G’day, and welcome to The China Signal. This week, China Southern Power Grid explores a bid for Italian power utility Enel’s Peruvian electricity distribution business, AMLO’s nationalisation of Mexico’s lithium industry clouds Ganfeng Lithium’s prospects, ZTT Submarine Cable & System secures a subsea power cable contract for an offshore Mexican oil and gas field, 4,000 people protests against Sinochem subsidiary in Colombia — taking 86 hostages, now freed, plus much more. Read on.
The Peruvian unit of Italy's biggest power utility, Enel (ENEI.MI), said on Friday that state-owned China Southern Power Grid is carrying out "due diligence" on the local unit for a possible purchase offer on its energy distribution operations.
Bloomberg reported earlier on Friday that the Chinese firm is weighing a possible bid for Enel's distribution business in Peru, which it said could be valued at some $3 billion.
In November, Enel announced an asset sale plan worth 21 billion euros ($22 billion) to be completed by 2025 with the aim of cutting debt…part of that announcement included the plan to put up for sale Enel Peru's distribution and generation assets.
Enel currently serves more than 1.5 million clients, according to the company's website. Enel currently supplies electricity to the northern area of Metropolitan Lima, Callao, and the Huaura, Huaral, Barranca and Oyón provinces.
The acquisition of Enel's distribution assets in Peru would help boost China Southern Power's presence in Latin America even further as it most recently bought a 28% stake in Chilean utility Transelec SA from Brookfield Infrastructure Partners for around US$ 1.3 billion in 2018. (VV)
On February 18, Mexican President, Andres Manuel Lopez Obrador, signed a decree handing over responsibility for lithium reserves to the energy ministry, after nationalizing lithium deposits last April (see TCS April 23 for further background).
…Studies suggest Mexico may have some 1.7 million tonnes of lithium. While close to a dozen foreign companies have active mining concessions that aim to develop potential lithium deposits, Lopez Obrador has said all of them [including Ganfeng Lithium’s Sonora (whose case we extensively covered also on TCS June 12, 2022)] - will be "reviewed," which has cast a cloud over the sector's future prospects.
…Last week, the chief executive of Litio para México (LitioMx), the Mexican state-run company for lithium production, Pablo Taddei, confirmed that Mexico is open to partnerships but that the federal government would have a majority stake in any future joint venture.
Lopez Obrador previously said that public funds are insufficient to develop the sector without private investors (see TCS September 9, 2022). (RP)
The Bolivian ministers of Mining and Metallurgy Ramiro Villavicencio and Development Planning Sergio Cusicanqui visited the Ambassador of China in Bolivia, Huang Yazhong, to discuss the progress made towards the signing of a a US$350 million credit contract for the construction of a zinc refinery in the Oruro department.
The Chinese Government already approved the credit line in February. The two countries are now working to make this disbursement effective. Once in operation, the plant is expected “to treat 150,000 tons per year of zinc concentrates, producing approximately 65.000 tons of metallic zinc per year”.
Bolivia also expects China to approve financing for another zinc refining plant in the Potosí department. Between January and November last year, Bolivia exported zinc concentrates worth US$1.67 billion, mainly to Japan and China, while overall zinc output reached 490.000 tons, said Villavicencio earlier this year. (RP)
Cusicanqui (left), Huang (center), and Villavicencio (right) at their meeting. Source: Bolivia’s Ministry of Mining and Metallurgy (MMM)
Colombian President Gustavo Petro announced on Twitter that his ministers successfully negotiated the release of 88 hostages taken during a deadly protest against the oil company Emerald Energy in San Vicente del Caguan (Caqueta province).
…The protests demanded that Emerald Energy provide infrastructure investments and compensation for environmental damage to the surrounding [indigenous] community …An estimated 4,000 people took part in the protests.
Emerald Energy has been a wholly-owned subsidiary of China’s Sinochem Holdings Co., Ltd. (“Sinochem”) since October 2009 (see company backgrounder below).
Founded in 1950, Sinochem morphed into its current state-owned company structure in May 2021 following the joint restructuring of Sinochem Group Co., Ltd. and China National Chemical Corporation Ltd. Headquartered in Beijing. Sinochem operates under the supervision of China’s State-owned Assets Supervision and Administration Commission of the State Council (SASAC), boasting over 220.000 employees.
One of the world’s leading chemical conglomerates, Sinochem has 17 listed domestic and overseas companies. It has factories and R&D facilities in over 150 countries. Aside from Emerald Energy, Sinochem’s Latin American-registered subsidiaries include Sinochem Petroleo Brasil Ltda. (Brazil), Sinochem Belida Co., Ltd., Sinochem Merangin Co., Ltd., and Sinochem Yemen Holding Co., Ltd. (Cayman Islands), and CRS Resources Ecuador Ldc (Ecuador).
