The China Signal - October 21
Critical minerals, Goldwind's wind turbines to Brazil, Cansino signs agreement with Argentina's Laboratorio Richmond
G’day, and welcome to The China Signal. This week, critical mineral developments in Argentina and Bolivia, Chinese firm Goldwind’s plans for wind turbine production in Brazil, Paraguay presses Taiwan for greater market access and economic support, Latin American governments pursue hedging strategies in international fora, Cansino signs an agreement with Argentina’s Laboratorios Richmond for vaccine production, and much more. Read on.
Also, my Veracity colleagues and I recently outlined scenarios to watch in Brazil’s presidential election. The runoff is on October 30, and we’re continuing to watch developments closely.
Critical Minerals & Natural Resources 🪨⚒️
Argentina 🇦🇷
Construction of the first stage of the US$741mn Caucharí-Olaroz lithium project in Argentina’s Jujuy province is on track to wrap up this year, with work 90% complete, according to a social media post by project owner Ganfeng Lithium.
In an initial stage, it will produce 40,000t/y of battery-grade lithium carbonate and work continues to progress toward production upon completion of all purification circuits, according to a corporate presentation.
…Meanwhile, Lithium Americas and Ganfeng have begun planning stage 2, involving at least 20,000t/y, and continue to advance development of the exploration well field. Stage 2 is expected to start in 2023.
Ganfeng and Lithium Americas are entitled to 51% and 49% of production. Useful life is around 40 years.
Ganfeng Lithium is a well-known company name for our readers, and so are its lithium mines projects in Argentina, and Mexico. See TCS June 12 for our in-brief backgrounder. (RP)
Can China and Argentina strengthen their mining ties? - BNamericas - September 23, 2022
Jiangxi Ganfeng Lithium, Hanaq Group, Tsingshan Holding Group and Zangge Mining Group either own or hold interests in Argentine mining projects. Since 2020, Chinese investments have totaled US$2.62bn, according to a report the Argentine mining ministry prepared for the 2022 China Mining Conference, held virtually.
Chinese miners are engaged in nine projects, six of which are for lithium and in the construction stage. Lithium carbonate accounted for 98.2% of last year’s Argentine lithium exports to China, followed by lithium chloride (0.8%), while 42% Argentina’s total lithium exports went to China.
Yet, China’s dominant position as a manufacturing country has led Western rivals, especially the US, to implement a containment strategy, Zijin Mining's chairman Jinghe Chen told the event. This strategy could not just hit the Chinse economy but also mining partners like Argentina.
To hedge against potentially negative effects, Chen and other officials advocate the creation of globally influential mining companies, resembling technology powerhouses like Huawei, ByteDance or CATL.
Zijin wants to become a major global lithium supplier by 2025 and a top metal miner by 2030. Currently, Zijin controls over 10Mt of lithium carbonate equivalent resources, ranking among the top 10 lithium miners in the world and the top three in China.
More details on China’s active mining projects can be found here. (MH).
Bolivia 🇧🇴
~ Article above is paraphrased from Spanish ~
On Monday 3 October, the Bolivian government announced that it expects to build at least two Direct Lithium Extraction (DLE) plants with a processing capacity of 25,000 metric tons each per year. These plants "will be strategically located" in the Bolivian salt flats of Uyuni, and Coipasa and Pastos Grandes, the Minister of Hydrocarbons and Energy said in a press release.
The state-owned Yacimientos de Litio Bolivianos (YLB) will construct, operate and maintain these plants "through technology transfer".
Another lithium carbonate industrial plant - currently under construction - in Llipi (Potosí region) is expected to produce an additional 15,000 metric tons per year …With these three projects, YLB expects to reach an average production of 40,000 metric tons of lithium carbonate per year by 2025.
The Bolivian government announced plans to resume lithium extraction in May 2021 (TCS May 7, 2021), and despite a verdict originally due June 15 (see TCS June 12), is still considering six foreign firms. Four are Chinese (Xinjiang TBEA Group; Fusion Enertech; Brunp, a subsidiary of world’s largest car battery maker, CATL, with China Molybdenum; and CITIC Guoan Group with the China Railway International Group). YLB’s final decision is now expected by the end of the year. (RP)
Suriname 🇸🇷
~ GlobalTimes.cn is a Chinese state-sponsored media outlet ~
[On Tuesday 18 October,] China's largest gold producer Zijin Mining Group announced the acquisition of the Rosebel gold mine in Suriname, one of the largest of its kind in South America, with a proposed investment of US$360 million.
