The China Signal - June 12
What the Summit of the Americas means for China, AMLO shifts tone on Ganfeng Lithium, Chinese organised crime in Buenos Aires
G’day, and welcome to The China Signal. This week, what the Summit of the Americas means for China, Mexico’s president shifts tone on Ganfeng Lithium’s Sonora mine, Chinese organised crime gangs continue to menace Chinese diaspora in Buenos Aires, plus much more. Read on.
Summit of the Americas
USA 🇺🇸 + Broader Latin America 🏝🏔
For Beijing, one of the most significant outcomes of the Summit of the Americas was President Biden’s proposal to work with the hemisphere’s largest food exporters (Argentina, Brazil, Canada, and Mexico) to coordinate their efforts to boost food and fertilizer production. Any alterations to current agricultural trade flows would impact China, who is the world’s largest food importer. TCS May 27 observed a flurry of agricultural agreements and developments between China and various Latin American countries in recent months, in a clear effort by Beijing to shore up China’s food security.
The Summit’s headline announcement was the Americas Partnership for Economic Prosperity, which was perceived as an effort to address immigration, climate change, and China’s growing influence in the region. Some observers argue that these priorities aren’t shared by the region, and that inflation and the war in Ukraine will continue to consume the Biden administration’s attention at Latin America’s expense.
In Chinese press, Foreign Ministry spokesperson Zhao Lijian countered US National Security Advisor Jake Sullivan’s criticism of China, arguing the United States acts for “its own selfish interests to exclude and contain other countries,” which is a “great disrespect to Latin American countries.” Sympathetic Latin American publications echoed similar critical narratives. (IA, MH)
An exclusive Reuters analysis of U.N. trade data from 2015-2021 shows that outside of Mexico, the top U.S. trade partner, China has overtaken the United States in Latin America and widened the gap last year.
But the trade gap with the United States in the rest of the region, which first opened up under former U.S. President Donald Trump in 2018, has grown since Biden took office in January last year, despite a pledge to restore Washington's role as a global leader and to refocus attention on Latin America after years of what he once called "neglect".
When excluding Mexico, total trade flows - imports and exports - between Latin America and China hit nearly $247 billion last year, according to the latest available data, well above the $174 billion with the United States. The 2021 data lacks trade numbers from some regional countries but those balance each other out in terms of U.S.-China bias.
Critical Minerals 🔋
On Tuesday June 7, Mexican President Andres Manuel Lopez Obrador appeared to ease pressure on China’s Ganfeng Lithium Co., Ltd. (“Ganfeng”) over the future of its Sonora lithium mine.
…Asked about the status of Ganfeng’s concession, Lopez Obrador said at a news conference: “If the agreements are in order, and there is an exploration and production project, they will be respected”.
AMLO nationalised the country’s lithium sector in April (see TCS April 23), and although he called on the Mexican government to review all existing contracts and concessions - particularly Sonora’s - legal analysts debate whether the laws passed can be applied retroactively.
The Sonora project was originally structured as a 50-50 joint venture between Ganfeng, and Bacanora Lithium, however Ganfeng increased their share to 97.3% under a 2021 deal (see TCS August 26, 2021). After pandemic-related delays, the project aims to break ground in 2024.
Background: Ganfeng Lithium Co., Ltd. (“Ganfeng”) 🔍
Established in 2000 and headquartered in Xinyu (Jiangxi province), Ganfeng Lithium Co., Ltd. has been listed on the Shenzhen, and the Hong Kong Stock Exchange since 2010 and 2018 respectively, becoming the first Chinese lithium company to be dual-listed.
Ganfeng principally engages in the research, development, production and sales of deeply processed lithium products. Its main products include lithium compounds, lithium metal and lithium batteries.
Active in the domestic and in overseas markets, Ganfeng is also operating in Argentina on the Mariana (Salta province - see TCS June 18, 2021), and on the Cauchari-Olaroz (Jujuy province - see TCS July 2, 2021) mines. (RP, MH)
Bolivia has narrowed to six from eight the list of competing foreign firms vying to tap its vast lithium resources, energy minister Franklin Molina said on Tuesday…
Under left-wing President Luis Arce, Bolivia has sought to partner with foreign firms to jumpstart its mining capacity. Last year, he announced a shortlist of eight companies from the United States, China, Russia and Argentina that, if chosen, would extract the metal using an untested technology known as Direct Lithium Extraction.
…final results are expected to be announced on June 15, itself a delay on an initial May deadline for the announcement.
