The China Signal - May 5
New oil project in Guyana, Chile moves to nationalise lithium, Venezuela thaw?
G’day, and welcome to The China Signal. This week, Guyana approves another offshore oil project—this time worth $12.7 billion—to the ExxonMobil/CNOOC/Hess consortium, discussions to begin soon with the Chilean government and SQM following announcement to “nationalise” the lithium industry, Argentina begins paying for Chinese imports in yuan, a possible turning point in China-Venezuela relations, plus more. Read on.
Oil 🛢️
Guyana 🇬🇾
Guyana Greenlights $12 Bn Oil Development Plan | Barron's | April 26, 2023
Guyana has approved a US$12.7 billion investment proposal by a US and Chinese consortium seeking to develop an offshore oil field, Vice President Bharrat Jagdeo said April 26.
The consortium is led by ExxonMobil, and includes the China National Offshore Oil Corporation [CNOOC], and Hess Corporation.
ExxonMobil is the largest shareholder with a 45% stake. Hess and CNOOC own 30% and 25% stakes respectively. The consortium was given a 20-year license on April 28.
The investment plan was approved "after vigorous analysis by external consultants and the documents would be made public as we have done with all of the other licenses," Jagdeo told AFP.
…At stake are deep-water oil fields called Uaru [which, at their peak] could yield around 250,000 barrels of oil per day.
Uaru - which is expected to start producing in the second quarter of 2027 - is part of the Stabroek block, whose estimated resources stand at 11 billion barrels of crude. See TCS March 8* for an analysis on how the oil bonanza is reshaping Guyana’s economy and bilateral relations with China.
Separately, a Guyanese court ruled on May 3 that the consortium breached insurance obligations in their Liza-One project, the first section of the Stabroek block that began production in 2019. Exxon and its partners CNOOC and Hess Corporation are required to furnish local authorities with a liability agreement by June 10, or their Liza-One environmental permit will be suspended. Exxon is “reviewing the court decision and evaluating next steps.”
The consortium operates five offshore projects, producing approximately 380,000 barrels of oil per day, which is all of Guyana’s oil output.
*In TCS March 8 we mistakenly wrote that the Stabroek block has an estimated 8 billion barrels of crude. The correct amount is 11 billion barrels. Sorry. (RP)
Critical Minerals 🪨🔋
Chile 🇨🇱
Chile will start talks with SQM (SQMA.SN) over its operations in the Atacama “this semester” to convince the world's No. 2 lithium mining company to sign onto a state-led public-private model, the economy minister said on Monday, while SQM said it would need to invest an additional $2 billion under the new strategy.
…Economy Minister Nicolas Grau told Reuters state miner Codelco would start talks over public-private lithium production "as soon as possible."
While Codelco dominates copper output in Chile, the world's top copper producer, the state has yet to produce lithium.
The strategy includes a new national lithium company, which congress must approve, but [Economy Minister Nicolas] Grau said the government believes Codelco has the "capacity to assume new challenges" as well as the "scale and know-how" to deal with lithium. (MH)
Peru 🇵🇪
Peru's Las Bambas copper production falls 15% in Q1 | Bnamericas | April 28, 2023
Production of Las Bambas, the copper mine owned by China’s MMG mine in Peru’s Apurímac region, fell 15% in Q1 compared to the same period last year to 58,426t.
According to MMG’s latest production report, the lower output was due to a shortage of supplies resulting from protests that affected the company's logistics chain.
Chinese-state owned copper project Las Bambas has experienced significant turmoil over the last year as road blockades and protests from the indigenous Huancuire community forced production halts. MMG plans to invest $2 billion over the next five years to expand Las Bambas.
See TCS April 4 (including our background on MMG Ltd.), as well as TCS February 16, TCS April 23, & TCS September 28 for further coverage of this issue. (VV)
Energy 🏭
Brazil 🇧🇷
Brazil's Minister of Energy and Mines, Alexandre Silveira, met with the president of the Chinese state-owned company Energy China International, Lyu Zexiang on April 27.
According to the announcement, Energy China plans to invest US$10 billion in renewable energy generation and green hydrogen production in Brazil “in the coming years.”
Silveira indicated that the Brazilian government is working to improve regulatory stability and legal certainty to attract increased investment into renewable energy. (NRM)
Finance 💱
Argentina 🇦🇷
Argentina to pay for Chinese imports in yuan rather than dollars | Reuters - April 26, 2023
Argentina will start to pay for Chinese imports in yuan rather than dollars, the government announced Wednesday, a measure that aims to relieve the country's dwindling dollar reserves.
