Asia-LAC Business Digest — 31 Aug 17

Up Front

Last week, a consortium led by China Three Gorges (CTG) Corp agreed to purchase the Chaglla hydroelectric plant in northern Peru from Odebrecht for a reported $1.39 billion. The CTG-Odebrecht deal follows several other high profile acquisitions of Latin American power generation, transmission, and distribution assets by Chinese SOEs in the last 24 months.  In total, the sector has seen more than $15b in transactions since Q2 2015:

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* to be signed in China next week

With more rumored to be on the way from Brazil (State Grid looking at the Belo Monte transmission lines and China National Nuclear in Angra 3) to Chile (SPIC buying Latin America Power’s assets) what remains to seem is whether these transactions will pass the muster of the move last week by the Chinese State Council to reign in and redirect overseas investment by Chinese firms. On the banned/discouraged list are obvious ones like military, gambling, sex industry, exports of tech and arts, as well as real estate, hotels, cinema chains, entertainment, sports clubs and investments in countries where China has no diplomatic relations (Panama slides in just under the wire). Belt and Road projects, tech, agriculture, forestry, fishing, trade, culture, logistics, "prudent mineral and energy exploration," and — "where suitable" — finance are all encouraged. The devil is in the details, and so it remains to be seen how these announcements are implemented.  

Top Stories

Argentina approves construction of Chinese-financed dams in Patagonia — Reuters
Argentina leader leaves controversial legacy with Patagonia dams project — The Guardian
The two controversial President Nestor Kirchner hydro projects in southern Patagonia have been approved following public hearings. China Gezhouba Group Co Ltd, which holds a majority stake in the project, and Argentina’s Electroingeniera SA will build the 1,310 megawatt dams, which will provide up to 5% of the country’s electricity demand. Construction of the $4.7b dams is to be financed by China Development Bank.

Temer diz a TV chinesa que quer trazer investimento do país para o Brasil — G1
Os acordos entre Brasil e China que devem ser assinados durante a viagem de Temer — Infomoney
Brazil and China sign new nuclear power cooperation agreement — Macau Hub
Brazil set to seal visa deal with China — Global Times

China is set to host a BRICS Summit next week, and everyone who is anyone looks like they’ll be there. President Michel Temer in particular is going to be busy over the next two weeks, having left for China on Tuesday. In the lead-up to the  event, Brazil is expected to ink a bunch of trade deals with China, including:

  • Purchase of 45% of CPFL by State Grid.
  • Authorization for purchase of 18 Embraer jets.
  • Fiscal incentives for CBSteel to build a steel mill in the northeast State of Maranhão
  • $700m financing for multimodal port terminal in São Luis Maranhão.
  • Construction of port terminal in Paranaguá, in the southeast state of Paraná.
  • Lines of credit from China Development Bank for Brazilian banks via BNDES.
  • A new agreement on completing the Angra 3 nuclear power plant.
  • Allowing for five-year multiple-entry visas.

Additionally, the two sides will sign MOUs on:

  • Construction of FIOL (East West Integration Rail line) in Bahia.
  • Construction of Porto Sul port in Ilhéus, Bahia.
  • MOU between China Railway and the State of Bahia on a Salvador-Itaparica bridge.

Temer also hopes Chinese companies will invest in the round of privatizations that the Brazilian government has planned.

BRICS+ impulsará aún más las relaciones China-México — Milenio
Several "non-BRIC” countries have been invited to participate in the summit, in eluding Mexico. Interestingly, the Chinese ambassador to Mexico pushing the idea that Mexico at the BRICS+ meeting will strengthen Mexico-Brazil ties.
East Asia-Latin America forum opens in Busan — Korean Herald
Korean leader vows increased cooperation, exchanges with Latin American countries — Korean Herald
Canciller Saint Malo iniciará agenda en Corea del Sur este lunes — La Estrella de Panamá
Busan hosted foreign ministers from 36 countries (16 Asian; 20 Latam) for the 8th Forum for East Asia-Latin America Cooperation. Before the meeting, several attendees met with Korean industry, with Panamanian VP and Foreign Minister Isabel de Saint Malo touring with the Korean International Cooperation Agency (KOICA). Saint Malo is pushing the idea of Panama as Asia’s port of entry to the Americas, thanks to it’s solid platform of services, logistics, and finance, as well as it’s air connectivity to the region and the world. To say nothing of the expanded canal. 

