China Signal - February 9
CATL & CMOC to build lithium processing facility in Bolivia, BYD eyes Brazil lithium acquisition, Xi to visit Peru later this year.
G’day, and welcome to The China Signal. Here’s what you need to know:
Critical Minerals - Bolivia. CATL and CMOC signed an agreement to build a lithium processing facility in Bolivia
Critical Minerals - Brazil. BYD eyes takeover of Sigma Lithium Resources, a Canadian firm active in Brazil.
Diplomacy - Peru. Xi Jinping may travel to Peru to inaugurate the Chancay port later this year.
Investment - Latin America. Major geopolitical themes emphasised and analysed by The China Signal for the past 18 months have been affirmed by the Inter-American Dialogue’s latest China investment study.
Plus more. Read on.
Critical Minerals 🔋
Bolivia 🇧🇴
The Chinese consortium CBC - which includes CATL and CMOC - has signed a second agreement with Bolivia’s state-owned lithium enterprise YLB for a $90 million pilot plant processing 2,500 metric tons of lithium per year.
CBC and YLB first announced their first collaboration in January 2023 to construct two “lithium industrial complexes” in the Coipasa and Uyuni salt flats (see TCS January 30, 2023).
China is not Bolivia’s only partner in lithium development. Bolivian authorities briefly worked with German firm ACI Systems in 2018 as well as the Russia’s Uranium One Group and India’s Altmin since 2023. (IB, RP)
Brazil 🇧🇷
Chinese electric-car maker BYD has held talks about a potential takeover of a lithium producer in Brazil.
BYD’s Brazil chair Alexandre Baldy said discussions had taken place with $2.9bn-valued Sigma Lithium Resources over a possible supply agreement, joint venture or acquisition.
Sigma, a Toronto Stock Exchange listed company, began shipping lithium from its hard rock mine and processing plant in Minas Gerais in 2023. Sigma’s shares have fallen about a third over the past six months, amid a sharp fall in lithium prices that has stirred concerns of oversupply. The company’s board is conducting a strategic review that could result in a sale of the business, or listing of its Brazilian unit on Nasdaq and the Singapore Stock Exchange.
BYD’s projected move follows a late 2023 Latin American tour by a delegation of its executives, including the company’s chairman and founder, Wang Chuanfu, who met Chile’s Gabriel Boric to discuss accelerating electrification and developing of the local lithium industry.
Additionally, BYD has already expressed interest in processing iron phosphate and lithium at its Bahia unit to support the production of electric vehicles, a deal that was inked last year (see TCS July 14, 2023). BYD’s factory in Bahia is set to become the company’s first electric car factory outside Asia. (RP)
More Context:
In November 2022, Canada ordered three Chinese companies - Sinomine Rare Metals Resources, Chengze Lithium International, and Zangge Mining’s subsidiary Zangge Mining Investment - to sell their investments in Canadian critical minerals, citing national security.
Earlier, in June 2022, Canada entered the Minerals Security Partnership with the US and others, aimed at securing the supply of critical minerals including lithium.
Neither the US nor Canada have free trade agreements with Brazil, meaning Brazilian lithium does not qualify for US Inflation Reduction Act subsidies. (RP)
Chile 🇨🇱
BYD will provide Spanish power producer Grenergy’s Chilean subsidiary with over 2,000 battery storage systems for its Oasis de Atacama solar project in Northern Chile.
Grenergy’s Oasis de Atacama project will be the world’s largest energy storage project, according to its press release.
The company is investing US$1.4 billion in the project, which is expected to be operational from 2026. (RP)
Diplomacy 🕊️
Peru 🇵🇪
Chinese president Xi Jinping will visit Peru to inaugurate the completed Chancay port terminal between October-December 2024, as part of a broader regional itinerary.
The Chancay port, built by Cosco Shipping and considered a flagship Belt and Road project, will link Peru with Shanghai and reduce cross-continental maritime travel from 35-40 days to approximately 23 days.
Chancay has faced dual-use concerns that it may confer a regional geopolitical advantage on China and faced environmental concerns from Peruvian civil society. See TCS March 18 for further context.
