Latin American Commodities Seen as the Main Beneficiaries of China’s Reopening

Sector experts tell Bloomberg Línea that commodities and infrastructure will be the main sectors to benefit from China abandoning its zero-Covid policy and reopening to trade

Export-oriented companies have a clear opportunity in the Chinese market for non-traditional products as the Asian giant reopens.
January 30, 2023 | 07:30 PM

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Bloomberg Línea — The dismantling of China’s ‘zero-Covid’ policy has begun to boost markets, especially emerging markets, which are closely following the increase in demand for raw materials from Asia’s largest economy after its full economic reopening, and in the case of Latin America, projections of increased demand could bring significant benefits, especially for countries and companies engaged in the commodities markets.

For Munir Jalil, chief economist for the Andean region at BTG Pactual, China’s reopening will translate into greater demand for basic goods, and which will see companies enjoying an increase in sales to China.

“Especially for South American countries, China’s reopening is positive for all commodity-producing companies, and since most of the region’s countries produce such goods, and by public companies, Latin American governments will be the main beneficiaries as they see an increase in dividends and tax payments from them,” Jalil explained.

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The benefits of China’s reopening for Latin America

The fact that China has lifted its restrictions imposed to curb Covid-19 encouraged the markets at the beginning of the year and, according to some companies, greater demand from the world’s second-largest economy may alleviate the recession forecast for the United States and the European Union.


Forecasts even point to a 4.8% growth in China’s GDP this year, compared to 0.4% in the United States and 0.1% in the EU.

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“Other sectors in which China has shown interest in the region, and it would have no reason not to be different in Colombia, are energy and technology. We also know that, in the mining sector, the Chinese are showing interest in what has to do with responsible mining,” Cristina Carrizosa, director of strategy and markets at KPMG Law, told Bloomberg Línea.

For Carrizosa, export-oriented companies have a clear opportunity with the Chinese market in non-traditional products.


Among them, she also highlighted companies that export meat products, as well as coffee and flowers, which “are always in the spotlight”. In addition, she sees demand for commodities and hydrocarbons continuing to increase.

Furthermore, the outlook remains strong for the stock market. Morgan Stanley and Goldman Sachs Group Inc expect the MSCI China index to gain approximately 10%, while Citi Global Wealth Investments sees a rise of around 20%, Bloomberg reported.

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Copper and oil the protagonists

“In the case of minerals such as copper, we have seen a positive dynamic since the beginning of the year, while with oil the combination of China and recession possibilities in the developed world have meant that we are not seeing the same behavior of base metals,” BTG Pactual’s Jalil told Bloomberg Línea.

On January 26, copper reached $9,314 per ton on the London Metals Exchange, its highest level in seven months, despite mines continuing to grapple with logistical challenges.


Chinese appetite for copper is key for the commodities sector, so much so that Goldman Sachs Group Inc. forecasts that it will exceed $10,000 per ton by the end of the year.

According to Jalil, even in countries such as Peru, whose mineral production is in the hands of private companies, royalty and tax payments should increase this year due to demand from China.

Key exporters such as Chile and Peru will play a key role, Christine Philpotts, portfolio manager at AllianceBernstein LP in New York, said recently, because as supply constraints persist and inventory levels are low, there is “strong support” for higher prices.


As for crude oil, the outlook may also become bullish. For analysts at ING Groep NV, the Brent oil benchmark could exceed $100 per barrel this year, as China reopens and demand rises.

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The impact of Covid-19 on China

However, the positive impacts of China’s reopening on Latin America’s economy, and that of the world in general, will depend on one key factor: Covid-19.

In its latest weekly report, the Asian powerhouse said Covid-related deaths totaled 12,658 between Jan. 13 and 19, according to the China Center for Disease Control and Prevention.

In addition, a senior health official suggested that more than 1.1 billion people had been infected since controls on the virus were abruptly dismantled late last year. This factor heightens market and government fears of new variants of SARS-CoV-2, which could cause a shift in China’s policy of reopening.

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