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PAPER PREPARED FOR FLACSO-ISA JOINT INTERNATIONAL CONFERENCE, BUENOS AIRES

South-South cooperation between Latin America and

Africa Analysis with trade and FDI indicators

Andrea Molinari - Ilan Strauss - Jesica De Angelis

South-South cooperation is a key tool for developing countries to gain a better position in the

global context and strengthen the inter-regional links. In this paper, we look at the economic

relationship between Africa and Latin America and the Caribbean by studying trade and FDI

flows over 2003-2012. We find a negligible quantitative relationship but, at the same time,

some potentialities for it to start growing in the near future.

2

Introduction

Over the last few years there has been an increasing interest in cooperation among developing countries, often referred to as "South-South cooperation". This came, to some extent, as a response to the various challenges imposed by a globalising world. The concept of "South-South cooperation" is very new. It was defined by the United Nations Office for South-South Cooperation (UNSSC) as:

“(...) a broad framework for collaboration among countries of the South in the political, economic, social, cultural, environmental and

technical domains (...) it can take place on a bilateral, regional,

subregional or interregional basis [to] share knowledge, skills,

expertise and resources to meet their development goals through concerted efforts. Recent developments in South-South cooperation have taken the form of increased volume of South-South trade, South-South flows of foreign direct investment, movements towards regional integration, technology transfers, sharing of solutions and experts, and other forms of exchanges” [words in bold were introduced by authors].

Delgado Caicedo and Barrera Castro (2010) indicate that:

“South-south cooperation includes (...) a common agenda between countries with similar development features, which face similar (but not identical) challenges and needs. Likewise, south-south dialogue is recognized as an important tool to solve common problems on key and complex issues this countries face while protecting their national

interest" [words in bold were introduced by authors, authors translation into English].

The objective of our research is to discuss the main potentialities of South-South cooperation between Africa and Latin America and the Caribbean (LAC).1 This is because we believe that these countries can achieve a better global and south-south economic integration. With this goal in mind, in this first paper we analyse the perspectives of economic cooperation between these two developing regions by looking at trade and foreign direct investment (FDI) flows. In the next section, we briefly cover the cooperation background (i.e. institutional framework and agreements). The following two sections analyse trade and FDI between LAC and Africa. Finally, we draw some conclusions and pose future research lines.

1 See Appendix A for the countries included in each of these regions and their sub-regions.

3

1. African-LAC cooperation: a brief background

There is an important background of national, bilateral and multilateral agencies, organisations, fora and regional agreements that support the negotiation and execution of cooperation between countries (see Figure 1). As was stated by Delgado Caicedo and Barrera Castro (2010), the absence of diplomatic representation of Asian, African and Latin-American countries in other regions in the south, lead to communication problems that block the implementation of cooperation. Also Betancourt and Schulz (2009) stress the importance of developing national capacities to implement cooperation (strengthen organisations and agencies for cooperation, academic training, national policies and strategic planning for South-South cooperation). This means that some form of bilateral or multilateral framework that aim sat encouraging interactions between Africa and LAC can contribute to strengthen the dialogue among their countries.

Since 1974 the United Nations Office for South-South Cooperation (UNOSSC) aims at increasing technical cooperation among developing countries and accounts with the Global South-South Development Academy, South-South Development Expo and South-South Global Assets and Technology Exchange.2 The Paris Declaration (2005), to improve the quality and effectiveness of aid and its impact on development, and the Accra Agenda for Action (AAA, 2008) designed to strengthen Paris´ targets, identified some challenges for South-South cooperation. These were national capacity building to level academic training between south countries; the creation of indicators to measure the impact of aid, and a best practices ‘systematisation´ (Delgado Caicedo and Barrera Castro, 2010; Betancourt and Schulz, 2009).

2 The Global South-South Development Academy is a service platform that facilitates the sharing and scaling up of development solutions produced by other countries in the South (http://academy.ssc.undp.org/GSSDAcademy). The Global South-South Development Expo is celebrated once a year to find successful answers to development problems (http://ssc.undp.org/content/ssc/services/expo.html/). South-South Global Assets and Technology Exchange is a virtual and physical platform that allows the exchange of technology, assets and finance (http://ssc.undp.org/content/ssc/services/expo/2013/the_expo/global_assets_tech_exchange.html).

4

Frequently, South-South cooperation emphasise on technical transferring between countries. One of the most important type of cooperation between LAC and African countries has been on scientific and technical grounds—mostly in relation to farming sector—via memoranda or formal agreements. There has also been some economic and commercial cooperation, particularly a number of Free Trade Agreements and some agreement on FDI.

One of the most important milestones of African-LAC cooperation was the South America Summit (ASA). The (so far) three summits of this cooperation forum were held in 2006 (in Nigeria), 2009 (in Venezuela), 2013 (in Equatorial Guinea). The main ASA agreements are framed on various sectors, such as farming and rural development, water resources, trade and investment, infrastructure, energy and solid minerals, tourism, information and communication technologies (ICTs) and science and technology. In this context, Venezuelan leadership, especially under Hugo Chávez´ presidency, was essential in this LAC-Africa cooperation forum, implementing several initiatives, such as the creation of ASA´s permanent Headquarters (currently located in the Isla Margarita), opening embassies in several African countries, making official visits and cooperating on energy3 and poverty issues. The second ASA summit strengthened the relationship between the Union of South American Nations (USAN/UNASUR, in Spanish) and the Africa Union (AU), stressing on energetic issues4 (Delgado Caicedo and Barrera Castro, 2010).

The importance of Brazilian leadership has also been highlighted as a key element to strengthen LAC interrelations with Africa. In this respect, BRICS is an important forum

3 Oil prices maintenance and defence of national resources. 4 In this context, it worth noting the role of Libya, Nigeria, Angola and Venezuela on oil resources, and Brazil´s leadership on renewable energy.

Figure 1. Cooperation Framework between LAC and Africa

Source: SELA (2013) and the official websites of each organization. See Appendix for the references on the agreements.

Institutional framework in LAC

Union of South American Nations (USAN or Unión de

Naciones Sudamericanas, UNASUR.

Latin American Integration Association (LAIA or

Asociación Latinoamericana de Integración, ALADI)

Latin American and Caribbean Economic System (LAES

or Sistema Económico Latinoamericano y del Caribe,

SELA)

Community of Latin American and Caribbean States

(CLACS or Comunidad de Estados Latinoamericanos y

Caribeños, CELAC)

Sistema de la Integración Centroamericana.

Inter-American Development Bank (IADB)

Andean Community of Nations (ACN or Comunidad

Andina de Naciones, CAN)

Caribbean Community (CARICOM)

Central American Common Market (CACM)

Common Market of The South (MERCOSUR)

Institutional framework in Africa

African Union

African Development Bank (AFDB)

Southern African Development Community (SADC)

Economic Community of Central African States (ECCAS)

Economic Community of West African States (ECOWAS)

Common Market for Eastern and Southern Africa

(COMESA)

Southern African Customs Union (SACU)

West African Economic and Monetary Union (UEMOA)

East African Community (EAC)

Great Lakes Economic Community (CEPGL)

The Intergovernmental Authority on Development (IGAD)

Arab Maghreb Union (AMU)

The Community of Sahel-Saharan States (CEN-SAD)

Mano River Union (MRU)

West African Monetary Zone (WAMZ)

The Liptako–Gourma Authority (LGA)

Intercontinental

framework

ASA SUMMITS

UNOSSC

BRICS

IBSA

CPLP

General agreements

(1)

Scientific and

technical agreements

(2)

Trade agreements (3)

FDI Agreements (4)

Bi-national commerce

chambers (5)

5

worth mentioning, with Brazil and South Africa gathering —together with three other emerging economies: Russia, India and China.5 BRICS summits began in 2006 and also stress the importance of south-south cooperation, especially on key issues such as developing alternative and renewable energy, infrastructure, ICTs, food safety, agribusiness, etc.

IBSA Dialogue Trilateral Forum (among India, Brazil and South Africa) is another important forum, set up in 2003 to cooperate in areas of common interest such as agriculture, agribusiness, alternative energy, environment, government, health and social development. The Community of Portuguese Language Speaking Countries (CPLP)6 seeks to generate a frame for cooperation on education, health, science and technology, technical cooperation, and other areas.

Although commercial agreements have been highlighted as channels to stimulate trade, neither exchanges nor the commitments between Africa and LAC are yet too important (SELA, 2011). That said, these regions have signed some trade agreements, such as the Common Market of the South (MERCOSUR) with the Southern African Customs Union (SACU), Morocco and Egypt, and some other bilateral trade agreements.7

Finally, it is worth noting two studies which ask a similar question to ours. Brun (2009) studies the Africa-LAC relations from five LAC countries’ points of view (i.e. Argentina, Brazil, Chile, Mexico and Venezuela) and by analysing trade, investment, constraints to increase trade and LAC political actions towards Africa. SELA (2011) looks for cooperation potentialities between LAC and Africa by analysing trade flows (as proxy for the status of bilateral relations). The study also focuses upon some LAC regional arrangements, such as the Union of South American Nations (USAN), CARICOM, and the Mesoamerican Project, to define precise opportunity areas for cooperation.

Both studies found a small and concentrated (in few actors and sectors) but also increasing commercial relation between Africa and LAC. Brun links the small trade relations to limited national budget and internal priorities, the lack of information about each other, deficiencies on transport infrastructure and lack of preferential agreements. As potentiality, SELA highlights the key role played by successful sub-regional agreements in taking advantage of some opportunity areas as trade, telecommunications, health, and environment. Moreover, Brun poses Brazil´s central role in developing much more solid relations with Africa, but he regrets the lack of data regarding bilateral investments to analyse the Africa-LAC relation.

Another paper worth mentioning is UN (2003), analysing the cooperation between both regions. IT reflects some of the valuable cooperation experiences developed by civil society and nongovernmental organizations on human rights, governance and social science research issues. Further, it reviews the key role of best practices and information sharing, together with the role of the existing institutional background for implementation purposes. This study finds a high correspondence between the New Partnership for Africa's Development (NEPAD)´s priority areas and the South-South cooperation experiences between Africa and LAC.

5 Argentina was recently invited to participate on BRICS´ 6th summit, held in Fortaleza, Brazil on July 2014. 6 Its member countries are: Portugal, Brazil, Angola, Cape Verde, Guinea-Bissau, Mozambique, São Tomé and Príncipe and East Timor. 7 See Appendix for the reference on the specific agreements.

In the following two sections we analyse the relationstwo different angles: trade and FDI bilateral (i.e. intercontinental) flows. Due to the lack of bilateral data about trade in servicesThis is an important weaknessworld trade. Conversely, the both the services and commodities

2. Africa-LAC trade

2.1. Trade: general overview

Despite Africa and LAC show role on total trade (Figure 2years: while in 2003 LAC showed a share 2.6 timesreduces to 2.2.

Figure 2. Share of LAC and Africa

Data source: COMTRADE.

