China Signal - December 15
Copper mining contract revoked in Panama, $72m loan to build solar park in Nicaragua
G’day and welcome to The China Signal. Here’s what you need to know:
Critical Minerals - Panama. Panama’s highest court has revoked a major copper mining contract with First Quantum, whose largest shareholder is Jiangxi Copper Co.
Clean Energy - Nicaragua. Nicaragua’s legislature has approved a $72 million loan agreement from China Communications Construction to build a solar park.
Automotive - Mexico. A Shaanxi Automobile Group subsidiary plans to invest $10 million to construct a truck manufacturing plant in central Mexico.
Diplomacy - Argentina. The Milei administration says it won’t join BRICS.
Infrastructure - El Salvador. Construction on a $40 million water treatment plant begins.
Trade - Nicaragua. Nicaragua ratified its China FTA, to be implemented in January 2024.
Plus more. Read on.
Critical Minerals 🪨
Panama 🇵🇦
Panama’s top court has revoked a $375 million/year copper mining contract from First Quantum to mine the Cobre Panama site. First Quantum is a Canadian mining company whose biggest shareholder is China’s Jiangxi Copper Co Ltd. The awarding of the contract sparked allegations of favoritism in the bidding procedure and a lack of due process.
The contract was signed in October. Initial public discontent over the agreement morphed into broader anti-government sentiment; some protests prevented supplies from reaching the mine, temporarily halting production. Panama’s top court ruled the First Quantum’s contract with the state unconstitutional on November 28.
First Quantum initiated international arbitration against Panama in December.
Cobre Panama contributes 5% to Panama’s GDP and 1% in global copper production, according to Reuters.
Jiangxi Copper Co actually increased their stake in First Quantum in November while Panama’s courts were reviewing the contract, indicative of the greater risk tolerance many Chinese companies have, who often receive official and informal state-backing.
The company grew its share of First Quantum from 18.3% to 18.5%.
Shortly after Jiangxi Copper Co acquired its stake in First Quantum in 2020, First Quantum instituted a policy that prevents any shareholder owning more than 20% of the company. (IB, MH)
Panamanian protesters expressing discontent over the First Quantum contract in October 2023. Source: Bloomberg News.
Clean Energy 💡
Nicaragua 🇳🇮
The National Assembly’s Production, Economy, and Budget Committee has approved a $72 million loan agreement between the Nicaraguan government and China Communications Construction (CCC) for a solar park, first inked in October 2023.
The solar park is projected to reduce the state water utility Enacal’s electricity bill by 40%.
No Chinese financial institutions were mentioned to date in the solar park agreement. It appears the loan is being offered directly by CCC in its capacity to provide customers with “investment financing” services.
This ongoing renewables project between Nicaragua and China is moving in parallel with other recently publicized deals, including the Tumarín power plant and the Mojolka power plant, supported by China Huadian Overseas Investment. (IB)
Automotive 🚛
Mexico 🇲🇽
China’s Shaanxi Automobile Group’s subsidiary Shacman will invest $10 million in the first quarter of 2024 to install a heavy truck assembly plant in Querétaro State.
Shacman aims to manufacture 1,000 truck units in 2024.
The gradual entry of Chinese automakers in the Mexican market is raising trilateral USMCA concerns surrounding fair competition. For more context, see TCS November 14. (IB)
Diplomacy 🕊️
Argentina 🇦🇷
Argentina won’t join BRICS next year, said Diana Mondino, Argentina’s new foreign minister.
This stance confirms what Mondino previously said after President Javier Milei’s election victory. Argentina was poised to become a BRICS member starting January 1 (see TCS September 8 for further background). Milei and his team were sworn into office on December 10.
Milei met with Wu Weihua, Chinese Congress’s Vice-Chairman, on December 11. (RP)
Mexico 🇲🇽
Mexican president Andrés Manuel López Obrador met with Chinese president Xi Jinping on the sidelines of the APEC summit in San Francisco on November 16. This was the first in-person encounter between the two leaders.
The discussion covered trade, bilateral supply chains, infrastructure, greater electric vehicle collaboration, and the fentanyl crisis, including a verbal commitment to combat the illegal trafficking of precursor chemicals.
The China-Mexico bilateral discussion on fentanyl control occurred in tandem with US-China and US-Mexico discussions on the same subject.
Mexico and the US have sought greater cooperation with China on fentanyl monitoring since this April, with limited results. For further context, see TCS April 7 and TCS April 24. (IB)
The Mexican and Chinese presidents during their meeting. Source: X/Twitter (Mexican Secretariat of Presidency), @GobiernoMX.
Infrastructure 🏗🛠
El Salvador 🇸🇻
El Salvador expects to start construction on a Chinese-gifted $40 million water treatment plant in Ilopango in December. Work on a $100 million sporting stadium also broke ground recently.
China’s Hebei Construction Group will construct the plant, which is expected to take three years.
The completed plant will supply approximately 250,000 inhabitants across eight municipalities.
El Salvador is experiencing a boom in Chinese-funded projects, recently opening a Chinese-gifted $54 million library in San Salvador, the first of its size and resources in the region. The library has attracted controversy after authorities demolished a cultural heritage site for its construction. (IB, MH)
Nicaragua 🇳🇮
The China State Construction Engineering Corporation began building a Nicaraguan public housing project funded by China’s International Development Cooperation Agency, one of the first initiatives announced after Nicaragua broke off relations with Taiwan in 2021.
The Managua-based project is expected to be completed in three years for an undisclosed amount, and will include 920 affordable homes, a public plaza, and sporting grounds, among other amenities.
This project is part of a broader 12,000-plus unit housing development commitment between Nicaragua and China’s International Development Cooperation Agency, first reported this April. See TCS April 24 for further details. (IB)
Background: China State Construction Engineering Corporation (“CSCEC”) 🔎
CSCEC, founded in 1982, is a subsidiary of China Construction Engineering Corp and specializes in several types of projects in China and worldwide: construction engineering; infrastructure and investment; real estate development and investment; and prospecting and design, among others. CSCEC’s largest presence in Latin America is in Nicaragua. (IB)
Trade 📊
Nicaragua 🇳🇮
The Nicaraguan legislature has unanimously ratified the Nicaragua-China FTA to be implemented in January 2024. Nicaraguan authorities are focused on exporting bovine meat, sugar, seafood products, and textiles, and are selling the agreement as a boon for small businesses.
See TCS July 28 and TCS September 8 for further background. (IB)
Uruguay 🇺🇾
Uruguay and China have elevated their bi-lateral relationship to a “Comprehensive Strategic Partnership'' following a meeting between the country’s leaders in Beijing on November 22. Twenty-four agreements and MOUs to enhance market access for Uruguayan products were signed. FTA negotiations continue.
These agreements have the potential to boost Uruguayan agricultural exports by $750 million.
FTA negotiations between the two countries are still on course, despite Mercosur’s resistance (see TCS August 19 for further background).
A Comprehensive Strategic Partnership is the highest category that Beijing awards to its diplomatic partners. In the region, Argentina, Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela have the same title. (NRM)
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