Asia-Latin America Round Up — 21 Jul 2017

Highlights

US and China talks in Washington end in deadlock as threat of trade war rises — SCMP
US and China step up steel talks to avert trade war — FT
The U.S.-China Comprehensive Economic Dialogue this week confirmed that the honeymoon between Donald Trump and Xi Jinping is over. The talks appear to have been substantive, but looming over them is Trump’s threat of invoking a Cold War-era law and impose either tariffs or quotas on steel imports.

China’s Jack Ma has penetrated the Trump administration — and he knows what he wants — Washington Post
China's Richest Man Jack Ma Leads Chinese Business Tycoons to US — The Diplomat
On Tuesday, Alibaba’s Jack Ma cohosted the US-China Business Leaders Summit with Stephen Schwarzman, the CEO of the private-equity firm the Blackstone Group. The meeting was held the day before the U.S.-China Comprehensive Economic Dialogue, and Ma’s goal is approval by CFIUS of Ant Financial’s acquisition of MoneyGram.

Chinese Top Foreign Homebuyers in US - Again — Mingtiandi
Foreign Buyers Drive Record $153 Billion of U.S. Residential Sales, Miami Top Market — World Property Journal
For the third year in a row, buyers from China exceeded all countries by dollar volume of sales at $31.7 billion, as well as number of housing units (40,572), according to the National Association of Realtors’s annual survey. Florida received 22% of foreign buying activity, with Miami being the main focus. However the state was not the biggest focus of Chinese buyers (which was California), but instead attracted the most Canadian buyers.

It’s Official: Mexico City Eliminates Mandatory Parking Minimums — Streetsblog USA
Mexico City has eliminated mandatory parking minimums for real estate developments, in many cases replacing them with maximums. For example, office developments had been required to include at least one parking space per 30 square meters of floor area. Now that is the maximum parking ratio developers can build. Additionally, the new rules also require developers to pay a fee if they build more than 50 percent of the maximum parking allowed in the central city. The new rules do require one type of parking: new buildings will have to include space for bicycles.

BTG Pactual hires Credit Suisse trader for Miami wealth unit — Citywire
Brazil’s BTG Pactual has hired a trader from the Bahamas to grow their presence in the Miami  offshore market, which is driven by Latin America clients.

Where We Are in the Emerging Market and Big Dollar Cycle — Mark Dow
One of the smartest independent macro analysts out there is still bullish on Emerging Markets.

 

China-Latin America

Chinese investors zero-in on Latin America — China Dialogue
Chinese foreign direct investment in Latin America has now surpassed $110b and continues to rise fast — it’s expected to total $250b by 2025.

Alongside the rapid rise in investment, the nature of Chinese investment in Latin America is changing as well, with the service sector receiving over half of all investment since 2013. In fact, industries such as finance, electricity, renewable energy, and transport have all received more than US$4 billion in Chinese investment.

Elsewhere, Latin America’s automotive industry has received over US$10 billion in investment, as Chinese firms race to capture market share in the Americas. However, these investments are concentrated in Brazil, Mexico, and Argentina. This is consistent with overall Chinese investment in Latin America, focused in a just few countries, including Brazil, Peru, Mexico, Argentina, and Bolivia. Also notable is that the vast majority of Chinese investment is from state-owned enterprises (SOEs), comprising over 80%, contrary to Chinese FDI in the US and EU, which come from mainly private Chinese firms.

Chineses planejam investir pelo menos R$ 32 bi no Rio — O Globo
Chinese SOEs are looking to make signifiant investments in Rio de Janeiro totaling at least R$32b ($10b). Sanitation company Cedae is being looked at by “chinese companies.” China National Nuclear Corporation (CNNC) is looking to participate in the construction of the R$13b ($4b) Angra 3 nuclear power plant.  China National Petroleum Corporation (CNPC) is looking to build a R$13b ($4b) refinery for the Comperj oil complex. State Power and China Three Gorges are competing to purchase the R$2.2b ($700m) Cemig stake in the Light power utility. And phone company Oi is in negotiations to be recapitalized by China Development Bank, ZTE, and Hong Kong investment fund TGP. This all follow’s HNA’s R$4b ($1.25b) purchase of Odebrecht’s stake in Galeão airport.

Belgium-China consortium wins $166m Panama cruise terminal contract — Seatrade Maritime
Cruceros del Pacifico, formed by Belgium’s Jan de Nul and Beijing-based China Harbour Engineering Co. (CHEC), was awarded a $165.7m contract by Panama Maritime Authority (AMP) to design, develop and build the Amador Cruise Terminal at the Panama Canal Pacific entrance. The terminal will have capacity to accommodate two ships of 360 meters in length, with a capacity of 5,000 passengers per vessel, in an area whose draught must reach 10.5 meters.The work will be completed by mid-2019.

Sino-Mexican consortium wins oilfield exploration contract in Mexico — China Daily
A consortium made up of China's Shandong Kerui, and Mexico's Sicoval MX and Nuevas Soluciones won the bid for Area Six, a field of 193 square kilometers in the Veracruz oil belt which has potential to provide liquefied gas. The consortium bid $2.2b, beating out a Mexican and an American competitor.

