The Belt & Road is a reality for Latin America, even if it isn't in it

Up Front

There has been a lot of discussion on the Belt and Road Initiative and Latin America, including at last week’s China-ECLAC forum. What we call the “soft expansion” of the Belt and Road to the Western Hemisphere has always had more cheerleading from Latin America, compared to a more circumspect approach by Chinese officials. Our friend Margaret Meyers at The Dialogue notes this and asks as the key question: "LAC’s Not Part of the Belt and Road, but Does That Matter?

Chinese officials referred to the region as a “natural extension” of the Maritime Silk Road, while adding that the region is an “indispensable participant” in the construction of the BRI.

Although this language is suggestive of BRI-LAC linkages, no steps were taken by Wang Yi to formalize LAC participation, or, more importantly, to extend financing from the Silk Road Fund, a $40 billion investment fund established by China to make its Belt and Road ambitions a reality.

She notes that of the seventy counties that have signed a Belt and Road Cooperation Agreement (“一带一路”合作协议) with China, Panama is the only one in the Western Hemisphere.

Whether Latin America formally remains in or out of the Belt and Road Initiative, more Latin American countries signing up. Uruguay — who has been on the front end of engaging China, at times to the chagrin of it’s neighbors — last week agreed with China to sign a Cooperation Agreement “as soon as possible."

Not to be left out, Argentine President Mauricio Macri — who travelled to the Belt and Road Summit last year representing Mercosur — sat down in Buenos Aires this week with Chinese Finance Minister Xiao Jie where the latter talked about how the Belt and Road Initiative can be a vehicle through how the Asian Infrastructure Development Bank (AIIB) can finance projects such as hydroelectric dams in Santa Cruz, as well as the Black Water Tunel (Túnel de Agua Negra) to connect San Juan with Chile’s Coquimbo region.

However, countries in Latin America need to keep in mind that the Belt and Road Initiative isn’t just a funnel for needed infrastructure financing. It can be a challenge to existing economic models. This week China announced that the Belt and Road Initiative will now include the North Pole and Northwest Passage (一带一路延伸至北极和拉美 外媒:真正成为全球方案 from 参考消息网 [Cankaoxiaoxi]). While most commentary focuses on the challenge to the US, shipping from East Asia to the East Coast of North America could be $600k cheaper per ship than through the Panama Canal. The first country in Latin America to sign up for the Belt and Road Initiative could be the first one to be hurt by it.

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Ferreyros: “TPP-11 permitirá que exportaciones crezcan 22%” EL Comercio
El CPTPP generará oportunidades para exportaciones no tradicionales de Peru — Xinhua
Mercedes Aráoz: "El TPP-11 será positivo para el Perú — El Comercio
Peruvian Prime Minister Mercedes Aráoz and Trade Minister Eduardo Ferreyros crow about the benefits to their country of the Trans-Pacific Partnership (TPP), including free trade with four new countries: Brunei, New Zealand, Malaysia and Vietnam. Ferreyros expects exports to grow 22% thanks to TPP.

Te vas porque yo quiero que te vayas… Del TPP. - Japón a EU— Expansion
Japón y Chile descartan renegociar el TPP para incluir a Washington
Following President Donald Trump’s surprise musing that he would think about bringing the US back into the TPP if it was made "substantially better," Japan and Chile have said they think the TPP is fine as is: “If the US wants to join, this does not mean a new renegotiation,” says a spokesperson for the Japanese government.

México subestima su potencial — Milenio
Con China y Japón, México avanza en diversificación comercial: ProMéxico — El Economista
Los Aranceles que Sí Paga México — Expansion
In the face of NAFTA uncertainty, Mexico needs to come out of it's shell (to use Harry Van Shaick’s metaphor) and promote itself to the world. ProMexico’s Paul Carreño King is on it,  noting that China and Japan are at the top of the league table of Mexico’s growing trading partners, having increased trade by 180% and 100%, respectively. As a result, the US has declined in it’s dominance as a trade (75%, down from 80% in 2012) and investment (35%, down from 46%) partner. But Mexico still faces a lot of tariff barriers with places like China, Taiwan, and South Korea that hold it back.

China’s Dockless Biking Boom and the Lessons for Latin America — Inter-American Development Bank
Chinese bike-sharing firms gear up to launch in Mexico — Reuters
Bring On the Bikocalypse — Wired
Everyone is talking dockless bikeshare this week. Rival Chinese bike-sharing companies, Ofo and Mobike, have set their eyes on Mexico, where they are ready to launch. Having raised over $1b each, they will strengthen China’s tech presence in Mexico and increase interest in alternative transportation services in the gridlocked country. And they are looking further, says the IDB:

OFO one of the largest Chinese bike-sharing companies, announced that it would enter the Mexican market, covering Mexico City, Guadalajara and Monterrey. Davis Wang, CEO of Mobike, another major Chinese firm, has said the company expects to enter three to five major Latin American cities in the first half of this year.