Historically, Africa-LAC trade has been rather lowshown an increasing trend. DLAC has grown faster than while Africa and LAC exports 2003 exports, total trade between both continents 3).LAC exports have mainly gone to and Europe.9 The main exports

8Rest of the world: total partners without Africa (LAC) for LAC (9 WTO Data, Intra- and inter-regional merchandise trade, 2012.10 The main International Standard Industrial Classification of All Economic Activities (ISIC) groups (over 2003-2012) are: manufacture of vegetable and animal oils and fats; growing ofcrops; and production processing and preserving of meat and meat products (ISIC).

500

1 000

1 500

2 000

2 500

2003 2004 2005

In the following two sections we analyse the relationships between LAC and Africa from : trade and FDI bilateral (i.e. intercontinental) flows. Due to the lack of

n services, the trade section only considers commodities dataan important weakness, especially when services are having a growing share

he FDI database provides both inward and outward flows on commodities sectors.

eneral overview

Africa and LAC show increasing shares on total trade, the latter region 2). That said, the difference seems to be shrinking

while in 2003 LAC showed a share 2.6 times larger than Africa; in 2012 this gap

Share of LAC and Africa over total trade (billion US$)

LAC trade has been rather low, but over the past ten or so years Despite showing a similar behaviour, trade between Africa and

has grown faster than that with the rest of the world8 (from now onexports to RW showed a level of (respectively) 3.3 and 2

between both continents was over four times larger mainly gone to other LAC countries, and then to North America

The main exports have been in `food, tobacco and beverages´

Rest of the world: total partners without Africa (LAC) for LAC (Africa).

regional merchandise trade, 2012. The main International Standard Industrial Classification of All Economic Activities (ISIC) groups (over

manufacture of vegetable and animal oils and fats; growing of fruit, nuts, beverage and spice crops; and production processing and preserving of meat and meat products (ISIC).

2005 2006 2007 2008 2009 2010

Latin America and the Caribbean Africa

6

between LAC and Africa from : trade and FDI bilateral (i.e. intercontinental) flows. Due to the lack of

commodities data. a growing share in

inward and outward flows on

region has a larger That said, the difference seems to be shrinking over the past

larger than Africa; in 2012 this gap

US$)

, but over the past ten or so years it has trade between Africa and

(from now on, RW). In 2012, and 2.6 times the

times larger (Figure North America, Asia

`food, tobacco and beverages´10 and

The main International Standard Industrial Classification of All Economic Activities (ISIC) groups (over fruit, nuts, beverage and spice

2011 2012

`machinery, equipment and tools´destination is Europe, followed by exports are in `metals and its manufactures´

Figure


Despite this slightly increasing trend, values, but its trend is also exports and 4.7% of its total imports (2003is even lower: 1.8% of its exports trade was about US$39 billion1,931 billion dollars for Africa and LAC, respectively (

Figure 4. Share of LAC (Africa) in total Africa

11 The main ISIC groups (2003television and radio transmitters and appaelectricity distribution and control apparatus.12 WTO Data, Intra- and inter-regional merchandise trade, 2012.13 The main ISIC groups (2003-manufacture of basic iron and steel.14 The main ISIC groups (2003-processing and preserving of meat and meat products; and growing of cereals and other crops.

200

400

600

800

1 000

1 200

2003 2004 2005

Africa expo to RW

Africa expo to LAC (secondary axis)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2003 2004 2005

Africa expo to LAC/Africa total expo

`machinery, equipment and tools´.11 On the other hand, Africa´s followed by Asia, Africa and North America.12 The main

`metals and its manufactures´,13 `food, tobacco and beverages´

Figure 3. Trade evolution (billion US$)

Despite this slightly increasing trend, inter-regional trade is not only negligible in absolute also not too promising. LAC only accounts for 3.4% of total African

exports and 4.7% of its total imports (2003-2012 mean). The share of Africa in LAC’s trade of its exports and 2% of its imports. While in 2012

billion, that with the rest of the world has been illion dollars for Africa and LAC, respectively (Figure 4).

. Share of LAC (Africa) in total Africa’s (LAC’s) exports

The main ISIC groups (2003-2012) are: manufacture of other electrical equipment; manufacture of

television and radio transmitters and apparatus for line telephony and line telegraphy; and manufacture of electricity distribution and control apparatus.

regional merchandise trade, 2012. -2012) are: manufacture of basic precious and non-

manufacture of basic iron and steel. -2012) are: growing of fruit, nuts, beverage and spice crops; production,

processing and preserving of meat and meat products; and growing of cereals and other crops.

2005 2006 2007 2008 2009 2010

Africa expo to RW LAC expo to RW

Africa expo to LAC (secondary axis) LAC expo to Africa (secondary axis)

2005 2006 2007 2008 2009 2010

Africa expo to LAC/Africa total expo LAC expo to Africa/ LAC total expo

7

most important The main African

`food, tobacco and beverages´.14

regional trade is not only negligible in absolute not too promising. LAC only accounts for 3.4% of total African

2012 mean). The share of Africa in LAC’s trade in 2012 total Africa-LAC

has been around 995 and

exports (%)

2012) are: manufacture of other electrical equipment; manufacture of ratus for line telephony and line telegraphy; and manufacture of

-ferrous metals; and

2012) are: growing of fruit, nuts, beverage and spice crops; production, processing and preserving of meat and meat products; and growing of cereals and other crops.

5

10

15

20

25

2011 2012

LAC expo to Africa (secondary axis)

2011 2012

LAC expo to Africa/ LAC total expo


Over most of the period analysurplus with LAC. Inter-regional tdrop in 2009, recovering 2008 in 2012, Figure 5.

Figure 5. Trade


As of the bilateral trade, only texplain almost two thirds of total countries trading with AfricaMorocco (mainly for Brazil)Angola (for Brazil and Chile). Brazil has a trade deficit Argentina has shown a balance surplus.explains why total inter-continental

Table 1. Major bilateral (total bilateral/total Africa

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Argentina

Argentina

Argentina

Cumulative Percentage


To sum up, LAC is more important than Africa in the world trade, but this gap shrinking over the period of analysisshows a slightly increasing trend, in absolute termspartners, the data show a large

- 10

10

20

30

40

50

2003 2004 2005

analysed (except in 2009 and 2012), Africa has regional trade has increased from 2003 to 2008 and suffered a big

2008 level in 2011 but again suffered an important slump

Trade Balance (LAC as exporter, million US$)

only ten inter-continental flows, six of which include Brazil, of total Africa-LAC trade. Argentina and Chile are o

trading with Africa. The most important African trade partners are Nigeria, Morocco (mainly for Brazil), Algeria, South Africa, Egypt (for Brazil and Argentina); andAngola (for Brazil and Chile). The difference between South American

ade deficit with Africa over the whole period (except alance surplus. The fact that Brazil is Africa´s

continental trade balance is mostly in deficit for LAC

Major bilateral inter-continental trade relationshipsotal bilateral/total Africa-LAC trade, %)

Bilateral flow 2003 2012 2003-2012

Brazil-Nigeria 21.1 23.2 21.9

Brazil-Algeria 13.1 11.2 10.5

Brazil-South Africa 9.9 6.7 7.0

Brazil-Egypt 5.3 7.6 5.7

Brazil-Angola 2.6 3.0 5.2

Brazil-Morocco 4.5 5.5 4.1

Argentina-South Africa 3.5 3.3 3.3

Argentina-Egypt 4.8 2.7 3.0

Argentina-Algeria 2.2 3.8 3.0

Cumulative Percentage 67.3 67.0 63.7


LAC is more important than Africa in the world trade, but this gap of analysis. Moreover, even though trade between both

increasing trend, in absolute terms it is still very small. In terms of large concentration in a handful of countries.

2005 2006 2007 2008 2009 2010

Total trade Trade balance for LAC

8

has shown a trade 2003 to 2008 and suffered a big

an important slump again

)

which include Brazil, Argentina and Chile are other LAC

partners are Nigeria, Algeria, South Africa, Egypt (for Brazil and Argentina); and

partners is that xcept in 2009), while Africa´s main partner

for LAC, Table 1.

relationships

LAC is more important than Africa in the world trade, but this gap is gradually rade between both regions

very small. In terms of trade

2011 2012

2.2. LAC exports to Africa

The major LAC exporters to Africa are Brazil and Argentina. Brazil accounts for almost 61% of total LAC exports to Africa and Argentina sells nearly 27%, both countries explain more than 85% of total trade Africa are México, Uruguay, Chile, Peru and Colombia

Figure 6. Main LAC exporters to Africa (2003


Over the period analysed, Argentina shows billion dollars. African markets from 5% of total Argentinean for Argentina are South Africa, Egypt and Morocco. The mentioned markets explain almost ¾ of Argentinean exports from to Africa over the period

With the exception of 2009, Brazil to over 2 billion dollars. AfricaBrazilian trade over the period analy2003 to 25% in 2012.16 For BrazilNigeria and Angola; which whole period (Figure 8).

15 Conversely, although Africa also shows a growing share in Argentina’s imports (i.e. 1% in 2003 to 4% in 2012), the African continent is less important as a source of Argentinean imports than as a destiny for its exports. 16 Imports from Africa also show a high Brazilian total imports, growing to 29% in 2012.

Mexico

4%

Uruguay

Chile

1%

Colombia

1%

LAC exports to Africa

The major LAC exporters to Africa are Brazil and Argentina. Brazil accounts for almost 61% of total LAC exports to Africa and Argentina sells nearly 27%, both countries explain more than 85% of total trade over the whole period. Other LAC countries exportiAfrica are México, Uruguay, Chile, Peru and Colombia, Figure 6.

. Main LAC exporters to Africa (2003-2012)


Argentina shows a trade surplus, reaching in 2012 almost 5 African markets are becoming increasingly more importan

Argentinean exports in 2003 to 18% in 2012.15 Other important marketsare South Africa, Egypt and Morocco. The mentioned markets explain almost

exports from to Africa over the period (Figure 7).

With the exception of 2009, Brazil has shown a trade deficit with Africa, reaching dollars. African markets also have seen an increasing importance for

trade over the period analysed, with Brazilian exports to Africa going For Brazil, the main markets in Africa are Egypt, South Africa,

which altogether explain around 60% of Brazilian exports in the

ersely, although Africa also shows a growing share in Argentina’s imports (i.e. 1% in 2003 to 4% in

2012), the African continent is less important as a source of Argentinean imports than as a destiny for its

Imports from Africa also show a high and increasing importance for Brazil: in 2003 they explained 7% of Brazilian total imports, growing to 29% in 2012.

Brazil

61%

Argentina

27%Mexico

4%

Uruguay

2%

Peru

1%

Colombia Other

3%

9

The major LAC exporters to Africa are Brazil and Argentina. Brazil accounts for almost 61% of total LAC exports to Africa and Argentina sells nearly 27%, both countries explain

whole period. Other LAC countries exporting to

, reaching in 2012 almost 5 important for Argentina, Other important markets

are South Africa, Egypt and Morocco. The mentioned markets explain almost

, reaching in 2012 an increasing importance for

going from 6% in he main markets in Africa are Egypt, South Africa,

altogether explain around 60% of Brazilian exports in the

ersely, although Africa also shows a growing share in Argentina’s imports (i.e. 1% in 2003 to 4% in 2012), the African continent is less important as a source of Argentinean imports than as a destiny for its

and increasing importance for Brazil: in 2003 they explained 7% of

Figure 7. Main Argentinean (2003-2012)


In terms of goods, LAC exports to Africa are quite concentrated on `food, tobacco and beverages´, which accounts for 73% of total sales to Africacategory are cereals and other crops (maize and wheat), the manufacture of vegetable and animal oils and fats (mostly Argentinean soybean oilcake & other solid resimanufacture of sugar (mostly Brazilian sugar cane and other cane or beet sugar). Both Argentina and Brazil are key players in the exports within this category, but the former has a higher concentration, sincemanufactures´.

