The China Signal - April 8
No new loans to LAC from China's policy banks, Colombia's next 4G highway on track, Argentina pushes Beijing to fully fund $8.3bn Atucha III nuclear power plant
G’day, and welcome to The China Signal. This week, no new loans from Chinese policy banks to the region in 2021; Colombia’s Mar 2 “4G” highway on track for completion in the middle of this year; Venezuelan oil sits off Chinese ports; Ecuador officially begins FTA negotations with Beijing; Argentina’s government pushes China to fully fund the planned Atucha III $8.3bn nuclear power plant; plus much, much more. Read on.
Also, I’m thrilled to share that I have started a new role as a Director at Veracity Worldwide! Veracity is a political risk and strategic intelligence consultancy based in New York. My role will see me working on projects across the globe, with a bias towards Latin America, complimenting well my ongoing work with The China Signal. If you have any interest in Veracity’s offerings, please reach out to me.
Finance 💱
Broader Latin America and the Caribbean 🏝🏔
What Role for China's Policy Banks in LAC? - The Dialogue - March 29, 2022
Main Findings:
As noted in previous Inter-American Dialogue and Boston University Global Development Policy Center briefs on Chinese development finance in LAC, China’s policy banks—China Development Bank (CDB) and China Export-Import Bank (Eximbank)—are no longer issuing the sorts of multi-billion-dollar, oil-backed loans that once characterized Chinese financial engagement with the region.
There are several probable reasons why Chinese sovereign lending to the region has halted in recent years, such as the effects of the global pandemic, CDB’s commitment to meeting development goals at home, and a sometimes-problematic portfolio in LAC, including the prospect of continued losses in Venezuela.
Although they aren’t providing sizable sovereign loans in LAC at present, China’s policy banks, in addition to an increasingly wide range of Chinese creditors, are still actively supporting China’s broader economic activity in the region, whether by issuing finance directly to Chinese and LAC companies, which then invest in regional projects, through policy coordination with regional development banks, or else by partially backing regional private equity funds, such as the China-LAC Cooperation Fund.
There is also some possibility that CDB and Eximbank will again lend relatively small amounts to LAC governments and SOEs in 2022. Eximbank will reportedly back the expansion (phases IV and V) of Argentina’s Cauchari solar project, for instance, as it did Cauchari I, II, and III,13 and may also play a role in some of the other agreements struck between Presidents Alberto Fernández and Xi Jinping during their meeting in February 2022.
The combined effect of limited Chinese policy bank activity, co-financing initiatives, commercial bank finance, private equity investment, and other forms of engagement will ensure a sizable Chinese financial presence in the region for years to come. Total combined Chinese finance to the region is unlikely to ever approximate the previous peaks of policy bank lending, however.
Although LAC economies were hit harder by the pandemic-related global recession than any other region, driving several nations into debt distress, China has not taken draconian action against countries unable to repay their Chinese debt.
This report is essential reading every year. Read it here, and access the China Latin America Finance Database here. (MH).
Infrastructure, PPP 🏗
Colombia 🇨🇴
One of the first public-private partnership (PPP) infrastructure deals in Latin America involving a Chinese sponsor is on track to be delivered in mid-2022, according to Carlos Gaviria, the vice-president of the Agencia Nacional de Infraestructura (National Infrastructure Agency, ANI). Part of the government’s “4G” (fourth generation) infrastructure programme, the “Mar 2” highway will help Colombia overcome long-running difficulties in upgrading its road network. In detail:
[The project is being] carried out thanks to two lines of credit, with a value of US$652 million. The first was granted in tandem by China Development Bank, which contributed US$418 million, and the Japanese Sumitomo Mitsui Banking Corporation, which provided the remaining US$84 million. The second stream of credit is for US$150 million, from Colombia’s state-owned Financiera de Desarrollo Nacional (FDN). When it was signed in 2015, the concession also saw the China Harbour Engineering Company (CHEC) awarded the contract to build the road, alongside five domestic construction companies, as part of the Autopistas Urabá consortium.
The large set of 4G works began in 2014 with the Pacifico 1, Pacifico 2 and Pacifico 3 highways, located in Antioquia’s coffee-growing regions. These seek to connect these areas with the southwestern Pacific and, specifically, with Buenaventura, Colombia’s largest port, which moves 60% of all goods entering and leaving the country. Linked to these are the Mar 1 and 2 highways, which aim to speed up the crossing of Antioquia from south to north, where they reach the region of Urabá. Here, on the Caribbean Sea, there are three ports - Puerto Pisisí, Puerto Antioquia and Darien International Port. [...] As part of this programme, Colombia’s target budget increase for roads will rise from 1% to 3% of GDP, in order to build more than 8,000 km of routes throughout the country.
