Andean Group - March 2011 (ISSN 1741-4466)

China's interests in Colombia and Ecuador are comparatively modest, yet very much in line with its policy towards the region, aimed at expanding its export markets and procuring natural resources (particularly in the energy sector).

China's ministry of commerce (MOFCOM) estimates only slight increases in Chinese FDI stock in Ecuador (from US$89m to US$90m) and Colombia (from US$14m to US$15m) between end-2008 and end-2009. Both countries combined make up a little over 1% of Chinese FDI stock in Latin America. According to the Economic Commission for Latin America and the Carribean, Colombian exports to China increased between 2000 and 2009, but only gradually, to 2.9% of Colombia's total exports in 2009, up from 0.2% in 2000. Nonetheless, China became Colombia's fourth largest export partner and its second largest import partner in 2008.

In contrast, Ecuador's exports to China actually decreased, falling to 0.9% of its total exports in 2009, from 1.2% in 2000, the only country in South and Central America to register a decrease in sales to China. However, in the same period China became Ecuador's second largest import partner. Ecuador's trade deficit with China is estimated at over US$500m. Columbia's is even higher, at almost US$1.8bn.

Crude oil is the top export product to China for both Colombia and Ecuador, (with oil accounting for 94% of Ecuador's exports to China and 50% in Colombia's case). In August 2010, the China Development Bank gave Ecuador a US$1bn loan in return for 96,000 barrels of oil per day (bbl/d) for two years. This came just weeks after the Exim Bank of China and the Ecuadorean government agreed a loan deal for a new hydroelectric project worth an estimated US$1.7bn (with a 6.9% interest rate supplemented by oil). Ecuador's oil exports to China were 36,000 bbl/d in 2009 (12% of its total oil exports) and Colombia's export agency reported a 500% growth in Colombia's oil exports to China in 2009, which were worth US$364m.

• WikiLeaks US diplomatic cables dated November 2009 suggest that following President Hugo Chávez 's visit to China in 2006 Chinese companies were told to invest in Venezuela. However, the cable claims that many companies were reluctant, preferring to invest in Colombia due to its economic “openness" and political “stability".  One cable cites a meeting between the-then charge d'affaires at the US embassy in Beijing, Daniel Piccuta, and the Colombian Trade Commissioner, Alejandro Ossa, in which Ossa said that while Colombia was interested in Chinese investment" (particularly in infrastructure and certain consumer goods) it was unlikely to enter into a Free Trade Agreement with China, given the competition in many sectors. Moreover, Ossa claimed that Colombia was “suspicious of China's environmental and labor practices". In the same year Chinese, investment in Colombia had grown 114.4%.