While some are concerned about importing Shanghai’s bike-chocked sidewalks, our friend Felix Salmon says embrace it — it is an opportunity to retake megalopolises from cars.

China moves into Latin America — The Economist
“美国优先”冲击美拉关系(国际视点) —
China aprovecha el vacío de Trump para ganar peso estratégico e inversor en América Latina — Publico
¿Las políticas de Trump favorecen la integración de América Latina? — Marco Trade News
At Davos, the Real Star May Have Been China, Not Trump — New York Times
A series of articles providing comprehensive overviews of the relationship between China and Latin America, and the US’s diminishing influence in the region. Michael Reid’s Bello column in the Economist provides a good summary of the moves of “the friendly dragon” into Latin America.

Former Chilean Finance Minister Andrés Velasco sums up how Trump’s America First policy clears up stumbling blocks to trade deals: US agriculture subsidies are no longer an issue for Brazil and Argentina; Brazil and the US are no longer vying for regional dominance; and it goes hand-in-hand with the decline of “retrograde populism” in Latin America:

"If the three main obstacles have disappeared," Velasco asks, "what prevents the creation of a free trade agreement (without the US) of the Americas? Nothing, except political inertia and lack of clear leadership. However, there is no shortage of regional leaders who could carry the torch.

Checking in from Davos, the NYT puts the issue in a global dimension:

In Davos, President Temer of Brazil said that he was not concerned about the rising influence in South America of China, which has increased investments in his country and extended enormous loans to Venezuela and Ecuador.

Mr. Temer said [Venezuelan] debts should be seen as a financial issue, not a geopolitical one. “The major concern they have is to recover the loans they gave Venezuela, they want their payment,” he said in an interview. “This was actually quite explained in the meetings we have.”


China triplicará participación en Feria comercio Expocomer en Panamá — Xinhuanet
China, el protagonista de Expocomer — Metro Libre
China is tripling its exhibits at this year's Expocomer International Commerce Fair in Panama. Panama is happy, as this shows China’s increasing "interest in considering Panama as a point of distribution for theirs products throughout the region”, says Néstor González, Minister of Industries and Commerce.

Grupo chinês Fosun avalia aquisições e vê espaço para ampliar negócios no Brasil — ISTOÉDinheiro
Fosun is bullish on Brazil. After it’s acquisitions of Rio Bravo and Guide Investimentos, it says it is focused products and services destined to the middle class. Fosun invested over $150M in Brazil over the past two years and country rep Diogo Castro is undeterred by the upcoming Brazilian elections.

Interesse chinês anima empreiteiras — Estadão
Companies like China Communications Construction Company (CCCC), China Railway Construction (CRCC) and China Road and Bridge Corporation (CRBC), are moving to fill the void in civil construction in Brazil in the wake of the Lava Jato corruption scandal.

¿Miedo a Trump? Macri no respondió invitación china por TLC con Mercosur — Urgente 24
Buscan acuerdos con la Alianza del Pacífico y China, con el Mercosur — La Mordaza
Esencial comercio libre con China — El Observador
Nin: De la inversión de China en América Latina, Uruguay recibe solamente el 0,2% — Espectador
Uruguay and China flirt with a trade agreement, but Mercosur is not convinced —Merco Press
The pas de deux between China and Mercosur continues. While Uruguay continues to be the driving force, Argentina is warming to the idea, but hasn’t responded to China’s invitation to begin discussions with Mercosur. And there doesn’t seem to be a peep out of Brazil, nor likely will there be until after October’s election. Maybe free trade is the carrot that gets Paraguay to switch diplomatic recognition to Beijing?

The Heat: China-Latin America relations — CGTN
CELAC driving for a Silk Road of shared interests —
Tentacularidad China I — Analítica
Round-ups following up on last week’s China-ECLAC Forum. The most controversial, from Beatriz de Majo, is downbeat: she asks us not to delude ourselves, that China seeks to lock in a sphere of influence in Latin America while building alliances in left-leaning countries, skeptical of the imperialist to the north. She says that the relations between China and countries like Mexico, Ecuador, and Uruguay show how China wants to subjugate and subdue Latin American nations.

China se consolida como el primer socio comercial de Chile con el 26% de las exportaciones — Xinhua
China se destaca como principal parceiro comercial do Brasil em 2017 —
The governments of Chile and Brazil note that China remains their largest trading partner, with the country being the largest trading partner for 13 Brazilian states.

