China Signal - Oct 31

Chinese firms intensify plans to nearshore in Mexico

G’day, and welcome to the China Signal. Here’s what you need to know:

1. Nearshoring - Mexico. Samuel Garcia, governor of Nuevo Leon in Mexico’s north, announced a swathe of Chinese investments in critical minerals, electric vehicle supply chains, and a $5 billion industrial park during a recent trip to China.

2. Infrastructure - Colombia, Nicaragua. Medellin has awarded a contract to complete a dam to a Chinese-Colombian consortium. Chinese engineering companies plan to convert a military airport to civilian use in Nicaragua, and construct a new railway line, which could become an important trade route.

3. Critical Minerals - Chile, Mexico. Tsingshan Holding Group will build a lithium iron phosphate plant in northern Chile, and a rare earth production plant will be expanded in Mexico.

4. Renewable Energy - Mexico. Trina Solar will invest up to $1 billion in Nuevo Leon; details are unclear.

5. Finance - Argentina. Finance minister and presidential candidate Sergio Massa secured a $6.5 billion equivalent swap line from Beijing on the eve of Argentina’s first round presidential election.

6. Diplomacy - Colombia. Colombia upgraded its diplomatic relationship with China, but didn’t commit to the Belt and Road Initiative.

7. Public Health - Chile. Sinovac abandons plans for a vaccine factory in Chile.

Plus more. Read on.

Nearshoring 🤝 

Mexico 🇲🇽

China's Lingong Heavy Machinery Co., Ltd. (“LGMG”) will establish a US$5 billion industrial park in Mexico's northern state of Nuevo Leon.

• The project will construct facilities for processing and manufacturing, warehousing and logistics, and business support services.

• Founded in 1972, LGMG is one of China’s four major construction machinery manufacturers. Headquartered in Jinan (Shandong province), it is one of LGMG Group’s 19 subsidiaries.

Car parts supplier Ningbo Tuopu Group and technology company Shenzhen H&T Intelligent Control Co. will invest approximately $1 billion in Nuevo Leon, where Tesla has plans to build an electric vehicle battery “gigafactory.” 

• Ningbo Tuopu Group will invest $710 million, and Shenzhen $260 million. Per Garcia, Ningbo could begin production in Nuevo Leon by year end, although construction of Tesla’s factory has yet to start.

• See TCS August 19 for further background.

Nice timing for a presidential campaign:

• Nuevo Leon’s Governor Samuel Garcia promoted the announcement to score political points against his opponents. Garcia plans to run for president in Mexico’s 2024 elections–he’s a long shot. (MH, RP)

Infrastructure 🏗️

Colombia 🇨🇴

Colombian company Empresas Públicas de Medellín (EPM) has awarded a $254 million contract for work on the Hidroituango dam to Yellow River Engineering Consulting (“YREC”) as part of a Chinese-Colombian consortium. YREC had a small involvement with the Coca Codo Sinclair Hydroelectric plant in Ecuador, which has been marred by structural issues, environmental damage, and corruption. 

• Per EPM, the consortium is: Yellow River Engineering Consulting, LTD Sucursal Colombia, and Schrader Camargo S.A.S.

• The project is projected to be completed in three years.

Background: Yellow River Engineering Consulting (“YREC”) 🔎

YREC is a Chinese state-owned engineering consulting company, founded in 1956. YREC has surveyed and designed several large-scale projects in Latin America (see TCS March 8). (VV)

Nicaragua 🇳🇮

China CAMC Engineering Co (“CAMCE”) will convert the Punta Huete military airport in Managua for civil use, as part of broader airport improvements and expansion. signed an around US$492 million contract for the reconstruction, expansion and improvement of the Punta Huete military Airport in Managua.

• The contract is worth approximately $490 million, and aims to convert the airport into a civil airport with a capacity up to 3.5 million passengers per year to support tourism.

• CAMCE, a Shenzhen Stock Exchange-traded subsidiary of China National Machinery Industry Corporation (“Sinomach”) was ranked 279th on Fortune’s Global 500 2023 List with revenues around $51 billion.