The category `metals and its manufacture´ accounts for 7% of LAC´s exports to Africa. In this case, the main products sold are mining of iron ores (iron ores and concentratesagglomerated) and manufacture of basic iron steel and ferrous products obtained by direct reduction of iron ore). Trade composition does not show differences when analyAppendix).17

17 Even excluding Brazil (i.e. the major exporter) from the analysis, the results do not change significantly.

Egypt

22%

Morocco

8%

Tunisia

4%

Angola

4%

Nigeria

4%

Libya

3%

Senegal

2%

Mozambi

que

1%

Other

8%

Argentinean partners Figure 8. Main Brazilian (2003-2012)

goods, LAC exports to Africa are quite concentrated on `food, tobacco and beverages´, which accounts for 73% of total sales to Africa, Figure 9. The main products in this category are cereals and other crops (maize and wheat), the manufacture of vegetable and animal oils and fats (mostly Argentinean soybean oilcake & other solid resimanufacture of sugar (mostly Brazilian sugar cane and other cane or beet sugar). Both Argentina and Brazil are key players in the exports within this category, but the former has a

, since Brazil also shows an important share of `metals and its

The category `metals and its manufacture´ accounts for 7% of LAC´s exports to Africa. In this case, the main products sold are mining of iron ores (iron ores and concentratesagglomerated) and manufacture of basic iron and steel (tubes, pipes, seamless, iron nesoi & steel and ferrous products obtained by direct reduction of iron ore). Trade composition does not show differences when analysed between 2003 and 2012 (see

Even excluding Brazil (i.e. the major exporter) from the analysis, the results do not change significantly.

Algeria

22%

South

Africa

22%

Other

Algeria

8%

Morocco

7%

Ghana

3%

Libya

3%

Tunisia

2%

Senegal

2%

10

Brazilian partners

goods, LAC exports to Africa are quite concentrated on `food, tobacco and The main products in this

category are cereals and other crops (maize and wheat), the manufacture of vegetable and animal oils and fats (mostly Argentinean soybean oilcake & other solid residue) and the manufacture of sugar (mostly Brazilian sugar cane and other cane or beet sugar). Both Argentina and Brazil are key players in the exports within this category, but the former has a

re of `metals and its

The category `metals and its manufacture´ accounts for 7% of LAC´s exports to Africa. In this case, the main products sold are mining of iron ores (iron ores and concentrates—

and steel (tubes, pipes, seamless, iron nesoi & steel and ferrous products obtained by direct reduction of iron ore). Trade composition does

see Table A.1 in the

Even excluding Brazil (i.e. the major exporter) from the analysis, the results do not change significantly.

Egypt

18%

South

Africa

17%

Nigeria

13%Angola

12%

Other

15%

Figure 9. Exports from LAC to Africa by sector (2003

Data source: COMTRADE

Taking into account the technological contentimportant concentration in primary products, which accounts for 60% of total intersales, and resource based (agriculture/forest) manufactures, with 21%. Both categories can be related to the `food, tobacco and beverages´ sector. Primary products increased their share over the2003-2012 period, while the manufactures based on other resources show a slighdecline. Regarding the remaining categories, although both medium technology (related to engineering industries) and high technology manufactures increased their share in 2012 (visà-vis2003), they still show a very negligible participation under total t

Figure 10. Exports from LAC to Africa by technological content (2003


18 Foreign Trade National Commission (Argentina); trade correspondences are based on Lall (2000).

Automotive

4%

Chemicals

2%

Machinery,

equipment &

Metals and its

manufactures

7%

Other

4%

Low technology

manufactures b) Other

low technology

2%

Medium technology

manufactures a)

Automotive products

3%

Medium technology

manufactures b)

Medium technology

process industries

4%

Medium technology

manufactures c)

Medium technology

engineering industries

3%

High technology

manufactures a)

Electronics and

electrical products

1%

. Exports from LAC to Africa by sector (2003-2012)


Taking into account the technological content,18 LAC exports to Africa (important concentration in primary products, which accounts for 60% of total inter

rce based (agriculture/forest) manufactures, with 21%. Both categories can be related to the `food, tobacco and beverages´ sector. Primary products increased their share

2012 period, while the manufactures based on other resources show a slighdecline. Regarding the remaining categories, although both medium technology (related to engineering industries) and high technology manufactures increased their share in 2012 (vis

vis2003), they still show a very negligible participation under total trade (

. Exports from LAC to Africa by technological content (2003

ission (Argentina); trade correspondences are based on Lall (2000).

Chemicals

2%

Coal, Oil and

Natural Gas

6%

Food, tobacco and

beverages

73%

Machinery,

equipment &

tools

4%

Metals and its

manufactures

7%

Other

4%

Primary products

Resource-based

Manufactures a)

Agriculture/forest based

21%

Resource-based

Manufactures b) Other

resource based

2%

High technology

manufactures a)

Electronics and

electrical products

High technology


high technology

products

1%

Other Transactions

3%

11

2012)

LAC exports to Africa (Figure 10) show an important concentration in primary products, which accounts for 60% of total inter-regional

rce based (agriculture/forest) manufactures, with 21%. Both categories can be related to the `food, tobacco and beverages´ sector. Primary products increased their share

2012 period, while the manufactures based on other resources show a slight decline. Regarding the remaining categories, although both medium technology (related to engineering industries) and high technology manufactures increased their share in 2012 (vis-

rade (Table A.2).

. Exports from LAC to Africa by technological content (2003-2012)

ission (Argentina); trade correspondences are based on Lall (2000).

Primary products

60%

In sum, exports from LAC to Africa are Argentina) and in six destinations (Egypt, South Africa, Algeria, Angola, Nigeria and Morocco). The sectoral concentration is even more categorical: LAC is a net expobeverages (i.e. primary resources and resource based manufacture).

2.3. African exports to LAC

The major African exporters to LAC markets are Nigeria, Algeria, Angola, South Africa and Morocco, which accounted for almost (Figure 11). That said, despite the relative importance of LAC in African trade, LAC only explains on average a little share of its African partners´ exports: 2% for Nigeria, 3% for Algeria, 3% for Angola, 3% for South the period 2003-2012, only Morocco (except in 2009) and South Africa have had trade surpluses with LAC.

Figure 11


Brazil is also one of the major partners for Africa, especially for Algeria, which sells 94% of its total exports to LAC to Brazil. The share of exports concentration to Brazil is also high in Nigeria (83%), Morocco (68%), South Africa (43%) and Peru also show a big share in Angola’s exports, and Argentina and Mexico in South African and Moroccan exports. The increasing prices of oil explain, at least in part, the rising share of Angola in Brazilian imports (

Morocco

6%

Libya

3%

Equatorial Guinea

2%

sum, exports from LAC to Africa are mainly concentrated in only two countries (Brazil and Argentina) and in six destinations (Egypt, South Africa, Algeria, Angola, Nigeria and Morocco). The sectoral concentration is even more categorical: LAC is a net exporter of food, tobacco and

primary resources and resource based manufacture).

African exports to LAC

The major African exporters to LAC markets are Nigeria, Algeria, Angola, South Africa and Morocco, which accounted for almost 84% of total African exports to LAC over 2003

. That said, despite the relative importance of LAC in African trade, LAC only explains on average a little share of its African partners´ exports: 2% for Nigeria, 3% for Algeria, 3% for Angola, 3% for South Africa and 5% for Morocco. Out of these countries, over

2012, only Morocco (except in 2009) and South Africa have had trade

11. Main African exporters to LAC (2003-2012)

COMTRADE.

Brazil is also one of the major partners for Africa, especially for Algeria, which sells 94% of its total exports to LAC to Brazil. The share of exports concentration to Brazil is also high in Nigeria (83%), Morocco (68%), South Africa (43%) and Angola (32%). Moreover, Chile and Peru also show a big share in Angola’s exports, and Argentina and Mexico in South African and Moroccan exports. The increasing prices of oil explain, at least in part, the rising share of Angola in Brazilian imports (Figure 12, Figure 13, Figure 14, Figure 15 and

Nigeria

42%

Algeria

17%

Angola

10%

South Africa

9%

Egypt

3%

Equatorial Guinea

Gabon

2%Congo

2%

Oher

4%

12

two countries (Brazil and Argentina) and in six destinations (Egypt, South Africa, Algeria, Angola, Nigeria and Morocco).

rter of food, tobacco and

The major African exporters to LAC markets are Nigeria, Algeria, Angola, South Africa and frican exports to LAC over 2003-2012

. That said, despite the relative importance of LAC in African trade, LAC only explains on average a little share of its African partners´ exports: 2% for Nigeria, 3% for

Africa and 5% for Morocco. Out of these countries, over 2012, only Morocco (except in 2009) and South Africa have had trade

2012)

Brazil is also one of the major partners for Africa, especially for Algeria, which sells 94% of its total exports to LAC to Brazil. The share of exports concentration to Brazil is also high in

Angola (32%). Moreover, Chile and Peru also show a big share in Angola’s exports, and Argentina and Mexico in South African and Moroccan exports. The increasing prices of oil explain, at least in part, the rising share of

and Figure 16).

Figure 12. Main Algerian (2003-2012)

Figure 14. Main Moroccan (2003-2012)


Mexico

3%

Cuba

1%

Costa Rica

1%

Ecuador

0%

Other

0.69%

Mexico

18%

Argentina

7%

Colombia

2%

Uruguay

2%

Peru

1%Other

2%

Algerian partners

Figure 13. Main Angola(2003-2012)

Moroccan partners Figure 15. Main Nigeria(2003-2012)

Brazil

94%

Peru

22%

Ecuador

3%

Uruguay

3%

Mexico

1%

Other

1%

Brazil

68%

Peru

5%

Mexico

3%

Chile

3%

Trinidad

and

Tobago

2%

Uruguay

2%

Other

2%

13

. Main Angolan partners

. Main Nigerian partners

Chile

38%

Brazil

32%

Peru

22%

Brazil

83%

Figure 16. Main South Africa


African exports to LAC are highly concentrated on for 83% of total. Other important sectors are `mineral and its products´ (gas´ are Nigeria, Algeria and Angola, whichbituminous minerals (crude). Morocco and South Africa are the most important Africanexporters of chemicals; the main product for the former is Chlorine and fertililatter. Regarding `metals and its manufactures´, the most important exporter is South Africa and the main products are basically major exporter of `minerals and its manufactures´, mainly selling natural calcium (inc alum cal) phosp & phosp chalk.

