The China Signal - May 28
Crude oil tax could hit Venezuelan oil, Argentina's fighter jet plans hit a hurdle, LatAm's electricity sector
G’day, and welcome to The China Signal! This week, Beijing’s new taxes on crude oil could hit Venezuela’s exports to China; efforts to sell Chinese FC-1 Xiaolong fighter jets to Argentina hit a hurdle; an overview of China’s moves in the region’s electricity sector, vaccine updates; plus more. Read on.
Oil
Venezuela 🇻🇪
Did China Just Sound The Death Knell For Venezuela’s Oil Industry? - May 23, 2021
China has announced that it will impose taxes on heavy sour crude, a move that could hit Venezuela hard as it continues to struggle with U.S. sanctions and a dilapidated oil industry.
Media reports suggest as many as 400,000 bpd of Venezuelan oil could be orphaned as new Chinese tax laws make it impossible for the country to export its crude to Asia. New regulations expected to come into place on June 12 would make the profit margins on Venezuelan oil too low to warrant its current export route.
Venezuela has not been exporting oil directly to China since 2019, largely due to the U.S. sanctions that continue to restrict the country’s oil exportation. However, China has been importing Venezuelan oil via Malaysian refineries, where it is mixed with fuel oil or bitumen before continuing on to China. China’s new rules could add around $30 per barrel to this "diluted bitumen", making it economically inviable.
The Chinese Ministry of Finance stated of the background for the new tax introduction, "A small number of companies have imported record amounts of these fuels and processed them into sub-quality fuels which were then funneled into illicit distribution channels, threatening fair market play and also causing pollution".
New taxes are expected to pave way for opportunities for China’s domestic refiners to increase supply as well as boosting prices as the country’s fuel demand continues to increase. This comes as Chinese oil refiners hit higher production levels in April, signaling a sustained recovery in crude processing.
Military
Argentina 🇦🇷
This was first mentioned in TCS May 7. As the below article notes, Argentina is still subject to an arms embargo from the United Kingdom, which restricts their ability to purchase military goods or technology with British origins.
Argentine Air Force faces another hurdle for its re equipment plans — MercoPress - May 26, 2021
And now the latest attempt, which apparently was well advanced for 12 FC-1 Xiaolong jet fighters from China, which have a reputable experience in Pakistan, is also in trouble, because the manufacturer has opted for PK16LE eject seats, from Martin Baker. The Argentine defense ministry was much encouraged with the possible transaction because not only did it include technology transfer, but also long term financing. However according to Hispaviación is all depends on the UK's attitude.
Electricity
Broader Latin America 🏔🏝
China's Bid to Dominate Electrical Connectivity in Latin America - Jamestown - May 21, 2021
TCS reader Evan Ellis’ latest. In his own words via email, Ellis argues in his article that:
The article looks at how Chinese companies have made significant advances in the generation, transmission and distribution of electricity across the region. I argue that in addition to the commercial logic, such advances should also be examined in in the context of Chinese effort to expand its position in activities key to the "connectivity" underlying Latin American economies. This is a concept that also extends to the construction and operation of ports, roads, railroads, telecommunications, ecommerce and other infrastructure, and arguably supports PRC economic advances in other strategic sectors.
Trade
Brazil 🇧🇷
Driven by ore, Brazil's exports to China grow 36% by April | The Rio Times - May 24, 2021
Rising international soy and particularly iron ore prices, coupled with an upturn in the global economy, led Brazil's exports to China to surge further and reach the highest level on record for the months of January through April.
In the first 4 months of the year, the country exported the equivalent of US$27.63 billion to China, the highest value on record for the same period.
The Asian country is now the destination of 34% of Brazilian products, the highest level on record and more than triple sales to the U.S.
Vaccine Diplomacy
Chile 🇨🇱
China's Kangtai Biological, partners agree to run Phase III trial in Chile -Reuters - May 25, 2021
China's Shenzhen Kangtai Biological Products has reached an agreement with Chilean partners to run a Phase III clinical trial for its COVID-19 vaccine in the Latin American country, state media Xinhua said.
The vaccine, which obtained emergency use approval in China earlier this month, adopts a technology similar to a shot from Chinese vaccine developers Sinovac Biotech already being used in Chile's mass vaccination drive.
In a signing ceremony on Monday, Chile's Advanced Medical Systems And Investment S.A and University of Chile have also agreed with Kangtai on the procurement of the vaccine, Xinhua said, without disclosing details of the purchase.
Xinhua did not specify the regulatory procedures Kangtai and its partners have to go through in order to start the trial in Chile.
Venezuela 🇻🇪
As highlighted by Francisco Urdinez in his report that I covered in TCS April 16, Venezuela received a large amount of PPE donations from Beijing at the outset of the pandemic. So it’s notable that until now, Caracas has received very few Chinese vaccines.
Venezuela receives 1.3 million COVID-19 vaccines from China: Maduro | Reuters - May 24, 2021
Venezuelan President Nicolas Maduro said 1.3 million vaccines from China had arrived in the South American country, which is poised to start a vaccination campaign in the coming days.
In Venezuela, with a population of about 30 million, 1.4 million vaccines have already arrived from Russia and China, according to information from the Ministry of Health.
Maduro said earlier this month Venezuela was aiming for 70% of its population to be vaccinated by August, when single-dose Russian Sputnik Light vaccines were due to arrive. There has been no announcement about whether or not some of those doses have already arrived.
Paraguay 🇵🇾
“Paraguay receives 250,000 COVID-19 vaccine doses to resume immunisations”
~Paraphrased Translation~
Paraguay received 250,000 doses of the Chinese Sinopharm vaccine against COVID-19 from the United Arab Emirates on Monday, the largest batch to arrive in the country that will allow the resumption of suspended immunisations in several regions due to a lack of injectables.
Paraguay recibió el lunes 250.000 dosis de la vacuna china Sinopharm contra el COVID-19 procedentes de Emiratos Árabes Unidos, el mayor lote en llegar al país que permitirá retomar las inmunizaciones suspendidas en varias regiones por la falta de inyectables.