Nicaragua has signed an MoU with state owned China Civil Engineering Construction Corporation (“CCECC”) to design and construct the Managua-Masaya-Granada railroad.

• No further details were publicly available.

• CCECC is a China Railway Construction Corporation, Ltd. (“CRCC”) subsidiary. See TCS May 27, 2022 for background on CRCC, which most recently reported $163 billion in revenue. (RP)

Critical Minerals 🔋🪨

Chile 🇨🇱

Chile's President Gabriel Boric announced a $233.2 million investment from China's Tsingshan Holding Group to establish a lithium iron phosphate (LFP) plant in northern Chile.

• The project is expected to be operational by May 2025, and would produce 120,000 tonnes of LFP. 

• Tsingshan Chairman Xiang Guangda, raised the possibility of further investments such as a lithium battery industry park, conditional on the Chilean government’s support.

Tsingshan is a major actor in Argentina’s lithium industry.

• See TCS January 15 (Centenario Ratones) and TCS September 8 (Jujuy province). (NRM)

Mexico 🇲🇽

China’s JL MAG Rare-Earth Co., Ltd. (“JL MAG”) will invest US$100 million in Nuevo Leon to expand a rare earth magnet production plant, to be completed by 2025.

• The facility will have an annual recycling capacity of 5,000 tons of scrap alloy, and a production output of 3,000 tons of high-end magnetic products a year.

• Founded in 2008, JL MAG is headquartered in Ganzhou (Jiangxi Province). It has been listed on the Shenzhen Stock Exchange since September 2018. (RP)

Renewable Energy 🔋

Mexico 🇲🇽

Chinese solar panel producer Trina Solar will invest $700 million to $1 billion in Nuevo Leon.

• Nuevo Leon Governor Samuel Garcia made the announcement during a visit to China, where he met with Trina’s executives on October 16. Further details on the nature or timeframe of this investment were not announced.

• Trina Solar has active projects in Chile and Colombia (Los Llanos, Urrá). Production of solar panel trackers is expected to begin in Bahia, Brazil by year end. (RP)

Samuel García visiting Trina Solar’s headquarters. Source: @samuel_garcias (Twitter)

Finance 💸

Argentina 🇦🇷

Days before Argentina’s first round presidential election, current finance minister and presidential candidate Sergio Massa secured $6.5 billion worth of Chinese yuan to stabilise Argentina’s economy. Taken in context against Massa’s election rival Javier Milei, who threatens to break diplomatic ties with Beijing, this could be viewed as an effort by Beijing to shape Argentina’s election. Per Reuters:

• “The agreement with China has helped Argentina increase its depleted foreign currency reserves as it undergoes a major economic crisis, with annual inflation above 130% and central bank dollar reserves hitting negative levels.”

• Beijing expanded its swap line with Argentina in June.

• Argentina began paying for some Chinese imports in yuan in April.

Beijing is using central bank swap lines as a tool of economic statecraft, according to academics. Read this Yale School of Management post to go deeper. (MH, NRM)

Suriname 🇸🇷

Suriname aims to restructure its debt with China to align with other creditors, as it enters negotiations with the IMF over its $600 million debt to the fund.

• Foreign Affairs Minister Albert Ramdin will travel to Beijing on November 5 for talks.

Refresh yourself on Suriname-China debt talks: TCS June 16. (RP)

Cybersecurity 🔐🌐

Costa Rica 🇨🇷

The Costa Rican government has indirectly blocked Chinese companies from participating in its 5G network. The Chinese Embassy in Costa Rica responded that “the confidence” of Chinese companies operating in has been “undermined.”

• In August, Costa Rica’s President Rodrigo Chaves determined that 5G services cannot be contracted to companies from countries that have not ratified the 2001 Budapest Convention on cybersecurity. This excludes Chinese, Russian, Indian, and South Korean companies, among others.

Dig deeper:

• Paula Bogantes, Costa Rica’s Minister for Science, Innovation, Technology and Telecommunications defended the decision in an open letter last week.

Costa Rica suffered two major cyberattacks from Russian cyberattackers in May 2022. The attacks stood out by targeting a foreign government, and calling for its overthrow. The incidents drew cybersecurity funding from the European Union and the United States. 

