Chinese tech firms up to BAT in Latin America

Up Front

Happy New Year from all of us here at Novam Portam, and we hope your 2018 is off to a cracking start. 

It definitely is in the tech space, where the year began with the expected announcement that Didi Chuxing is acquiring Brazilian rideshare app 99 at a valuation for the Brazilian firm of just under R$1b ($380m). The $600m investment cements a relationship that began almost exactly a year ago with Didi’s initial investment in 99. The deal is indicative of a greater interest in Latin America. Said Didi Chuxing head Cheng Wei at the time of his initial investment in 99: 

"China and Latin America are the principal Emerging Markets in the world, with great opportunities for our urban mobility industry”

Along with an announced move into Mexico, this establishes Didi as a rising competitor for Uber, as well as one of several Chinese firms looking at Latin America.

Asian players like Japan’s Softbank have been in the region for decades, and newer entrants like Korea Venture Investment Corp (KVIC) are establishing funds to explore the tech scenes in countries like Mexico. And Chinese hardware incumbents like Xiaomi and Huawei have made Latin America a priority for 2018. 

But Latin America is shaping up to be the new software/services horizon for Chinese tech firms. For example, early last year, Tsing capital led a Series A round investment in luggage start-up Bluesmart. But the biggest players are the so-called BATs (Baidu, Alibaba and Tencent). 

Baidu has had a focus on Brazil. Several years ago it set up its own search engine for the country, and acquired local deals site Peixe Urbano. But more recently it has taken a portfolio approach, establishing the $60m Easterly Ventures fund to provide funding, technology, local traffic and industry expertise for Brazilian mobile tech startups.

Of course not all is going smoothly. Alibaba’s subsidiary Ant Financial’s star-crossed effort to acquire remittance behemoth MoneyGram has finally been killed off by the Trump administration. The deal had been stuck in limbo by the lack of approval by the Committee on Foreign Investment in the United States (CFIUS). Ant Financial and MoneyGram announced this week that they were calling the whole thing off. 

However Alibaba has been actively looking around Latin America, with Jack Ma cosying up to Mexico’s Enrique Peña Nieto and visiting with Argentina’s Mauricio Macri this past year. Observers wonder if Mercado Libre isn’t in Alibaba’s sights. Or maybe they will partner up with our friends at YellowPepper.

The big question is Tencent, owner of WeChat and QQ and China’s social media giant. Up to now, Tencent has not cast it’s eyes towards Latin America, and claims it is "not in a hurry" to speed up its overseas expansion. But with success in the online space requiring a global presence, Latin America wants to know what will be Tencent's first big move?

Top Stories

China amplia laços com América Latina - e os EUA deveriam se preocupar — Infomoney
Nuevas oportunidades: las relaciones entre China y América Latina — Clarín
Perspectiva podrá EEUU frenar a China y Rusia en 2018? — Los Tiempos
Lo que prometen en China para el año nuevo — Publimetro Colombia
China en América — Diario La Opinión
China, en el punto de mira del desarrollo global — El Mundo Financiero
América Latina entrega buenas cuentas económicas en 2017 y promete mantenerlas en 2018 — Xinhua
China le gana a EU en el comercio con América Latina y va por más — El Financiero
China amplía lazos con Latinoamérica. ¿Y Trump? — El Comercio
Trump's Bellicosity Is Ceding America's Influence to China — The Atlantic
Donald Trump’s Year of Living Dangerously — Politico Magazine
The new year opens with a slew of articles about the positioning of China vs the United States in Latin America. The dynamic is driven by the rising presence of China in the region. But it is also driven by much greater uncertainty among regional governments — including long-time allies of the US — about whether they can depend on their northern neighbor. The view that the Trump administration’s isolationism and erratic behavior is pushing Latin America into China’s arms is summed up in the Politico piece, which leads with dinner between Donald Trump, Mauricio Macri, Michel Temer, Juan Manuel Santos and Juan Carlos Varela:

"The Latin Americans who met for dinner with Trump in September told the former U.S. official afterward that maybe they should invite the Chinese into the region instead."