Mar 2 will connect the inland municipality of Cañas Gordas with Necoclí, on Antioquia’s Caribbean coast. Divided into six segments, it aims to reduce the journey time from Medellín, the capital of the department, to Necoclí from eight to four hours. It is currently at 75% completion, across all its segments. [...] According to estimates published by the Autopistas Urabá concession, it will generate more than 14 trillion pesos (US$3.7 billion) as a result of transactions during the construction phase, and the annual GDP growth rate of the department of Antioquia will increase from 4.5% to 6%. (RP)
Background: CHEC Ltd.
China Harbour Engineering Company Ltd. (“CHEC”) is an engineering contractor and a subsidiary of majority state-owned China Communications Construction Company (CCCC), a Global Fortune 500 company. Headquartered in Beijing, China, it is actively involved in the Belt and Road Initiative.
Established in the 1980s, it is a leading provider of full services in engineering-procurement-construction (EPC), build-operate-transfer (BOT) and public-private-partnership (PPP). It’s known for carrying out marine engineering, dredging and reclamation, and infrastructure construction projects for both public and private sectors.
Active worldwide with over 90 branches and representative offices, CHEC currently conducts business in more than 100 countries undertaking USD 40 billion worth in projects. CHEC has a presence in 16 Latin American and Caribbean countries, including Argentina, Bolivia, Brazil, Chile, Costa Rica, Mexico, Panama and Colombia, where it also leads a consortium of Chinese state-owned enterprises building the Bogotá metro.
Oil 🛢️
Venezuela 🇻🇪 + Iran 🇮🇷 + Russia 🇷🇺
Tankers carrying 22 million barrels of Russian, Iranian and Venezuelan oil are piling up off China, according to Kpler, as the country battles a virus outbreak that’s sapping demand and causing logistics problems. China has been one of the only buyers of sanctioned Iranian and Venezuelan oil over the last few years. The world’s largest crude importer is also still taking Russian supplies that are being largely shunned since the invasion of Ukraine.
… Kpler estimates that daily oil demand will drop by at least 450,000 barrels in April, mainly due to falling consumption of gasoline and jet fuel, according to Jane Xie, a senior oil analyst at the data and analytics firm in Singapore.
The current logjam compares with around 10 million barrels of oil from Russia, Iran and Venezuela that were sitting off the Chinese coast at the start of the year, according to Kpler. (RP)
Trade 🤝
Ecuador 🇪🇨
~Above for the full Spanish article~
Ecuador’s Comité de Comercio Exterior (Foreign Trade Committee, COMEX) green-lighted the beginning of official bilateral negotiations for a free trade agreement (FTA) with China, with ambitions to reach an agreement by December this year. This move follows the Memorandum of Understanding (MOU) signed on February 5 during President Guillermo Lasso’s meeting with Chinese counterpart Xi Jinping. (RP)
Taiwan 🇹🇼
Paraguay 🇵🇾
~Paraphrased translation~
The 21st economic cooperation meeting between the Republic of China (Taiwan) and the Republic of Paraguay was held on March 31 in the city of Taipei...
La 21ª reunión de cooperación económica entre la República de China (Taiwan) y la República del Paraguay se llevó a cabo el 31 de marzo en la ciudad de Taipei…
The Ministry of Economic Affairs highlighted the signing of a letter of intent on cooperation in industrial policy and two memorandums of understanding on exports and investment promotion, as well as technical and personnel training on the diagnosis of African swine fever.
El MOEA destacó que los aspectos más destacados del evento fueron la firma de una carta de intenciones sobre cooperación en política industrial y dos memorandos de entendimiento sobre exportaciones y promoción de inversiones, así como capacitación técnica y de personal sobre el diagnóstico de la peste porcina africana.
~Paraphrased translation~
The Minister of Agriculture and Livestock of Paraguay, Moisés Bertoni, declared that the Government of the Republic of China (Taiwan) has announced its audit for the Paraguayan pig industry, laying the path for a new market for Paraguayan pork.
El ministro de Agricultura y Ganadería de Paraguay, Moisés Bertoni, adelantó que el Gobierno de la República de China (Taiwán) ya anunció su auditoría para la industria de cerdos, y con ello se estaría habilitando un nuevo mercado para la carne porcina paraguaya.
Technology
Argentina 🇦🇷
Xiaomi opens first brick-and-mortar store in Argentina-Xinhua - April 8, 2022
*Xinhua is a state-backed media outlet.
Chinese technology firm and consumer electronics maker Xiaomi opened its first brick-and-mortar store in Argentina on Thursday, bringing the brand closer to its Argentine customers.
Xiaomi's products will be distributed in Argentina by the company Solnik-Etercor…
Energy 🔋 + Finance 💴
Argentina 🇦🇷
Argentina is pushing China to fully finance a new $8.3 billion nuclear power plant in the country, as the government grapples with high debt levels and looks to bring down its fiscal deficit as part of a recent deal with the International Monetary Fund.
