Asia-LAC Business Digest — 28 Sep 2017

Up Front

Expanding consumer appetite and uncertainty created by US policy, is creating opportunity in Latin America’s auto market, and companies from across Asia are taking advantage.

This year’s Foreign Direct Investment in Latin America and the Caribbean briefing paper from ECLAC, published this week, highlights what they call the "technological revolution in the global automotive industry.” 

ECLAC believes that auto manufacturers "will concentrate much of their global production in a small number of new modular platforms, increasingly focused on areas of specialization and passing increasing areas of responsibility to their suppliers.” And that Latin America can benefit from this revolution.

The report highlights the success story of the Mexican auto industry, but sees the potential for trouble on the horizon:

The outlooks for Mexico’s motor vehicle industry will depend on at least two independent sets of factors. On the one hand is the transformation driven by the technology revolution under way in the global automotive industry, changes in the concept of mobility and consumptions patterns, and regulatory pressure in the fields of safety, the environment and energy efficiency. On the other hand is the uncertainty triggered by the announcements of the new Administration in the United States.

China’s connection with Mexico is relatively new but strengthening quickly. Earlier this month we mentioned that BAIC was considering building another assembly plant in Mexico. From Korea, KIA is now on track to build 300,000 cars a year in Nuevo León.

And it’s not just Mexico. Chile, while a smaller market, has also attracted interest from Korean (although they have struggled recently), Japanese, and Chinese automakers (like BAIC), with the bus-makers like BYD expanding in the market, as well.

We’ve also noted that Argentina has been a growing market for Chinese car companies, with over a dozen of them currently there or exploring the market. This week, Greely stole Lifan’s thunder by announcing two SUVs for the market. Lifan has been making noise that it wants to bring electric vehicles to the market, but that the company “depends on the government” to make it a success.

Amongst all this activity, Brazil has remained a quiet. For the past five years, Brazil has capped car imports from Mexico following a well-publicized spat between the two countries when Brazil tried to shield it’s struggling domestic industry from the more efficient Mexican producers.

So it was news this week when Toyota announced it was investing R$1b ($316m) in into a new Brazilian production line for the Yaris, citing growing demand. Does this augur future interest from other automakers?

Top Stories

Países del TPP avanzan en la renegociación para sellar el acuerdo — Televisa News
Trump dio "gran oportunidad" a China en Latinoamérica al salir de TPP, según Piñera — Télam
The other 11 countries of the Trans-Pacific Partnership are looking to have a draft ready for the APEC Summit in Vietnam in November. Sebastián Piñera, ex-president and again candidate in Chile, highlights that Trump’s abandonment of TPP gives a “great opportunity” to China.

China interesada en ampliar comercio y cooperación con América Latina y el Caribe, informa cancillería dominicana — Acento
RD y China dan primeros pasos para profundizar sus relaciones — Listin Diario
As we suspected two weeks ago, People’s Republic of China Foreign Minister Wang Yi met with his counterpart from the Dominican Republic Miguel Vargas Maldonado on the sidelines of the UN General Assembly meeting in NYC last week, as part of Maldonado’s meeting with his counterparts from Guyana, Ecuador and El Salvador. China’s position is characterized as “wanting to deepen commercial relations and cooperation with the countries of Latin America and the Caribbean.” Taiwan, beware.

Argentina lanza una licitación ferroviaria por 2.000 millones de dólares — El Economista América
Argentina opens bidding to buy $2 bln of railcars for Buenos Aires — Reuters
Argentina has launched an RFP for 1500 electric trains to improve the Buenos Aires area transit system.  The $2b project will double the fleet of trains in Buenos Aires, and has attracted interest from companies such as Germany’s Siemens, Canada’s Bombardier, China's CRRC, and Marubeni and Mitsubishi from Japan. The RFP is open through November 14 and will require at least 20% of train components to be manufactured in Argentina.

Dan tendencias de IED en América Latina y el Caribe — Méxicoxport
China será maior investidor em projetos desenvolvidos no Brasil — O Globo
Write ups of ECLAC’s Foreign Direct Investment in Latin America and the Caribbean 2017 briefing paper. FDI inflows to the region continue their decline (by 7.9% to US$ 167b in 2016), driven by the fall in commodity prices and sluggish economic growth in the region. Brazil received almost half of all FDI, which according to Itamaraty amounted to $46.8b in investments (of $103.6b announced) over the past five years.

