Latin America Needs a China Strategy… and a "Latin America."

Up Front

"Latin America Needs a China Strategy,” says Mac Margolis. "Because China definitely has a Latin America strategy.” Plenty of observers are noting that "China is getting serious about Latin America.” But Latin America still isn’t serious about China.

With the US having effectively abdicated global leadership under it’s current administration, China has moved to step into the vacuum, including in Latin America. Not only is this happening in countries where China has an established relationship or partnership (like Venezuela or Brazil), but increasingly so in countries like Mexico that are concerned about the economic impact of American isolationism.

Latin American countries look to China as an export market for their primary products, and theoretically a bottomless pit of FDI. But this attitude betrays a lack of sophistication on the issue that holds back the relationship. 

Many in Latin America are beginning to realize that China is looking to "dictate the new globalization rules” on it’s terms. And certainly China prefers primary material and agricultural imports from Latin America, while exporting value-added products like electronics and automobiles.

China benefits from the fact that Latin America doesn’t have the capacity to engage in a unified and proactive fashion. As Ignacio Bartesaghi of the Uruguay Catholic University says: “once again, the problem isn’t on the side of our primary commercial partner, but in our limitations to change."

Latin America - not Brazil, not Mexico, not Argentina, but Latin America - needs a China plan. And it needs one soon. 

But the problem is there is no united Latin America. If Simón Bolívar couldn’t do it 200 years ago in the face of a crumbling Spanish empire, do we expect trade ministers to do it in the face of a rising China today?

Top Stories

Lawsuit shows China losing patience with Venezuela — FT
Sinopec settles with Venezuela’s PDVSA, ending 5-year dispute — FT
Venezuela's PDVSA Pays China's Sinopec To Settle Dispute ... After 6 Years — Latin
It’s a sign of the increasing strains in the China-Venezuela relationship that Sinopec sued PDVSA in US court last week in a five year old dispute over non-payment of $21.5m for steel rebar. Less than a week later, PDVSA agreed to pay the amount to settle the issue. But the payment is coming in two tranches — this month and next — which is an indication of the bigger problem:

“That’s how cash poor and badly run PDVSA is,” said Russ Dallen of boutique investment bank Caracas Capital, who first made the dispute public. “They are sitting on top of the biggest oil reserves in the world and they can’t even write a cheque for $21.5m dollars.”

Ford to shift midsize sedan production out of Mexico — Reuters
Ford Fusion deixará o México em 2019 para se tornar chinês — Notícias Automotivas
Comparative wages giveth; comparative wages taketh away. Ford plans to shift production of the small Focus and midsize Fusion out of Hermosillo and move it to its joint venture with Changan Automobile in Chongqing, China. While Ford says the Fusions won’t be exported from China to the US, the Focuses will be. This puts a hole in the argument that pulling out of NAFTA will bring more auto production back to the US.

Didi, el Uber de China, llegará a México — C|NET
Didi Chuxing is expanding it’s presence in Latin America and the world. Didi is expected to begin operation in Mexico — the first market outside of China in which it will operate — in the first quarter of next year. Didi led a $100m investment round in the Brazilian app 99 Taxis  at the beginning of this year.

Japonesa Furukawa Electric Corp abre planta en México con una inversión de US$4.5M — América Economía
Japón mantiene inversión en México, su segundo mejor mercado en América Latina — Economia Hoy
Japan’s Furukawa Electric opened the $4.5m first phase of a fibre optic production plant in Mexicali this week. Opening a plant on the US border is a bold choice in a protectionist age, but Furukawa Electric Latam head Foad Shaikhzadeh is sanguine: 

“The maquila model existed before the NAFTA treaty, and we believe it will continue for many years. So this doesn’t worry us much… The decision to be here [in Mexico] was made with the intention to be here for the long haul."

Furukawa Electric already has plants in Brazil, Colombia and Argentina. This is their first in Mexico.

Promueven ZEEs en Japón y Corea del Sur — El Financiero
Empresas niponas y coreanas, interesadas en las Zonas Económicas Especial - Economía Hoy
A delegation from the Mexican Authority for Special Economic Zones (AFDZEE) had a roadshow this week to Japan and South Korea looking for investment and end users.

China-LAC

China's Citic Sees Brazil as Growth Driver After Dow Corn Deal — Bloomberg
Citic is looking to conquer the ag world from Brazil. After it’s acquisition of Dow Chemical’s Brazil corn seed assets, the general manager of the newly renamed LP Sementes is ambitious:

"Citic is starting to become an international company, and Brazil will be the global manager of this strategy,” Vitor Cunha said in a telephone interview from Ribeirao Preto, in Sao Paulo state. "The Chinese will expand its agricultural business from Brazil."

Bolsonaro faz alerta contra ‘invasão chinesa’ no Brasil — Veja
Tropicália Trump Jair Bolsonaro reacts to the sale of Dow Chemical’s Brazil corn seed business to CITIC, warning against a “Chinese invasion" of the country:

“The country is losing control of it’s primary production [capability] and it’s own alimentary security… We need to establish legal limits urgently, and they are not used in this area."

