The China Signal - September 9
China-Brazil investment rebounds, Ecuador & Nicaragua pursue FTAs, Taiwan, Argentine fertilizer plant investment
G’day, and welcome to The China Signal. This week, Chinese investment in Brazil rebounds after 2020 lows; Ecuador and Nicaragua continue pursuing trade agreements with Beijing; Taiwan diplomacy in Belize and Guatemala; Shaanxi Coal Group announces US$ 1.25bn fertilizer plant investment in Argentina, plus much more. Read on.
Investment 💸
Brazil 🇧🇷
The China Brazil Business Council released a report on China’s investment in Brazil in 2021. Read the full report here. From the report’s executive summary:
In 2021, Chinese companies invested US$ 5.9 billion in Brazil, the largest amount since 2017 and an increase of 208% over 2020.
A total of 28 projects were carried out - the same number as in 2017 and the second-highest ever recorded - representing a 250% growth over 2021.
It is important to note that the double-digit increases reflect in part a historically low base of comparison, since 2020 was a year particularly affected by the Covid-19 pandemic.
The China Global Investment Tracker [compiled by the American Enterprise Institute] estimates that Brazil was the country that received the most Chinese investments in the world in 2021, with a 13.6% share of the total.
In contrast to the expansion recorded in Brazil, Chinese investments in the United States and Australia fell by 27% and 70%, respectively. In the Belt and Road Initiative (BRI), the drop was 41%.
In South America, excluding Brazil, Chinese investments grew by 30% in 2021.
By the criteria of the number of projects, the electricity sector led Chinese investments in Brazil in 2021, with 13 ventures, equivalent to 46% of the total.
The Information Technology sector stood out with 10 projects, a number close to the total of 12 registered between 2007 and 2020.
Take the country comparisons with some caution given that they were compiled by different groups with differing methodologies, but it appears that Chinese investment into South America has rebounded from 2020 lows, while investment into the United States and Australia has continued to slide, no doubt partly due to heightened bi-lateral tensions between China and these countries.
Chinese investments in South America jump 30 percent - Brazilian Report - August 31, 2022
Another data source, the China Global Investment Tracker (CGIT) compiled by the American Enterprise Institute and the Heritage Foundation, estimates Colombia received the third highest amount of investments from China last year, with 9.1 percent of the total.
According to data from China’s Ministry of Commerce (MOFCOM), there were 18 mergers and acquisitions involving Chinese companies in Latin America last year, a number of transactions that is 20 percent higher than in 2020. However, these deals amounted to USD 2.1 billion, only 3.7 percent of the total volume worldwide and 37 percent less than the previous year.
The broad devaluation in Latin American currencies partly explains the reduction in value of M&A transactions in 2021. (MH)
Trade 🚢📦
Guyana 🇬🇾
China-Guyana trade near one billion US dollars so far this year | CNW Network | August 24, 2022
Trade between Guyana and China was estimated at US$950 million for the first half of 2022, as the Guyanese government and the private sector deepen their engagement with Chinese investors.
Speaking at a virtual China-Guyana investment opportunities seminar held on Monday 22 August, Vice Chairman of the China Council for the Promotion of International Trade (CCPIT) Zhang Shaogang, said the trade so far this year represents a 223% increase compared to 2021 levels in the same period. US$720 million are reportedly Chinese imports from Guyana.
In May, Guyana signed a US$260 million agreement with a Chinese joint venture to construct a new bridge over the Demerara River, the largest contract for a transport infrastructure project ever financed by Guyanese government (see TCS May 27). The joint venture includes China Railway Construction Corporation (International), Ltd., China Railway Construction (Caribbean) Co. Ltd, and China Railway Construction Bridge Engineering Bureau Group Co. Ltd (China & Trinidad and Tobago). (RP)
Ecuador 🇪🇨
Ecuador confía en cerrar TLC con China este año - SWI swissinfo.ch - August 17, 2022
~Paraphrased translation~
The Minister of Production, Foreign Trade and Investment of Ecuador, Julio José Prado, affirmed today Ecuador’s intention to close a free trade agreement with China this year.
Nicaragua 🇳🇮
~Paraphrased translation~
On Tuesday 30 August, the Government of Nicaragua announced it will build 920 houses with Chinese funding, at an estimated amount of $60 million. The Chinese commitment comes as part of a series of agreements signed in February, following the restoration of diplomatic relations between the two countries in December 2021.