Getting value from construction $ — Trinidad and Tobago Newsday
Carolyn Cooper — Jamaica, yes, xenophobia, no! — Jamaica Gleaner
CHEC says it will intensify efforts to address labour breaches — Jamaica Observer
INSIGHT: A Word to the Wise — Tribune 242
A series of opinion pieces around Chinese SOE activity in the Caribbean, with criticism coming from voices in Trinidad, Jamaica, and the Bahamas. The criticisms surround labor and corruption concerns, as well as the crowding out of local businesses that they feel are at a disadvantage when competing against Chinese firms. Of note is the Tribune 242 article, in which the Bahaman paper interviewed Jamaica’s Opposition Spokesperson on National Security and former National Security Minister Peter Bunting. Bunting has been critical of SOEs in Jamaica, including China Construction America, which is building the Parliamentary Campus in Kingston. The article ends with its word to the wise in the Bahamas:

It would be wise for this new FNM administration, which came in on a wave of tying the previous PLP government to the Chinese, to take a careful look at this Chinese relationship before we place anymore eggs in their basket.

U.S., Canada and Mexico Wrap up NAFTA First Round — Wall Street Journal
Via Juan Gonzalez, a good summary of where things stand - at the end of this week, the second round of negotiations begins in Mexico City.

China-LAC

Argentina volverá a exportar aceite de soja a China — Clarín
Argentina: Soybean Industry Finds a Friend in China — Stratfor
China abrirá su mercado a la carne enfriada y con hueso argentina — El Cronista
China comes to the rescue. Quoth Stratfor: "On Aug. 22, the United States imposed 50-64 percent import tariffs on Argentine biodiesel imports, arguing that Argentine subsidies created unfair competition for U.S. biodiesel producers… On Aug. 24, China's state-owned Sinograin announced that it would resume soybean oil imports from Argentina.” The deal was announced during a trade mission to Beijing; Chinese had suspended imports from Argentina in 2015. Separately on the trip Sub-secretary for Agroindustiral Markets Marisa Bircher was also able to announce a deal with the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) allowing for Argentina to export cuts of chilled beef, bone-in beef, and poultry to China. The deal is expected to go into effect by year end.

Chile to attract Chinese investment in public transit — China Daily
Transportes buscará en China inversiones para Transantiago — La Tercera
Destaca ProChile la nueva versión de la Semana de Chile en China 2017 — Xinhua
Chile Week in China Aims at Bolstering Economic Relations — Latin American Herald Tribune
Chile Transport Minister Paola Tapia is headlining Chile in China week next month. She will be looking at potential Chinese electric buses for the Transantigo mass transit system; six new bus companies in the system will be required to have 15 electric buses running in a year’s time.

Leading Chilean nectarine exporter to make inroads in China — Fresh Fruit Portal
With the first full season in which Chile can export nectarines to China coming up, the country’s largest nectarine exporter Gesex is looking to ramp up activity. Last year the company exported 40,000 boxes to China; the Chilean Fruit Exporters’ Association expects this year it could be up to 3.5m boxes. Gesex says it is in talks to sell high quality varietals via Alibaba’s channels:

“We are planning to have some high quality, high Brix varieties that only we own to be sold on the channel, so the final consumer may only eventually be able to get these varieties via Alibaba. And we are open to see and explore other opportunities in terms of e-commerce.”

Uruguay: Embassy promotes food products — Global Times
Taking a page from the Chilean playbook, the Uruguayan embassy in Beijing held a small event to promote the country’s exports of beef, mutton, honey, cheese, blueberries and citrus fruit (lime, lemon, orange and grapefruit). As would be expected, Uruguay highlighted the quality and safety provided by their food traceability systems.

En el comercio con China, México es el mayor perdedor entre países de América Latina — Arena Pública
A study by the International Labour Organization (ILO) says that Mexico lost a net 513,000 jobs in bilateral trade with China in the sixteen years ending in 2011. Argentina also was a net loser of jobs; Chile and Brazil net job gainers. These figures could be bandied about in next year’s Mexican presidential election.