Trump Steps Up Efforts to Check China Influence in Latin America — Bloomberg
With belated recognition that current policy (and personnel) drift is changing regional dynamics, the US government is beginning to act. But it may do more harm than good. The US Treasury has sent a letter to the Inter-American Development Bank (IADB), complaining about the plan for China to hold the IADB’s annual meeting in 2019 - ostensibly because of the small share China has in the bank. However, the proposal was approved by the US last year, and no complaints were made about Korea hosting the event in 2015, even though it has a share the same size as China.

Arancel extra de 15% a cables de acero chino — Portafolio
While an investigation into the dumping of steel cables into the Colombian market is ongoing, that country’s Ministry of Commerce has decided to impose an additional 15% tariff on Chinese steel cable imports to the country.

PSA troca o comando na América Latina — Automotive Business
Following last month’s announcement that Carlos Gomes is going to run both Asia and Latin America for the firm, Peugeot auto-maker PSA has tipped Patrice Lucas to run Latin America under him.

China-LAC

La opción de salir del Mercosur — El Observador
Have they been reading our newsletter? Following our note at the end of last year that Uruguay may threaten to go it alone if Mercosur drags it’s feet on a trade deal with China, liberal newspaper El Observador comes out with an op-ed arguing for leaving Mercosur if they can’t get a deal with China. In an understatement, the paper says opening the regional block is a reasonable ask: "but not easy to undertake.”

Huawei's undersea cable project raises red flag in Australia — Financial Times
Huawei’s plan to lay fiber-optic cable from China to Chile may have run up against security concerns “down under.” Australia has offered to pay for cable connecting the Solomon Islands with Australia (competing with a Huawei Marine Networks proposal). Australia may deny the Chinese firm landing rights in the country, citing national security concerns.

Shippers benefit as China laps up Brazilian iron ore — Reuters
China’s moves to improve it’s environment redound to Brazil’s benefit. To combat severe winter smog, China has slashed iron ore output, pushing steel mills in the world’s second biggest economy to import more high-grade ore. This has led to increased Chinese demand for high-grade iron ore from Brazil, as well as Australia.

JISCO ships first cargo from Alpart — Jamaica Observer
China's State-owned Jiuquan Iron & Steel Group (JISCO) has shipped it’s first cargo of alumina produced by the Alpart refinery in St Elizabeth, Jamaica. The 35,000 tonnes of alumina are destined for China. JISCO has announced a  $1b investment program for Alpart.

Autobuses eléctricos con tecnología china comenzarán a operar en Chile en 2018 — América Economía
Chile looks forward to arrival of China-made electric buses — Xinhua
Chile destaca llegada de autobuses eléctricos con tecnología china — Xinhua
Transantiago is looking forward to receiving the first 15 of 90 BYD electric buses promised last year.

Team from China Railway visits — Trinidad Express
China Railway Construction Company sent a delegation to Trinidad and Tobago, where they met with Tobago House of Assembly Chief Secretary Kelvin Charles, among other officials.

Arándanos y arvejas secas hacia China — El Economista
Los arándanos entrerrianos llegarán a China en junio — Radio La Voz
Argentina will be able to send blueberries and dried peas to China — Fresh Plaza
Agricultural producers in Argentina remain excited about the Chinese market. Argentina and China (AQSIQ) have signed the sanitary protocols necessary to allow for more exports from Argentina in 2018. Argentine berries are expected to begin export to China in June, with peas and avocados soon to follow.

China determinará el precio del cobre en 2018; fuerte alza este año — El Financiero
Trump y China impulsaron el precio del cobre, para satisfacción de Chile — Merco Press
Chile is happy with the performance of copper in 2017, the price of which was up 30.1% on the year. Solid demand from China drove the increase in price, as well as expectations for an infrastructure spending package in the US. China is expected to continue supporting the performance of copper next year, but will the US do it’s part?

América Latina aprecia liderazgo de China contra el proteccionismo, afirma experto de CEPAL — Xinhua
Sebastián Herreros, in charge of Economic Affairs at the International Commerce Division of ECLAC, echoes that Latin America is appreciative of China’s leadership against protectionism “in an international contest marked by great uncertainty."