In April, it aims to pay around $1 billion of Chinese imports in yuan instead of dollars and thereafter around $790 million of monthly imports will be paid in yuan, a government statement said.
The decision aims to ease the outflow of dollars, Argentina's Economy minister Sergio Massa said during an event following a meeting with the Chinese ambassador, Zou Xiaoli, as well as with companies from various sectors.
In November last year, Argentina expanded a currency swap with China by $5 billion, seeking to strengthen Argentina's international reserves. (MH)
Diplomacy 🤝
Venezuela 🇻🇪
China Renews Embrace of Maduro’s Venezuela as the US Looks On - BNN Bloomberg - May 2, 2023
High-ranking officials from China, Venezuela’s biggest creditor, met with close aides to President Nicolas Maduro in Caracas as recently as last month to discuss the restructuring of the nation’s long-standing line of credit, according to people with knowledge of the matter. The two sides also talked about potential areas to renew collaboration, including telecommunications and oil, said the people, asking not to be named discussing internal strategy.
A thaw in China relations would offer Maduro a powerful ally as well as the chance of a renewed conduit for oil sales, while potentially handing him more leverage with the US as Washington looks to bring more crude to market to lower prices at the pump for American voters.
Although there’s little public data, D’Sola, who is director of the Andres Bello Foundation, estimates the outstanding debt to be around $11-12 billion, meaning Venezuela has paid nearly 80% of the total it owed to China, which receives oil as repayments of debt. Venezuela hasn’t been able to send enough crude to meet its obligations in recent years as its production cratered and crude prices tumbled, leading to one of the steepest economic contractions in modern history. A string of US sanctions further hindered the nation’s ability to export oil, its biggest source of revenue.
…senior Chinese diplomat and former adviser to the Chinese embassy in Venezuela, Lan Hu, has just returned to Caracas as ambassador after four years in the Foreign Ministry in Beijing and a stint as ambassador in neighboring Colombia. (VV)
Taiwan Diplomacy 🇹🇼 🕊️
Guatemala 🇬🇹
President Alejandro Giammattei concluded his visit to Taiwan on April 27. In a speech to Taiwan’s legislature on April 25 Giammattei expressed “rock-solid friendship” with Taiwan and appealed “to the international community and the free world” to “strive to respect [Taiwan’s] sovereignty and territorial integrity”. He later reiterated the message on May 2.
Meeting with Taiwan’s President Tsai Ing-wen for the second time in three weeks (see TCS April 7), they inspected an electric vehicles manufacturer RAC Electric Vehicles Inc. factory in Taichung on April 26.
Guatemalan financial officials previously claimed that the country is not asking for “free money” from Taiwan, but rather for backing with up to “25, 30 years” of projects. Economy Minister Janio Rosales said on April 25:
We want to have a better balanced trade, so what we are promoting is for more investment from enterprises from Taiwan to Guatemala and to extend cooperation between the two countries.
Officials dismissed comparisons with Honduras - which cut diplomatic ties with Taiwan last March (see TCS March 29) - arguing that Guatemala doesn’t run a comparable amount of debt with the island. (RP)
Paraguay 🇵🇾
Paraguay’s ruling candidate Santiago Peña, 44, scored a big win in the country’s presidential election on Sunday, tightening the conservative Colorado Party’s political grip in the country and defusing fears about the end of diplomatic ties with Taiwan.
Pena, who has pledged to maintain Paraguay’s long-standing Taiwan relations, had 42.7 percent of the vote with over 99 per cent of ballots counted, a more than 15-point lead over center-left rival Efrain Alegre, who has argued for switching allegiance to China.
During the election campaign, diplomatic relations with Taiwan were questioned. Peña's election, however, confirms the continuity of relations–for now. The president of Taiwan, Tsai Ing-wen, congratulated Peña. She mentioned that Taiwan's aim is to deepen the relationship between the two countries, who have been diplomatic partners for over 60 years. (NRM)
Trade 📊 💸
Nicaragua 🇳🇮
~ Global Times is a Chinese state-backed media outlet ~
Nicaragua will be able to export [66] products duty-free to China from May 1 under the Early Harvest Arrangement (EHA) for a bilateral Free Trade Agreement (FTA), the Customs Tariff Commission of the State Council, China's cabinet, announced on April 24.