Alibaba Should Acquire MercadoLibre To Expand Into Latin America — Seeking Alpha
A good idea in theory, you’d have to ask eBay about this one. While eBay sold it’s stake in MercadoLibre last year, but the two continue to work to help eBay sellers reach shoppers in Latin America — in March, they opened an eBay portal for Chile.

SPORTT writes Chinese construction company on illegal electricity and water connections — Trinidad Express
Shanghai: We did nothing illegal — Trinidad Express
Shanghai Construction Group would take little solace from the maxim attributed to Ronald Reagan: "If you're explaining, you're losing.” In addition to questions about donations to foundations linked to SporTT, SCG is now being asked to vacate and demolish buildings which have been illegally erected and occupied for more than a year on the eastern side of the National Cycling Velodrome in Couva. SCG says it has done nothing illegal, but this episode will fuel further criticism in the region.
 

Venezuela's PDVSA negotiating Curacao refinery lease, open to China partners — Reuters
Venezuelan state oil company PDVSA is likely to bring in a partner like China’s Guangdong Zhenrong Energy as it renegotiates its lease of Curacao’s Isla refinery. Several years back Curacao asked for a $1.5b modernization of the facility that the cash-strapped Venezuelans may be hard pressed to pay. Guangdong Zhenrong Energy signed a binding framework pack with Curacao in November that would allow it to operate Isla starting in 2019 if PDVSA can’t renew it’s lease.

Primeros becarios panameños llegan a China tras establecimiento de relaciones — TVN
Along with the hard power comes the soft power - 32 Panamanian students have gone to China on scholarships to study at the University of International Business and Economics in Beijing and Tianjin University.

Colombia y China firman acuerdos de cooperación — El Tiempo
Gobierno de Colombia recurre a aporte chino de USD $13,5 millones para financiar el posconflicto — PanAm Post
China’s Military Office for International Cooperation has agreed to provide $13.5m in de-mining and Bailey bridges to support post-conflict reconstruction in Colombia in the wake of the FARC demobilization. While the amount is not significant, this is another step by the PLA in it’s new initiative to take part in peace-keeping and multilateral humanitarian missions - we believe the first effort of it’s kind by the PLA in the hemisphere.

China, o maior mercado para as exportações de soja, minério de ferro, petróleo e celulose — Comex do Brasil
China was the top destination for Brazil’s top three exports — soybeans, iron ore, and oil — in the first six months of the year. China was also the biggest market for Brazilian cellulose, and the second largest market for beef (after Hong Kong) and poultry (after Japan).

Perú fortalece su exportación de lana de alpaca a China — Fashion Network
Peru’s Beijing Foreign Commercial Office (OCEX) is looking to promote alpaca wool exports to China, tripling the $3m a year market in three years.

Empresa chinesa de transporte ferroviário estuda investir no Rio Grande do Sul — InvestRS
And it’s not just Brazilians going to China looking for deals. China Railway Rolling Stock (CRRC) América Latina Corporation was in the southern state of Rio Grande do Sul, where they discussed the state’s plans for upgrading train equipment, the Cerro Chato wind farm, and electric buses.

Bankrupt Caribbean Paradise Woos Chinese Tourists—and Their Cash — Bloomberg
Puerto Rico is having Yingke Caribbean China Center lead private investors build a $200m China-themed center in Arecibo, an hour outside San Juan. The commonwealth’s access to the US market and tradition of pharmaceutical production has made it attractive to Chinese investors.

Barco chino capturado en las islas Galápagos llevaba más de 6.000 tiburones — Ecuavisa
Flota china se aleja de islas Galápagos con rumbo a zona marítima de Perú — El Universo
China Fishery to sell Peruvian land, netting $1.3m for creditors — Undercurrent News
Earlier this month a Chinese vessel was caught illegally fishing in the Galapagos, with 300 tons of fish and 6,000 endangered sharks. This week the captain of the boat was sentenced to four years in prison, with the rest of the crew getting at least a year in jail. Additionally, the crew was ordered to pay Galápagos National Park $5.9m. The boat was one of about 300 boats from China in Ecuador’s Exclusive Economic Zone that are headed towards Peru. Combined with the collapse of China Fishery Group in Peru, Chinese fishing needs to clean up it’s act in Andean waters.

