The China Signal - April 24
Lula's visit to China, control over Lima's electricity grid, BYD in Chile, discussions for a deep water port in Nicaragua
G’day, and welcome to The China Signal. This week, Lula’s visit to China, Enel sells its two Peruvian electrical utility equity stakes to China Southern Power—leaving Lima’s entire electricity distribution network to two Chinese state owned companies, BYD to build a battery component plant in Chile, the US intelligence leak reports Nicaragua’s and China’s plans for a deep-water port in eastern Nicaragua, plus more. Read on.
Diplomacy 🕊️
Brazil 🇧🇷
Lula signed 15 bi-lateral agreements worth approximately US$10 billion in his recent visit to China from April 11-14. 20 other agreements between private companies were also inked.
Lula courts Chinese tech for Brazil, brushes off "prejudices" | Reuters - April 14, 2023
China and Brazil agreed to set up a working group to pursue cooperation on semiconductors as the South American nation strengthens ties with Beijing in areas of sensitive technology.
The 15 agreements included a deal for a sixth satellite used to monitor the Amazon, and the development of technology for cybersecurity and fifth-generation (5G) mobile communications.
In 2022, Brazil was the third largest producer of silicon, a vital semiconductor component, and China first. China produces 98% and 59% of the world’s gallium and indium.
The China-Brazil Earth Resources Satellite (CBERS) programme began in 1988. Each country will share half the cost of this new satellite, which is expected to be launched in 2028. The agreement involves Huawei, and was signed after Lula’s visit to Huawei's Shanghai research center on April 13.
On April 13, Lula also attended Dilma Rousseff’s inauguration ceremony for her new role as president of the New Development Bank (NDB), and met with electric vehicles maker BYD’s CEO (see TCS April 8, 2022 for further background).
BYD - which already owns an iron-phosphate battery factory in Brazil’s Amazonas region, as well as two other factories - is reportedly in talks to start operations at a factory in the state of Bahia this year. The company plans to build two more factories by 2025.
Other agreements were signed in the trade, media, and agriculture domains:
Brazil and China agreed to form a working group to “avoid unnecessary barriers to trade” and accelerate the “movement, release, and customs clearance of goods”.
…The state news agencies Xinhua and EBC [Empresa Brasil de Comunicação] will jointly share news stories and a limited number of photos each month.
A new protocol [was signed] on sanitary requirements for animal protein exported from Brazil to China, [along with] a work plan on electronic certificates for animal products.
Finally, the two countries stressed their prolonged collaboration in multilateral mechanisms, and towards climate change counter-action, environmental protection and sustainable development. (RP)
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China-founded fast-fashion giant Shein plans to invest nearly US$150 million in Brazil, making the country its manufacturing and export hub for Latin America as the e-commerce platform continues global expansion.
Shein also anticipates that its investment will help 2,000 local manufacturers create as many as 100,000 jobs within the next three years, it said. Its online marketplace plans to on-board third-party Brazilian sellers following a pilot programme last year.
The company aims to have 85% of its sales in Brazil sourced from local manufacturers and vendors by the end of 2026. It currently imports 70% of the products sold in the market from China, Shein’s Latin American chairman Marcelo Claure told local media outlet Brazil Journal.
Venezuela 🇻🇪
China invita a Venezuela a participar en proyecto de estación lunar | el Diario.es | April 08, 2023
Venezuela announced on April 8 that it will participate in the International Lunar Research Station (ILRS). The announcement was made during a meeting between the Bolivarian Agency for Space Activities (ABAE) and China's Deep Space Exploration Lab (DSEL). Venezuela became the first invited country to be part of this project.
Background: International Lunar Research Station (“ILRS”) 🔎
The ILRS is a space project being developed by China National Space Administration and Roscosmos, Russian national agency. The project is scheduled to be operational in 2035. The project's purpose is to conduct space scientific research, including lunar exploration.
