch-rival Chile. Times are sensitive given last month’s espionage controversy and 100-plus years of general bad blood stemming from a border dispute. However, the ministers did not mention what Peru’s leading newspaper La Republica reported recently: That in July, a Peruvian military delegation traveled to China to evaluate the MBT-2000 tank model. The result: The Peruvians were initially turned off by the MBT-2000 because they didn’t think it would be able to defeat the Chilean Leopard 24A.

Doesn’t exactly assuage fears.

Anyway, how do you go about closing an arms deal for a buyer on the fence, you may ask? From AP:

Rafael Rey told The Associated Press that the army is testing MBT-2000 tanks brought from China, but wants a better-equipped model of the tank. Peru showed the tanks in a parade on Tuesday.

Rey didn’t say how many tanks Peru would buy. The Lima newspaper La Republica reported that it plans to buy 80 to 120 tanks and has evaluated Chinese, German, Russian, Ukrainian and Polish models.

A parade! There’s a novel way to evaluate military hardware. Tank parades in Beijing during October’s National Day 60-year anniversary and now Chinese tank parades in “the US’s backyard”?

Cue US Congressional fear-mongering.

Hugo Chavez is a blogger’s world leader. From last month:

Venezuela’s efforts to combat severe drought conditions may include President Hugo Chavez going airborne with scientists as they try to generate rain from clouds.

Chavez has said a team of Cuban scientists are in Venezuela to fly aircraft with special equipment designed to influence weather patterns, specifically to bring on much-needed precipitation.

“I’m going in a plane; any cloud that crosses me, I’ll zap it so that it rains,” Chavez said late Saturday, according to Reuters.

Brings to mind China’s cloud tinkering during the Olympics and Beijing’s most recent set of snowfalls. Not that Hu Jintao will be manning the cockpit anytime soon.

Image: Slate

Last month, a group of 15-20 gunman attacked a Chinese-owned copper project in northern Peru at dawn, killing three workers and torching 80% of the site. According to news reports filed in the following days, two other workers were still missing. The US$1.4 billion Rio Blanco copper project (bought by Fujian-based Zijin Mining Group in 2007) has been the site of violence and controversy before. In 2005, before Zijin took over, security guards killed one protester and allegedly tortured two dozen more. Those who oppose the mine argue it harms the environment and has a negative impact on local society.

Like the Bagua protests earlier this year, November’s Rio Blanco attack illustrates the major tensions between Lima’s economic and industrialization development plans for the country and some locals who fiercely resist it. Peru’s president Alan Garcia himself is a perfect example – he is lauded by international businesspeople for his open foreign investment policies and reviled at home, with an approval rating of 26%. Chinese companies, who are heavily invested in Peru’s mines, are caught in the crossfire.

Chinese mines in Peru have been targets of violence before, but I would argue the backlash against Chinese companies in Peru have little to do with them being Chinese. It is fast, polluting, large-scale development, and social and environmental upheaval that protesters are lashing out against. American and European energy and mining companies have been targeted as well.

Conflicts like the one in Rio Blanco are about development – about if and how it should happen, and who whose decision it should be.

In China, of course, fast, unconstrained, top-down development is near Gospel – The Gospel of Fazhan (or development). I’m using “fazhan” instead of “development” from here out because the word connotates so much more than new buildings and roads. You hear “fazhan” everywhere in China; it is a mantra, an obsession. Fazhan is progress, a thing to believe in. Fazhan levels are the way you compare countries. Fazhan is tied closely to national pride and unity. There are those who want fazhan and those who don’t know any better.

So note how state-owned newspaper China Daily handled the Rio Blanco attack:

Drug cartel behind Zijin Peru copper project attack

A weekend attack on a copper project in northern Peru that left three dead may have been the work of drug traffickers who want to keep the area undeveloped in order to protect their trade, the head of a business leaders group said on Tuesday

…

“There is no dispute or conflict with the community, so this makes you think that criminal interests are behind it, probably drug traffickers,” said Ricardo Briceno, head of Confiep, Peru’s largest business federation. Police said they were still collecting evidence from the attack.

Big mines tend to bring roads, police and development to areas where those involved in the drug trade want to keep a low-profile.

…

The company and people from the business community say townspeople now support the construction of the mine, though violence has broken out before at Rio Blanco.

The Peruvian government has also struggled at times to win the public debate over the benefits that big mines bring to isolated towns in the Andes.

