China Signal - Oct 10
Ganfeng's lithium contracts cancelled in MX, may be open to other lithium miners beyond 2024
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Critical Minerals - Mexico. AMLO has canceled nine lithium concessions held by Chinese state-owned firm Ganfeng Lithium. Beyond Mexico’s 2024 election, this may create opportunities for non-Chinese lithium miners.
Oil - Ecuador. Ecuador may continue allowing oil exploration in a reserve known for its biodiversity and indigenous populations, despite Ecuadorians voting overwhelmingly to halt operations. Chinese companies will benefit.
Diplomacy - Colombia, Chile. Chile’s Gabriel Boric and Colombia’s Gustavo Petro will travel to separately to Beijing on October 12 and 25, respectively.
Finance - Bolivia, Brazil. State-run Chinese banks have begun operating in Bolivia with a mandate to increase yuan-based transactions; Brazil recently completed its first yuan-reis direct currency swap.
Agriculture - Colombia. Colombia will begin exporting frozen beef to China next year.
Infrastructure - Argentina. Two electric trams were shipped to Argentina’s Jujuy province.
Critical Minerals 🪨🔋
Mexico 🇲🇽
AMLO’s government has canceled nine lithium concessions held by Chinese state-owned firm Ganfeng Lithium, arguing that the firm did not meet minimum investment requirements. The move is a troubling continuation of AMLO’s energy nationalist ideology. Under AMLO, Mexico’s lithium sector is under-funded and under-developed. Its hard rock lithium is more difficult to extract than lithium brine found in Argentina, Bolivia, and Chile. However a new Mexican president from December 2024 will face budgetary and investor pressure to open Mexican energy to greater private participation. This could re-align Mexico’s lithium sector with North America within the USMCA trade pact and for subsidies under the US’ Inflation Reduction Act.
In response Ganfeng Lithium filed appeals with the Ministry of Economy, arguing that the cancellation violated Mexican and international law.
Ganfeng Lithium’s concessions were in Sonora and were meant to be valid until at least 2060. (Read TCS June 12, 2022 for further background on Ganfeng).
AMLO moved to nationalize Mexico’s lithium in April 2022, pledging to gain greater control over its 1.7 million tons of lithium reserves. (Read more in TCS March 8, and TCS April 23, 2022).
AMLO has not issued any new mining concessions since taking office in 2018.
Canadian mining firms have invested the most in Mexico’s lithium sector, according to industry advisor Armando Ortega.
Ortega argued that AMLO’s nationalisation violates the USMCA and the Trans-Pacific Partnership, and that any action must be negotiated with its signatories. (VV)
Oil 🛢️
Ecuador 🇪🇨
Ecuador’s outgoing President Guillermo Lasso will not halt oil exploitation in the Yasuní reserve, and the country’s two presidential candidates are non-commital. A majority of Ecuadorians voted in a recent referendum to halt exploitation. Four different Chinese companies currently operate in the park.
Almost 60% of Ecuadorians voted to cease oil exploitation in the Yasuní reserve (see TCS September 8) on August 20.
China’s Sinopec and Chuanqing Drilling Engineering Company Limited (“CDEC,” a subsidiary of CNPC) have operated in the ITT oil block within the reserve since 2016. CDEC recently entered the Ishpingo field which, per a report by NGO Latinoamérica Sustentable, threatens irreversible environmental impact.
Reporting from 2013 suggests Beijing successfully lobbied Ecuador’s then president Rafael Correa to allow oil drilling.
Current presidential candidates Daniel Noboa and Luisa González are approaching the issue cautiously ahead of the October 15 runoff. Noboa questions the logic of continued exploitation, while González rejected the referendum because of its adverse fiscal impact. (NRM)
Diplomacy 🕊️
Colombia 🇨🇴
Colombian President Gustavo Petro will travel to China to meet China’s President Xi Jinping on October 25. Beijing is pushing Colombia to sign on to the BRI. Corruption allegations over the construction of Bogota's subway system by a Chinese consortium cloud the trip, and have Beijing looking to distance itself from formal talks of the metro line.
Petro wants China’s further assistance on transportation projects, particularly rail. He wants to modify the Bogota metro’s existing construction plans, however Xi has apparently stated twice he will not discuss the metro construction in a meeting with Petro. Read TSC September 22 for coverage of Bogota’s planned metro line no. 2.
An investigation by local news weekly Semana alleged in late September that the metro line was tainted with bribes of approximately $3.6 million, involving a Chinese individual, a former employee of the Ministry of Transportation, and Bogota’s mayor Claudia Lopez.
China’s ambassador to Colombia, Zhu Jingyang, urged Colombia to join the BRI at a recent bilateral forum, which was covered uncritically by local business journal Portafolio. (NRM)
Chile 🇨🇱
Chile’s President Gabriel Boric will make his first visit to China from October 12.
Seven ministers form part of Boric’s delegation, which aims to sign bilateral deals in technology, innovation, and education. Look also for activity in Chile’s copper, lithium, and fruit exports sectors.
Chile’s Ministry of Foreign Affairs will also host the eighth edition of Chile Week (October 14 - 20), an investment promotion event, in Shenzhen, Chengdu, Beijing, and Shanghai. (RP)
Finance 💸
Bolivia 🇧🇴
Chinese banks ICBC and Bank of China have begun operating in Bolivia with a mandate to promote the use of the Chinese yuan in international transactions, according to Chinese state media. This aligns with Bolivia’s President Luis Arce’s pledge to increase the volume of transactions in yuan and grow commercial ties with China.
Promotion of the yuan: Bolivia began using the yuan more extensively in May (see TCS July 28) to alleviate its shortage of US dollars.
Strategic collaboration with Chinese lithium consortium: Minister of Economy Marcelo Montenegro highlighted the role of Chinese and Bolivian banks in facilitating investments by Chinese lithium consortium CBC to develop two direct lithium extraction plants in Bolivia. An estimated US$ 1.4 billion will be invested. See TCS July 14 for further background. (NRM)
Brazil 🇧🇷
China and Brazil completed their first direct currency exchange, according to Chinese state media.
Bank of China said in a statement on October 3 that it facilitated a currency swap involving a letter of credit facility for Eldorado Brasil, a Brazilian paper pulp company. The amount exchanged was not disclosed.
Suzano, another pulp company, and oil giant Petrobras are reportedly considering similar direct currency swaps for China-related business.
The two countries signed a currency swap agreement in March (see TCS April 7). (RP)
Trade 📊
Colombia 🇨🇴
China has approved Colombian beef for import, following a decade of negotiations. The announcement came shortly after Colombian President Gustavo Petro’s upcoming visit to Beijing was publicised, and should be viewed as a broader diplomatic overture from Beijing to Bogota, given the economic and political influence of Colombia’s beef industry.
The breakthrough follows Colombia regaining status as free of foot-and-mouth disease.
China accounts for 43% of global frozen beef imports.
Colombian shipments are expected to begin in 2024, and industry leaders hope for 50,000 tons to be exported in the first year, worth approximately US$ 300 million. (NRM)
Infrastructure 🚆
Argentina 🇦🇷
Two lithium iron phosphate battery-powered tram trains departed China for Argentina’s Jujuy province on September 23. State media hailed the delivery as the first since Argentina joined the Belt and Road Initiative, although the contract with rail equipment manufacturer CRRC Tangshan Co predates Argentina joining the BRI.
CRRC is the world's largest supplier of rail transit equipment.
Read more of CRRC’s light rail in Jujuy in TCS May 13. (RP)