Mercosur could seek trade deals with CanadaAustraliaNew Zealand — Reuters
Mercosur Makes Moves to Go Global — Stratfor
Mercosur is moving forward with global trade alliances, looking at the EU, Pacific Alliance, Canada, Australia, New Zealand, and Asia. Per Stratfor, the latter could be trouble:

Mercosur has maintained a unified front in trade negotiations with its regional neighbors and Europe, but gaining a consensus in trade negotiations with China and South Korea has been more difficult. If the bloc can reach an agreement, Uruguay and Paraguay could significantly increase their agricultural exports to those countries. Argentina has also expressed some optimism with the two negotiations even though there is reluctance from Buenos Aires' domestic industries to give greater market access to China and South Korea's highly competitive industrial sectors.

Meanwhile, according Uruguayan diplomatic sources, Brazil was the only country that opposed a trade agreement with South Korea and China.

Latin America’s Delicate Dance With China — US News
Latin America Response to China — Two Weeks Notice
A good English language piece about how Latin America is picking and choosing in it’s relationship with China and avoiding too much entanglement. This comes up in local content restrictions and local hiring regulations, but also explains why a China-led alternative to the TPP isn’t gaining more ground in the region.

China-LAC

Os chineses estão interessados na Oi — Exame
Oi confirma negociações com China Telecom — Notícias ao Minuto Brasil
Oi Telecom says it is in negotiations with China Telecom for the latter to take an equity stake. Finance Director Ricardo Malavazi says they’ve signed an NDA, but “negotiations are preliminary." China Mobile is also purported to be interested in the beleaguered Brazilian company. Oi was due to present its creditors committee with a new restructuring program this week, with a creditor vote on October 9th. Oi is expected to propose raising at least R$8b ($2.5b) in new capital.

Richa recebe grupo chinês que adquiriu terminal de contêineres — Agência de Notícias do Paraná
Expectativa é grande em Paranaguá por atração de investimento após chegada de chineses — Gazeta do Povo
Having bought 90% of the Paranaguá Container Terminal, China Merchants Ports vice president Vicenti Lu and development director Natalie Wan met with Paraná Governor Beto Richa (PSDB), and Paranaguá Mayor Marcelo Roque (PV). At the meeting with Gov Richa, Lu explained the Paranaguá is only the first step for China Merchants Port in Latin America, as part of it’s strategy to be a global leader in transport, finance, and real estate. Lu expects to invest further in Paranaguá: “the principle of the group is to invest in the ports, the industrial parks, and the cities where it is operating.”

Argentina y China estrechan lazos por la minería — MDZ Online
El gobierno chino propuso "intensificar la cooperación y la inversión" minera con la Argentina — Télam
China mostró interés por las inversiones en cobre, ante una delegación argentina — TélamAround the China Mining Fair in Tianjin, Argentine Sub-secretary for Mining Development Mario Capello met his Chinese counterpart Cao Weixing, and the two pushed for “intensifying cooperation and investment” in Argentine mining. Good news for Argentina’s plan to raise $15b in investment in 30 mining projects.

Perú: La principal fuente de cobre para China tras superar a Chile — El Comercio
Perú busca atraer inversiones mineras en China Mining 2017 — Andina
Also news from the China Mining Fair is the strong showing by Peru. The country overtakes Chile as China’s largest source of copper this year, thanks to an increase in production at the Las Bambas mine, operated by China’s MMG. Viceminster of Mines Ricardo Labó went to the China Mining Fair with the goal of gaining more.

Gov't finalises Alpart deal with JISCO — Jamaica Observer
Jiuquan Iron & Steel Company (JISCO) signed a deal to operate and build-out the Alpart alumina works at Nain, St Elizabeth in Jamaica. According to Transport and Mining Minister Lester 'Mike’ Henry, the agreements formally unlocks the inflow of at least an additional US$1 billion in investment and the creation of another 800 direct and high-paying jobs.