AliExpress emerges as Chile's leading purveyor for Chinese brands — China Daily
Chile’s Correos is making a tidy little business running the AliExpress website in Chile for Alibaba. It has now become the largests portal for the retail of Chinese goods in Chile. Pre operations manager Katherine Cid:

"I think the best course for Chinese brands that want to expand their horizons is to follow this alliance with AliExpress. In 2014, four million purchases arrived from Asia, in 2015, 10 million, and this year, we expect 17 million packages."

$4.7 Billion Chinese Development Project Advances in Haiti — HuffPo
Ralph Youri Chevy says in a letter he’s willing to accept the Port-au-Prince Municipal Renovation Project proposed by China’s Southwest Municipal Engineering Design and Research Institute. The $4.7b project contains proposals for water and drainage works, road improvements, environmental protections, drainage and sanitation, a communications network and reconstruction of the old city of Port-au-Prince. In an understatement, the article notes: "It is unclear at this point where the money will come from."

Chinese investors to develop 2,100-acres industrial park in Nuevo Leon — Mexico Now
Ground was broken this week on the Hofusan Industrial Park, a joint effort between Chinese corporations Holley Group and Futon Group, as well as Cesar Santos, a prominent investor from Monterrey. The partners expect to invest $60m to develop the 2,100 acre space to host some 100 plants or facilities they expect to attract over a 10-year period. 

Expanding Jamaican lobster supplier eyes more China sales — Undercurrent News
B&D Trawling, the largest exporter of conch in the world, is hoping to secure a deal to increase exports to China, increasing export from $15m to $100m in the next five years. The goal is to include lobster, as well. Jack Ma loves to mention that a Singles’ Day promotion Alibaba did recently sold almost 100,000 Canadian lobsters in a day, so the appetite is there. 

Perú próximo a firmar con China protocolo para ingreso de langostinos — Andina
In other crustacean news, Peru says it is close to inking a deal to allow for the export of prawns to China.

El tren bioceánico Perú-Bolivia-Brasil, un reto en la era post-Odebrecht — abc
Presidents Evo Morales and Pedro Pablo Kuczynski are expected to sign Friday their recommitment to the Bi-oceanic train that goes through the territory of their respective countries. However, financing for the project — which is “85% done” —remains up in the air: “before, with Odebrecht, everything was ‘easier’.” Now China may step in to fund the remainder.

Embajador de Argentina en China: en el G20, seremos continuadores de la presidencia china — People’s Daily
A long interview with Diego Ramiro Guelar, Argentina’s ambassador to China. He ducks the Belt and Road question, but makes sure to quote Xi Jinping’s plan to "have a Messi in twenty years."

Avanzan las marcas chinas en el mercado argentino de autos — La Nación
There are seven Chinese auto brands in the Argentine market (Chery — largest in Argentina and first to arrive in 2008 — Lifan, Geely, Zotye, Foton, DFM and JCM) and seven more are on the way Baic, Borgward, Brilliance, BYD, Dongfeng, Great Wall/Haval and Kandi). While Chinese autos in Argentina have been mostly imported up until this point, local production is now picking up. Ralitor, importer of the Foton pick-up, will spend $10m over five years to produce JMC and DM trucks in La Plata; BYD plans to make electric buses in Salta; and Dongfeng is hinting it will produce electric buses in the Buenos Aires Province town of José C. Paz. Chinese automakers expect to have 2% of the Argentine market by 2018.

Event discusses Chinese investments in Brazil and regulatory challenges — FGV
The Fundação Getulio Vargas (FGV)’s Law School (Direito Rio) hosted its First Brazil-China Seminar: Regulatory and Legal Challenges for Chinese Companies and Investments in Brazil at the beginning of the month. The President of FGV, Professor Carlos Ivan Simonsen Leal and the Consul General of China in Rio de Janeiro, Li Yang, were among the speakers.

KOREA-LAC

Samsung SDI bids for Chilean lithium mine project for stable supply — Pulse News
A brief profile of Samsung’s bid for Chilean lithium; in January Chilean state development agency CORFO will choose it or one of the other six companies on it’s short list to gain a steady supply of lithium at a favorable price.