China Could Have a Big Say on Venezuela's Future — Bloomberg
Venezuela owes China more than $62 billion in loans, and is behind in the oil shipments used for payment on some of them. Embattled Venezuelan President Nicolás Maduro is refusing to negotiate with a strengthened opposition in that country. A Chinese-led effort to show Maduro the error of his ways might have some impact, but will involved China overcoming it’s policy of"non-interference” in the internal affairs of other countries. 

Fosun faz oferta avaliando a Guide em R$ 500 milhões — Brazil Journal
Fosun has made an offer for a majority of Banco Indusval’s Guide Investimentos that values the brokerage at R$ 500m ($160m). Last year Fosun bought Rio Bravo Investimentos, and is expected to integrate the two.

In Cuba, a Chinatown With No Chinese — The Diplomat
“The barrio chino? Not even the Chinese go there.” An interesting article that contrasts the lack of Chinese nationals in a country that is awash in Chinese white goods, automobiles, and investment.

 

Asia-Latin America

Asian firms seek to shake up Chilean infrastructure — Reuters
A $600 million tender for Chile's Route 66, known as "The Fruit Highway," will be published in the coming weeks. This is part of $2b in infrastructure projects that Chinese Korean, and other firms are showing a strong interest in. The firms include China Harbor Engineering Co and the China Gezhouba Group Co, China Three Gorges Corp, as well as South Korea's SK E&C, Posco E&C, and Hyundai. A Malaysian investors’ group has also shown interest.

Axis Bank, IIC pact to boost trade with Latin America — Money Control
India’s Axis Bank has signed up for the Inter-American Investment Corporation’s Trade Finance Facilitation Program (TFFP); making it the first Indian bank to do so.

Empresa argentina San Miguel compra peruana Agrícola Hoja Redonda — Reuters
Argentine fruit company San Miguel bought Peruvian company Agrícola Hoja Redonda for $64m so as to be able to access Asian and US markets. San Miguel is a citrus company; Hoja Redonda is the largest mandarin orange producer in Peru, and also grows avocados and grapes.

Minera Crystallex gana orden judicial en corte EEUU contra china Haitong sobre activos de Venezuela — Reuters
Canada’s Crystallex received a $1.4b judgment from the ICSID international arbitration court against the government of Venezuela last year due to the latter’s expropriation of the Las Cristinas gold mine in 2008. Crystallex has now received a US judgement attaching Venezuelan assets held in the US by China's Haitong International Securities Group. This attachment means that the assets cannot be moved until Crystallex is compensated. Last month, a similar judgement was issued against Japan’s Nomura.

TPP, the Trade Deal Trump Killed, Is Back in Talks Without U.S. — NYT
Japan has been pushing the eleven remaining members of the TPP — including Mexico, Chile, Peru, Malaysia and Korea — to move forward with the trade deal without the US. The deal would strengthen trade ties across the Pacific, as well as potentially push China to reform.

 

China Econ/Policy

China tells lenders to turn off the taps to Dalian Wanda — FT
Wanda Finds Second Buyer After Sunac Deal Draws Scrutiny — WSJ
What’s the Rationale Behind Wanda’s $9.4 Billion Asset Sale? — Caixin Global
Dalian Wanda’s woes continue. Last week, Sunac had agreed last week to buy 76 of Wanda’s 77 hotels, together with Wanda’s 13 cultural tourism projects, for $9.3b. However, after the deal announced last week came under fire from major credit ratings firms, R&F Properties suddenly stepped in to acquire the 77 for RMB 19.9 billion ($2.9b). R&F has been expanding it’s real estate empire, recently acquiring several properties in London.

HNA risks in Latin America — Bloggings by Boz  
Behind a Chinese Powerhouse, a Web of Family Financial Ties — NYT
Another Chinese company that has been under scrutiny is HNA, which the New York Times notes has a lot of related-party relationships with companies owned by family members of leadership. Our friend Boz notes that a stumble by HNA could impact Latin America, where it has bought shares of airlines and airports. It would cause uncertainty, to be sure, but ultimately these are best thought of as contingent liabilities for the Chinese government, who would step in and take over HNA.

Chinese state TV asks: did Suning buy Inter Milan to launder money? — SCMP
Appliance retailer Suning Holding Group, made a splash last year by buying a 70% stake in Inter Milan for €270m ($311.61m). But now it’s taking a hit from the government media over the move:

“This famous club (Inter Milan) has been making a loss for five years, with total losses amounting to 275.9 million euros. For what purpose would a Chinese company take over it?” asked the host of a TV show on state-owned China Central Television on Tuesday morning.

“Some companies are already highly indebted at home, yet they spend lavishly with bank loans abroad ... I think many overseas acquisition deals have a low chance of generating cash flow, and I cannot exclude the possibility of money laundering,” said Yin Zhongli, a researcher with the Chinese Academy of Social Sciences, during the show.

China to Accelerate SOE Consolidation in Bid to Build Corporate Giants — Caixin Global
The State-Owned Assets Supervision and Administration Commission (SASAC) is looking to rationalized the Chinese SOE sector. A document now being drafted by SASAC will be released by the end of the year, with a target of classifying all companies as either investment, financial services or industry firms, the source said. After completing the grouping, SASAC will use consolidation to reduce the number of companies under its supervision from the current 101 to about 80. Among those, about 20 will be investment companies; two or three will be from the financial services group; and about 50 will come from the industry category.

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