"Macau as a Bridge between China and Peru: From the past to the present and the future“

Conference on "Macau's Bridging Role between China and Peru" in the 19th Macao International Trade and Investment Fair Latin American Business Forum

October 24, 2014 Macau

Carlos Aquino Rodriguez

Professor, Universidad Nacional Mayor de San Marcos, PeruEmail: carloskobe2005@yahoo.com

Index

• I. Introduction• II. Chinese immigration to Peru and role of

Macau• III. China and Peru present relations• IV. Macau as a Bridge between China and Peru • V. Conclusions

Introduction• Peru, and American, continent aboriginal people came from North Asia,

who entered North America across the Bering Strait• Macau relation with Peru is very old. Around the middle of the XVI

century when the Galleon trade began between Acapulco and Manila, goods from China (silk and porcelain among others) were brought from Macau to Manila in exchange of Latin American colonies silver (included from Peru) and then those goods were taken to Acapulco and from here to Peru. This was the called Marine (eastward) Silk Road or the “Guangzhou – Latin American Sea Route”

• Chinese and other Asian came to Peru due to this trade and there is a register that by 1613 some Chinese were living in Lima as also some Japanese, Pilipino and Malays.

• Thanks to that trade Mexican silver and currencies was widely used in China and so much went to it that by the end of the XVIII century this country suffered a period of high inflation

Macau and its position in Portuguese and Spanish global trade routeshttp://www.aaapoe.net/1china1-002aag.html

II. Chinese immigration to Peru and role of Macao

• Macau was also the place from where many of the nearly one hundred thousand Chinese immigrants departed to Peru from the middle of the XIX century to the beginning of the 1870s. At that time China was opened to the world and people began leaving the country and Peru was in need of labor force to work in the cotton and sugar plantations, built railroads and extracting guano.

• There was scarcity of labor because the laborers working in the plantations, mainly black people brought before as slaves by the Spaniards from the XVI century, were given freedom in 1845 (abolition of slavery) and most of them left the fields for the cities

• Most of the Chinese came from the southern part of China, in present day Guangdong province

• Peru was one of the first countries in Latin America to begin receiving Chinese immigrants in a large scale.

• The immigrants coming from China to Peru suffered many hardships in the way to Peru, traveling in dire conditions in the ships (on average the trip lasted around four monts), but also suffered in Peru due to the hard and bad working conditions.

• For example the Dea del Marwhich had set sail to Callao from Macau in 1865 with 550 Chinese on board, arrived in Tahiti with only 162 of them still alive.

• In this way Chinese immigrants to Peru came to form one of the largest communities of Chinese in Latin America, but in 1872 this immigration came to a halt.

• In July 1872 the Peruvian ship “Maria Luz”, during a stop in the port of Yokohama, Japan, suffered the desertion of one Chinese on board. He escaped throwing himself into the sea, where he was rescued by the crew of a British warship in the port. He complained of mistreatment in the Peruvian ship.

• After the British captain of the warship complained to Japanese authorities, they ordered the Peruvian ship to return the laborers to China. After that the Qing Imperial Government forbade Chinese immigration to Peru

• Because of this incident China and Peru began negotiations to have official contacts, and in 1874 diplomatic links were established, becoming Peru the first country of Latin America to do this.

• It is said that perhaps 5% of Peru population is of Chinese origin but many of them have no Chinese surnames and no Chinese physical characteristics. What happened is that with time there have been a lot of intermarriage of Chinese with Peruvians and so the surname and the Chinese physical characteristics have been lost.

• It is interesting to notice that the Chinese laborers who came to Peru during the XIX century were all men, and no Chinese women came during most of that period. As a result Chinese immigrants had to get married to local women.

• Also it should be noted that because of the harsh conditions in the fields, some of them flee and they went to places far away to avoid being prosecuted. Some of them changed their surnames to avoid been caught by authorities. Also some of them adopted the surnames of their patrons after finishing the work contracts.