Sinochem ranked 31st overall - and 1st in the chemicals industry - in the 2022 Fortune 500 list with revenue of around US$172 billion. (RP)
Chinese subsea cable manufacturer ZTT Submarine Cable & System has secured a cable design and supply contract with Hokchi Energy, the Mexican subsidiary of Pan American Energy, for a field located in the Gulf of Mexico.
The contract covers the design, supply, delivery, and testing of 33.3 kilometers of submarine power cable and spares for the Hokchi Field off the coast of the state of Tabasco.
According to ZTT, the cable is scheduled to be delivered in the second quarter of the year and will be delivered in one continuous length.
…The Hokchi field is located in the southeastern province of Oil Basins, in the territorial waters of the continental shelf of the Gulf of Mexico, to a distance from the coast of approximately 20 kilometers.
…The well stream is piped over a distance of 24 kilometers from the two offshore platforms to an onshore processing facility where oil and gas are separated and treated for further sale to the Mexican state company Pemex.
No further details regarding this deal’s economic value have been made publicly available to date. ZTT Submarine Cable & System’s activity network in Latin America includes controlling a Brazilian subsidiary, ZTT do Brasil, and the construction of the Mejillones-Cardones 500kV power transmission line in Chile (Antofagasta province). (RP)
Map of the Hokchi Field. Source: Hokchi Energy (article)
Ecuador wants Chinese contractor Sinohydro, which built the Coca Codo Sinclair hydroelectric plant, to take over the operation for the next 30 years and reimburse the State for investments, energy and mines minister Fernando Santos told BNAmericas.
…The biggest hydro in the country has not met public works reception criteria due to thousands of cracks found in its massive structure since 2018 …the hydro has "17,499 irreparable cracks" and the runners of turbines No. 4 and 6 have suffered excessive wear and tear, while the steel used for the distributor modules is not suitable for hydroelectric plants.
Ecuador’s Coca Codo Sinclair hydroelectric plant has cost the government US$3.4 billion, financed in part by a US$1.68 billion loan from China's Eximbank. Since 2019, the Ecuadorian government has been in a legal battle with Sinohydro over the dam’s structural faults, while studies show the hydroelectric plant’s harmful environmental impact on the Coca river (see TCS December 17, 2021 for more background).
It is not the first time that Sinohydro has found itself at the forefront of legal allegations. In 2022, the Ecuadorian Prosecutor's Office raided the Chinese firm as part of a corruption investigation into former President Lenín Moreno (see TCS September 28, 2022). (VV)
Ecuador’s prosecutor’s office requested ex-president Lenín Moreno be placed under house arrest on March 3. Lenín Moreno is accused with 36 other people for allegedly receiving bribes in exchange for the contract to build the Coca Codo Sinclair hydroelectric power plant.
The 37 defendants, among whom are close relatives of the former president, "would have received about US$76 million dollars in bribes", which according to the Prosecutor's Office is "the highest amount prosecuted for acts of corruption in Ecuador". Lenín Moreno has called the prosecutor’s office requests arbitrary and inhumane. (RP)
An allocation of JM$22.1 billion (approximately US$14.3 million) has been made to continue work on the Southern Coastal Highway Improvement Project (SCHIP) in the 2023/24 fiscal year.
…The project is being implemented by the Ministry of Economic Growth and Job Creation, with co-funding from the Government of Jamaica and the Export-Import Bank of China (China Exim Bank).
…Some JM$5.2 billion (US$3.3 million) has been estimated for fiscal year 2024/2025, if necessary.
According to The China-Latin America Finance Database estimates, China Exim Bank, and China Development Bank (CDB) combined for US$2.1 billion in loans to Jamaica for various infrastructure projects between 2005 and 2017. A US$326 million loan from China Exim Bank to develop an earlier section of the SCHIP in 2017 was the most recent known loan to Jamaica. (RP)
Guyana’s Special Organised Crime Unit (SOCU) has charged a couple and their son with a combined 268 counts of money laundering and conspiracy to launder more than GYD$4.1 billion (approximately US$19 million at current exchange rates).
SOCU said …they were “operating as nominees for some Chinese businesses and also facilitating tax evasion” through a family company.
SOCU head, Fazil Karimbaksh, alleged the family transferred GYD$3.7 billion to 22 companies in China under the pretext of importing raw materials to produce biodegradable products, while other sums were disguised locally totalling over GYD$4.1 billion.
The SOCU hasn’t released further details on these 22 Chinese companies in question. The matter has sparked debate in Guyana, with some Guyanese pushing for demonstrations in front of the Chinese embassy in Georgetown. These sympathizers argue that Guyanese family in question were a front for a larger organized crime network, and are upset that authorities have not pursued perpetrators.
This case takes place as oil developments and Chinese capital have expanded the bilateral relationship economically and politically.
Guyana’s economy has been transformed with the development of the Stabroek oil block off Guyana’s coast, which began development in 2019. After the most recent discoveries, the project is said to hold an estimated 8 billion barrels of crude. China’s state-owned CNOOC (see TCS May 6, 2022) has a 25% interest alongside ExxonMobil subsidiary Esso Exploration and Production Guyana Ltd. (45%), and Hess Guyana Exploration Ltd. (30%). Guyana’s offshore oil and gas industry is projected to reach US$7.5 billion in annual revenues by 2030. Revenues reportedly surpassed US$1.1 billion last year.