The evolution of African exports to LAC countries international (mainly oil) prices

Conversely, the rising LACprices and larger trade volumes

19Diammonium Hydrogenor Thophosphate and Ammonium Dihydrogenorthophosphate, Mixtures Thereof With Diammonium Hydroge Northophos Phate.20 Mainly flat-rolled products of stainless steel and o

Mexico

27%

Argentina

11%

Chile

7%

Peru

3%

Uruguay

3%Colombia

3%

. Main South African partners (2003-2012)

African exports to LAC are highly concentrated on `coal, oil and natural gas´, which accounts for 83% of total. Other important sectors are `chemicals, metals and its manufactures´ and mineral and its products´ (Figure 17). The most important exporters of `coal, oil and natural

gas´ are Nigeria, Algeria and Angola, which mainly sell petroleum oils and oils obtained from bituminous minerals (crude). Morocco and South Africa are the most important Africanexporters of chemicals; the main product for the former is Chlorine and fertililatter. Regarding `metals and its manufactures´, the most important exporter is South Africa and the main products are basically `manufactures of basic iron and steelmajor exporter of `minerals and its manufactures´, mainly selling natural calcium (inc alum

The evolution of African exports to LAC countries has mainly been due prices, especially from 2003 to 2008 (seeFigure

LAC-Africa exports can be explained by both more and larger trade volumes (Figure A.1 in the Appendix).

Diammonium Hydrogenor Thophosphate and Ammonium Dihydrogenorthophosphate, Mixtures Thereof With

Diammonium Hydroge Northophos Phate. rolled products of stainless steel and other Ferro-manganese.

Brazil

42%

Mexico

ColombiaOther

4%

14

coal, oil and natural gas´, which accounts chemicals, metals and its manufactures´ and

). The most important exporters of `coal, oil and natural mainly sell petroleum oils and oils obtained from

bituminous minerals (crude). Morocco and South Africa are the most important African exporters of chemicals; the main product for the former is Chlorine and fertilisers19 for the latter. Regarding `metals and its manufactures´, the most important exporter is South Africa

teel´.20 Morocco is the major exporter of `minerals and its manufactures´, mainly selling natural calcium (inc alum

been due to the increase in A.2in the Appendix).

more expensive food

Diammonium Hydrogenor Thophosphate and Ammonium Dihydrogenorthophosphate, Mixtures Thereof With

Figure 17. Exports from Africa to LAC by sector (2003


Although with a slightly reducing share, primary products exports to LAC (Figure 18), this is mostly explained by the Another important category is medium technology manufactureindustries, mainly fertilisers in the chemical sector. The only sectors that rose its share over the period 2003-2012 are medium technology (process industries), high technology (electronics and electrical products) and other transactions, but only the first and the last one have a significant position in African exports to LAC (

Figure 18. Export from Africa to LAC by technological content (2003


To conclude, Nigeria, Algeria, Angola, South countries. Although Brazil is among the main destinations in every case, some other worth mentioning, like Chile and PerAfrican and Moroccan sales). oil and natural gas´ (i.e. primary products in

Metals and its

manufactures

3%

Resource-based

Manufactures b) Other

resource based

2%

Low technology


low technology

Medium technology

manufactures b)

Medium technology

process industries

7%

Medium technology

manufactures c)

Medium technology

engineering industries

1%

. Exports from Africa to LAC by sector (2003-2012)


Although with a slightly reducing share, primary products concentrate 82% of total African ), this is mostly explained by the `coal, oil and natural gas´ sector.

egory is medium technology manufacture-medium technology process ers in the chemical sector. The only sectors that rose its share over

2012 are medium technology (process industries), high technology and electrical products) and other transactions, but only the first and the last one

have a significant position in African exports to LAC (Table A.2in the Appendix).

. Export from Africa to LAC by technological content (2003

, Nigeria, Algeria, Angola, South Africa and Morocco are the main exporters to LAC Brazil is among the main destinations in every case, some other

like Chile and Peru (Angolan exports) and Mexico and Argentina (South ). Further, African exports to LAC are highly concentrated on

primary products in technological terms).

Coal, Oil and

Natural Gas

83%

Chemicals

7%

Food, tobacco

and beverages

2%

Metals and its

manufactures

Minerals and

its products

3%

Other

2% 0%

Primary products

82%

Resource-based

Manufactures a)

Agriculture/forest

based

0%

Low technology


low technology

1%

High technology

manufactures a)

Electronics and

electrical products

0%

Other Transactions

7%

15

2012)

concentrate 82% of total African coal, oil and natural gas´ sector.

medium technology process ers in the chemical sector. The only sectors that rose its share over

2012 are medium technology (process industries), high technology and electrical products) and other transactions, but only the first and the last one

Appendix).

. Export from Africa to LAC by technological content (2003-2012)

are the main exporters to LAC Brazil is among the main destinations in every case, some other LACs are

xico and Argentina (South , African exports to LAC are highly concentrated on `coal,

Primary products

82%

3. Africa-LAC foreign

3.1. FDI: general overview

The picture for FDI is somewhat different to that of inflows grew much faster to LAC than to Africa. were 2.6 times larger than those into Africapartly be reflecting LAC’s larger

Figure 19. FDI inflows into Africa and L

Source: UNCTAD.

Greenfield project numbers show less of a stark difference during this period into 2014), with Africa punching above its relative economic size for much of the commodity boom period, as well as afterwards, and attracting a significant number of projects. The type of FDI inflows during this period is reflected in the d(‘average project size—Capexprojects into `coal, oil and natural gas´average capital expenditure (or intensity) per project

On a sectoral basis, Africa is increasingly attracting more diverse fworld, with non-commodity FDI, especially into services (ICT and banking in particular), playing a growing role in its inward Greenfield FDI. A very similar trend is evident with respect to LAC. Total FDI inflows into LAC have shisectors (in particular to ICT and business services, and also with a notable increase in automotive components). These trends follow falls in key commodity prices.

50

100

150

200

250

300

2003 2004 2005

oreign direct investment

eneral overview

picture for FDI is somewhat different to that of trade. Over the period of study, to LAC than to Africa. In 2003, total (world) FDI inflows into LAC

were 2.6 times larger than those into Africa, and grew to 4.9 times larger in 2012.This could partly be reflecting LAC’s larger GDP (Figure 19).

. FDI inflows into Africa and LAC (billion US$, 2003

Greenfield project numbers show less of a stark difference during this period into 2014), with Africa punching above its relative economic size for much of the commodity boom period, as well as afterwards, and attracting a significant number of projects. The type of FDI inflows during this period is reflected in the different average capital intensities

Capex’), with Africa attracting a greater proportion of coal, oil and natural gas´ and other mineral and metal sectors, thereby raising its

e (or intensity) per project (Table 2 and Figure

On a sectoral basis, Africa is increasingly attracting more diverse flows from the rest of the commodity FDI, especially into services (ICT and banking in particular),

playing a growing role in its inward Greenfield FDI. A very similar trend is evident with FDI inflows into LAC have shifted from the commodity to the service

(in particular to ICT and business services, and also with a notable increase in automotive components). These trends follow falls in key commodity prices.

2005 2006 2007 2008 2009 2010

Latin America and the Caribbean Africa

16

Over the period of study, FDI FDI inflows into LAC

grew to 4.9 times larger in 2012.This could

US$, 2003-2012)

Greenfield project numbers show less of a stark difference during this period (and extending into 2014), with Africa punching above its relative economic size for much of the commodity boom period, as well as afterwards, and attracting a significant number of projects. The type

ifferent average capital intensities ’), with Africa attracting a greater proportion of Greenfield FDI

and other mineral and metal sectors, thereby raising its Figure 20).

lows from the rest of the commodity FDI, especially into services (ICT and banking in particular),

playing a growing role in its inward Greenfield FDI. A very similar trend is evident with fted from the commodity to the service

(in particular to ICT and business services, and also with a notable increase in automotive components). These trends follow falls in key commodity prices.

2011 2012

Table 2. Greenfield project details for World to LAC and World to

No. of Projects

Total Capital Investment (

Average project size (

Source: Financial Times (FT)

Figure 20(number of projects, 2003

Source: Financial Times fDi Database.

All in all, UNCTAD data shows LAC to be a far more aggressive outward investor globally than Africa, much larger than their relative GDP’s would indicate. This is to be expected from UNCTAD data, as this reflects flows arising from all previous investments. This outwaorientation of LAC firms rose strongly between 2004 and 2008, the commodity boom years (Figure 21).21 We use Financial Times (FT) FDI more granular picture of the FDI relationship. The FT data, while not capturing official flows, provides detailed project level data at the country, sector and firm levelFDI flows are not publically level. Furthermore, for many African and smaller economies, on mirror data from advanced economies.

21 UNCTAD official FDI flows data reflect official flows between the direct investor and direct investment entity, including profits, loans, and reinvested earnings (which are generally imputed in the current account as an FDI income outflow and in the financial account as an FDI capital inflow). FT data are unofficial project level data covering only announced Greenfield FDI, and it covers estimates on capital expenditure and job creation but not FDI from mergers and acquisitions. The stock of FDI, since a considerable portion of official FDI flows consist of retained earnings accumulated on that past stock. Further, the data also have better coverage across countries and sectors, and it provides firm level details. On the other hand, FT data´s downside is that it does not give an indication on the size of FDI flows between the direct investor and direct investment entity

200

400

600

800

1 000

1 200

1 400

1 600

2003 2004 2005

. Greenfield project details for World to LAC and World to (2003-Feb2014)

World to LAC World to Africa

No. of Projects 10 875 6 279

Total Capital Investment (Capex) $1 066.9 b $807.3 b

Average project size (Capex) $98.1 m $128.6 m

(FT) fDi Database.

20. Greenfield FDI inflows into Africa and LAC(number of projects, 2003-February 2014)


UNCTAD data shows LAC to be a far more aggressive outward investor globally than Africa, much larger than their relative GDP’s would indicate. This is to be expected from

reflects flows arising from all previous investments. This outwaorientation of LAC firms rose strongly between 2004 and 2008, the commodity boom years

We use Financial Times (FT) FDI Greenfield project level data in order to gain a more granular picture of the FDI relationship. The FT data, while not capturing official flows, provides detailed project level data at the country, sector and firm levels

ally available bilaterally nor are generally detailed at the sectoral level. Furthermore, for many African and smaller economies, UNCTADFDI statistics are on mirror data from advanced economies.

UNCTAD official FDI flows data reflect official flows between the direct investor and direct investment entity,

including profits, loans, and reinvested earnings (which are generally imputed in the current account as an FDI utflow and in the financial account as an FDI capital inflow). FT data are unofficial project level data

covering only announced Greenfield FDI, and it covers estimates on capital expenditure and job creation but not FDI from mergers and acquisitions. The advantage of the FT data is that it is not influenced by the accumulated stock of FDI, since a considerable portion of official FDI flows consist of retained earnings accumulated on that past

data also have better coverage across countries and sectors, and it provides firm level details. On the other hand, FT data´s downside is that it does not give an indication on the size of FDI flows between the direct investor and direct investment entity.