Xi is also expected to attend the APEC forum’s Presidential Summit in Peru between November 10th and 16th. (IB)
Colombia 🇨🇴
Both heads of Colombia’s bicameral legislature met with their Chinese counterpart in Beijing on January 31. They discussed increasing trade and investment cooperation and holding more frequent professional exchanges between their countries.
The meeting follows Colombian president Gustavo Petro’s October visit to China, where he signed various agreements on industrial investment, science and technology, and the digital economy, among other topics. (IB)
Brazil 🇧🇷
On January 19, Brazil and China announced an agreement to double to ten years the validity of tourist and business visas for people traveling between the two countries.
The agreement was reached during the visit of Chinese Foreign Minister, Wang Yi, to Brazil (see TCS January 12 for further context). Brazil hopes that the deal will boost the number of Chinese tourist arrivals to the country, which continued well below pre-pandemic average in 2023.
Wang also met with President Lula in Bahia before heading to Jamaica. No further details were available. (RP)
Trade 🛳️📦
Ecuador 🇪🇨
Ecuador’s recently ratified FTA with China has been scrutinised for concerns that it would overload the country’s waste disposal system and cause environmental damage.
Under the FTA’s terms, Chinese waste from “pharmaceutical products, electrical parts, batteries, scrap metal, plastics, glass, and contaminated liquids” would enter Ecuador for processing.
Given that the FTA will heavily incentivize agricultural and marine Ecuadorian exports, experts also predict a corresponding rise in deforestation, overfishing, and pesticide-sourced pollution as well as public health challenges.
For more on Ecuador’s road to its FTA with China, see TCS January 15, 2023. (IB)
Oil 🛢️
Ecuador 🇪🇨
To finance Ecuador’s war on organized crime, President Daniel Noboa is contemplating postponing the shutdown of a contentious oil reserve on Indigenous lands with Chinese operations.
In August 2023, a majority of Ecuadorians voted via referendum to cease extraction in Block 43-ITT, an oil-rich sector of Indigenous lands in the Amazon. However, operations have yet to be formally wound down.
The block produces approximately 58,000 barrels per day and is forecast to generate $13.8 billion in income for Ecuador over the next two decades.
Four different Chinese companies, including Sinopec and CNPC have been awarded extraction contracts since 2016. For more details, see TCS September 8 and TCS October 10. (IB)
Investment 💴
Latin America 🏔️🏝️
TCS reader Margaret Myers and her colleagues at the Inter-American Dialogue have published their latest report on Chinese investment in Latin America. Their findings, which analyse investment up to 2022, affirm trends The China Signal has emphasized for the past 18 months. Here are selected quotes from their key findings:
Data on Chinese FDI to the LAC region show a notable downward trend in project announcements over the past few years. This presents as a tapering in the value of greenfield FDI projects over time, and a more pronounced drop in the value of Chinese mergers and acquisitions (M&A) in the region.
Chinese companies are in many cases pursuing more engagement with LAC, but through smaller deals on average—and in frontier sectors that are directly aligned with Beijing’s own economic growth objectives.
Many of these new, priority areas are described by China as “new infrastructure” (新基建), a term which encompasses industries— telecommunications, fintech, and energy transition, for instance—that are broadly innovation-related, but also a critical part of China’s own economic growth strategy.
Chinese FDI in these industries is on the rise, accounting for 58 percent (around $3.7 billion) of total annual Chinese FDI in the region in 2022 and over 60 percent of the total number of FDI deals announced by Chinese companies that year.
Chinese investors remain focused on traditional sectors of interest, too, including those related to China’s own food and energy security. Some of these still account for a significant portion of overall investment, but investment within these sectors is also shifting in ways that are consistent with China’s growing focus on innovation.
In general, the sorts of large-scale infrastructure projects that once characterized the Belt and Road Initiative (BRI)—Chinese President Xi Jinping’s signature foreign policy initiative—are no longer as emblematic of Chinese investment in LAC as they once were. In many parts of the region, Chinese interest in canals, rail, and other major transport and energy infrastructure is being replaced by a growing emphasis on innovation, whether in information and communication technology (ICT), renewable energy, or other emerging industries—consistent with Beijing’s laser focus on its own economic upgrading and global competitiveness. (MH)
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