South Korea's CJ buys Brazil soy protein maker from Chile's Corpesca — Reuters
Brazilian soy protein maker Selecta says its owners had sold a 90 percent stake to South Korea’s CJ CheilJedang Corp for R$450m ($143m). Chile’s Corpesca sold it’s 60% stake, with minority shareholders providing the rest.

Coreia do Sul quer ampliar e diversificar troca comercial e cultural com Brasil — Agência Brasil
Comments by Jeong-Gwan Lee, Korean ambassador to Brazil, at the Second Korean Literature Essay Contest in Brasília. Unsurprisingly, he’s pro trade between the two countries, and sees the potential for the growth in trade across the board.

Korean Food Exports Making Inroads into Brazil — KBS
The Korea Agro-Fisheries and Food Trade Corporation held a Korean cuisine cooking show and exhibition in São Paulo.

INDIA-LAC

Brazil's Raízen interested in ethanol mill owned by India's Shree Renuka — Reuters
Brazil’s Raízen Energia — a joint venture between Cosan Industria e Comércio and Royal Dutch Shell — is interested in bidding for an ethanol mill owned by the Brazilian subsidiary of India’s sugar producer Shree Renuka Sugars.

ASEAN & OCEANIA-LAC

Peru sees 'ambitious' trade deal with Australia as early as 2018 — Reuters
Building on the bones of the Trans-Pacific Partnership, Peru’s Deputy Trade Minister Edgar Vasquez sees the potential for a trade deal with Australia. The remaining signatories of the TPP (after the US pulled out) were in Australia this week to pick up the pieces and see how they could move forward.

Peru, Indonesia to likely start trade talks in December: minister — Reuters
Not to be outdone by his subordinate, Peru's Foreign Trade Minister Eduardo Ferreyros said that Peru and Indonesia will likely start negotiating a free trade deal in December as Lima pursues a “very aggressive” trade agenda.

Alibaba sees Australian fresh produce as its next big opportunity for growth — Business Insider
Alibaba is looking to ramp up sourcing of produce and meat from Australia, and the country is reciprocating. Maggie Zhou, Alibaba's Australia and New Zealand managing director has been appointed by the government of the state of Victoria as its first “ambassador" under a new trade strategy designed to help businesses, particularly small to medium enterprises, access the global market. As Chile has tried to dominate this market, this could be a source of contention going forward.

GULF-LAC

Brasileira Valid atrai aposta do GIC e mira EUA e China — Infomoney
Valid, the Brazilian document management and credit card chip validation company, is strengthening it’s ties with the world, in particular with China. It is also benefitting from investment from Singapore’s GIC, which became the company’s biggest investor last year.

Dubai Chamber eyes Latin America, India to boost trade — Gulf News
After opening an office in São Paulo, Dubai sees the potential for Latin America, per Dubai Chamber of Commerce and Industry president and CEO Hamad Bu Amim:

“As one of the world’s most dynamic and resource-rich regions, Latin America offers plenty of exciting trade and investment opportunities. The region is home to the world’s leading agricultural producers and exporters, which means that there is a lot of room for Latin American countries to enhance their collaboration with the UAE on food security.”

Ras Al Khaimah plans area for Brazilian companies — ANBA
Dragão Mart? The Ras Al Khaimah (UAE) Economic Zone, which runs the emirate’s free trade zone and investment authority, pitched to Brazilian companies at the Arab Brazilian Chamber of Commerce in São Paulo. The trip kicks off negotiations on the possibility of a separated area to Brazilian companies in RAKEZ, which currently houses 16 Brazilian companies.

Coffee exports from Brazil to Arab region up — Trade Arabia
Coffee exports from Brazil to the Arab region grew almost 30% to $112m during the first seven months of the year, compared to the same period last year, per Brazilian Coffee Exporter Council (Cecafé). Lebanon remains the top buyer, followed by Jordan.

Inaugural trade mission for Chilean Blueberry Committee heads to India, UAE — Fresh Fruit Portal
Not content to rest on their laurels, the Chilean Fruit Exporters Association (ASOEX) is traveling to New Delhi, Mumbai and Dubai to meet with potential buyers and logistics service providers.

JAPAN-LAC

We didn’t see anything this week — what did we miss? Email us at: mtd@novamportam.com

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