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China-Chile mining agreement, FTA on cards?

China Daily

Chile rolls out red carpet for Chinese mining firms

Zhang Jin

28 May 2004

China and Chile, the world’s largest copper consumer and supplier respectively, signed a memorandum of understanding to create a joint commission on mining, which paves the way for more Chinese miners to explore the lucrative mining market in the South American nation, said a visiting Chilean official.

Chilean Mining Minister Alfonso Dulanto said the newly launched commission will help identify opportunities for mining investment and development of joint projects.

The commission, set up on Tuesday, will be conducive to solving problems involving mineral trade and investment between the two countries.

The minister also said that Chile is rolling out the red carpet for Chinese mining firms.

Joint ventures are likely to be set up to explore the copper market in Chile, he added.

"I have visited some mining companies during my stay in China," he said, "they have shown great interest in investing in Chile."

Chile and the China Minerals and Metals Group (China Minmetals), China’s largest metals trader, are talking about a copper mining project in Chile’s Gabi region.

Dulanto said the medium-sized project involves investment totalling US$5 million and that China Minmetals is interested in this.

That was confirmed by China Minmetals.

An official from the company said China Minmetals is discussing the project with the Chilean Government, but the final result has yet to come.

"China Minmetals is attaching greater importance to South American markets," the official said on condition of anonymity.

Dulanto also met entrepreneurs from Jinchuan Group Co, and officials from the China Non-Ferrous Metal Industry Association and the Shanghai Gold Exchange.

Dulanto also wants two countries to team up in penetrating a third country, saying the commission will help to promote exchanges involving miners in the two nations.

Chile is a good platform for Chinese companies to expand their businesses in Latin America.

Analysts say the joint commission shows that bilateral partnership in copper mining is heading in a new direction. Previously, the two countries simply dealt with the trade of copper.

Chile annually produces 4.9 million tons of copper. About 850,000 tons are exported to China, Dulanto said. China is experiencing a raw material shortage as its economy booms.

In another development, Chile is pressing ahead with efforts to establish a free trade agreement (FTA) with China. Feasibility studies on the FTA could be completed by the end of the year, Dulanto said. He added that the two countries might start FTA negotiations after the studies are finished.

Chile has already reached a FTA with South Korea, and its exports to the country are expected to increase.

If the Sino-Chilean FTA is signed, Chilean exports such as wine may come in large flows into China, analysts say.

China inked a framework free trade accord with the Association of South East Asian Nations last year, which paves the way for establishing an agreement in 2010.

The nation is now active in talks with other neighbours and major economic powers on FTAs. Possible free trade partners include New Zealand, Australia and the Gulf Co-operation Council.

In 2003, total trade volume between China and Chile measured US$3.53 billion, rising 37.5 per cent over the previous year.

China exported goods worth US$1.28 billion to Chile and imported commodities worth US$2.24 billion in 2003. It is widely estimated that the two-way trade volume could reach US$10 billion by the end of 2008.

China and Chile are both large recipients of foreign direct investments.