Here is the official ILRS building road map. (NRM)
Cuba 🇨🇺
China donates water resources equipment to drought-stricken Cuba | China.org.cn | April 19, 2023
Cuba's National Institute of Hydraulic Resources (INRH) on Tuesday welcomed a donation from the Chinese government to help the Caribbean island weather a severe drought.
China donated 449 pieces of equipment, including trucks, bulldozers, lighting towers, backhoe loaders, motor graders, and thermal diffusion welding machines.
… Chinese Ambassador to Cuba Ma Hui said the donation will contribute to improving water supply in Cuban provincial capitals and communities on the outskirts of urban areas.
This year, the Chinese government has made a number of donations to the Cuban government. There was an official donation of 700 million yuan (around 100 million dollars) in January (for further background, see TCS January 30). In March, the Cuban Ministry of Construction received 93 pieces of construction equipment, including dump trucks and front loaders, along with 26 generators and lighting towers. (NRM)
Nicaragua 🇳🇮
Nicaragua y China firman nuevo acuerdo de cooperación | Panamá América | April 15, 2023
On April 14, the Government of Nicaragua signed an agreement with China to construct low-income housing and to develop a 150 megawatt thermal power rehabilitation project.
The $60 million housing project, launched with China’s International Development Cooperation Agency, will see the construction of 12,000 home units in 84 different municipalities around the country.
This latest agreement marks the first major project since Nicaragua and China re-established diplomatic relations in 2021. The power plant’s location is still to be determined. (VV)
Dominica 🇩🇲
Dominica and China seeking to strengthen bilateral relations | Dominica News Online | April 07, 2023
On March 30, 2023 Chinese State Councilor and Foreign Minister Qin Gang met with the Minister of Foreign Affairs, International Business, Trade and Energy of Dominica Dr. Vince Henderson in Boao, Hainan Province for the Boao Forum for Asia Annual Conference 2023 where they openly discussed the strengthening of bilateral relations between China and Dominica.
The two leaders discussed expanding cooperation in the field of agriculture, maritime affairs, climate response, human resources development, and cultural and people-to-people exchanges. (VV)
Guyana 🇬🇾
Guyana gets $60m in medical equipment from China | Stabroek News | April 15, 2023
Guyana received around $60 million in medical equipment from China for improved healthcare services at the Georgetown Public Hospital Corporation (GPHC).
Another agreement was also sealed for local medical specialists to undergo training programmes which will be conducted by the Chinese medical team.
Taiwan 🕊️
Guatemala 🇬🇹
President Alejandro Giammattei left for Taiwan on April 22, and will visit the island April 24-27. He will meet with President Tsai Ing-wen just three weeks after they met during her Guatemala and Belize trip (see TCS April 7). Giammattei is also expected to speak in front of the local parliament and inspect a technology company in Taichung. (NRM)
Utilities 🔌⚡️
Peru 🇵🇪
Enel sells Peruvian assets to CSGI in $2.9bn deal | Financier Worldwide | April 13, 2023
In a deal valued at $2.9bn, Italian multinational manufacturer and distributor of electricity and gas Enel Group is to sell its equity stakes in two Peruvian assets to power grid company China Southern Power Grid International (CSGI).
Under the terms of the agreement, CSGI will acquire Enel Perú’s equity stakes in Enel Distribución Perú S.A.A. (equal to around 83.15 percent of the share capital) and Enel X Perú S.A.C. (equal to 100 percent of the share capital).
Once this acquisition (first covered in TCS March 08) is complete, all of Lima’s electricity distribution will be handled by Chinese state companies: China Southern Power (CSGI) and China Yangtze Power International (CYPI). Before the acquisition passes, the National Institute for the Defense of Competition and Intellectual Property (INDECOPI) will evaluate the transaction from a competition standpoint.
The announcement has generated debate in Peru. The National Society of Industries (SNI) and Peru’s former Energy and Mines Vice Minister Luis Espinoza have separately cautioned the Peruvian government over concentrating Lima's electricity distribution with Chinese companies, and called for greater regulation. Several articles have warned of Peru’s growing dependence on China.