• Additionally, as some of them settled in small towns, when they registered to the local authorities, and especially when they had their children, at the moment of registering their surnames, the local authorities often misspelled their names and surnames in the documents, certificates of birth, and of marriage, so their names and surnames become different from the original ones

III. China and Peru present relations

• On November 2nd, 1971 Peru and the People Republic of China established diplomatic relations.

• One of the engines of Peru economic growth has been external trade, and specially demand from China.

• In 1993 the amount of Peruvian exports to China was only of 140 million dollars, but in 2003 they reached 676 million dollars. In the same period imports from China increased from 90 million dollars to 646 million dollars.

• But from the last decade exports to China leaped to reach 7.8 billion dollars in 2012, though it decreased to 7.3 billions dollars last year 2013. See table 1. Imports from China were 8.3 billion dollars in 2013

COUNTRY 2010 2010 2011 2011 2012 2012 2013 2013

Exports Imports Exports Imports Exports Imports Exports Imports

1. U.S.A6,087 5,811 5,903 7,350 6,175 7,916 7,306 8,783

1. China 5,436 5,140 6,963 6,325 7,848 7,802 7,331 8,379

1. Japan1,790 1,336 2,174 1,314 2,575 1,499 2,226 1,433

1. Canada3,329 539 4,232 583 3,445 588 2,692 615

1. Switzerland

3,845 118 5,937 150 5,074 154 2,967 158

Source: Aduanas del Peru:http://www.aduanet.gob.pe/aduanas/informae/BalContiZonaPais_01122013.htm

TABLE 1: MAJOR TRADE PARTNERS OF PERU, 2010-2013, IN MILLION OF DOLLARS

Country/Economy 1993 1997 2003 2010 2011 2012 2013World Total 3,344.40 6,741.75 8,939.82 35,073.25 46,386.03 45,846.18 41,511.7

Australia 14.99 16.31 53.12 117.5 115.35 99.50 130.37

South Korea 59.36 91.50 176.34 894.9 1,696.09 1,545.35 1,536.38

China 140.84 490.06 676.96 5,425.9 6,972.64 7,848.97 7,331.44Philippines 31.99* 47.96 11.06 123.41 109.75 55.23 128.11

Hong-Kong 28.60 68.82 30.31 78.5 93.24 96.54 84.22Indonesia 32.62* 36.33 22.67 36.61 61.49 101.18 105.31

Japan 299.04 473.57 391.16 1,790.4 2,174.76 2,575.33 2,226.72Malaysia 57.33* 59.77 5.51 8.43 6.75 27.68 56.29

New Zealand 1.50 - 3.72 13.5 18.63. 25.82 22.55

Russia 9.90 9.48 14.18 57.9 78.80 88.43 149.76

Singapore 1.68* 11.96* 16.15 6.66 7.94 21.46 20.18

Thailand 11.71* 36.23 26.71 98.10 264.76 234.06 138.25

Taiwan (Chinese Taipei)

118.78 159.11 147.28 293.0 365.28 261.10 211.29

Vietnam 1.62* 2.56 10.64 63.89 77.72 90.43 44.80

*Year1994Source: Aduanas del Perú: http://www.aduanet.gob.pe/aduanas/informae/2012/generales/ExpoImpoPorContiZonaPais.htmlhttp://www.aduanet.gob.pe/aduanas/informae/BalContiZonaPais_01122013.htm

TABLE 2: PERU'S EXPORTS TO ASIAN MEMBERS OF APEC (IN MILLION OF DOLLARS)

• The then Ministry of Economy of Peru, said on October 2011 that he “prays every day” for China economy to continue growing at high rates because that way Peru will benefit from that. If China economy reduces its pace of growth there will be less demand for Peru raw materials, prices, of specially minerals, will decrease, exports revenue will decrease and the country will be affected. In fact this happened from 2012.

• Peru will mainly sells raw materials to China, but mostly buy manufactured goods.