The South American nation signed an agreement with the China National Nuclear Corporation (CNNC) for construction of a nuclear power plant in February. CNNC at the time said it would finance 85% of the cost, with Argentina shouldering the rest.
…the aim was to sign the final agreement by the end of 2022, once nine pre-existing conditions established in February were met, including financing, an environmental impact study, which has already been carried out, and a public hearing.
Agriculture
Brazil 🇧🇷
China bans three Brazil meat exporters, JBS and Marfrig beef units affected | Nasdaq - April 7, 2022
China's General Administration of Customs has suspended imports from two Brazilian beef plants and one poultry producer, according to a statement on its website.
The suspensions will last one week and are effective from April 8, GACC said, without giving a reason for the move. The ban concerns a JBS SA JBSS3.SA beef plant in Goias, a Marfrig MRFG3.SA beef unit in Mato Grosso, and a chicken plant in Sao Paulo owned by Zanchetta, which is not listed.
Security
Brazil 🇧🇷
Brazil's Multilaser to produce China's Hikvision security products | Reuters - April 7, 2022
Brazilian electronics maker Multilaser SA announced on Thursday an agreement to take over part of the production of security equipment from China’s Hikvision.
In the deal, which starts in the third quarter, Multilaser will take over the distribution and sale of entry-level security cameras of the HiLook brand, intended for small projects. It will also be responsible for the Hikstorage line.
Hikvision, one of the world’s largest video-surveillance equipment providers, is on numerous US government blacklists that restrict US Government entities from buying their equipment or services, prevents US exports to the firm, and prohibits Americans from investing in it.
Prominent members of US Congress such as Senator Marco Rubio have long pushed for Hikvision’s exclusion from the US economy, primarily for their role in enabling human rights abuses of China’s Uighur minority in Xinjiang. (MH)
Clean Energy / Public Transport 🌳 🚌
Colombia 🇨🇴
Bogotá incorpora 406 buses eléctricos de la firma china BYD | América Economía | April 5, 2022
~Above for the full Spanish article~
This week, the Chinese firm BYD (Build Your Dreams) delivered 406 electric buses to Bogotá. With this delivery, the Colombian capital’s public transportation will have a fleet of 1,048 BYD electric buses in operation, serving 425,000 users and providing more than 1,100 new jobs to the local population.
BYD’s expansion plans to the Andean country have so far earned it a market share of over 96.5% in the Colombian electric bus market and 99% in Bogotá (TCS January 15, and December 3, 2021).
Background: BYD Ltd.
Build Your Dreams Ltd. (“BYD”) is a Chinese state-owned conglomerate manufacturing company headquartered in Shenzhen (Guangdong region), China.
It was founded in 1995, and currently has two major subsidiaries: BYD Auto Co., Ltd. and BYD Electronic International Co., Ltd. Its mission consists of zero-emission energy solutions, especially in the automotive and rail transit. BYD is listed on the Hong Kong Stock Exchange (since July 2002) and on the Shenzhen Stock Exchange (June 2011).
BYD has a global footprint with over 220 factories in 30 countries, including a presence in Chile, Ecuador, Panama and Brazil. It also has an iron-phosphate battery-dedicated factory in Brazil’s Amazonas region. (RP)
Russia 🇷🇺 + Multilateral Diplomacy 🇺🇳
Bolivia 🇧🇴
UN votes to remove Russia from Human Rights Council | CBS News | April 7, 2022
On Thursday April 7, the United Nations’ 193 member General Assembly voted to suspend Russia from the Human Rights Council based on "gross and systematic violations and abuses of human rights" and "violations of international humanitarian law" in its invasion of Ukraine.
The resolution passed 93-24, with 58 nations abstaining. Bolivia, Cuba and Nicaragua were the only Latin American countries to vote against the resolution, siding with Belarus, China, Iran, North Korea, Russia and Syria, amongst others. Belize, Brazil, El Salvador and Mexico abstained by casting an invalid vote, in effect helping the resolution pass without explicitly supporting it.
~Above for the full Spanish article~
On Friday April 1, Bolivia also voted against the renewal of the UN mechanism investigating torture and other abuses perpetrated by Alexander Lukashenko and his regime in Belarus.
The Andean country joined China, Cuba, Eritrea, Russia and Venezuela for the 6 votes against, while 22 countries were in favor, and 19 abstained.
Bolivia, and a handful of other Latin American countries (TCS March 4) faced earlier criticism for abstaining in the UN vote condemning Russia’s invasion of Ukraine, when it declared that demanding Russian troops’ withdrawal would be contrary to its constitutional provisions. Bolivian diplomatic representatives claimed to not take sides and to be following peaceful means for conflict resolution. Bolivia followed a similar strategy of abstention/rejection in previous conflicts in Afghanistan, Iraq, Libya, Palestine and Syria. (RP)