Chinese make tough decision on Monymusk — Jamaica Gleaner
However it is not all sweetness between Jamaica and China. After further negotiations, Pan Caribbean Sugar Company (PCSC) has said that its decision to operate the Monymusk Sugar Factory for the 2017-2018 crop year was made to prevent a socio-economic crisis for communities along the sugar belt but that it is unsure how it will prevent further hemorrhaging at the Clarendon facility:

"Our board of directors took into consideration the Government's concern over the potential disaster if operation is suspended at Monymusk,” PCSC spokesperson Sun Y’ Dan  told The Gleaner in a telephone interview recently. "Of course, China is trying to help, but while getting the quota to import refined sugar for the domestic market will mean an additional source of income, we are still going to have losses.

"So this is not a business decision because we will continue to sustain losses even though it will not be as much as before."

Government to sign MOU with China — Jamaica Gleaner
Agriculture Ministry paves way to enter Chinese fisheries market — Jamaica Observer
The Jamaican Ministry of Industry, Commerce, Agriculture and Fisheries signed an MOU with China’s AQSIQ on Friday paving the way for lobster exports.

Colombia en la recta final para enviar aguacates a China — HSB Noticias
Autoridad sanitaria de China verificará las condiciones de producción de aguacate hass — La Republica
Colombian avocado is at China's gates — Fresh Plaza
Chinese guacamole may be about to get a Colombian spin. Colombian Minister of Agriculture and Rural Development Aurelio Iragorri has announced that "China’s sanitary authority” (presumably AQSIQ) will be visiting Colombia next month to confirm that Colombian avocados will be suitable for export to China.

''El TLCAN no es un asesino de empleos, el problema está en China y también lo sufre México'' — Economia Hoy
Our friend Shannon O’Neil talks about the third round of NAFTA renegotiations, and puts them in context. As she says, for the US: “NAFTA isn’t a job-killer, the problem is in China, and Mexico suffers it as well.”

Panama to strengthen economic ties with China, president says — NASDAQ
Chinese companies could replace Brazil’s Odebrecht in financing Panama's Chan 2 hydroelectric plant. The new diplomatic partners are also working to bring direct flights from China to Panama

Chinese investors go big in Latin American energy — LatinFinance
Our friend Margaret Myers at the Inter-American Dialogue outlines some of the recent energy deals by Chinese companies in the region, including China Three Gorges and State Grid. As she notes: "Brazil is a top destination for these companies, but it is also a showcase. It is part of a broader Chinese plan for infrastructure investment and diversification in the region."

Negocios con el Mundo — La Nación
China-Argentina ties have room to grow, say experts — China Daily
La Nación hosted an event focusing on connecting Argentina with the world. There was a heavy China spin to the event, with the head of ICBC in Argentina speaking. Experts believe that Argentine exports to China could be four times larger, and that strengthening Mercosur is Argentina’s best strategy for opening to Asia.

Brazil watchdog OKs Odebrecht's Rio airport stake sale to China's HNA — Reuters
HNA gets the high sign to close their deal to buy a controlling stake of Rio’s Galeão International Airport from Odebrecht.

Governo arrecada R$ 12,1 bi em leilão de quatro hidrelétricas — Veja
Conheça a empresa chinesa que comprou uma hidrelétrica da Cemig — Veja
The Brazilian government auctioned off four hydroelectric dams owned by CEMIG, the Mines Gerais Electric Company, for R$12.1b ($3.8) or 10% above the expected. The largest of the the four, São Simão, was sold to China’s State Power Investment Corporation (SPIC) for R$7.2b ($2.25b); with France’s Engie winning two auctions and Italy’s Enel winning the fourth.

El Alto: Abundan vendedores chinos, cubanos y venezolanos — Erbol Digital
El Alto, Incan crossroads town and second largest city in Bolivia, is seeing an upswing in foreign merchants, including Chinese sellers, per Adrián Huanca, the Director of Markets of the Mayor’s office. Unfortunately, many of these sellers are there illegally and do not pay taxes. 

China busca fortalecer cooperación bilateral con Colombia — HSB Noticias
Chen Lei, Minister of Water Resource of China, visited Colombia to encourage collaboration on managing flooding and silting.

PDVSA y CNPC incorporarán 800 pozos para incrementar en 200 mvd la producción petrolera — PDVSA
Unclear if China will put any new money into this plan to reactivate 300 wells in the Faja del Orinoco and the rehabilitation of 500 wells in Anzoátegui state.

