The China Signal - January 31
Argentina and Ecuador's presidents travel to Beijing, Great Wall to invest $1.9 for EV production in Brazil
G’day, and welcome to The China Signal. This week, Ecuador and Argentina’s presidents line up a series of announcements for their upcoming trips to Beijing to meet with Xi Jinping during the Winter Olympics; rail construction MOUs for new lines in Argentina’s Buenos Aires province announced; Great Wall announces plans to invest $1.9 billion to build electric vehicles in Brazil over the next decade; plus more. Read on.
Finance
Ecuador 🇪🇨
Ecuador's president wants to untie oil output from debt on China visit | Reuters - January 25, 2022
Ecuador's President Guillermo Lasso said on Tuesday he will seek to disconnect the handover of crude from outstanding debt to China during a visit to the Asian country next month, part of his plan to renegotiate some $4.1 billion in debt.
"We are going to seek better terms and above all we are going to untie oil from debt payments to China, so that oil is freely available to the Ecuadorean government," Lasso told local radio. "That is the big challenge of this negotiation that I expect to start on this next visit to China."
Lasso said he will seek to renegotiate $4.1 billion of Ecuador's debt to China with his counterpart President Xi Jinping. Another $500 million in credit is part of long-term contracts with more favorable interest rates and will not be renegotiated, he added.
Ecuador has signed 16 contracts for crude with Asian oil companies which are tied to loans from Chinese banks, in conditions considered by analysts to be unfavorable to Ecuador.
The South American country still has to turn over 160 million barrels of crude to the Asian companies by 2024, Italo Cedeno, head of state oil company Petroecuador, told local radio on Monday.
Lasso is also seeking to initiate discussions for a free trade agreement between the two countries, according to Ecuadorian media. China’s Ambassador to Ecuador Chen Guoyou had an opinion piece published in El Telégrafo to promote the upcoming bilateral meeting.
Argentina 🇦🇷
Argentina Asks China to Expand Yuan (CNY) Swap to Strengthen Reserves - Bloomberg - January 26, 2022
South America’s second-largest economy is looking to ask China to increase its 130 billion yuan swap ($20.6 billion) by an additional 20 billion yuan, according to a person with knowledge of the matter, who asked not to be named because the discussions are private. Argentina has already requested the increase and the topic will be discussed next week in Beijing with Chinese President Xi Jinping when President Alberto Fernandez travels there for the Winter Olympics, a second person said.
Infrastructure
Argentina 🇦🇷
The Argentine Ministry of Transport has signed three memorandums of understanding with Chinese companies for the financing, analysis and construction of three railway projects, it announced yesterday.
The agreements were signed on Wednesday by Alexis Guerrera, the Argentine transport minister, and representatives of the firms CRRC Sifang Argentina and the China Railway International Group (CRIG).
The first of the schemes, signed with CRIG, will modernise the Sarmiento commuter railway in Buenos Aires province. This will include the rehabilitation of two tracks, interconnection with the Buenos Aires metro, as well as the renewal of electrical and fibre-optic signalling systems, as well as the construction of a control centre and workshops.
The second, also with CRIG, covers the modernisation and electrification of the Belgrano Norte railway in Buenos Aires. This will involve the renovation of 94km of tracks as well as improving signalling, refurbishing stations and crossings, and the provision of rolling stock. There will also be a 15km extension of the line to the Pilar industrial park.
The third agreement, signed with CRRC Sifang, is for the renovation of 60km of the Federico Urquiza line, which serves the suburbs of Buenos Aires. This will include electrification, station renovation and upgraded signalling, as well as the supply of trains.
Argentina is reportedly close to signing an initial US$35bn agreement with China for a five-year investment plan that would benefit major energy and infrastructure projects.
The document will be signed on Thursday before President Alberto Fernández begins a visit to Beijing that is expected to see further financing talks, Argentine daily Ámbito reported, quoting unnamed sources within the federal government.
Some of the projects that are expected to be included in the financing agreement are:
Cauchari photovoltaic plant expansion (US$400mn)
Atucha III Nuclear Plant (US$8.5bn)
Néstor Kirchner and Jorge Cepernic hydro dams (US$4bn)The financing will also be for railway modernization but will not include 5G due to Argentina’s lack of adequate infrastructure for the technology, according to the sources.
Another announcement expected for Fernández’ China visit is an electric car and lithium battery factory in Santa Fe province by Chinese firm Chery.
Diplomacy
Brazil 🇧🇷
Brazil and China missed the deadline at the end of 2021 to renew the two main documents that define the guidelines and priorities of their bilateral relations.
Both the Ten Year Plan for Brazil-China Cooperation and the Joint Action Plan signed between the two countries in 2012 and 2014, respectively, expired in December. Talks between the two governments have been ongoing since 2019.
While the Ten Year Plan sets out common guidelines to govern the partnership, the five-year document is more detailed.
Automotive
Brazil 🇧🇷
China's Great Wall says will invest $1.9 bln in Brazil over next decade | Reuters - January 28, 2022
China's Great Wall Motor (601633.SS) said on Friday it will invest 11.5 billion yuan ($1.81 billion) over the next decade to build electric vehicles in Brazil where its has taken over a factory from Daimler AG (DAIGn.DE).
I noted Great Wall Motor’s purchase of the Daimler AG factory in Sao Paulo state in TCS August 26.
Baoding-based Great Wall, China's top pickup truck maker, said it planned to launch 10 new electrified products within three years in Brazil, four of which will be pure electric vehicles and six hybrid. It added that it would introduce the first product in the fourth quarter of this year, it added.