2006 2007 2008 2009 2010 2011 2012

Africa Projects LAC Projects

17

. Greenfield project details for World to LAC and World to Africa

World to Africa

LAC

UNCTAD data shows LAC to be a far more aggressive outward investor globally than Africa, much larger than their relative GDP’s would indicate. This is to be expected from

reflects flows arising from all previous investments. This outward orientation of LAC firms rose strongly between 2004 and 2008, the commodity boom years

ject level data in order to gain a more granular picture of the FDI relationship. The FT data, while not capturing official flows,

s. Official (UNCTAD) generally detailed at the sectoral

FDI statistics are based

UNCTAD official FDI flows data reflect official flows between the direct investor and direct investment entity, including profits, loans, and reinvested earnings (which are generally imputed in the current account as an FDI

utflow and in the financial account as an FDI capital inflow). FT data are unofficial project level data covering only announced Greenfield FDI, and it covers estimates on capital expenditure and job creation but not

advantage of the FT data is that it is not influenced by the accumulated stock of FDI, since a considerable portion of official FDI flows consist of retained earnings accumulated on that past

data also have better coverage across countries and sectors, and it provides firm level details. On the other hand, FT data´s downside is that it does not give an indication on the size of FDI flows between the

2012 2013 2014

Figure 21. Total

Data Source: UNCTAD.

On the other hand, Financial Times Greenfield FDI project numbers since 2003announced project data) paint a very different picture, mostly due to the strong growth in intra-African FDI flows. Over the past ten years, propensity (by a multiple of three) to engage in outward FDI than LAC, despite its smaller economic size (Table 3).

Table 3. Greenfield FDI project details for LAC to World and Africa to

No. of Projects



Data Source: Financial Times fDi Database.

Africa mainly invests intraregionallyEurope. Other destinations are far less significantimportant destination. Similarly, idestination is itself, followed by North America, Western Europe, and Asia Pacific.

Regarding bilateral FDI flowsterms, negligible. It comprised less than 1% of its total Greenfield projects and 1.2% of its Greenfield FDI Capex between 2003 and 2014period. LAC is the smallest investor 10% of the cumulative Greenfield FDI projects which the Middle East has into Africa during the same period. Africa is even of less relative significant for LAC as a source of Greenfield FDI, contributing less than 0.5% of same period, with no major changes throughout the period.that it is by no means clear that Africa is the weaker FDI partner. LAC has only a slightly bigger number of Greenfield investments into Africa than vicemore Greenfield projects into LAC.

20

40

60

80

100

120

140

2003 2004 2005

Total FDI outflows from Africa and from LAC (billion

Financial Times Greenfield FDI project numbers since 2003paint a very different picture, mostly due to the strong growth in

Over the past ten years, Africa emerged as having a much greater propensity (by a multiple of three) to engage in outward FDI than LAC, despite its smaller

. Greenfield FDI project details for LAC to World and Africa to

(2003-Feb2014)

Africa to World LAC to World

No. of Projects 6 285 2 306

Total Capital Investment (Capex) $807.4 b $176.6 b


Data Source: Financial Times fDi Database. b=billion; m=million.

intraregionally, followed (somewhat further behindEurope. Other destinations are far less significant: though for South Africa, Europe remains an

Similarly, in the case of LAC, the most significant investment followed by North America, Western Europe, and Asia Pacific.

flows, LAC’s importance to Africa as an investor is, in quantitative terms, negligible. It comprised less than 1% of its total Greenfield projects and 1.2% of its

between 2003 and 2014, with a consistent trend throughout the period. LAC is the smallest investor out of all the other regions into Africa, providing less than 10% of the cumulative Greenfield FDI projects which the Middle East has into Africa during the same period. Africa is even of less relative significant for LAC as a source of Greenfield FDI, contributing less than 0.5% of its Greenfield FDI investment projects and same period, with no major changes throughout the period. That said, bilateral

it is by no means clear that Africa is the weaker FDI partner. LAC has only a slightly bigger er of Greenfield investments into Africa than vice-versa. In 2010 and 2011 Africa had

more Greenfield projects into LAC. By project Capex a similar trend emerges,

2006 2007 2008 2009 2010

Africa Latin America and the Caribbean

18

billion US$)

Financial Times Greenfield FDI project numbers since 2003 (which look at paint a very different picture, mostly due to the strong growth in

as having a much greater propensity (by a multiple of three) to engage in outward FDI than LAC, despite its smaller

. Greenfield FDI project details for LAC to World and Africa to World

LAC to World

behind) by Western or South Africa, Europe remains an

n the case of LAC, the most significant investment followed by North America, Western Europe, and Asia Pacific.

, LAC’s importance to Africa as an investor is, in quantitative terms, negligible. It comprised less than 1% of its total Greenfield projects and 1.2% of its

throughout the whole into Africa, providing less than

10% of the cumulative Greenfield FDI projects which the Middle East has into Africa during the same period. Africa is even of less relative significant for LAC as a source of Greenfield FDI,

its Greenfield FDI investment projects and Capex between the bilateral data suggest

it is by no means clear that Africa is the weaker FDI partner. LAC has only a slightly bigger versa. In 2010 and 2011 Africa had

a similar trend emerges, although the gap

2011 2012

between the two is often larger, owing to Africa investing in LAC’s financiacapital intensive (Figure 22)

Figure 22. Bilateral Greenfield FDI projects between LAC and Africa

(project numbers and


One of the main differences between the two bilateral Greenfield FDI relationships is sectoral composition. LACs investments into Africa are far more capital intensive (predominantly in the primary sectorAfrica’s Greenfield investments into LAC are more diversified, containing a greater proporof service investments. Only 25% of

Table 4. Greenfield FDI project details for LAC to Africa and Africa to LAC

No. of Projects



Source: Financial Times fDi Database.associated with an FDI Greenfield project, not a flow between countries, and is therefore not FDI. It rather indicates FDI caintensity, and therefore it is useful to analy

3.2. LAC FDI to Africa

The sources of FDI from LAC Brazil accounted for 57% of other hand, destinations are fairly spread out and reflect a mixture of resource(to gain access to natural resources) from prominent Brazilian energy companiessophisticated market-seeking (to capture new consumer markets)seeking FDI (to gain access to more competitive inputs used in the production process).

22 Excludes food and related items.

1

10

100

1 000

10 000

2004 2005 2006

Projects (secondary axis) Africa to LAC

Capex Africa to LAC

between the two is often larger, owing to Africa investing in LAC’s financia).

. Bilateral Greenfield FDI projects between LAC and Africa

(project numbers and Capex, million US$)

Source: Financial Times fDi Database. Note: No projects from Africa to LAC in 2003.

One of the main differences between the two bilateral Greenfield FDI relationships is sectoral composition. LACs investments into Africa are far more capital intensive (predominantly in the primary sector22 (44%) –discussed further later. Africa’s Greenfield investments into LAC are more diversified, containing a greater proporof service investments. Only 25% of African projects went into the primary sector in LAC.

. Greenfield FDI project details for LAC to Africa and Africa to LAC

(2003-Feb2014)

LAC to Africa Africa to LAC

No. of Projects 65 51

Total Capital Investment (Capex) $10.8 b $3.6 b


Source: Financial Times fDi Database.b=billion; m=million. Note: Capex is a mechanical estimate of the capital expenditure associated with an FDI Greenfield project, not a flow between countries, and is therefore not FDI. It rather indicates FDI ca

therefore it is useful to analyse its sectoral composition.

from LAC to Africa are highly concentrated. Over the period 2003Brazil accounted for 57% of Greenfield FDI project inflows into Africa

destinations are fairly spread out and reflect a mixture of resource(to gain access to natural resources) from prominent Brazilian energy companies

seeking (to capture new consumer markets), as well as efficiencyseeking FDI (to gain access to more competitive inputs used in the production process).

Excludes food and related items.

2006 2007 2008 2009 2010 2011

Projects (secondary axis) Africa to LAC Projects (secondary axis) LAC to Africa

Capex Africa to LAC Capex LAC to Africa

19

between the two is often larger, owing to Africa investing in LAC’s financial sector that is not

. Bilateral Greenfield FDI projects between LAC and Africa

One of the main differences between the two bilateral Greenfield FDI relationships is sectoral composition. LACs investments into Africa are far more capital intensive (Table 4) as they are

discussed further later. On the other hand, Africa’s Greenfield investments into LAC are more diversified, containing a greater proportion

projects went into the primary sector in LAC.

. Greenfield FDI project details for LAC to Africa and Africa to LAC

is a mechanical estimate of the capital expenditure associated with an FDI Greenfield project, not a flow between countries, and is therefore not FDI. It rather indicates FDI capital

Over the period 2003-Feb2014 FDI project inflows into Africa (Figure 23).On the

destinations are fairly spread out and reflect a mixture of resource-seeking FDI (to gain access to natural resources) from prominent Brazilian energy companies, more

as well as efficiency-seeking FDI (to gain access to more competitive inputs used in the production process).

2

4

6

8

10

12

2012 2013

Projects (secondary axis) LAC to Africa

Figure 23. Source countries of LAC


As the next section shows, the concentrated origins of the FDI flows from LAC to Africagreater for Africa’s investments into LAC, owing to the competitive dominance of South African firms on the African continent.

The only notable time trend in theof Bermuda as a home country for FDIAfrica are small (with 5 projectscountries, Brazil has consistently been the dominant investor into Africa, followed by Bermuda, Chile, and then Cayman Islands and the Bahamas. Investments from Brazil reflect its expertise in finance, minerals, agriculture, the automotive sector, and petrol.

Bermuda, on the other hand,financial centre) so investments from it reflect firms from other nationalities. Nine companies have been involved in 10 FDI projects from Bermuda to Africathe projects having been investment destination in Africa country, as both are offshore financial centres with related expertise. Mauritius opegateway to investing in India and Indonesia as well as other into countries, globally, due to its taxation treaties and other favourable business legislation. For LAC resident firms, investing in Mauritius provides them with aabroad investing in emerging Africa and Asian markets as well as to invest in Bermuda.24

23 In 2003 there were only three FDI projects from LAC (Brazil and Bermuda) into Africa. In 2013 there were only five (from Brazil Bermuda and Mexico). The sample is, therefore, not meaningful to make a year by year analysis.24 Based on FT fDi project description

Bahamas

5%

Cayman Islands

5%

Venezuela

3%

Mexico

3%

. Source countries of LAC Greenfield FDI into Africa

(project numbers, 2003-Feb2014)


the concentrated origins of the FDI flows from LAC to Africagreater for Africa’s investments into LAC, owing to the competitive dominance of South African firms on the African continent.

The only notable time trend in the LAC bilateral flows into Africa is the growing prominence of Bermuda as a home country for FDI.23 Investments from all the other LAC countries into

projects or less) and show no clear pattern over timeBrazil has consistently been the dominant investor into Africa, followed by

Bermuda, Chile, and then Cayman Islands and the Bahamas. Investments from Brazil reflect its nce, minerals, agriculture, the automotive sector, and petrol.