Fein se reunió con una delegación de Shangai para fortalecer el vínculo con la ciudad china — La Capital
Mayor Monica Fein of Argentina’s third largest city, Rosario, sat down with a delegation from Shanghai headed by Yao Hai, Director General of the Shanghai Office of Cooperation and Exchange.

Justiça federal proíbe compra e uso de Leuginase da China em toda a rede SUS — G1
The Brazilian judiciary has blocked the import of Leuginase from China. The medicine, used to treat children’s leukemia, has been criticized for impurities and lack of effectiveness.

Ação da ABPA na China gera negócios e reforça aproximação com autoridades chinesas — Comex do Brasil
The Brazilian Animal Protein Association (ABPA) pushed their goods at the China International Food, Meat and Aquatic Products Exhibition (FMA 2017) in Guangzhou.

Korea-LAC

Suman 53, los bancos autorizados en México — El Economista
Mexico authorizes operations of South Korea's KEB Hana Bank — Reuters
Mexico’s Finance Ministry and banking regulator CNBV announced on Friday that South Korea’s biggest lender, KEB Hana Bank, has been granted a license to operate in Mexico. Unlike many other moves by Asian and global banks into Mexico and Latin America in recent years, this is a de novo banking license, rather than an acquisition of a local bank. The new bank will mainly focus on corporate finance and international trade between South Korea and Mexico.

TLC con Corea del Sur  se mantiene en la agenda — elPeriodico
Guatemala and Korea continue to work towards a Free Trade Agreement; Nin Kim, chargé d’affaires at the Korean Embassy expects the agreement to be signed in the second half of next year.

Bolivia's Longest Bridge Built by Bolivian and South Korean Hands — Be Korea-savvy
Bolivia’s longest bridge was officially open to the public this week. The Puente Banegas cost just under $50 million, is 1,440 meters long and stands atop the Grande River. Hyundai Development Company and various South Korean construction firms took part in the building of the bridge.

Perú: ProInversión realizará "roadshows" en Pekín, Seúl y Tokio — América Economía
ProInversión presenta proyectos APP por US$ 17 mil millones en Corea del Sur — El Comercio
Peru’s ProInversion has relaunched its roadshows in the fourth quarter. After one in Mexico, a roadshow this week will visit Beijing, Seoul, and Tokyo - the first one in two years.

Corea del Sur aumenta su 'apetito' por productos naturales del Perú — Gestión
South Korea increased it’s imports of natural products from Peru by 2333%, led by sacha inchi.

Japan-LAC

El príncipe de Japón inicia una extensa visita a Chile — Cooperativa
Príncipes japoneses visitan Chile y se reúnen con Bachelet — 20 Minutos
Japan’s Prince Akishino and his wife Princess Kiko visited Chile on the 120th anniversary of diplomatic relations between the two countries. They met with President Bachelet.

India-LAC

ARGENTINA: Country Wants To Consolidate And Diversify Exports To India — Markets Insider
On the sidelines of UNGA, Argentine Foreign Minister Jorge Faurie met with his Indian counterpart, Sushma Swaraj. At the meeting, both foreign ministers agreed that the Indian ties with Argentina and the Mercosur are "well below its potential,” and that both governments have an interest in increasing trade. Currently, India is Argentina's sixth largest export destination.

GCC & Oceania-LAC

UAE Ambassador to Mexico meets Governor of Nuevo Leon State — Emirates News Agency
Ahmed Hatem Al Menhali, UAE Ambassador to Mexico, traveled to Monterrey to meet with independent  Nuevo León Governor Jaime Rodriguez "El Bronco” Calderon. Per the UAE Embassy: "During the meeting, the two sides discussed ways to strengthen and expand opportunities of cooperation between the UAE and the state of Nuevo Leon, which is the leading state in the Republic of Mexico in the field of industrial economy and logistics."

New players step into Brazil vacuum created by Petrobras scandal — FT
In the FT’s “Brazil: the Road Ahead” package last week, a status check on the Santos/Dubai Ports deal:

Odebrecht says it is negotiating to sell two-thirds of the Embraport container terminal in Santos to DPW Brazil, the Brazilian subsidiary of Dubai-based port conglomerate DP World (DPW already owns the remaining third). In May, CADE, Brazil’s antitrust authority, approved the sale. “For DPW Brazil, acquiring control of Embraport is in line with its strategy to expand its investments in the country,” CADE said in its ruling.

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