…Approval for the deal is still needed from the governments of China and Suriname, Zijin noted in its statement.
Through the acquisition of the Canadian IAMGOLD Corporation’s Rosebel project at a 95% stake, Zijin will control a mine whose gold resources are conservatively estimated to be 217 tons. This move confirms the Zijin’s expanding influence over the region, where it already controls other extraction sites in Argentina (lithium, Tres Quebradas), and Colombia (gold, Buriticá). (RP)
Wind Power 🔋🌬
Brazil 🇧🇷
China's Goldwind to manufacture wind turbines in Brazil | Reuters | October 19, 2022
China's Xinjiang Goldwind Science & Technology Co Ltd is in advanced talks to install a wind turbine factory in Brazil with deliveries expected to start in 2024, an executive said on Wednesday October 19.
The plant, whose location is not yet defined, will serve the Brazilian market, but may also export equipment to other countries in South America, according to Roberto Veiga, general manager of Goldwind in Brazil.
…The company is negotiating with the governments of three Northeastern states - Ceara, Pernambuco and Bahia - to install the plant …Vega did not disclose the investment value, but stated that it is a "considerable" amount.
…The start of local manufacturing - which enables better financing conditions for generators - represents a milestone for the Brazilian wind power industry, which recently experienced the exit of GE, an important global player that stopped producing its turbines in the country earlier this year.
Background: Xinjiang Goldwind Science & Technology Co Ltd. (“Goldwind”) 🔎
Founded in 1998 and listed both on the Shenzhen (December 2007), and Hong Kong (October 2010) Stock Exchanges respectively, Xinjiang Goldwing Science & Technology Co Ltd. (“Goldwind”) is a Chinese multinational wind turbine manufacturer.
Headquartered in Beijing, Goldwind’s global business network covers 32 countries across six continents, with eight R&D centers worldwide. Its fully-owned subsidiary Goldwind Americas supervises LatAm-based operations. (RP)
Agriculture 🌾
Paraguay 🇵🇾 + Taiwan 🇹🇼
~ Paraphrased from Spanish ~
The Paraguayan pork sector’s entrance into the Taiwanese market is only a few details away, informed Taiwan’s Ambassador to the country, José Chin-Cheng Han
...Taiwan has already become the third largest buyer of Paraguayan beef, with a significant increase in volumes and values over the last years.
Taipei’s efforts to attract Paraguayan meat exports has strategic significance. Remember, Paraguay’s meat industry has periodically pressured Paraguay’s government to switch its diplomatic alliance for Beijing to pursue the mainland market. Paraguay’s government has increased pressure on Taiwan for greater economic support, too (see next article). For further background on Paraguayan meat exporters, see TCS April 8, and TCS May 27. (RP, MH)
Paraguay calls for Taiwan to invest $1bn to remain allies | Financial Times - September 28, 2022
“We are working with the president of Taiwan . . . so that the Paraguayan people feel the real benefits of the strategic alliance,” Abdo told the Financial Times during a visit to the US.
“There is Taiwanese investment of more than $6bn in countries which don’t have diplomatic relations with Taiwan, we want from that $1bn to be put in Paraguay,” he said. “That will help us to build the argument about the importance of this strategic alliance with Taiwan.”
Taiwan’s foreign ministry said Abdo’s hope for $1bn in Taiwanese investment “would have profound significance for the Taiwan-Paraguay strategic partnership”.
Paraguay is a major exporter of soyabeans and beef, but its relations with Taiwan, which Beijing claims as part of its territory, have cost it access to the vast Chinese market. This has upset the South American nation’s powerful farming lobby.
A study published in the journal Foreign Policy Analysis last year estimated Paraguay’s alliance with Taiwan had cost it the equivalent of 1 per cent of gross domestic product per year in lost aid and investment between 2005-14. “Paraguay received nil from China,” the authors wrote. “This was not offset by flows from Taiwan.”
The alliance with Taipei also cost Paraguay access to coronavirus vaccines at a crucial moment in the pandemic when supplies were only available from China. Abdo said he had sent his health minister to speak to the Chinese consul in neighbouring Brazil at the time.