, on the other hand, serves as a low tax jurisdiction (and technically an offshore financial centre) so investments from it reflect firms from other nationalities. Nine companies

in 10 FDI projects from Bermuda to African countries undertaken since 2007. Nevertheless, Bermuda’s major single

investment destination in Africa (Mauritius) reflects synergies between the host and home as both are offshore financial centres with related expertise. Mauritius ope

gateway to investing in India and Indonesia as well as other into countries, globally, due to its taxation treaties and other favourable business legislation. For LAC resident firms, investing in Mauritius provides them with a platform to assist clients from abroad investing in emerging Africa and Asian markets as well as to those

In 2003 there were only three FDI projects from LAC (Brazil and Bermuda) into Africa. In 2013 there were only

five (from Brazil Bermuda and Mexico). The sample is, therefore, not meaningful to make a year by year analysis.ptions.

Brazil

57%

Bermuda

15%

Chile

8%

Haiti

1%

Cuba

1%

Argentina

2%

20

FDI into Africa

the concentrated origins of the FDI flows from LAC to Africa is even greater for Africa’s investments into LAC, owing to the competitive dominance of South

flows into Africa is the growing prominence Investments from all the other LAC countries into

over time. From all LAC Brazil has consistently been the dominant investor into Africa, followed by

Bermuda, Chile, and then Cayman Islands and the Bahamas. Investments from Brazil reflect its nce, minerals, agriculture, the automotive sector, and petrol.

serves as a low tax jurisdiction (and technically an offshore financial centre) so investments from it reflect firms from other nationalities. Nine companies

n countries, with all but one of undertaken since 2007. Nevertheless, Bermuda’s major single

reflects synergies between the host and home as both are offshore financial centres with related expertise. Mauritius operates as a

gateway to investing in India and Indonesia as well as other into countries, both in Africa and globally, due to its taxation treaties and other favourable business legislation. For LAC

platform to assist clients from those firms in Mauritius

In 2003 there were only three FDI projects from LAC (Brazil and Bermuda) into Africa. In 2013 there were only five (from Brazil Bermuda and Mexico). The sample is, therefore, not meaningful to make a year by year analysis.

Bermuda, the Cayman Islands and the Bahamas reflect the beneficial access to overseas markets that they provide to overseas firms as offshore financial centres. This means that projects originating from thefirms which are ‘homegrown’ to LAC or have been resident in LAC for some time. In fact, as noted below, one South African hotel firm invests back into Africa from Bermuda due to the financial advantages it offers.

The destinations in Africa of LAC’s investments are fairly spread outAfrican investments into LAC (see for 46% of all investment projects. countries. By capital expenditure the picture changes quite dramatically (different relative levels of concentrated in the service sectorwhile the traditional mineral countries of Angola, Mozambique, bulk of capital expenditure resulting from FDI projects into Africa by LAC countries.

Figure 24. Top 10 African

(project numbers


It is difficult to discern any trends in the changing investment destinations. South Africa are more sophisticated and diverseservices and chemicals. This is indicative ofAfrica. In Angola, investments reflect medicine and micro-credit) production projects). Furtheand market-seeking investments,

Mozambique only emerges as an important destinationgas discoveries were made and exploited b

2

4

6

8

10

12

Bermuda, the Cayman Islands and the Bahamas reflect the beneficial access to overseas vide to overseas firms as offshore financial centres. This means that

projects originating from these countries are not necessarily reflective of investments by firms which are ‘homegrown’ to LAC or have been resident in LAC for some time. In fact, as

d below, one South African hotel firm invests back into Africa from Bermuda due to the financial advantages it offers.

The destinations in Africa of LAC’s investments are fairly spread out, especially compared to African investments into LAC (see next section). In fact, the top four FDI destinations account

6% of all investment projects. However, they are mainly concentrated in mineral rich By capital expenditure the picture changes quite dramatically (

levels of capital intensity. In this sense, flows going to South Africa are concentrated in the service sector, and hence accrue a lower level of capital expenditure, while the traditional mineral countries of Angola, Mozambique, Algeria and Nigeria absorb the bulk of capital expenditure resulting from FDI projects into Africa by LAC countries.

Top 10 African Greenfield investment destinations for LAC firms

(project numbers and average Capex in million US$, 2003-Feb2014).


It is difficult to discern any trends in the changing investment destinations. South Africa are more sophisticated and diverse, ranging from software and services and chemicals. This is indicative of changing global investments patterns into South Africa. In Angola, investments reflect both market seeking FDI (e.g. to produce anti

credit) and resource-seeking FDI (one oil production and two cement Further, investments into Nigeria by Brazil reflect a mixture of energy

seeking investments, mainly in automotive (buses).

Mozambique only emerges as an important destination after 2007, when important oil and gas discoveries were made and exploited by a prominent LAC firm called

Projects Avg Capex (secondary axis)

21

Bermuda, the Cayman Islands and the Bahamas reflect the beneficial access to overseas vide to overseas firms as offshore financial centres. This means that

are not necessarily reflective of investments by firms which are ‘homegrown’ to LAC or have been resident in LAC for some time. In fact, as

d below, one South African hotel firm invests back into Africa from Bermuda due to the

, especially compared to FDI destinations account

However, they are mainly concentrated in mineral rich By capital expenditure the picture changes quite dramatically (Figure 24), implying

lows going to South Africa are and hence accrue a lower level of capital expenditure,

and Nigeria absorb the bulk of capital expenditure resulting from FDI projects into Africa by LAC countries.

for LAC firms

Feb2014).

It is difficult to discern any trends in the changing investment destinations. FDI flows into ranging from software and ICT to financial

changing global investments patterns into South to produce anti-malaria

one oil production and two cement nvestments into Nigeria by Brazil reflect a mixture of energy

when important oil and called Vale (into Tet,

0

50

100

150

200

250

300

350

400

450

500

22

Mozambique). LAC’s oil and gas investments are heavily concentrated in Mozambique, followed by Libya and Algeria; while metals FDI are concentrated in the Democratic Republic of Congo (DRC), where again, the dominant investing firm was Vale. This highlights an important complementarity between Africa (natural resources) and LAC (home to major commodity multinational enterprises, e.g. Petrobras and Vale). A similar potential for complementarity is evident in Africa’s investments into LAC.

As noted above, the two most important investors into Africa are Brazil, followed some way by Bermuda. Brazil’s projects are somewhat spread out throughout Africa, and no single destination accounts for more than 1/6th of its projects (Table 5).

Table 5. Investment destination of the 3 main LAC investors into Africa

(number of projects, 2003-Feb2014)

Source/ Destination

South Africa

Mozambique Angola Nigeria Morocco Mauritius Egypt Ghana DRC Other Total

Brazil 5 6 6 5 1

1 3 3 7 37

Bermuda 2

1 3

4 10

Chile 1

1

2

1 5

Total 8 6 6 5 3 3 3 3 3 12 52


The overall sectoral composition of FDI flows from LAC to Africa shows considerable diversity, reflecting both the strengths of LAC firms and their available investment opportunities in Africa (Table 6).

Table 6. Sectoral distribution of Greenfield projects from LAC into Africa

(number of projects and Capex in million US$, 2003-Feb2014)

Sector Projects Capex

Coal, Oil and Natural Gas 13 7516

Financial Services 9 99

Metals and its manufacture 6 449

Chemicals 5 358

Automotive 6 194

Business Services 5 20

Hotels & Tourism 3 491

Building Materials 3 580

Alternative/Renewable energy 2 450

Software & IT services 4 30

Non-Automotive Transport 2 28

Food, tobacco and beverages 4 127

Other 3 17

Source: Financial Times fDi Database. Note: ‘Other’ includes all categories with only a single project. This accounts for 3 projects.

23

In terms of specific sectors, the most prominent was `coal, oil and natural gas´ (13 projects out of 65), which accounted for 20% of the total and 70% of total capital expenditure into Africa; metals (six projects); and chemicals (four projects). The other significant sector was financial services (nine projects). For resource-seeking FDI the most important firms were Brazil’s energy giants, Vale and Petrobras.

Moreover, a number of automotive investments have also taken place. This reflects a coherent strategy by Brazilian bus firm Marcopolo to expand into the major African markets (Nigeria, Egypt, South Africa, and Ghana) where growing demand for such items coupled with a lack of productive capacity has assisted in creating a ‘match’. Bus assembly investment took place into Ghana in order to take advantage of the regional and domestic markets; a joint venture with Daewoo in Nigeria for similar purposes. The investment into South Africa was for the expansion of production capacity for buses and creating a training facility, and investments into Egypt were done through a joint venture with Egypt's GB Auto to manufacture a chassis.

Lastly, agriculture has been another important area of complementarity, given that both African and LAC countries are land abundant. Brazil in particular is a major agricultural producer with skills and technology in the field. For example, Embrapa, a Brazilian agricultural research firm, invested in Mozambique, Ghana, and South Africa. A plant was established in Ghana, which will process vegetables for export mainly to South Africa and supported by USAID, among others. A similar potential for complementarity is evident in Africa’s investments into LAC. Mentioned below are phosphate investments (fertiliser) by a Moroccan firm into Brazil and Argentina, for example.

The sectoral distribution of investment has become more diverse over time, mainly due to an increase in the number of projects (see Table A.4in the Appendix). The number of source countries was almost the same for both periods.

In sum, LAC investments into Africa reflect complementarities in firm specific assets. LAC countries have similar endowments in land and minerals and this creates opportunities for LAC firms with sufficient working capital, finance, and skills. We can see this very clearly from the about case. Remarkably, one third of all investment projects in Africa from LAC countries came from just three firms: Vale (11 projects), Marcopolo (six), and Petrobras (five). Five other firms had more than one investment: Embrapa (three); Banco de Desarrollo Económico y

Social de Venezuela (BANDES, two); Appleby (two); Odebrecht (two); and Kerzner International (two), reflecting competitive advantages in offshore financial services (Appleby’s), and chemicals and plastic (Odebrecht).25

3.3. African FDI to LAC

The sources of Greenfield FDI from Africa into LAC countries are far more concentrated in terms of source countries than the inverse flow. Only seven countries from Africa have invested in LAC (according to the Financial Times database), while the corresponding figure for LAC into Africa was ten, despite Africa containing more countries overall.

25 Invested in Tanzania and Angola.

South Africa accounts for the overwhelming majority of projects into LAC, reflecting a greater relative concentration of projects than under analysis, 78% of outward Greenfield FDI projects to LAC countries came from South Africa (40 out of 51), followed by Kenya at 8% (countries investing in LAC engaged in one project, except for Angola and Moroccoengaged in two.

South Africa has consistently been the overwhelmingly dominant inperiod under analysis. In fact, prior to 2008 investor country into LAC. From 2008 other African countries begin to invest haphazardly into LAC. Among them, Kenya country from the continent into LAC (far above its current GDP)

Figure 25. Source countries for African Greenfield FDI into LAC

Source: Financial Times fDi

Destinations into LAC by African firms are also more concentrated than vice versa. African firms invested in only 11 LAC countries in totalAfrica. The top four destinations account for 65% of all investment projects. This reflects the overwhelming competitive advantage and sophistication of South African firms on the continent relative to their peers in Sub

South Africa accounts for the overwhelming majority of projects into LAC, reflecting a greater relative concentration of projects than Brazilian investments into Africa

78% of outward Greenfield FDI projects to LAC countries came from South Africa (40 out of 51), followed by Kenya at 8% (four projects), see Figure countries investing in LAC engaged in one project, except for Angola and Morocco

South Africa has consistently been the overwhelmingly dominant investor throughout the In fact, prior to 2008 it was the only recorded African Greenfield

investor country into LAC. From 2008 other African countries begin to invest haphazardly Kenya has emerged, albeit only from 2012, as a notable FDI source

country from the continent into LAC (far above its current GDP).