Panamá y China comenzarán negociaciones para un TLC en segundo semestre 2018 — W Radio
China, Panama to begin talks on free-trade deal in June 2018 — Reuters
China and Panama will begin discussing a Free Trade Agreement in June of next year, just a year after they recognized each other diplomatically. 

China iniciará estudios para conectar Panamá y Costa Rica por tren — Swissinfo
China has agreed to finance feasibility studies for the train to connect Panama and Costa Rica. 

Cancun signs ad deal to lure tourists from China — The Yucatan Times
Cancun and Riviera Maya will become part of regular advertising in China with the signing of a new agreement to promote Mexico’s Caribbean region in Shanghai.

Small Mexican growers keen to tickle Chinese taste buds — Xinhua
A profile of the Guacamo Dely group of avocado growers and packers in Mexico's western Nayarit state that exports to the US, Israel, and Russia, and is now targeting China.

The Chinese province of Hebei is interested in Chilean fruit — Fresh Plaza
Hebei Vice Governor Yuan Tongli visited the Maule region of Chile, looking to deepen connections on table grapes, cherries, blueberries and fresh plums exports to China.

Autopeças chinesas ampliam liderança no Brasil — Automotive Business
China has won pole position in the Brazilian auto parts market. After being the third largest source of auto parts imports to Brazil last year, the $1.3b in parts exported from China to Brazil is the most this year, followed by the US. Imports by automakers and major parts manufacturers — and not the aftermarket — have driven the 30% increase in Chinese imports.

México se encuentra en desventaja en el tratado TPP-11 — El Sol del Centro
The TPP-11 deal announced last month in Danang may not be as good a deal for Mexico as they might hope. According to the World Economic Forum’s Competitiveness Index, Mexico lags its other 10 partners in 108 out of 126 competitiveness variables. 

Apotur: El 2018 será el 'boom' del turismo de China en el Perú — Gestión
The Peruvian Tourism Operators Association is looking to 2018 to be a “boom” of tourism from China. The elimination of visas for Chinese tourists increased their numbers this year by 30%.

Pedro Luis Tirso Grados Smith: "España y China son los países que más apuestan por Perú” — Expansión
An interview with the chief of Cofide, Peru’s Development Bank. He notes that Chinese (and Spanish) engineering firms are excited to get into the Peruvian market in the wake of the collapse of the presence of Brazilian firms like Odebrecht.

Automotriz china Lifan apuesta a vender más autos en el país y a exportar vinos — El Cronista
A nice bottle of Lifan Malbec, anyone? An interview with the chief of automaker Lifan, Mu Gang, who visited Argentina last week after the China-LAC Business Summit. In addition to increasing the company’s sales in the country, Mu talks about importing Argentine wine to China and selling it under the Lifan brand:

“It was very well received. Additionally, in China there are many problems with contamination of food, so Argentine beef and wine would be very much welcomed."

Todos los modelos y precios de Baic, la automotriz china que empieza a venderse en la Argentina — iProfesional
BAIC officially launches in Argentina next week, with four SUV going on the market, including an electric one.

China "robaría" producción de nopal a México — Net Noticia
Mexican nopal producers remain concerned about competition from China for production of the prickly pear, and are pushing for an appellation for the succulent cactus.

Muestran a comitiva de China el potencial y las ventajas para invertir en Sinaloa — Punto MX
Empresarios  de China conocen Mazatlán — El Sol de Mazatlán
Chinese Ambassador to Mexico Qiu Xiaoqi guided a group of Chinese businessmen around Sinaloa to look at investment opportunities in the ports of Topolobampo and Mazatlán.

Inauguran primera tienda de productos de alpaca peruana en China — Perú.com
Peru opens first alpaca fiber products store in China — Andina
Just in time for those cold Beijing winters, the Alpaca del Peru alpaca-clothing store sponsored by PromPeru has opened on Wangfujing Street.

María Eugenia Vidal terminó su gira de seis días por China — La Nación
Con exposiciones ante inversores y empresarios, Vidal concluyó su gira por China — La Prensa
Buenos Aires Province Governor María Eugenia Vidal finished her six day roadshow in China this past week, along with 50 banking and financial sector firms. The group visited Beijing, Chengdu, and Hong Kong.

Afirman que la reforma arancelaria en China beneficia a los productos argentinos — Telam
China bajó los aranceles a la importación de productos agroindustriales de Argentina — Revista Chacra
Oportunidad para Argentina: China redujo aranceles para la importación de alimentos — Primera Edición
China has brought down tariffs on Argentine agroindustrial goods, including: lobsters, dairy, pasta, jellies and drinks. Argentine ambassador Diego Guelar thinks it’s an “enormous opportunity” for his country.

Argentina quiere exportar arándanos a China — Nea Rural
Berry producers in Argentina received a visit from Chinese Agriculture Vice-Minister Qu Dongyu around the WTO meeting in Buenos Aires this week. Alejandro Pannunzio, head of the Mesopotamia Berry-Producers Association, pushed for Argentine berries to be exported to China.

