China Signal - March 19

SOE wins major railway construction contract in Brazil, Ganfeng Lithium grows presence in Argentina

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

1. Infrastructure - Brazil. Chinese SOE CRRC won a concession to build two railways in São Paulo state.

2. Critical Minerals - Argentina. Ganfeng Lithium will take a 14.8% stake in Proyecto Pastos Grandes, growing their Argentina presence.

3. Electric Vehicles - Brazil. BYD began building a vehicle manufacturing plant in Brazil as part of their Latin American expansion.

4. 5G - Paraguay. Paraguay’s president met with Huawei executives in Spain. Paraguay’s 5G auction is expected to occur later this year.

Plus more. Read on.

Infrastructure 🏗️

Brazil 🇧🇷

China’s state owned rail equipment manufacturer CRRC Corporation and Brazil’s Comporte won a 30-year concession to build two railways within São Paulo state and to manage a currently state-owned train line. 

• The duo formed the sole bidding consortium for the three-part project, whose two legs of construction are due to be completed in 2031 at a cost of US$ 2.8 billion.

• The two planned routes run between the cities of Campinas and São Paulo and between Campinas and Jundiaí using 15 trains. State authorities underscored their broader ambition to continue building passenger train projects across key cities. (IB)

Critical Minerals 🪨

Argentina 🇦🇷

Ganfeng Lithium will buy a 14.8% stake in Millennial’s Argentine subsidiary, Proyecto Pastos Grandes, for US$70 million. 

• Ganfeng also has a stake in Argentina’s Caucharí-Olaroz project, in stage 2 of production since 2023. 

• Ganfeng was the top shareholder in Lithium Americas, which split its North American and Argentine divisions into two independent companies in May 2023 amidst US government pressure for a North America-centric supply chain. The split left Ganfeng with control of Lithium America’s Latin American operations. 

• Ganfeng had a significant stake in Mexico too, however the AMLO government canceled nine Ganfeng concessions in late 2023, alleging contract non compliance. AMLO nationalised Mexico’s lithium industry around the same time - Ganfeng argues their projects fall outside the scope of AMLO’s nationalisation law.

• See TCS October 10, 2023 and TCS October 22, 2022  for more details. (IB, MH)

Electric Vehicles 🔋🚗

Brazil 🇧🇷

BYD, China’s leading EV company, began building a manufacturing plant in Brazil announced last month.

• The plant, slated to be operational by late 2024 or early 2025, will produce an estimated 150,000 models yearly, including regional top seller “Dolphin Mini”.

• For more on BYD’s growth in Latin America, see TCS February 27. (IB)

Technology 📱📡

Paraguay 🇵🇾

President Peña met with Huawei executives in his recent visit to Spain, walking a delicate line between his country’s formal diplomatic recognition of Taiwan and its search for increased infrastructure, trade, and investment opportunities. 

• Huawei currently provides smartphone sales, broadband partnerships with the Ministry of Education, and youth talent search programs in the country. The company may be looking to further position itself ahead of Paraguay’s 5G network auction. 

• Paraguay has not opened public bidding for its 5G network, although it expects to do so in the second half of 2024. Prior to any auction, the telecommunications authority seeks to increase service providers’ licensing period from 5 to 15 years. 

• The US government has strongly cautioned its diplomatic allies in the region to reject Huawei’s partnerships due to potential information security hazards. (IB, MH)

Diplomacy 🤝

CELAC Heads of State Summit

Former ambassador and “Special Representative on Latin American Affairs” Qiu Xiaoqi attended CELAC’s 8th Heads of State summit in Saint Vincent and the Grenadines. In a speech, Qiu highlighted China-CELAC ties. He also met with Honduran president Xiomara Castro. 

• Honduras’s switch to China in March 2023 was marked by China’s alleged use of dollar diplomacy to outcompete Taiwan. See TCS March 29, 2023 for further background. 

• Honduras’ national electricity company awarded a US$125 million electricity generation contract to SOE China Energy in February 2024, the most significant bilateral agreement so far.

• Qiu Xiaoqi also traveled to Panama, where he met with Panamanian Vice Foreign Minister Vladimir Adolfo Franco Sousa to discuss enhancing China-Latin America cooperation. (IB, NRM)

Uruguay 🇺🇾

Uruguay’s president Luis Lacalle Pou accused fellow MERCOSUR members Brazil and Argentina of “barring” the country’s attempts to strike a Free Trade Agreement with China during an annual speech to legislators.

• Uruguay has remained in the exploratory stage of a bilateral FTA with China for several years. Both sides have spoken positively about the implications of such a deal. For more context, see TCS July 26, 2022. 

• Crucially, Uruguay claims a differing interpretation than its fellow bloc members of whether MERCOSUR permits unilateral FTA negotiation with non-member states. Trade experts assert the current agreement does not allow this. 

• Even without an FTA, Uruguay-China economic ties have grown. Notwithstanding a $2 billion drop in trade volume between 2022 and 2023, Uruguay continues to be a key agricultural products exporter that addresses China’s focus on food security. (IB)

Trade 💱

Panama & Colombia 🇵🇦 🇨🇴

Chinese authorities have certified Panama’s pork processing plant for export to China and cleared Panamanian companies to export beef, chicken, oil, and fishmeal, Minister of Agriculture Augusto Valderrama announced. Valderrama contextualised the approvals as a counterbalance to Panama’s import-dominant trade relationship with the United States.

• According to Valderrama, exporting to China provides a counterbalance against US imports. He also argued that the US-Panama Trade Promotion Agreement (TPA), adversely affects Panama’s pork, poultry, dairy, beef, and rice sectors, which account for nearly 75% of the country's GDP. 

• Chinese and Colombian authorities also advanced discussions to export Colombian shrimp, pork, and lemons, per the Colombian Ministry of Agriculture. Two beef export plants were “approved” for construction - no further details were provided. (NRM, MH)

Honduras 🇭🇳

Chinese companies are considering offering shrimp import contracts from Honduras’ south at lower prices than offers from Taiwan. Taiwan was a key buyer of shrimps from Honduras before the Central American country recognised Beijing and severed formal diplomatic ties with Taipei in 2023.

• One Chinese company Alba China has offered $1.60 to $1.80 per pound, undercutting Taiwan's $2.50 offer. However, tariffs distort this pricing; Taiwan has levied a 20% tariff on shrimp imports following Honduras’ diplomatic separation, while China is allowing tariff-free shrimp imports while bilateral FTA discussions continue.

• No information on “Alba China” was uncovered online. (NRM, MH)