…Imports from Nicaragua [include] beef, seafood, cable and clothing …China will be able to export to Nicaragua [78] products such as insecticides, fungicides, herbicides, plastics and raw materials for textiles and toys.
The announcement came the same day as the Ministry of Foreign Affairs’ Latin America chief Cai Wei visited Managua. Cai met with Nicaragua’s foreign affairs minister Denis Moncada, and President Daniel Ortega’s son Laureano Ortega.
After the EHA was signed in July last year, FTA negotiations were initially due to conclude in September (see TCS February 16 for further background). However, progress has been slow. The two countries signed a bilateral infrastructure project on April 14 (see TCS April 24), the first major agreement since resuming diplomatic relations in 2021.
Later, on May 4, China’s ambassador to Nicaragua Chen Xi donated wheat and fertilizers at a ceremony with Laureano Ortega. (RP)
Ecuador 🇪🇨
Ecuador and China will sign significant trade agreement on May 10 | Prensa Latina | May 02, 2023
~Prensa Latina is a Cuban state-backed media outlet~
The authorities of both nations decided to sign the pact after 10 months of meetings and four rounds of negotiations focused on the reduction of tariffs to allow merchandise access to the two markets.
The pact also includes rules to improve customs procedures, protocols for sanitary and phytosanitary measures, reduction of obstacles to commercial exchange, cooperation for investment, promotion of electronic commerce, among other aspects.
Ecuador’s exports to China are higher than any other country with which Ecuador trades. In 2021 Ecuador exported $4.03 billion to China, with a large proportion coming from the agricultural and agro-industrial sectors, including crustaceans ($261 million) and bananas ($10.1 million).
Ecuador and China first began these negotiations in February 2022. For more information on the Free Trade Agreement, see TCS January 15. (VV)
Auto 🚙🔋
Brazil 🇧🇷
China's GWM to start Brazil plant operations in May 2024 | Reuters | April 27, 2023
Chinese carmaker Great Wall Motor Co Ltd will start operations of its Iracemapolis plant in Brazil on May 1, 2024, the company announced on Thursday, also disclosing which vehicles it will manufacture there.
The firm, owner of brands such as Haval and Tank, said it will produce a hybrid, flex-fuel pickup called Poer and a still undisclosed hybrid SUV in the plant, which was bought from Mercedes-Benz in 2021 and will be its largest in a Western country.
Great Wall Motor is China's eighth largest automobile manufacturer, founded in 1984. In August 2021, GWM acquired a Mercedes Benz plant in Iracemápolis with a strategy to enter the Latin American market. GWM has invested approximately $1.9 billion in the region so far. From this factory GWM plans to export cars to the entire region; its production capacity is slated to grow from 20,000 to 100,000 units annually. (NRM)
Agriculture 🐄
Uruguay 🇺🇾
~ Xinhuanet is a Chinese state-backed media outlet ~
The Uruguayan Minister of Livestock, Agriculture and Fisheries, Fernando Mattos, will lead an official mission to China in May with the aim of obtaining sanitary authorizations to export poultry meat, rapeseed and wheat, among other products…
Fernando Mattos will be in China between May 7 and 26, where he will meet in Beijing with his counterpart, Customs authorities, health services, and businessmen, as well as visiting Henan and Inner Mongolia, among other destinations, and trade fairs. (...)
According to information provided to TCS by the Uruguayan Ministry of Livestock: Uruguay has shown great interest in exporting poultry and horse meat to China over the past decade.
The Uruguayan government has been taking steps to finalize the export of poultry meat since 2017; horse meat export procedures began in 2013. Neither efforts have been successful yet. Uruguay exported approximately $3 billion of goods to China in 2021, primarily consisting of frozen beef ($1.43 billion). (NRM)
Media 📺
Cuba 🇨🇺
Cuba and China officially present joint television program | Prensa Latina | April 29, 2023
~ Prensa Latina is Cuba’s official news agency ~
Executives from China Media Group (CMG) and Cuban Television officially presented the television program ConTextos (ConTexts), dedicated entirely to information about China [on April 28].
…The program co-produced by China Global Television Network (CGTN)... [is the two countries’ first media] joint program …[ConTextos] has been on air on trial mode since July 6, 2022 … [and] aims to tell the Cuban public the truth about China.
The announcement follows Politburo’s Secretary Roberto Morales' April 23-28 visit to China, the first stop of an Asian tour including Laos and Vietnam. (RP)