TABLE 3: TOP 11 PRODUCTS EXPORTED TO CHINA, 2013

PRODUCT Millions of DollarsFOB value

Total 7,331Copper ores and concentrates 3,338Copper cathodes 1,020Fishmeal 856Iron ore 855Zinc ore 203Lead ore 195Silver ore 182Zinc, not alloyed 100Cuttle fish and squid 91Other gasoline without lead tetraethyl

58

Fresh grapes 45

Ores and Fishmeal (8 products): 92% of total Source: ADUANAS DEL PERU http://www.aduanet.gob.pe/aduanas/informae/XPaisPartMensual_01122013.htm

Country/Economy 1993 1997 2003 2010 2011 2012 2013

World Total 4,024.55 7,716.79 8,428.51 27,910.70 37,891.00 42,150.68 43,273.7

Australia 17.35 33.09 28.12 75.07 111.1 133.0 132

South Korea 99.42 230.25 277.72 1,044.25 1,497.2 1,647.6 1,588

China 90.43 195.92 646.54 5,115.3 6,364.7 7,802.9 8,379

Philippines 11.06 12.04 22.9 27.4 29.8

Hong Kong 12.29 17.04 15.19 22.80 15.8 20.5 18.8

Indonesia 40.00 120.96 221.1 245.1 206

Japan 303.62 417.99 367.40 1,336.96 1,314.4 1,499.9 1,433

Malaysia 57.77 160.44 207.0 206.9 199

New Zealand 45.95 - 16.20 56.47 68.1 119.0 80.9

Russia 15.28 21.92 56.36 183.42 513.0 334.2 339

Singapore 22.23 38.45 50.83 60.00 57.4

Thailand 32.10 372.28 443.7 452.1 651

Taiwan 60.16 112.05 133.58 327.80 442.1 461.7 442

Vietnam 4.69 52.50 102.4 113.1 131

TABLE 4: IMPORTS OF PERU FROM MAJOR ASIAN MEMBERS OF APEC (IN MILLION OF DOLLARS, CIF) Source: Aduanas del Peru

• Actually China is the biggest market for Peruvian exports. China buys most of the copper, iron ore, zinc, fishmeal, that Peru sells abroad. And China is the second source of imports, after the U.S.

• In the other hand, most of the textiles and garments imported by Peru came from China as also are toys, footwear, electrical appliances and most of the consumer goods, and increasingly cars.

• Cheap manufactured goods from China have helped improve the living standards of many Peruvians, especially of poor people.

• But also cheap Chinese goods have represented a strong competition to some manufacture sectors in Peru

• Foreign Direct Investment (FDI) in Peru has increased a lot in the last years

• China investment in Peru was nil up to 1992. That year, Shougang Corporation ( 首钢集团 ) bought the state company Hierro Peru that exploits iron. It was the first big sale of a Peruvian state company after the government began in 1990 a process of economic reforms and opening of the economy to foreign investment.

• China interest in securing sources of raw material was the reason behind its decision to buy the Peruvian company. It was the first biggest investments by a Chinese state company of a foreign asset outside Asia. Shougang paid around 120 million dollars for that. The mine that Shougang bought is the only one that produces iron ore in Peru

• China investment is mainly in mining, but lately there is also in oil and fishmeal sectors.

• In the last years Chinese companies have announced and are carrying out big investment. For example Chinalco Aluminiun Corp. invested 3.5 billion dollars in a copper mine called Toromocho, in the central part of Peru. Another big investment is the project Pampa de Pongo, of the Nanjinzhao Group Co. Ltd. for 3.28 billion dollars that will produce iron.

• According to statistics by the Ministry of Energy and Mines of Peru, by June 2014 there is an amount of 61.28 billion dollars of investment being currently carried on the mining sector, of which investment from China accounts for 22.58% of the total, or 13.83 billion dollars, the biggest one.