• Russian hacking group Conti initiated a ransomware attack on Costa Rican government institutions in April 2022. Disruptions caused estimated losses of $30 million per day and lasted several weeks. President Chaves to invoke a state of emergency.

• The Hive ransomware group paralyzed Costa Rica’s health care system when it was infiltrated on May 31, 2022.

• Costa Rica signed an MOU with the EU in December 2022 to deepen cybersecurity cooperation. 

• The United States announced a three-year, $9.8 million cybersecurity assistance package with Costa Rica in August 2023. (RP)

Guyana 🇬🇾

Chinese hackers are suspected to be behind a cyberespionage campaign against Guyanese government entities in February this year.

• The attacks occurred amidst heightened tensions between Guyana and China, after a Guyanese family was arrested on charges of laundering $19 million for Chinese businesses (see TCS March 8). No further information on the status of the case has been publicly released.

Read Americas Quarterly’s feature on Latin America and the Caribbean’s vulnerability to cyberattack. (RP) 

Public Transportation 🚌 🚆 ✈️

Nicaragua 🇳🇮

Chinese firm Yutong delivered 250 buses to Nicaragua on October 13. Up to 2,000 units are expected to be delivered through 2024, according to a government spokesperson, although a contract for 500 is the only known agreement with Yutong.

• Nicaragua’s Ortega regime signed an agreement with Yutong to purchase 500 units on June 5.

Background: Yutong 🔎

Founded in 1963 as Zhengzhou Bus Repair Factory, Yutong is a large-scale (15% global market share) bus manufacturing company. It has three production plants in Zhengzhou (Henan province). Yutong Zijin has been listed on the Shanghai Stock Exchange since 1997.

According to the company’s most recent estimates, Yutong has exported at least 25,000 buses and coaches to Latin America and the Caribbean, second only to Yutong’s Asia-bound exports. Yutong has a Venezuelan branch, and has provided bus fleets to Chilean, Cuban, and Mexican municipalities. (RP)

Diplomacy 🕊️

Colombia 🇨🇴

Colombia and China upgraded their diplomatic relationship to a “strategic partnership” during Colombian President Gustavo Petro’s visit to Beijing last week, but did not sign on to the Belt and Road Initiative.

• Twelve cooperation deals were signed, including a commitment to increase Colombian beef imports, and the establishment of various working groups in order to improve commerce. 

• Petro met with executives of the China Harbour Engineering Company Limited and the Civil Engineering Construction Corporation, who form the consortium building the Bogotá metro line (see TCS October 10).

Colombian administrations have lagged behind the region in its diplomatic engagement with Beijing because of their reliance on the United States for aid and military support. However, the bilateral economic relationship grew substantially under previous president Ivan Duque, and will continue to do so.

• Guyana is now the only South American country not to have the “strategic partnership” designation from Beijing. (MH, VV)

Source: El Pais

Brazil 🇧🇷

For the first time in public, Chinese officials have urged Brazil to join the BRI. Next year’s celebration of the 50th anniversary of bilateral relations will serve as another hook to join, however the Lula administration is unsure if admission would generate additional economic activity over high existing levels, at the risk of straining relations with the US. 

• Zhu Qingqiao, China's ambassador to Brazil called for Brazil to join the BRI to achieve “higher level” bilateral ties at the China-Brazil Business Council meeting on October 23.

• Brazil and Colombia are the only South American countries that are not part of China’s BRI. (MH, NRM)

Public Health 🏥

Chile 🇨🇱

Sinovac Biotech Ltd. has abandoned a $100 million vaccine plant in Santiago. Progress on a similar vaccine plant in Bogotá, Colombia is unclear.

• The plant was slated to produce 50 million doses annually, and was expected to be in production by year end 2023. 

• According to Chile’s Minister of Science and Technology Aisén Etcheverry, Sinovac abandoned the project due to Chile’s “[insufficient] market size”.

Go back:

• Sinovac’s plans in Chile were first mentioned here in May 2021 and then May 2022.

• Sinovac’s Colombia plant arose from an MoU signed in December 2021 (see TCS December 3, 2021). (RP)