Under Bolivian law, only state-owed lithium firm Yacimientos de Litio Bolivianos (YLB) is allowed to extract the metal. The government has yet to announce how they would square that restriction with partnering with foreign firms.
The initial list of finalists in Bolivia includes U.S. startups Lilac Solutions - backed by German carmaker BMW and Bill Gates' Breakthrough Energy Ventures - and EnergyX, as well as China's giant battery maker CATL.
The other companies are Argentina's Tecpetrol, Russia's Uranium One and Chinese ventures Fusion Enertech, TBEA Co Ltd (600089.SS) and CITIC Guoan Group Co.
Ganfeng Lithium stated on its interactive platform that its 40,000 mt/year lithium carbonate project in Argentina is expected to be put into operation in the second half of 2022, and the specific production time depends on the construction progress of the project.
Infrastructure 🏗 🏟️
The US$23.3 million renovation of the multi-purpose Thomas A. Robinson stadium in Nassau, the Bahamas, has been recently placed “on hold” as the local government waits for grant funding from the Chinese government, a Cabinet minister revealed on Thursday June 9.
“Following the tender evaluation, it was recommended that a contract be awarded to Mosko’s United Construction Company [a local company based in Nassau] in the sum of $25.3m inclusive of VAT. The Government of The Bahamas is in negotiation with the People’s Republic of China to secure grant funding for the project. The contract with CCS is on hold until the funding for the works is resolved.”
The stadium is believed to be a “critical facility” given its central role in the so-called governmental “Sports in Paradise” tourism initiative, through which the country aims to host international sporting events. (RP, MH)
~Paraphrased from Spanish (see full article above)~
On Monday June 6, the Nicaraguan Minister of Development, Industry and Trade (MIFIC), Jesús Bermúdez, reported through government media that Nicaragua and China already have a proposed legal framework to negotiate a Free Trade Agreement (FTA), which he expects to be signed no later than 2023.
As anticipated in TCS May 27, Nicaragua and China are preparing to sign an "Early Harvest Agreement" (EHA), a prelude to the FTA which could enter into force within six months.
Approximately 90% of Nicaragua’s typical historical exports to Taiwan are expected to be covered in the EHA, while custom fees would be waved, said Bermúdez.
Taiwan was one of Nicaragua’s most significant bilateral donors prior to their diplomatic rupture in December 2021, financing 27 projects worth US$30 to 50 million. (RP)
Brazilian crude flows to China's independent refineries in May fell to zero for the first time since January 2016 as buyers turned to attractively-priced barrels from Russia and Iran, a move that would potentially help the refiners to boost their refining margins, S&P Global Commodity Insights' data showed June 8.
"We see Europe taking more cargoes than before. And almost all Brazilian cargoes that come to China are taken by state-owned companies. Independent refineries may have just one or two cargoes in coming months," said a China-based crude oil trader.
Brazil's Petrobras, which holds a 67.216% operating stake in the Tupi oil fields, continues to prioritize supplies for the domestic market over exports for its Tupi crude sales, trade sources told S&P Global.
As a result, independent refineries' crude imports from Brazil slumped 61.2% year on year to 2.95 million mt in January-May, dropping to the position of seventh-largest supplier from fourth-largest in the same period last year.
Chinese player PetroChina has signed a contract to run transshipment operations at the Port of Acu industrial complex in Rio de Janeiro state, as its production from the Brazilian pre-salt province continues to increase.
The long-term contract with Brazilian group Vast Infraestrutura, formerly known as Acu Petroleo, will allow PetroChina to use the company’s oil terminal in the port for ship-to-ship operations using aframax, suezmax and very large crude carriers.
PetroChina is the parent company of China National Petroleum Corporation (CNPC) and China National Oil & Gas Exploration & Development Corporation (CNODC).
CNPC holds a 10% working interest in the Mero pre-salt field, while CNODC has a 5% stake in the giant Buzios pre-salt field.
Organised Crime 💰
Efforts to target the leadership of different Chinese mafia groups in Argentina have proven unsuccessful in stopping their extortive practices. Corruption and cultural differences on the part of public officials still appear to play a role in the inability of police to root them out.
These groups maintain a hand in drug trafficking, human smuggling, and money laundering. But they mostly prey on the Chinese diaspora in and around Buenos Aires, reaping profits from extortion.
Police efforts to dismantle powerful factions within the organization have been consistently stymied by language barriers, resistance from within local Chinese communities and of course, official collusion.