“You have three options,” he quoted the consul as saying. “You can be Chinese, which you aren’t, an ally of China, which you aren’t, or a poor country which you aren’t either. These are China’s priorities.”
Uruguay 🇺🇾
Sorgo uruguayo quedó habilitado para China | Rurales, El País | October 15, 2022
~ Article above is paraphrased from Spanish ~
On Friday 14 October Uruguay was authorized to export sorghum to China, following two years of negotiations over sanitary requirements.
…China is the world's leading importer of sorghum, importing US$3 billion in 2021. Sorghum is used to produce brandy, sugar and vinegar, and for animal feed.
The two governments reached an in-principle agreement in August (see TCS August 12). The two countries are also currently engaged in trade negotiations. (RP)
Finance 💸
Argentina 🇦🇷
~ Article above is freely paraphrased from Spanish ~
Motivated by dwindling foreign exchange reserves in Argentina’s Central Bank, the Argentinian Ministry of Economy is looking for new dollars. It is pushing to reanimate economic relations with China, which were slowed down with former Secretary of Strategic Affairs, Gustavo Béliz, whose term ended on August 29.
…In the medium term, the Government aims at closing the trade deficit with China through the export of lithium and copper, and subsequently, to revive the money-flowing link with the Asian country. The first step is the reactivation of the financing for the Santa Cruz dams (see TCS May 13 for further ESG-themed background), which was funded by a pool of Chinese banks but was halted at the beginning of 2021 over incomplete paperwork by Argentine authorities. US$400 million are reportedly expected before the end of the year to revive the project.…Further talks will also address the stalled Atucha III nuclear power plant financing, where Chinese state-owned China National Nuclear Corp (CNNC) was awarded the construction contract, and Industrial and Commercial Bank of China (ICBC) is expected to finance 85% of the cost on loan (previous TCS editions covered the project in detail, lastly on TCS February 10, and TCS April 8 earlier this year). (RP)
Human Rights 🇺🇳✊📣
Latin America 🌎
Latin American governments are increasingly siding with Beijing and Moscow’s interests in international fora. Most are pushing twin objectives, to protect economic ties and diplomatic support from the two countries, and to bargain with the United States and its allies. Western governments should acknowledge this for what it is – rational behaviour from small and middle powers – and develop counter-strategies with this in mind. Western businesses operating in these markets must be cognizant that, like it or not, they’re players in a geopolitical contest, and that they face reputational risks (engaging with rivals), supply chain risks (sanctions, export restrictions), and more. (MH).
UN rights body rejects Western bid to debate Xinjiang abuses | AP News | October 7, 2022
In a decisive diplomatic victory for China, the U.N.’s top human rights body on Thursday [6 October] voted down a proposal from Britain, Turkey, the United States and other mostly Western countries to hold a debate on alleged rights abuses against Muslim Uyghurs and other ethnic minorities in China’s western Xinjiang region.
At the 47-member state Human Rights Council, 17 countries voted in favor, 19 were against, and 11 abstained in a vote to hold a debate on Xinjiang at its next session in March. The vote amounted to a test of political and diplomatic clout between the West and Beijing, and would have marked the first time that China’s record on human rights would merit a specific agenda item at the council.
Bolivia, Cuba, and Venezuela were amongst those voting against, while Argentina, Brazil, and Mexico abstained. Honduras and Paraguay - 2 of Taiwan’s 14 global allies - voted in favor. This was only the second time a motion has been defeated in the UN Human Rights Council’s sixteen-year history.
~
On Friday 7 October, a similar UN Human Rights Council vote was cast “to appoint an independent expert to scrutinize Russia’s domestic human rights record amidst crackdowns against dissenters of their war in Ukraine”. The motion passed 17-6, with 24 abstentions. Latin American countries voted similarly to the previous day’s China vote: Bolivia, Cuba, and Venezuela voted against, while Argentina and Paraguay voted in favor. Brazil, Honduras, and Mexico abstained.
Concurrently, Argentina, Bolivia, Brazil, Dominica, El Salvador, Honduras, and Mexico refused to sign a statement from the Organization of American States (OAS) condemning Russia's military deployment in Ukraine at the 52nd General Assembly in Lima. Twenty-four out of 31 active member states signed the declaration. (RP)
Vaccines 💉
Argentina 🇦🇷
~ Paraphrased from Spanish ~
The agreement between the Chinese pharmaceutical company CanSino Biologics and the Argentinian Laboratorios Richmond can "turn Argentina into a center that supplies the entire region" with different vaccines that will begin to be produced as of 2023 in a new biotechnology plant that will be inaugurated in the coming months in Pilar, a town in the outskirts of capital city Buenos Aires, with an investment of US$85 million.
