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The China Signal - July 14
EV and lithium developments in Brazil and Bolivia, Beijing pursues Colombia
G’day, and welcome to The China Signal. This edition, BYD and CITIC announce major electric vehicle and lithium investments in Brazil and Bolivia, a new military training facility in Cuba, Beijing pursues Colombia to join the BRI, Dominica looks for China’s support on Haiti in the United Nations, plus more. Read on.
Electric Vehicles 🔋🚙
On July 4, Chinese [electric vehicle] maker BYD said it will invest the equivalent of US$620 million in a new industrial complex in northeastern Brazil, as it aims to boost local production to offer more competitive prices.
The complex, made up of three plants, will be built in the Camacari industrial park in the northeastern state of Bahia, on land formerly occupied by a Ford plant that closed in 2021.
…Operation at the plants is expected to start in mid-2024. One of the plants will be dedicated to production of chassis for buses and electric trucks.
The second plant will be focused on hybrid and electric cars with an initial production estimated at 150,000 cars per year, while the third will process lithium and iron phosphate for the foreign market. The complex would generate over 5,000 jobs, the company added.
The announcement follows talks held during Lula’s visit to China last April (see TCS April 24 for further background), when the Brazilian president met with BYD’s CEO. (RP)
Critical Minerals 🔋🪨
China’s Zijin Mining Group Co., Ltd. is in advanced talks to build a plant in Argentina that will turn some of the nation’s huge lithium reserves into cathodes used to make electric-vehicle batteries.
Zijin has agreed to partner with Camyen, Catamarca’s provincial mining company, and a unit of Argentine state-run energy firm Yacimientos Petrolíferos Fiscales S.A. in the project, according to two people familiar with the matter who aren’t authorized to speak publicly.
The plant would produce 50,000 metric tons a year of lithium iron phosphate for cathodes, with operations set to begin as soon as next year, the people said. Zijin’s Tres Quebradas lithium mine in Catamarca (see TCS March 27, 2022 for purchase details) is scheduled to come online in the fourth quarter.
…Among other Chinese investments in Argentina, Ganfeng Lithium Group Co. is the majority owner of Minera Exar S.A., which recently became the South American country’s first lithium project in years to enter production. Ganfeng also spent almost US$1 billion last year to acquire another Argentine project (see TCS July 26, 2022 for further background on its Lithea Inc.’s acquisition).
China has shown a willingness to help Argentina with its downstream ambitions. Chinese carmaker Chery Inc. wants to build a US$400 million EV and battery plant in Argentina’s Santa Fe Province (see TCS March 4, 2022), while Jujuy province said it’s been in talks with suitors from China to make cathodes there in the framework of the Caucharí-Olaroz project. (RP)
Background: Zijin Mining Group Co., Ltd. (“Zijin”) 🔎
Founded in 1986 as Shanghang Mineral Company, Zijin has risen to become a global player engaged in the exploration and development of copper, gold, lithium, and zinc mines, as well as engineering and technological research. Headquartered in Shanghang (Fujian province), Zijin has been listed at the Hong Kong and Shanghai stock exchanges since December 2003 and April 2008 respectively.
Zijin has mining projects in 15 Chinese provinces, and 15 countries worldwide. In Latin America, Zijin’s reach outside of Argentina includes the Aurora gold mine in Guyana, the Rosebel gold mine in Suriname (see TCS October 21, 2022 for acquisition details), and the Buriticá gold mine in Colombia (see TCS October 30, 2020).
Zijin ranked 407th overall in the 2022 Fortune 500 list with revenue close to US$35 billion. (RP)
Chinese battery giant CATL confirmed a US$1.4 billion investment to help develop Bolivia's huge but largely untapped reserves of lithium, cementing on June 18 a partnership with the government made in January.
The agreement connects CATL, the world's largest manufacturer of electric vehicle batteries, with Bolivia's salt flats that are home to the world's largest lithium resources.
…Bolivian President Luis Arce confirmed the commitment to build two lithium plants to extract minerals from the country's Uyuni and Oruro salt flats.
…Construction of both plants could begin as soon as July, according to the country's energy ministry, with overall investment climbing to around US$9.9 billion during the project's industrial process.