For further details about China's major electricity companies in Latin America, read TCS reader Margaret Myers’ recent article. (NRM)
Media 🧑💻 📰
Honduras 🇭🇳
CMG opens bureau in Tegucigalpa after China, Honduras establish ties | CGTN | March 29, 2023
China Media Group (CMG) has opened its first bureau in Tegucigalpa after China and Honduras established diplomatic relations …
… CMG signed a groundbreaking cooperation agreement with National Television of Honduras (TNH).
CMG is China’s largest state-owned radio and communication company, and is controlled by the Propaganda Department of the Chinese Communist Party. Honduras became the 191st station that CMG has established abroad. (NRM)
Electric Vehicles 🚍🔋
Brazil 🇧🇷
China's Higer wins Brazilian electric bus tender | BNAmericas | April 19, 2023
Tevx Motors, the Brazilian subsidiary of China’s Higer Bus, will supply 15 electric buses to Cascavel city in Paraná (capital city of Paraná state).
…The contract is worth approximately US$8.2 million, a company spokesperson confirmed to BNamericas. The buses will be manufactured by Tevx Motors in Ceará state starting next year.
This was the first electric bus tender directly launched by a Brazilian city. Previously, Higer supplied buses to São Paulo, but that contract was signed with Enel X, which buys buses from manufacturers and leases them to operators.
Higer Bus had invested US$50 million for building an electric bus factory in the Ceará region in September 2022. The deal was anticipated by a previous US$10 million investment for the development of a vehicle for the Brazilian market, including the manufacturing of these 15 hydrogen buses.
The factory is expected to start operating with an initial capacity of 300 to 400 buses per year and investments of around US$20 million. Production capacity is expected to double between 2026 and 2027, when the plant’s second stage - which will consume investments of US$30 million - will start operating. (RP)
Chile 🇨🇱
China EV maker BYD to build $290 mln battery component plant in Chile | Reuters | April 21, 2023
China's BYD Co Ltd, the world's largest electric vehicle (EV) maker, plans to build a US$290 million lithium cathode factory in Chile's northern Antofagasta region, said Chilean economic development agency CORFO.
The South American country's government has named BYD Chile a qualified lithium producer, CORFO said, giving it access to preferential prices for lithium carbonate quotas.
…The plant will produce 50,000 tonnes per year of lithium iron phosphate (LFP) for cathodes, using lithium carbonate as an input. It is scheduled to start operating in 2025 and generate 500 jobs, CORFO said in a statement late on Wednesday.
The announcement comes despite President Boric's recent pledge to nationalize the country’s lithium industry. Under the plan, which is awaiting congressional approval, any company that wants to extract lithium would be required to partner with the state.
We first reported BYD’s moves to expand its footprint in Chile on TCS December 17, 2022. This will be BYD’s second iron-phosphate battery-dedicated factory in Latin America along its existing factory in Brazil’s Amazonas region (see our “Diplomacy, Brazil” section above) in September 2020. (RP)
Intelligence 🕵🏽♀️
Nicaragua 🇳🇮
According to the Miami Herald, the recent leak of U.S. classified intelligence reports has revealed a document describing secret negotiations between China and Nicaragua to build a deep-water port in Bluefields–a city and port in eastern Nicaragua.
The report attributes its information to signals intelligence, revealing that state-owned China Harbor Engineering Company, which is a subsidiary of China Communications Construction Company, has been negotiating to conduct initial surveys of the site and discuss future operations since mid-2022.
The leaked document also mentions Nicaragua’s decision to expand its defense ties with China, and that although China has not explicitly stated it wishes to gain military access in the country, that Nicaragua “probably would consider offering Beijing naval access in exchange for economic investment.” (VV)
Trade 📊 💸
Uruguay 🇺🇾
Uruguay’s Minister of Foreign Affairs Francisco Bustillo’s April 16-20* visit to China (see TCS April 7 for further background) concluded with no tangible agreement.