On July 12, the two nations signed a so-called "Early Harvest Agreement", which is considered a preliminary step a Free Trade Agreement (FTA). Official negotiations for a FTA will begin in late September, Nicaraguan Minister of Development, Industry and Commerce (MIFIC), Jesús Bermúdez recently stated. (RP)
Diplomacy 🕊️
Belize 🇧🇿 + Taiwan 🇹🇼
[On Wednesday 3 August], Taiwan handed over a US$ 950.000 grant to Belize for several initiatives, including the installation, connection, and improvement of Wi-Fi internet access for 197 schools.
Тhе grаnt, hаndеd bу the Taiwanese Аmbаѕѕаdоr, Dаvіd Кuаn-Сhоu Сhіеn, tо Belizean Рrіmе Міnіѕtеr, Јоhn Вrісеñо, іѕ thе ѕесоnd dіѕburѕеmеnt undеr thе 2022 “Віlаtеrаl Соореrаtіоn Рrоgrаm” bеtwееn Веlіzе аnd Таіwаn, ѕаіd а рrеѕѕ rеlеаѕе bу thе Government of Веlіzе Рrеѕѕ Оffісе. (RP)
Guatemala 🇬🇹 + Taiwan 🇹🇼
Guatemalan foreign minister to visit Taiwan from Monday | Focus Taiwan | August 28, 2022
After being appointed in February this year, Guatemalan Foreign Minister, Mario Búcaro, chose Taiwan as his first Asian country for an official state visit from Monday 29 August to Friday 2 September.
Búcaro notably met with local high-ranking officials, including Foreign Minister Joseph Wu, and President Tsai Ing-wen, when he emphasising that “Guatemala will always support Taiwan because we have a firm belief in the principles of peace, sovereignty, and territorial integrity”, as “like-minded countries [united by a] democratic alliance”. Additionally, a cooperation agreement on exchange and training of diplomatic personnel was signed. (RP)
Previously on Tuesday 23 August, twelve of the global fourteen Taiwan’s diplomatic allies - including Guatemala - had spoken up at the UN about their “serious concern” over China’s recent military exercises in the Taiwan Strait following U.S. House Speaker Nancy Pelosi’s visit to the island.
All of Taiwan’s Latin American and Caribbean allies - Belize, Haiti, Paraguay, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines - signed the statement, except for Honduras (see TCS June 6 for a brief recap of President Xiomara Castro’s conflicted attitude towards the Asian country). The Holy See - not a UN member - was the only other country not supporting the stance. (RP)
Critical Minerals 🪨
Mexico 🇲🇽
Mexico Plans To Open Lithium Sector To Private Investors | Barron's - August 31, 2022
Mexico will open lithium exploitation to private investors because there are insufficient public funds to develop the recently nationalized sector, President Andres Manuel Lopez Obrador said on Wednesday.
"Public funding alone would not be enough. Quite a lot of investment is required," Lopez Obrador told reporters.
In April, Congress approved a plan to put exploration and mining of the metal -- a vital material in the production of batteries for electric cars, mobile phones and other technology -- under state control.
The government said at the time that it would review eight lithium exploration concessions granted by previous governments to private companies, including a firm controlled by China's Ganfeng Lithium.
Previously, the government had said that the concessions would remain valid as long as the companies made the necessary progress towards starting production.
Ganfeng’s 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. (MH)
Public Health 🏥
Chile 🇨🇱
Sinovac Biotech will hold an initial trial in Chile to test two of its inactivated vaccines targeting the Omicron variant, the Chinese pharmaceutical company announced on Tuesday.
The trials, which were just approved by Chilean regulators, will test two candidates: one targeting just Omicron and a trivalent vaccine targeting the Delta, Omicron and original variants.
Remember, Chile was a major recipient of Chinese Covid-19 vaccines through 2021. However, earlier reports show China’s international vaccine distribution diminished in 2022, as demand for vaccines declined, and the availability of Western vaccines with greater efficacy became more widely available. (MH)
Agriculture 🌾
Argentina 🇦🇷
“Chinese company to invest US$ 1.25 billion in a fertilizer plant in Argentina”
~Paraphrased translation~
The Argentine ambassador to China, Sabino Vaca Narvaja, visited the Chinese province of Shaanxi for a week, where he met with its governor, Zhao Yide, who agreed to invest US$1.25 billion in a fertilizer plant in Tierra del Fuego...
As part of the agreement, Shaanxi Coal Group will commit to invest in the project to produce 600,000 tons of synthetic ammonia and 900,000 tons of urea annually, among other products.