. Source countries for African Greenfield FDI into LAC

(project numbers, 2003-Feb2014)


Destinations into LAC by African firms are also more concentrated than vice versa. African firms invested in only 11 LAC countries in total, whereas LAC firms invested in 19 countries in

destinations account for 65% of all investment projects. This reflects the overwhelming competitive advantage and sophistication of South African firms on the continent relative to their peers in Sub-Saharan Africa (Figure 26).

South Africa

78%

Kenya

8%

Morocco

4%

Angola

4%Algeria

2%

Namibia

2%

Tunisia

2%

24

South Africa accounts for the overwhelming majority of projects into LAC, reflecting a greater investments into Africa. Over the period

78% of outward Greenfield FDI projects to LAC countries came from South Figure 25. All other African

countries investing in LAC engaged in one project, except for Angola and Morocco, which

vestor throughout the was the only recorded African Greenfield

investor country into LAC. From 2008 other African countries begin to invest haphazardly as a notable FDI source

. Source countries for African Greenfield FDI into LAC

Destinations into LAC by African firms are also more concentrated than vice versa. African whereas LAC firms invested in 19 countries in

destinations account for 65% of all investment projects. This reflects the overwhelming competitive advantage and sophistication of South African firms on the

Figure 26. LAC Greenfield investment destination for African firms

(project numbers and


A few points are worth nothing regarding the time during which these investments took place. Three out of Peru’s four projects took place between 2004 and 2006countries the majority of investments took place from 200investment relationship between Africa and LAC very slowly. Only four out of Brazil’s 17 projects took place prior to 2010majority therefore starting between 2010the middle of the period under analysis, 2007Venezuela shoots to the second most prominent destination after Brazil (and the first one average Capex), even though it has received only two projects, as these were both in the capital intensive oil and offshore gas sector

The 17 FDI projects investedservices (in particular ICTmarket-seeking FDI. Two South African companiesDatatec (3), account for nearly half of these investments. The largest investment into Brazil was not however mineral related. (December 2012) that it would build the first African continent to Latin America.connection between Luanda

Investments into Argentina were all in the serviceprojects) undertaken by South Africa’s Standard Bank

in agricultural chemicals support services and two investments by providing mining services. Investments into Chilefairly diverse, with the large Kenyan multinational,

2

4

6

8

10

12

14

16

18

. LAC Greenfield investment destination for African firms

(project numbers and Capex in million US$, 2003-Feb2014)

fDi Database.

A few points are worth nothing regarding the time during which these investments took place. Peru’s four projects took place between 2004 and 2006, while for the other

countries the majority of investments took place from 2008 onwards. This suggests that the between Africa and LAC is not only in its infancy but also

out of Brazil’s 17 projects took place prior to 2010between 2010 and 2013. Argentina’s projects mainly took place in

the middle of the period under analysis, 2007-2009. Furthermore, by capital expenditure,Venezuela shoots to the second most prominent destination after Brazil (and the first one

), even though it has received only two projects, as these were both in the oil and offshore gas sector (Figure 26).

invested in Brazil were diverse sectorally, spread across metals and T and business), and reflect a mixture of resource

seeking FDI. Two South African companies, Anglogold Ashanti

account for nearly half of these investments. The largest investment into Brazil was not however mineral related. Angola Telecoms (through Angola Cables

that it would build the first undersea cable in the South AtlaAfrican continent to Latin America. This company will provide a telecommunications connection between Luanda (Angola) and Fortaleza (Brazil) and will be expanded thereafter.

Investments into Argentina were all in the services sector, with the majority (South Africa’s Standard Bank. The remaining three projects were one

in agricultural chemicals support services and two investments by SRK consulting

Investments into Chile (seven in total) and Mexicofairly diverse, with the large Kenyan multinational, Comcraft Group, undertaking three

Projects Avg Capex (secondary axis)

25

. LAC Greenfield investment destination for African firms

Feb2014)

A few points are worth nothing regarding the time during which these investments took place. while for the other LAC

This suggests that the not only in its infancy but also growing

out of Brazil’s 17 projects took place prior to 2010, with the vast and 2013. Argentina’s projects mainly took place in

y capital expenditure, Venezuela shoots to the second most prominent destination after Brazil (and the first one by

), even though it has received only two projects, as these were both in the

in Brazil were diverse sectorally, spread across metals and business), and reflect a mixture of resource-seeking and

, Anglogold Ashanti (five projects) and

account for nearly half of these investments. The largest investment into Brazil Angola Cables) announced

undersea cable in the South Atlantic linking the a telecommunications

and will be expanded thereafter.

sector, with the majority (six out of nine . The remaining three projects were one

SRK consulting to assist in and Mexico (six in total) are

, undertaking three

0

100

200

300

400

500

600

26

projects into Chile and Mexico (i.e. four of the Kenyan investments into LAC countries –with one of them into Costa Rica).

As noted above, the two most important investors are South Africa, followed some way by, Kenya. South Africa’s projects are relatively less spread out in LAC than Brazil’s into Africa. In fact, 35% of South Africa’s projects went to Brazil (Table 7).

Table 7. Investment destination of the 2 main African investors into LAC


Source/ Destination

Brazil Argentina Chile Mexico Peru Venezuela Colombia Ecuador Dominican

Rep. Costa Rica

Bolivia Total

South Africa 14 8 6 3 4 1 2 1

1 40

Kenya

1 2

1

4

Total 16 9 7 5 4 2 2 1 1 1 1 49


All four of Kenya’s investments were undertaken by the Comcraft Group through its subsidiary UST Global, and were in services (mainly call centres for technical support). Some of these are efficiency-seeking FDI, as they provide services to customers in the USA, Mexico and other Latin-American markets. Mexico’s universities and its developed IT sector make it an attractive investment location within the region.

Apart from mining, South Africa’s investments were mainly in business services, followed by sales, marketing and support activities. South Africa’s direct extractive activities were limited to seven projects, including five investments by AngloGold Ashanti into Brazil. Many of South Africa’s service investments support this though, such as Basil Read investing in Peru through TWP and SRK Consulting’s investments into Mexico, Brazil, and Argentina. Therefore, business services investments into LAC countries reflect a mix of supportive activities for both mineral extraction (SRK Consulting type projects) and market-seeking (Ad Dynamo type projects). Investments from South Africa also reflect its expertise in financial and business services, most notably through Datatec and Standard Bank but also through Ad Dynamo (including mobile advertising).

Further, the two investments from Morocco into LAC countries are by the (Moroccan) Office

Cherifien des Phosphate(chemicals) and were in sales and marketing in Argentina and Brazil; while the two investments from Angola are into telecoms in Brazil and `coal, oil, and natural gas´ into Venezuela.

As Table 8shows, projects from Africa are spread out sectorally, and certainly more so than LAC investments into Africa. By capital expenditure, `metals and its manufactures´ and `coal, oil and natural gas´ overwhelmingly dominate, with 68% of total capital expenditure.

27

Table 8. Sectoral distribution of Greenfield projects from African firms into LAC


Sectors Projects Capex

Software & IT services 10 181 Business Services 9 26 Financial Services 7 186 Communications 5 294 Food, tobacco and beverages 2 49 Rubber and plastic product 2 36 Chemicals 3 11 Metals and its manufacture 7 1224 Coal, Oil and Natural Gas 2 989 Other 4 251

Source: Financial Times fDi Database. Note: Total of 51 projects. All categories with only a single project are listed under ‘other’. This contained four projects.

Furthermore, Table A.4 (see the Appendix) indicates that the FDI sectoral distribution has diversified over time, both due to an annual increase in the number of projects and a growing diversity in the source countries of investment, as South Africa was the only investor into LAC prior to 2008. In particular, services have increased in importance over time as an FDI sector into LAC for African firms. All metals projects were undertaken by South African firms, the majority undertaken in Brazil by AngloGold Ashanti.26In the oil and gas sector, and unlike with Brazil’s oil investments into Africa, the only investments were done by Petro SA and Sonangol

Group into Venezuela in 2008 and 2010, respectively. All seven financial service projects were undertaken by Standard Bank in Argentina, with one them going to Brazil (subsequent to Standard Bank´s2006 M&A purchase of BankBoston Argentina). In 2012, Industrial and Commercial Bank of China (ICBC) acquired 80% of its shares and was rebranded in 2013.27

4. Some final remarks

This paper is a first attempt to analyse South-South economic cooperation between Africa and LAC, by looking at the trade and FDI flows between them. Overall, the data show a quite negligible relationship between the countries in these regions. However, both trade and FDI have shown a positive trend, hence suggesting that there are interesting potentialities for enhancing bilateral commercial and investment the inter-regional economic links.

Flows are very concentrated in a handful number of countries, where Brazil is a key player in both trade (both as exporter and importer) and FDI (both as source and destination).There is also a clear specialisation in primary products, with LAC exporting food to Africa and Africa selling fuels to LAC countries. Unlike the situation between Brazil and Argentina with other LACs (even more pronounced with other South American countries) specialisation rely mostly on primary products, similar to the North-South competitive advantage type of relationships. Further, intercontinental trade is very concentrated, both in a few sectors and in terms of actors, with Brazil and Argentina (LAC) and Angola, Algeria, Morocco, Egypt and South Africa (Africa) explaining the largest trade shares.

26 In this sector, Cosira Group invested in Chile and Goldfields in Peru. 27 In October 2007, ICBC acquired a 20% stake in Standard Bank for US$5.5 billion.

28

It is important to note that this analysis should be enriched by including data about trade on services, currently not available bilaterally and sectorally. This is especially key due to the large contribute of services to GDP, albeit smaller than in the developed world,28with an average of 59%for LAC and a 43% for Africa.

As of the FDI flows analysis, two main conclusions can be drawn. Firstly, bilateral investment between LAC and Africa is growing and speeding up. Many of the key multinational companies from have only recently began to invest into the other’s region. For example, prior to 2008 South African firms were the only recorded African Greenfield investors into LAC countries. At the same time, the vast majority of Brazilian investments into Africa took place between 2010 and 2013. This indicates the relatively minor role each region has played until just recently in the flow of Greenfield FDI projects of the other, and the recent trend also suggests the potential for this relationship to grow. One example is the recent Brazilian investments in DRC.

A second conclusion is drawn by looking at firm level endowments, which also seem to suggest that there is potential for a further expansion of FDI flows between Africa and LAC. The nature of the investments between the two continents reflects important complementarities for both demand and supply of agricultural and mining expertise, financial services, and the automotive sector. Both regions have highly competitive firms in these areas, and most of them have already undertaken investments across the Atlantic Ocean. As an example, two South African companies, Anglogold Ashanti and Datatec accounted for nearly half of Africa’s investments into Brazil, while South Africa’s Standard Bank accounted for all financial service sector investments into LAC countries (mainly in Argentina). On the other (LAC) side, one third of all investment projects in Africa came from just three firms (all Brazilian): Vale, Marcopolo, and Petrobras. Moreover, investments often take place at the margin of complementarities: even though South Africa and Brazil are the major global commodity exporters with expertise in the mining sector, AngloGold Ashanti still found it beneficial to invest into Brazil.