The Vice Minister of Alternative Energies of Bolivia, Álvaro Arnez, has stated that through this agreement, the Bolivian government aims to supply lithium batteries to international automotive companies such as Tesla, Toyota, and Ford among others. For further information on CATL’s investment in Bolivia, refer to TCS January 30.
Bolivian state-owned company, Yacimientos de Litio Bolivianos (YLB), signed similar agreements with the Chinese company CITIC Guoan (CITIC), and the Russian state-owned Uranium One Group, respectively.
Under these agreements, the two companies will invest a combined US$1.4 billion in the construction of two Direct Lithium Extraction plants. Uranium One Group will invest US$600 million in the project, while CITIC will invest US$857 million. CITIC also said it is “looking at investing in battery plants and the installation, possibly with technical studies, of a [local] vehicle assembly plant”.
These plants will be dedicated to the annual production and export of 50,000 tons of lithium, starting in 2025, according to Bolivian government officials. The production will take place in the Salar de Pastos Grandes, located in the Potosi region of southwestern Bolivia. (RP).
The Bolivian government's lithium production targets are ambitious; it has so far failed to commercially exploit the world's largest lithium resources due to a lack of local expertise, poor infrastructure, community resistance, and restrictive mining investment policies.
The CATL and CITIC announcements signal Beijing's intent on capturing Bolivia's lithium sector before it reaches a level of commercial viability that would attract Western companies.
Chinese firms dominate the lithium processing sector, and are likely best equipped to exploit Bolivia's lithium brine, where greater rainfall and the mineral's higher impurities have made traditional evaporation techniques commercially unviable.
Per Goldman Sachs research, Direct Lithium Extraction stands to double lithium productivity of lithium brine projects, increasing project returns, and reducing land and water usage. Lithium brine projects dominate in Bolivia, Chile, and Argentina. (MH).
Background: CITIC Guoan Group (“CITIC”) + Uranium One Group 🔎
CITIC Guoan Group is a subsidiary of CITIC Group Corporation Ltd., of which we made a backgrounder on TCS May 27, 2022.
CITIC Guoan Group was established in 1987 and its business areas include: information industry, resources exploitation, financial services and investment, real estate, cultural tourism, wine industry. In 2011, the company entered into a strategic cooperation agreement with Bolivia to explore lithium resources in Bolivia's Coupasa salt flats.
A global leader in uranium production, Uranium One Group, is part of Russian state-owned corporation Rosatom, which is the largest electricity generating company in the country. Uranium One Group possesses a portfolio of assets in Kazakhstan, the USA, and Tanzania.
This will be Uranium One Group’s first large-scale overseas lithium venture. The group has considered projects in Chile and Argentina. Last year, the company planned to establish a joint venture with Canadian corporation Alpha Lithium in Argentina, but it was suspended due to the conflict in Ukraine.(NRM)
On June 29, Argentina announced that the approximate equivalent of US$1 billion from its yuan reserves will be employed to cover its US$2.7 billion second-quarter installment to the International Monetary Fund (IMF). The remaining sum of US$1.65 billion is expected to be paid with the country’s holdings from the IMF’s Special Drawing Rights (SDR).
This is Buenos Aires’ most recent move (see TCS June 16, TCS May 5, and TCS January 15) as it attempts to counter the outflow of dollars from the country. Forecasts in Argentina see a 142% annual inflation for 2023.
Argentina’s Central Bank announced that it will allow commercial banks to open customer accounts in yuan on the same day. (RP)
China and Cuba are negotiating to establish a new joint military training facility on the island, sparking alarm in the U.S. that it could lead to the stationing of Chinese troops and other security operations just 100 miles off Florida's coast, the Wall Street Journal reported on June 20th, citing current and former U.S officials.
According to senior sources in the U.S. government, both countries are already discussing the sort of training they will be conducting jointly at this facility and what sort of leadership structure they will implement.
This news comes right as US Secretary of State Blinken returns from his trip to China where he met with Xi Jinping, a meeting in which he stressed the concern the US has over PRC intelligence or military activities in Cuba.
Earlier this month, it came to light that China has had a spy base in Cuba since at least 2019 (see TCS June 16). (VV)
China’s Special Representative for Latin America and the Caribbean, Qiu Xiaoqi, met with Colombian Vice Minister of Foreign Affairs, Francisco J. Coy, on June 26 in Colombia.