GRAPH 1: ESTIMATED PORTFOLIO OF MINING PROJECTS BY MAIN INVESTOR, JUNE 2014Source: Ministerio de Energía y Minas: “Cartera estimada de proyectos mineros, Junio 2013”, page 3

• In addition to that on April this year the company resulting from the merger of Glencore and Xstrata agreed to sell the copper project Las Bambas located in Apurimac, and sold it for $5.85 billion to a Chinese consortium led by MMG Ltd., which is owned by China Minmetals, and included Guoxin International Investment Corp. and Citic Metal Co. When the mine come into production it could increase by more than a third the amount of copper produced in Peru. This investment is the largest done on Peru.

• On November 13, 2013 it was announced that China National Petroleum Company through its listed company PetroChina bought Petrobras Peru unit for $2.6 billion. The Chinese firm bought all the shares of Petrobras Energia Peru S.A., which has three oil and gas fields in Peru.

• Peru and China has a Free Trade Area agreement since the year 2010

IV. Macau as a Bridge between China and Peru

• In this context of increasing economic relationship between China and Peru, Macau, as a vibrant and modern city, with old links to Peru and Latin America, could play again a role to increase more that relationship.

• What could be done for that to be achieved? First, you need to have direct air links between Peru and China and Macau in particular. Second, there is little exchange in the intellectual, cultural and tourism areas. There is a need for each part to know more of the other. Universities have a role to play in that. Third, a strengthening of the political and business links is also necessary, with more visit exchange of politicians and business delegations to both sides.

• There is a direct flight between Mexico city and Shanghai. Others direct flights should be established (promote Macau as a gateway to South China, establish charter flights from Latin America to China and beyond and vice versa)

• There could be a exchange of experiences in the tourism area (Macau as gambling center and shopping mall, Peru as not only the place of Machu Picchu and Nazca Line but also a place to enjoy nice Peruvian food (it seems soon a Peruvian restaurant will open in Macau). A visa exemption system could be established to promote tourism.

• Universities could organize joint conferences, conduct together research (establish also a Latin American Study Center in Macau), and engage in exchange of professors and students (direct some scholarships given by Chinese government to Peru students to study at Macau Universities)

• As Macau wants also to be a link between Portuguese speaking African countries and China it could organize tripartite Conferences for example on links between African countries, Peru and Brazil, and Macau.

• Macau trade itself with Peru is quite small. Trade in merchandise will remain small because of Macao’s small population but trade in services and investment could increase.

• Peru has a stable political and economic environment and the country offer plenty of investment opportunities (for example infrastructure, hotels, resorts, etc.). Macau could find a destination for its investment in a country that welcomes Chinese people.

• Macau was part of the Galleon trade in the 16 century, now could be part, again, of the Marine Silk Road

Conclusions• Now in the twenty first century, with China destined to become

the largest economy in the world in a few years time and with its vast necessities of raw materials, and with Peru that grows at the fastest rate in Latin America, endowed with plenty of natural resources and in need of capital to develop its infrastructure and industry, the two countries are destined to become increasingly linked.

• China is now Peru’s largest trade partner. Growing Chinese investment in Peru, beginning with mining and extending to others fields, and Peru looking to export not only raw materials but also with the aim in the growing consumer market of China with non traditional exports as agro-industry, fishery products, and others, both things constitute the elements that will make relations between the two countries be more stronger

• Peru can offer also besides its natural resources a destination for tourism. As home to the ancient Andean civilization and the Empire of Incas the country has many places to visit. Also the Peruvian gastronomy is gaining worldwide attention. The Chinese food in Peru, with its blend of local ingredients and flavors, is also an attraction (Chinese restaurants are called chifa, from he word 饎飯  pronounced cifan, in the Cantonese way). The Peruvian food itself has received a lot of influence from Chinese immigrants.

• But perhaps the most important thing is the warm reception that people from China could receive from Peruvians. As a country of immigrants Peru welcomes foreigners, specially to the Chinese.

• Macau as an open and international city could play a bigger role in the growing relationship between Peru and China