If this eventuates, the plant would have capacity to supply the domestic market and export its surpluses. Argentina currently imports a large quantity of urea. (MH)
Corruption 🤝🧳
Bolivia 🇧🇴
~Paraphrased translation~
The complaint involves the Chinese company Harbor Engineering Company (Chec) and officials of the state-owned Bolivian Highway Administration (ABC), including its president Henry Nina, a powerful indigenous leader and referent of the MAS. In February of this year, ABC awarded Chec the 25.8-kilometre Sucre-Yamparaez highway in the department of Chuquisaca (southeast) for 456.8 million bolivianos (65.6 million dollars) with funds from CAF, the General Treasury of the State and the local government, according to ABC.
According to the complaint filed by the legislator Arce, Henry Nina along with other members of the highway firm of that country "agreed in advance… Chinese citizen [and country head of Chec] Jin Zhengyuan," reported the newspaper El Deber. (MH)
Oil 🛢
Venezuela 🇻🇪
~Paraphrased translation~
China has entrusted a defense-focused state-owned company with shipping millions of barrels of Venezuelan oil, despite US sanctions, as part of a deal to offset Caracas's billions of dollars in debt to Beijing. according to three sources and tanker tracking data.
Although China National Petroleum Corp (CNPC) stopped transporting Venezuelan oil in August 2019 after Washington tightened sanctions on the South American exporter, crude continued to find its way to China through traders who rebranded the fuel as Malaysian, Reuters previously reported.
Since November 2020, China Aerospace Science and Industry Corp (CASIC) has been transporting Venezuelan crude in three tankers it acquired that year from PetroChina, a publicly traded unit of CNPC, the sources said. The oil is stored in a tank farm that it also acquired from PetroChina, the sources said.
The three CASIC tankers load in Venezuela with their active transponders, which allows monitoring by third parties, according to data from Eikon.
The company has so far taken 13 cargoes carrying a total of some 25 million barrels of oil, including two vessels due to arrive in China in September, according to loading schedules from Venezuela's state oil company PDVSA and tanker tracking data. from Refinitiv and Vortexa Analytics.
The 13 shipments, worth about $1.5 billion for Merey crude, Venezuela's benchmark, were declared "crude oil" at Chinese customs, without specifying their origin, one of the sources said.
Great Power Competition 🌎
European Union 🇪🇺 + Broader Latin America 🏔🏝
With a view to 2023, Brussels is preparing a diplomatic and commercial counteroffensive to try to reaffirm its positions in the area, according to a document sent to EU foreign ministers, to which EL PAÍS has had access.
According to the document, Brussels will try to broach the distance with Latin America with a “qualitative leap” in the intensity of its relations and contact. “The credibility of the EU and its power and ability to leverage on the international scene is at stake,” warns the document. At the beginning of his mandate, [High Representative of the Union for Foreign Affairs and Security Policy Josep] Borrell set out to strengthen the EU’s presence and influence in Latin America. But the pandemic prevented closer ties. And the Russian invasion of Ukraine has revealed not only that Europe has lost a lot of ground to China, but that many Latin American countries do not share the European response to the war launched by Russian President Vladimir Putin.
“The key will be to have an agenda of measures that help Latin American countries to overcome the macroeconomic consequences of the conflict in Ukraine,” says Javi López, a MEP and president of the European delegation in the Euro-Latin American Parliamentary Assembly. López points out that the region is facing a perfect economic storm, “with rising interest rates and little margin when it comes to fiscal policy.”
The government of Ukrainian President Volodymir Zelenski is aware that support for Ukraine in Latin America may be waning. In response, Kyiv has intensified its efforts with contacts in the region. Zelenski has received the Guatemalan president in person and has maintained contacts with the new Boric government, with whom he discussed the possibility of sending Chilean demining experts to help Ukraine. The Ukrainian president addressed the rulers and citizens of Latin America on Wednesday through a videoconference broadcast at the Catholic University of Chile. “Russia is trying to prevent Ukraine’s contact with Latin American countries,” said the president, who also urged the region to “spread the truth” about the Russian invasion. However, Ukraine’s meetings with Argentina and Brazil, where the government has clear sympathies for Putin, have been rather cold – “correct,” in the assessment given by diplomatic sources.
The European Commission has a budget of €3.4 billion to promote cooperation with Latin America during the 2021-20[2]7 period. Borrell’s department, according to the confidential report, believes these funds should be exploited “strategically and for maximum impact.” Brussels is also considering an investment package that, using public and private capital and credits, could mobilize €8 billion, according to the EU’s calculations.