Hence, it is also possible to conclude that there are also conditions for further exploiting these cross-complementarities. This implies that further research is required to understand what are the constraints and bottlenecks for this investment relationship to expand over time and to research on the exact factors that led to the investments discussed here.

Finally, other future research lines include extending the cooperation analysis to other areas and deepening on the main bilateral cooperation experiences to draw some policy conclusions.

28 With almost 65% over the period 2003-2012, versus a 54% on average for the world, according to the World Bank Data Bank (2014).

29

References

Betancourt, M. C. S., & Schulz, N. S. (2009). La cooperación Sur-Sur a partir de Accra: América Latina y el Caribe. FRIDE, Madrid.

Brun, E. (2009). Las relaciones entre América Latina y África: ¿potenciales o ilusorias? Documento de Proyecto. Santiago de Chile: CEPAL.

Caicedo, J. D., and Castro, A. B. (2010). Subiendo al Sur: África y América Latina en las nuevas dinámicas de la cooperación Sur-Sur. Revista Humanía del Sur, Venezuela, año5, 89-106.

Comtrade, U.N. (2014). United Nations Commodity Trade Statistics Database. URL: http://comtrade.un.org/.

Financial Times fDi Database (2014). The FDI Report 2014. Global Greenfield Investment

Trends, The Financial Times, London.

Lall, S. (2000). The Technological structure and performance of developing country manufactured exports, 1985-98. Oxford Development Studies, 28(3), 337-369.

SELA (2013). Nuevas modalidades de relacionamiento económico y cooperación entre América Latina y el Caribe y Africa. Secretaría Permanente del SELA. Caracas, Venezuela.

UN (2004). South-south Cooperation in Support of the New Partnership for Africa´s

Development. Experiences of Africa-Latin America and the Caribbean. United Nations, Published by the Office of the Special Adviser on Africa.

UNCTAD(2014). FDI/TNC database. URL:http://unctadstat.unctad.org/ReportFolders/reportFolders.aspx.

WTO Statistics Database (2014). International Trade Statistics 2012, World Trade

Organization. URL:http://stat.wto.org/.

30

Appendix

Countries in each region

Africa comprises (WTO classifications): North Africa: Algeria, Egypt, Libyan Arab Jamahiriya, Morocco and Tunisia Sub-Saharan Africa:

- Western Africa: Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo;

- Central Africa: Burundi, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Rwanda, and Sao Tome and Principe;

- Eastern Africa: Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Seychelles, Somalia, Sudan, United Republic of Tanzania and Uganda;

- Southern Africa: Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia, Zimbabwe and territories in Africa n.e.s.

Latin America: Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, Venezuela and other countries and territories in Latin American. List of bilateral agreements (from Figure 1)

(1) Argentina-Tunis (in force since 2008), Memorandum Argentina-Nigeria (2008), Brazil-Mozambique (1981), Brazil- São Tomé e Príncipe (1984), Colombia-Algeria (in negotiation), Mexico-Morocco (in force since 2000), Mexico-South Africa (in force since 2000), Uruguay-Morocco (1999), Uruguay-Egypt (1995), Uruguay-Mozambique (2007), Venezuela and Sierra Leone (2009). (2) Argentina-Cape Verde (in force since 2012), Argentina-Equatorial Guinea (in force since 1987), Argentina-Algeria (in force since 1987); Argentina-Angola (2004 and 2011), Argentina-Egypt (2008), Brazil-South Africa (2003), Brazil-Angola (1980), Brazil-Algeria (1977, 1981), Brazil-Benin (1972), Brazil-Botswana (2009), Brazil-Burkina Faso (2005), Brazil-Cape Verde (1977), Brazil-Comoros (1972), Brazil- Cote d'Ivoire (1972), Brazil-Egypt (1973), Brazil-Gabon (1974, 1975), Brazil-Ghana (1974), Brazil-Mali (1981), Brazil-Morocco (1984), Brazil-Mozambique (1981, 1989), Brazil-Namibia (1995), Brazil-Nigeria (1979), Brazil-Senegal (1972, 1976), Brazil-Togo (1972), Brazil-Zaire (1973), Brazil-Zimbabwe (in negotiation), Colombia- Cote d'Ivoire (1984), Colombia-Morocco (1992), Colombia-Kenya (1977), Mexico-Algeria (in force since 2012), Mexico-Egypt (in force since 1986), Mexico-South Africa (in force since 2011), Mexico-Senegal (in force since 1977), Venezuela and Sierra Leone (2009), Venezuela and Guinea Bissau (2009). (3) Argentina-Angola (in force since 1992), Argentina-Egypt (in force since 2002), Argentina-Tunis (in force since 1980), Argentina-Zaire (in force since 1988), Colombia-Algeria (signed in 1981, replaced in 1997), Colombia-Morocco (1995). Bilateral trade agreements: Argentina-Algeria (in force since 2003), Argentina-Morocco (in force since 2000), Argentina- Senegal (in force since 1980), Argentina-Tunis (in force since 1995), Argentina-Cote d'Ivoire (in force since 1980), Colombia-Algeria (1981, 1997), Mexico-Egypt (1966), Mexico-Gabon (1977). (4) Argentina-South Africa (in force since 2001), Argentina-Egypt (in force since 1993), Argentina-Senegal (in force since 2010), Argentina-Tunis (in force since 1995), Argentina-Morocco (in force since 2000), Argentina-Algeria (in force since 2002), Chile-Egypt (1999), Chile-Tunis (1998), Cuba-Algeria (1999), El Salvador-Morocco (in force since 2002), Jamaica-Egypt (1999). (5) Argentine-South African, African-Brazilian, Colombian-Libyan, Chilean-South African, Arab-Mexican, Paraguayan-South African, Angolan-Venezuelan, Uruguayan-African.

31

Table A.1. Exports by sector (%)

Sector LAC-AFRICA AFRICA-LAC

2003 2012 2003-2012 2003 2012 2003-2012

Automotive 4.2 2.5 3.9 0.2 0.6 0.4

Building & Construction Materials 0.8 0.2 0.6 0.1 0.2 0.2

Chemicals 2.9 2.1 2.2 9.6 9.9 7.2

Coal, Oil and Natural Gas 3.3 2.2 5.9 78.7 77.6 83.0

Food, tobacco and beverages 75.9 81.3 72.8 2.1 3.8 1.6

Forestry, logging and wood products 2.2 0.3 0.9 0.1 0.1 0.1

Machinery, equipment & tools 2.6 3.5 3.9 0.6 1.1 0.8

Metals and its manufacture 5.7 5.1 7.0 4.2 2.8 2.9

Minerals and its products 0.1 0.1 0.2 3.3 2.8 3.0

Non-Automotive Transport 0.2 1.1 0.9 0.0 0.1 0.1

Other manufacture 0.2 0.3 0.3 0.0 0.0 0.0

Paper, Printing & Packaging 1.0 0.5 0.7 0.3 0.1 0.1

Rubber and plastic product 0.4 0.4 0.4 0.1 0.2 0.1

Textiles, apparel, clothing 0.5 0.4 0.4 0.6 0.7 0.6

Total General 100.0 100.0 100.0 100.0 100.0 100.0


Figure A.1. LAC food, tobacco and beverages exports to Africa (2003=1)


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Kg. Dollars

3.0

2.5

32

Figure A.2. African coal, oil and natural gas exports to LAC (2003=1)


Table A.2. Exports by technological content (%)

Technological content LAC-AFRICA AFRICA-LAC

2003 2012 2003-2012 2003 2012 2003-2012

Primary products 60.3 65.1 59.6 78.7 72.5 80.8

Resource-based Manufacture a) Agriculture/forest based 22.8 21.1 21.0 0.4 0.5 0.3

Resource-based Manufacture b) Other resource based 2.0 1.2 1.9 2.7 2.0 2.3

Low technology manufacture b) Other low technology 2.2 1.0 2.0 2.1 0.8 0.8

Medium technology manufacture a) Automotive products 3.8 2.2 3.5 0.0 0.3 0.1

Medium technology manufacture b) Medium technology process industries

3.5 2.5 4.0 8.8 9.6 6.6

Medium technology manufacture c) Medium technology engineering industries

2.4 2.8 3.1 0.5 0.9 0.7

High technology manufacture a) Electronics and electrical products

0.4 0.7 0.9 0.2 0.5 0.4

High technology manufacture b) Other high technology products

0.2 1.2 0.8 0.1 0.1 0.1

Other Transaction 1.7 1.3 2.7 5.5 11.8 7.1

Total general 100.0 100.0 100.0 100.0 100.0 100.0


Table A.3. Trend of Sectoral distribution of Greenfield projects from LAC into Africa (number of projects)

Sectors / Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Alternative/Renewable energy

2

Automotive

3 2

1

Building & Construction Materials

1 1

1

Business Services

1 2 1

1

Chemicals

1 2

2

Coal, Oil and Natural Gas 2 1 2

1 3 1

3

Communications

1

Financial Services 1 1

1

1 1 1 1 2

Food, tobacco and beverages

1 1 2

Hotels & Tourism

2

1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Kg. Dollars

2.5

1.1

33

Sectors / Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Machinery, equipment & tools

1

Metals and its manufacture

1 2 1 1 1

Non-Automotive Transport

1

1

Other services

1

Software & IT services

2

2

Total general 3 6 4 3 5 9 9 4 9 8 5

Source: Financial Times fDi Database. Note: As the amount of projects is small, analysis by year are not meaningful. This table pictures the dispersion of FDI projects but nothing can be said about the trend.

Table A.4. Sectoral distribution of Greenfield projects from Africa into LAC (number of projects)

Sectors 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Alternative/Renewable energy 0 0 0 0 1 0 0 0 0 0 0

Business Services 0 1 0 0 0 2 1 5 0 0 0

Chemicals 0 0 0 0 0 0 1 2 0 0 0

Coal, Oil and Natural Gas 0 0 0 0 1 0 1 0 0 0 0

Communications 0 0 2 0 0 0 0 1 1 1 0

Financial Services 0 0 0 1 3 3 0 0 0 0 0

Food, tobacco and beverages 2 0 0 0 0 0 0 0 0 0 0

Hotels & Tourism 0 0 0 0 0 0 0 0 0 1 0

Machinery, equipment & tools 0 0 0 0 0 0 0 0 0 1 0

Metals and its manufactures 0 3 0 0 0 1 0 3 0 0 0

Rubber and plastic product 0 0 0 0 0 0 0 0 0 2 0

Software & IT services 0 0 0 1 0 1 2 0 4 1 1

Transportation 0 0 0 0 0 0 0 0 1 0 0

Total general 2 4 2 2 5 7 5 11 6 6 1

Source: Financial Times fDi Database. Note: As the amount of projects is small, analysis by year are not meaningful. This table pictures the dispersion of FDI projects but nothing can be said about the trend.

Documents

South-South cooperation between Latin America and Africaweb.isanet.org/Web/Conferences/FLACSO-ISA... · South-South cooperation between Latin America and Africa Analysis with trade