The article is lifted from a Reuters report filed the previous day, which distanced itself a bit from the all-is-well comments from Briceno. Rio Blanco’s violent history disappears, as do mentions of environmental concerns. Indeed, with a few edits, the article becomes China Daily’s perfect affirmation of the Gospel of Fazhan – everyone welcomes fazhan with open arms except for the criminals.

It is much easier for China’s government to convince its own people that fazhan is a universal aspiration. Again, few of them need converting to the Gospel, and there’s no reason foreigners wouldn’t believe in the same thing. For every protest or attack against a Chinese mining interest abroad, China Daily and Xinhua will be there to dutifully explain that the cause was a few bad seeds at odds the vast majority of supporters.

But how does China sell the Gospel of Fazhan abroad to those who might resist it, to those who don’t share the same values? There is no doubt China will continue transform all of Latin America with its resource-buying and fazhan-leading. This reality is settled by governments, by trade agreements and investment policies.

But if China hopes to get along harmoniously with the Latin American people whose lives are being utterly transformed by all this fazhan, it may be useful to recognize and plan for the fact that not everyone is a believer.

A few noteworthy links from around the web (a few that I’ve had on my desk for some time now). With a little down time in the coming weeks, I’ll hopefully give a few of these stories their proper treatment. But, for now, the short list:

Bloomberg reports that newly christened 2016 Olympic city Rio de Janeiro is looking to China to help finance the its planned US$11 billion in Olympics-related infrastructure projects. (China knows a thing or two about the topic). State-owned China Development Bank loaned Brazilian state-owned oil giant Brasileiro SA US$10 billion earlier this year.

On the subject of oil, the Latin Business Chronicle republished an article from the Wharton Business School on China’s quest for oil in Latin America. Buried half-way down in the piece is a good breakdown of China’s proposed deal to buy Argentinean oil exploration and refining firm YPF for around US$17 billion – which would be the largest-ever overseas deal by a Chinese company.

R. Evan Ellis, whose book China in Latin America: The Whats and Wherefores has been reviewed nicely here, published another exhaustively cited bird’s eye view of what China’s presence in Latin America means for the US earlier this month for the Jamestown Foundation’s China Brief.

Two of his four main claims raised an eyebrow for me: “[China] is enabling the survival and spread of regimes oriented against the United States, Western-style democracy and economic models” and “[China] is undermining the United States as a source of political and economic influence in the region, as well as U.S. options for regional engagement.” Ellis takes pains to point out that China is, of course, not directly undermining democracy and US influence, but rather propping up the economies and the political lives of leaders like Hugo Chavez and Rafael Correa with its investment and trade dollars. Still, should we be alarmed or is Ellis being alarmist? Is the US’s capacity for “regional engagement” actually hindered by China’s presence or is the US simply in less of a position of power?

Chile is the only South American country to commit to its own pavilion at next year’s Shanghai Expo, spending US$6 million on construction rather than renting, according to Shanghai Daily. Fear not: Easter Island will be represented at the Chilean pavilion, as will this groan-inducing design idea:

At the Shanghai event next year, Chile will attract visitors with three special wells. People will be able to look into the wells in the pavilion in Shanghai to see scenes and hear the sounds of some Chilean cities on the opposite side of the earth.

Finally, here is a new trilingual corporate blog from the newly launched SinoLatin Capital, which specializes in China-Latin American investment deals. The blog got off to a roaring start in August, but posts have since grown a bit infrequent. I can relate. There’s more to be written about SinoLatin Capital, but for now, find some background on the company here.

So, now it’s official – Brazil will be the first-ever South American country to host the Olympic Games, in 2016. I can only imagine the parties going on now on the beaches of Copacabana…

Like last year’s Summer Games in Beijing, the 2016 Games in Rio de Janeiro promise to be “coming out party” for one of the world’s largest and most important developing countries. No offense to London, but 2016 stands to be a momentous occasion – beyond sporting competition – for not only a city and a country, but a continent as a whole. As an article in the NY Times earlier this week put it:

For Brazil, which has bid three times before — Rio twice and Brasília once — Friday’s vote comes after several years of economic growth and the nation’s emergence as the continent’s business and diplomatic leader. The Olympics, Mr. Osorio said, would have “a clear alignment with the country’s long-term strategy of presenting itself in the world.”

There will be much to say on the Rio-Beijing comparisons in the coming days, but for now: Enjoy the party!