Chinese firms have also been involved in several other major infrastructure projects, including the Amaila Falls Hydropower Project, and the New Demerara Harbour Bridge.
China Railway Group Limited (see TCS November 21, 2022) was initially selected to construct the Amaila Falls in 2012, and approved again in 2021 (see TCS November 5). However the approval fell through when China Railway pushed for further changes to their submission. The Guyanese government is again evaluating several foreign company proposals.
Allegations of corruption involving Guyanese and Chinese subjects isn’t novel - VICE Media aired a documentary on the topic in July 2022 (see TCS July 4), which drew heavy criticism from their ambassador to Guyana.
In February 2021, Guyana abruptly terminated an agreement with Taiwan to open a de facto embassy, hours after China urged Georgetown to “correct a mistake” that would have violated their “One-China policy” (see TCS February 12, and TCS February 5, 2021 for reference). China and Guyana established diplomatic relations in 1972, with the latter becoming the Western Hemisphere’s first recipient of Chinese aid in the same year.
We will continue to follow the issue, with a focus on how it impacts bilateral relations, and for any further revelations of organized crime links between Guyana and China. (MH, RP)
According to a statement issued by the Ministry of Commerce of China, Beijing concluded the FTA negotiation with Quito on Thursday, and the two parties will continue with the work of reviewing legal documents, translation and instigation of the internal ratification procedures within each country.
FTA negotiations with China began in February 2022, culminating in a final agreement after ten months.
~ Prensa Latina is a Cuban state-run media outlet ~
Cuba's first deputy minister of Energy and Mines (MINEM), Javier Ruben Cid, met with representatives of various Chinese companies in Beijing …diplomatic sources reported on February 23.
Cid visited the headquarters of Taiyuan Iron and Steel Co., Ltd. (TISCO) …a strategic importer of Cuban nickel.
The Cuban Embassy also noted Cid’s talks with executives from the China National Petroleum Corporation [CNPC - see TCS April 23, 2022 for our backgrounder], its subsidiary the Great Wall Drilling Company (GWDC), and China National Huachen Energy Group Co., Ltd. (CHC) to follow up on recent cooperation agreements, and review the possibilities of executing projects to use renewable energy sources.
…His agenda also included meetings with authorities from the [state-owned] National Energy Administration (NEA), the National Development and Reform Commission (NDRC), and the Ministry of Commerce. (RP)
The MINEM delegation during their state visit. Source: Carlos M. Pereira (Cuba’s Ambassador to China) @cmphcuba (Twitter)
Brazil, the world’s largest beef exporter, halted shipments of meat to China after confirming a case of mad-cow disease, raising concerns among farmers over a drawn-out beef ban from the country’s biggest trading partner.
Brazilian authorities detected the case in Para, northern Brazil, and immediately suspended the export of beef to China, as specified in a protocol signed by the two countries in 2015.
However, processing companies such as Minerva S.A., the main beef exporter in South America, and Marfrig confirmed that their plants in Argentina and Uruguay will continue to export to China.(NRM)
President Tsai Ing-wen said Feb. 16 that the government is committed to deepening cooperation with Paraguay to advance the development of both countries and the world as a whole.
…In response, Abdo said Taiwan is more than an important ally; it is a strategic partner of Paraguay. Following the talks, Tsai and Abdo jointly witnessed the signing of a bilateral agreement on the training and exchange of diplomatic personnel.
Taiwan has 14 diplomatic allies, with eight in Latin America and the Caribbean. Three countries in the region have recently switched diplomatic relations from Taiwan to China: Panama (2017), El Salvador (2018), and Nicaragua (2021).
Paraguay is the only South American country that maintains diplomatic relations with Taiwan. Although statements by President Abdo in 2022 raised suspicions he was considering switching diplomatic allegiance, the president clearly stated in his recent visit to Taiwan that ties will remain.(NRM)
Abdo and Tsai at their meeting. Source: @MaritoAbdo (Twitter)
On February 14, Ing-wen had also received Belize’s first lady Rossana Briceno, pledging to work with the Caribbean ally to further develop economic resilience and promote regional peace, prosperity and stability in the post-pandemic era.
Briceno was invited by the government to participate in the Empower Women, Empower Latin America and the Caribbean Forum taking place Feb. 15 in Taipei.
Taiwan and Belize signed an Economic Cooperation Agreement (ECA) in September 2020. The deal had been under consideration since 2014, took effect in January 2022, and has already benefited Belize’s seafood procurement and food processing industries.
In March 2022, the two countries restructured Taiwanese grants and concessionary loans, which were key to allocating the Belizean 2022-23 government budget (see TCS March 11, and TCS March 27, 2022 for further background). (RP)