"At first we will start with the Covid vaccine and then we will incorporate others that use adenovirus, recombinant proteins, mRNA, and conjugates," said Richmond’s CEO, Juan Manuel Artola. Convidecia, CanSino’s WHO-approved flagship Covid-19 vaccine, is expected to be produced in complete cycle in the plant.
This development follows a transition in Beijing’s pandemic diplomacy we’ve identified over the past year, as focus shifts from vaccine donations and purchases to establishing scientific collaboration and pharmaceutical production agreements with local partners. The “hook” is to produce covid-19 vaccines, but the arrangements all appear to be open-ended to expand to other conditions and collaborations. This appears to be another play for market share in emerging markets – as Latin America’s middle class expands, so too, sadly will its public health burden. Deepening scientific collaboration with Latin American partners could also be a strategic play to offset the ongoing deterioration with US and other Western scientific and academic institutions. (MH)
Background: CanSino Biologics (“CanSinoBIO”) 🔎
Founded in 2009, and listed both on the Hong Kong (March 2019), and Shanghai (August 2020) Stock Exchanges respectively, CanSino Biologics (“CanSinoBIO”) is a Chinese vaccine company.
Headquartered in Tianjin, its main accomplishments feature research, development, and production of Ebola and Covid-19 vaccines. CanSinoBIO global presence include several African, Asian (e.g. Malaysia, Pakistan, Saudi Arabia), European (Hungary, Moldova, Russia), and other Latin American countries such as Chile, and Mexico. (RP)
Venezuela 🇻🇪
~ Paraphrased from Spanish ~
On Monday 3 October, a shipment with more than 6.15 million units of reagents and medical supplies to process 600,000 PCR tests, in addition to other clinical complements, arrived in Venezuela from China.
Equivalent to some $4.8 million in aid, the delivery was realized through commercial cooperation with the Chinese company Meheco. (RP)
Oil 🛢️
Venezuela 🇻🇪 + Iran 🇮🇷
China is again consistently buying Venezuelan oil, bypassing the U.S. embargo through a Venezuela-Iran connection. We first mentioned this trend in TCS April 8. (RP)
More shipments to Asia through intermediaries and growing cargo swaps with Iran drove Venezuela's oil exports in September to their third highest level this year, internal documents and tanker tracking data showed.
The OPEC-member nation's oil exports were volatile earlier this year due to a lack of diluents required to produce exportable grades and unstable output amid processing outages and scarce drilling equipment.
But oil production and exports regained their footing in the third quarter, helped by Iran's supplies of condensate and crude to state-run oil company PDVSA, and deliveries of Venezuelan heavy crude and fuel oil to Iranian state companies.
A total of 40 cargoes departed from Venezuelan waters last month carrying an average of 710,033 barrels per day (bpd) of crude and fuel, and 544,000 metric tonnes of byproducts mainly to China through regional hubs, according to PDVSA's internal shipping documents and Refinitiv Eikon vessel tracking data.
Much of the oil was acquired and resold by companies with no track record in crude trading. These intermediaries, which arrange shipment, payment and final buyers, accounted for 79% of the exports, the PDVSA documents showed.
Corruption 🤝💰💼
Latin America 🌎
Could Bolivia’s road bribery probe derail China’s LatAm investments? - BNamericas - October 3, 2022
Following last week’s coverage of Bolivia’s corruption probe into China Harbor Engingeering Company, there is speculation that other countries in the region could open investigations of their own:
In the rest of the region, contracts held by CHEC include:
Line No. 1 of the Bogotá metro (Colombia, US$3.1bn)
Las Palmas reservoir (Chile, US$140mn)
Panama Canal fourth bridge (Panama, US$1.5bn)
But the current developments could push governments across the region to review their tender and awarding guidelines, though Castrillón recommended avoiding singling out China.
Academic David Castrillón correctly notes that corruption issues aren’t confined to Chinese companies in the region - don’t forget the Odebrecht scandal. (MH).