Canaco buscará seguir impulsando las micro y medianas empresas — Meganoticias
The head of Mexico’s National Chamber of Commerce (Canaco) in Colima says that it will continue focusing on developing small- and medium-sized companies in the state by focusing on export opportunities to China.

La demanda en China pone en jaque a los burros en América Latina y África — EFE Verde
China reducirá aranceles a importación de piel de asno — Xinhua
China has lowered it’s tariffs on the importation of donkey pelts (from 5% to 2%), which is expected to spur demand from Latin America. They are a product used in traditional Chinese medicine recipes. 

La calidad de la alpaca del Perú se luce en la vitrina china — El Comercio
PromPerú and Peru’s Trade Office in Beijing opened the doors on a physical store for it’s Alpaca del Perú brand in Beijing at the end of last year.

Wall Street's Venezuela Bet Rests in Hands of These Seven People — Bloomberg
As Venezuela goes into a make-or-break year for the country (especially with it’s foreign creditors), Bloomerg profiles seven decision-makers that will have the country’s fate in their hands. Dai Houliang, new head of Sinopec — which settled an outstanding debt owed by Venezuela in a public law suit at the end of las year — is one of the lucky seven.

Por primera vez Oaxaca exportará chocolate a China este año — Milenio
In 2018, Oaxaca is going to export Chocolate to China for the first time. Under the “Oxacanita” brand, a team from the Mixeca Technical University — supported by MIT, Notre Dame, and the Barack Obama Foundation — will export artisanal chocolates for Chinese consumption.

Megaproyecto energético de Argentina muestra beneficios de colaboración con China para el desarrollo del país austral — Xinhua
A profile of the "Cóndor Cliff” (formerly Néstor Kirchner) and "La Barrancosa" (Jorge Cepernic) hydroelectric dams in Santa Cruz, Argentina, that are being build by Chinese construction firm Gezhouba with local partners Electroingeniería and Hidrocuyo.

China e Argentina garantem 60% da alta no saldo comercial — Valor
China e Argentina impulsionam saldo recorde do Brasil na balança comercial — El País
China and Argentina drove Brazil’s commercial balance to a record surplus last year, according to the Brazilian government. Total exports in 2017 were $67b, 40.5% above the year before.

El 2017 terminó con una mala nota para las exportaciones del complejo sojero — La Nación
Se redujo la participación de la soja argentina en las compras de China — La Nación
Argentine soy exports to China for the first eleven months of 2017 declined 26% (or $766m) compared to the previous year. Local producers in Argentina chalk this up to inefficient domestic production.

Japan-LAC

Clústeres automotrices del Bajío fortalecen cooperación con Japón — El Financiero
Mexico’s automotive cluster in the Bajío continues to benefit from Japanese involvement. The Clusters of Querétaro Guanajuato, San Luis Potosí and Aguascalientes have signed an MOU with Japan’s International Cooperation Agency (JICA) for a five year program to improve participation of Japanese companies, as well as the competitiveness of Tier 2 firms in the Bajío through the participation in training in programs such as kaizen and other management techniques.

México y Japón mantienen cooperación científica en sector agrícola — 20 Minutos
Mexico’s Agriculture Secretariat (Sagarpa) has established an exchange program with JICA and Japan Science and Technology to improve collaboration on genetic materials.

Govt to survey 4th-generation Japanese in Latin America — The Japan News
The Japanese government is planning to launch a survey of the estimated 2.13 m nisei in Latin America, with the hopes of finding talented young Japanese descendants who are interested in Japan and encouraging them to study or work in the country.

ASEAN & Oceania-LAC

Singapore fund buys 25% of Brazil's Algar Telecom — Telecompaper
Brazilian regional operator Algar Telecom announced that it sold 25% to Archy, an affiliate of GIC Special Investments, Singapore's sovereign fund in Asia. The sale involves a capital increase of R$352-379m ($108-117m) through the issue of new shares.

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