Reflections on Chinese Companies’ Global Investments in the Hydropower Sector Between 2006-2017 — International Rivers
An interesting overview of China’s global activity in hydropower. The discussion of Latin America provides a good summary of activity in the region:

In Latin America, Chinese companies have been most active in Bolivia, Ecuador and Honduras, and are presumably looking to have a bigger market share in the top six countries by installed hydropower capacity — Brazil, Venezuela, Colombia, Argentina, Paraguay and Chile (from 2015 Hydropower Status Report).  The greatest business expansion for Chinese hydropower companies in Latin America occurred in 2011, and Chinese companies haven’t had much success in securing new contracts since. Perhaps this is because Latin American countries require much higher standards and represent significantly higher political risks. The higher laws and standards in the host countries not only lead to higher financial costs and greater technical challenges, but also present higher legal risks to the Chinese companies. For example, the Nestor Kirchner and Jorge Cepernic hydropower projects that Gezhouba won in 2013 in Argentina were subsequently suspended by the Supreme Court in 2016 because the federal government didn’t perform mandatory studies and consultations.

China Fishery cita demora en venta de activos en Perú y pide extender plazo para subasta — Gestión
The ongoing China Fisheries saga in Peru doesn’t look like it’s going to end anytime soon. The group was supposed to get offers from creditors to bring it out of Chapter 11 by December 8, but it has asked the New York court overseeing the process to extend the window to February 28. Delays in plans to sell shares in the anchovy harvest to compensate creditors are driving the request.

China, Jamaica, Guyana: sugar stays sour — Trinidad Express
The tension between Chinese-owned companies and the Caribbean continues, with differences between local labor and foreign management: "George Hong Guo, deputy chief executive of the Chinese-owned Pan Caribbean Sugar Company, says the local population has no enthusiasm for cutting cane."

Bogotá se promociona como destino de inversión en Corea del Sur y China — W Radio
Invest in Bogotá head Juan Gabriel Pérez reflects on his roadshow to Korea and China in October.

China Telecom shelves plans for Oi bid - report — Telecom Paper
Claro espera que chineses não sejam rivais em telecom no Brasil — Valor
The ongoing inability of Oi Telecom’s creditors to come to an agreement on a restructuring of the company has led China Telecom to say they’re throwing in the towel. And no one is more relieved than América Móvil, owner of Claro, Net and Embratel in Brazil

Proponen vuelos directos entre ciudad china de Chengdu y México para promover comercio — Xinhua
Chengdu Party Municipal Committee Secretary Fan Ruiping stopped by Mexico City on Wednesday to promote the idea of direct flights between the two cities.

China to drive Latin American M&A activity — BNamericas
After a busy 2017, BN Americas expects China to keep it’s pocket book open in Latin America in 2018.

Korea-LAC

TLC impulsará los lazos de Corea y Costa Rica más allá del intercambio comercial — La República
Costa Rica and South Korea formally inked their Free Trade Agreement this week, further opening up trade connections between Central America and Seoul.

El Mercosur y Corea del Sur avanzan en la negociación de un acuerdo comercial —  Economía Hoy
Mercosur y Corea del Sur acercan posiciones para un TLC — Todo Logística
Brasil deve ampliar exportações para a Coreia do Sul em 2018 — SF Agro
On the sides of the World Trade Organization meeting in Buenos Aires this week, Mercosur and South Korea have agreed to begin discussions on a Free Trade Agreement “rapidly.” The FTA will cover goods, services, investment, and economic cooperation. Brazilian observers see an agriculture opportunity.

ANA desarrollará proyecto piloto para proteger zonas vulnerables del río Rímac — Andina
Peru’s National Water Authority is working with experts from Korea’s Ministry of Land Infrastructure and Transport to launch a pilot project to control vulnerable areas of the Rímac river, which saw significant flooding earlier this year.

Japan-LAC

Argentina y Japón como socios estratégicos: el momento es ahora — Infobae
Argentina-Japan Strategic Partners: The Time is now — The Bubble
Argentine Ambassador to Japan Alan Beraud pens an op-ed arguing for the two countries to deepen political, economic, trade and investment ties.

India-LAC

Cabinet approves signing of MoU between India and Colombia — Business Standard
The Indian government has OK an MOU with Colombia on research and an exchange of information on agriculture and fisheries.

ASEAN & Oceania-LAC

Brazil president postpones SE Asia trip after minor surgery — ABC News
We’re not going to link to the diagram going around Brazilian social media demonstrating President Michel Temer’s minor surgery this week. However, recovery has postposed a trip to visit Vietnam, Singapore, East Timor and Indonesia scheduled for January 5 to 13. Doctors say he’ll be able to travel two weeks after that.

GCC-LAC

Mohamed Bin Zayed receives Brazilian Minister — The Gulf Today
Mohamed Bin Zayed Al Nahyan, Deputy Supreme Commander of the UAE Armed Forces met with Brazilian Minister of Defence Raul Jungmann in Abu Dhabi.

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