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December 17, 2012 1:06 pm
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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