Discussions were held on the status of Chinese investments, negotiation agreements, and the potential visit of the Colombian President to China. It can also be inferred that China sought a prompt response regarding Colombia's decision to sign a Memorandum of Understanding (MoU) for the Belt and Road Initiative (BRI).
Colombia first contemplated joining the BRI during then President Ivan Duque's visit to China in 2019. The current administration under President Gustavo Petro remains undecided about joining the initiative. Currently, Colombia and Brazil are the only South American countries that have not yet become part of the BRI.
Qiu had previously visited Chile on June 23, meeting with a delegation of Chilean officials, headed by the local Undersecretary of Foreign Affairs, Alex Wetzig to discuss the two countries’ bilateral agenda. (NRM)
Prime Minister Roosevelt Skerrit has sent an urgent appeal to China to utilize its veto power in the United Nations Security Council to back the Caribbean Community’s (CARICOM) proposal for the deployment of an international security force to restore peace and stability in Haiti.
…China’s Assistant Foreign Minister, Hua Chunying, addressed the Haiti crisis, saying that the government is well aware of the region’s worries ...and would “see how we can help and how we can work together to bring security and stability back to Haiti.”
Haiti is currently experiencing insurmountable levels of gang violence and widespread hunger, a humanitarian crisis that has left almost half of its population in acute hunger and facing high levels of impoverishment.
Speaking with Caribbean journalists in Beijing, Cai Wei, Director-General of the Foreign Ministry’s Department of Latin American and Caribbean Affairs, remarked how the security issue Haiti faces has caught China’s attention, despite Haiti having no formal diplomatic ties with the PRC. (VV)
Taiwan Diplomacy 🇹🇼 🕊️
Presidential candidate in Guatemala, Bernardo Arevalo, who will be contesting a runoff vote in August, said on June 27, he would pursue closer relations with China if he wins.
Guatemala is one of only 12 countries, plus the Vatican, with official diplomatic ties with Taiwan.
Arevalo has expressed his desire to continue working with Taiwan, despite expanding relations with China, if he were to be elected. He stated that his administration would “aim to not choose” between both sides, and instead continue building upon its existing relationship with Taiwan while seeking opportunities to grow in its trade relations with China.
Guatemala is one of two remaining countries in Central America to be hosting Taiwan’s embassy. The outcome of the upcoming election will have future implications for the entire region, particularly as Arevalo’s position remains ambiguous with his “Guatemala’s sovereign interests” above all else stance. (VV)
[Ahead of his August 15 inauguration], Paraguayan President-elect (see TCS May 5) Santiago Peña is currently visiting Taiwan July 11-15 …as the two allies celebrate the 66th anniversary of the establishment of diplomatic ties, Taiwan’s Ministry of Foreign Affairs (MoFA) announced.
The Paraguayan delegation also features a number of Peña's incoming government's senior officials, including foreign minister-designate Rubén Ramírez Lezcano, incoming presidential official chief secretary Lea Giménez Duarte, finance minister-designate Carlos Fernández Valdovinos and incoming industry minister Francisco Javier Giménez García de Zúñiga.
Peña reaffirmed Paraguay’s “commitment to stand with the people of Taiwan for the next five years” during his July 12 meeting with Taiwan President Tsai Ing-wen. On July 13, Peña expressed his desire for increased Taiwanese investment in the country during a meeting with local electric vehicle manufacturers. (RP)
After the Cosco Shipping Company suspended construction work on a 1.8 km tunnel as part of its Chancay megaport project in Peru (see TCS June 16), the company's general manager has stated that tunnel construction will resume within a month. The tunnel is expected to be completed before the 2024 Asia-Pacific Economic Cooperation (APEC) summit to be held in Lima. (NRM)
Brazil has opened a second investigation into allegedly unfair trade practices in imports of fiber optics from Chinese companies.
The formal launch of this second investigation, which is the responsibility of the Ministry of Development, Industry, Trade and Services’s (MDIC) Foreign Trade secretariat, was published in the official gazette on June 22. The focus is on Chinese government subsidies provided …to Chinese producers that export fiber optic cables to Brazil, the statement reads.