On April 19, Bustillo met with Ren Hongbin, the head of China's Council for the Promotion of International Trade (CCPIT). The two notably discussed Uruguay’s participation in the 16th edition of the “China-Latin America and the Caribbean Business Summit”, which will be held in Beijing next November. (RP)
* TCS April 7 mistakenly reported April 13 as the visit official start date
Honduras 🇭🇳
China y Honduras impulsan agenda bilateral en comercio y cooperación | France 24 | April 20, 2013
~ Paraphrased translation ~
The director general for Latin America and the Caribbean of the Chinese Ministry of Foreign Affairs, Wei Cai, met on Wednesday with Honduran Foreign Minister Enrique Reina to advance the bilateral agenda on trade and cooperation …
On April 11, a delegation from the government of the Asian giant also arrived in Honduras to prepare economic agreements, the first after the establishment of diplomatic relations between the two countries.
Industrial sectors such as aquaculture have expressed concern that Taiwan will block Honduran exports. As a result, the Honduran foreign minister indicated that shrimp, lobster, coffee, and sea cucumber will be prioritized for export under a future trade agreement with China.
In order to visualize Honduras, China, and Taiwan's trade from 2000 to 2022, we have prepared the following graphs.
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Honduras' trade with China and Taiwan
Despite Honduras only switching its diplomatic allegiance from Taiwan to China last month, Honduras has historically had a far larger trading relationship with China, albeit at an enormous trade deficit. Honduras’ trade with Taiwan has been significantly lower in absolute terms, but more balanced.
From 2000–2021, two way trade between Honduras and China increased from US$15 million to US$2.11 billion in 2021. Imports from China dominate, comprising 99.3% of total trade.
Honduras-Taiwan trade grew from US$16 million to US$161 million in the same period. Honduras ran a heavy trade deficit with Taiwan until 2008, when Honduran exports began to grow. By 2021 exports to Taiwan had climbed to 46.6% of two way trade. Trade between the two countries was balanced between January and September 2022. (NRM)
Cuba 🇨🇺
Chinese and Cuban firms sign agreement to sell Cuban products | Prensa Latina | April 13, 2023
*Prensa Latina is Cuba’s state-sponsored media outlet
The agreement includes the selling of coffee, honey, fruit pastes, cosmetic creams and nutritional supplements, both online and in Central Pharmacy physical stores.
The agreement was signed in the context of the third edition of the Hainan International Consumer Goods Fair, in which Cuba has a stand and promotes leading products from its export portfolio.
Cuba celebrated its first anniversary this month for using the JD.com digital platform. This allows the island to access electronic commerce for export. (NRM)
Illicit Trade 💊
Mexico 🇲🇽
China Denies Fentanyl Trafficking with Mexico, Blames US | VOA News | April 07, 2023
China's government denied the country's involvement in any illegal fentanyl trafficking with Mexico and said it had not been notified by Mexico's government of any seizures of the precursor chemicals used to make the powerful drug.
Earlier this month, Mexico’s president, Andrés Manuel López Obrador, sent an open letter to President Xi Jinping asking him to help stop shipments of chemicals that Mexican cartels import from China. (For further details, see TCS April 7, 2023).
China's Foreign Ministry spokesman Mao Ning responded to the letter claiming that China has never had any involvement in trafficking fentanyl to Mexico. However, despite China’s efforts toward reducing the production of illicit fentanyl, approximately 160,000 chemical companies in the PRC still produce and sell the majority of precursor chemicals that are used today by the Sinaloa and Jalisco Cartels to manufacture fentanyl and methamphetamine. The US Justice Department recently filed charges against several Chinese nationals for allegedly supplying the precursor chemicals to the Sinaloa and Jalisco Cartels, a move aimed at affecting the cartel’s global supply network. Two Chinese firms were also sanctioned by the U.S. Treasury’s Office of Foreign Assets Control.
Mao continues to vehemently deny China’s role in the illicit fentanyl market, and has encouraged Mexico to take stronger measures in its counter-narcotics efforts. (VV)