…In Brazil and in other parts of Latin America, Chinese companies are now the main suppliers of fiber and optical equipment, particularly for small operators and internet service providers, mainly due to their competitive prices. Fiber imports in Brazil have hit record levels in the last two years, according to official trade statistics, the bulk of which come from Asia.
According to Prysmian’s Vice-President, Marcelo Andrade, the company presented the same arguments to other governments in Latin America where it has local production and/or significant sales operations, as in the case of Mexico … [Dumping of Chinese fiber may be taking place] in Chile as well.
…The new probe is expected to last six months, but that period could be extended …MDIC said that the "analysis of evidence of the existence of subsidies subject to compensatory measures considers the period from July 2021 to June 2022," while the period for damage analysis is wider, covering July 2017 to June 2022.
China’s ambition to become a major contender in the global market for subsea cables may have been thwarted especially by US government-led efforts, but per Financial Times reporting, “Beijing is still finding ways to gain ground [in regions where Chinese government-owned telecoms companies] have commercial and political influence [and where they are able to] fight price wars well”.
For instance, ZTT Submarine Cable & System was awarded the contract for three stretches of the Brazilian government sponsored Amazon river fiber project Norte Conectado last February through its subsidiary ZTT do Brasil. Hengtong, another Chinese fiber optics manufacturer, had been selected for an earlier stretch of the project in June 2022. (RP)
On July 3, the Prosecutor of Peru, Patricia Benavides, met with the Deputy Attorney General of China, Sun Qian, and his delegation. The objective of the meeting was to enhance their cooperation on cross-border crimes, including providing training to Peruvian prosecutors on the subject, as stated by the Prosecutor's Office.
China has been taking active steps to combat cross-border crimes by implementing policies and measures in recent years, including by enacting the China International Criminal Judicial Assistance Law (ICJA Law) in 2018, and establishing bilateral and multilateral agreements with other countries to combat cross-border crimes. (NRM)
Dominican Republic 🇩🇴
The two countries held their inaugural meeting of the Mixed Commission for Economic, Trade, and Investment Cooperation. This historic meeting took place in Santo Domingo, and covered various topics, including the economic situation of both countries, bilateral economic and trade relations, investment opportunities, and priority cooperation projects.
Since severing diplomatic ties with Taiwan in 2018, the Dominican Republic has sought to strengthen its relations with China significantly. It has become one of 21 Latin American & Caribbean nations to join the Belt and Road Initiative (BRI) by signing a Memorandum of Understanding (MoU) with China in 2018, a deal which Taiwan claims included a $3.1 billion package of investments, financial assistance and low-interest loans for the Dominican Republic.
In May of this year, China and the Dominican Republic celebrated five years since the establishment of diplomatic relations. According to the Chinese ambassador to the Dominican Republic, Chen Luning, since establishing formal ties, the volume of commercial exchange increased by 112 percent and both countries have signed over 20 agreements in key sectors such as trade, economy, agriculture, education and tourism. In March of this year, the general secretary of the United Left-wing Movement of the Dominican Republic, Miguel Mejía, visited Beijing and met with key leaders to discuss the strengthening of commercial and diplomatic ties. (VV)
The first meeting of negotiations for the signing of the Free Trade Agreement (FTA) between Honduras and China was held [in Tegucigalpa] on July 7, so as to advance bilateral cooperation, the Foreign Ministry reported.
…Within the context of this first round of FTA talks, the terms of reference of the negotiations, the work methodology and a schedule of meetings were agreed upon so that the treaty will be ready in a year.
Aspects related to cooperation, micro and small entrepreneurs and the agricultural sector, among others, were included in these terms.
Discussion of Honduras’ energy sector became a focal point of the first round of FTA talks. Both parties discussed the construction of hydro dams in Honduras and how this infrastructure could strengthen electricity dispatch and control flooding in Honduras.
Chinese Minister of Commerce, Wang Wentao, and Honduran Minister of Economic Development, Fredis Cerrato, jointly announced the launch of China-Honduras FTA negotiations on July 4. For more on Honduras and China’s evolving trade negotiations since severing diplomatic ties with Taiwan (TCS March 29), see TCS June 16. (VV)