Brasil supera Venezuela em fornecimento de petróleo à China — O Globo
Thanks to the collapse in Venezuela’s oil exports (down 25% since 2015), Brazil now supplies more oil to China — sending 455,338bpd in 2017.

Trina Solar and Mitsui win 104MW project in Mexico auction — PVTech
Chinese firm Trina Solar and Japanese conglomerate Mitsui won a bid for a 104MW solar project in Zacatecas, after having won an earlier 133MW project in Aguascalientes.

Ecuador says reaches partial deal with China over crude sales — Reuters
Exportación de crudo entre Ecuador y China podrían concretarse este año — Energia16
Ecuador has agreed on the price formula over crude sales with PetroChina and Unipec Asia, but says it will “continue to seek more advantageous conditions.” Ecuador has also agreed to the second phase of the Ishpingo-Tambococha-Tiputini project —  Petroamazonas will drill 97 wells in an oil field purported to hold 287m barrels of oil. President Lenín Moreno expects a return of $2.4b a year once the project is at full throttle.

Principal aerolínea de Panamá reconoce potencial de alianza con Air China — Xinhuanet
Copa Airlines CEO Pedro Heilbron is looking to integrate further with Air China for the China-Panama route, with the goal of making Panama the “hub of the Americas.” Air China has announced it will be setting up a regional office in Panama.

José Antonio Valdés, presidente ejecutivo de Pacific Hydro: “Los proyectos hidroeléctricos hoy son muy difíciles de hacer” — La Tercera
Pacific Hydro’s executive chairman José Antonio Valdés sees Chinese investment in Latin America as paramount. Optimistic about Pacific Hydro’s renewable energy capabilities thanks to Chinese ownership, Valdés hopes Chile will be able to distinguish itself and attract FDI to fund projects he wants to build.

Nectarines chilenos llegan a China con precios similiares a las cerezas — Estrategia
The first shipment of Chilean nectarines has arrived in China.

China abre seu mercado de 1,3 bilhão de consumidores para o mundo — Istoé
Em coletiva, China faz convite aos países para mercado de consumo — Cruzeiro do Sul
China is opening its 1,3 billion consumer’s market to the world by inviting nations to join the first China International Import Exposition (CIIE) in Shanghai in November. Chinese diplomats in Brazil are eager for the possibility to showcase more of Brazil's products.

China y Chile acuerdan cimentar intercambios parlamentarios — Xinhua
Chile espera exportar más cobre y litio a China para sus autos eléctricos — Cooperativa
China’s parliament speaker, Zhang Deijang, and president of the senate in Chile, Andres Zaldívar, met in Beijing to talk Chinese interest in Chilean copper and lithium, and Chile’s interest in exporting more fruit and meat. It’s unlikely they talked about Zaldívar’s weird investigation last year.

Sharp Power: Rising Authoritarian Influence — National Endowment for Democracy
The National Endowment for Democracy puts out a report on China in Latin America. Author Juan Pablo Cardenal targets China’s soft power strategies to influence the region, bringing attention to asymmetrical trade relationships and consequences. He says a hallmark of this strategy is people-to-people exchange, a form of public diplomacy that emphasizes the establishment of personal relationships with influential individuals. China has pursued this through sponsoring of educational, cultural, and academic programs and activities. Cardenal claims this policy has been far too well received by the Latin American elite.

Tras la polémica por su eventual uso militar, la estación espacial de China en Neuquén ya empezó a funcionar. — Infobae
China has established a space tracking station in Neuquén, Argentina, which began working three months ago despite fears of military use.

Pesquisador vê risco de influência política da China no Brasil — Folha de São Paulo
Thorsten Benner, director of the Global Public Policy Institute in Berlin, gave a presentation to the Fundação Getúlio Vargas in which he raises concerns about the influence of China on Brazil.

Argentina potenciará su exportación de alimentos para mascotas a China — Primera Edición
China and Argentina have reached a deal for Argentine pet-food to be sent to China. While less than 4% of the Chinese population owns pets, agroindustrial Secretary Marisa Bircher sees “great potential in the market of placing a product with high aggregate value.”


Automotriz coreana Kia prevé elevar 40% producción en México — El Economista
Horacio Chavez, Director General of KIA in Mexico, expects a 40% increase in production this year, reaching 314,000 cars. KIA’s optimism is due to “the confidence that everything will go well with NAFTA”, referring to the treaty’s recent renegotiations. While the US is KIA’s largest exporter to Mexico, the country to the south has been finding new locations for production.


Japón nombra nuevos embajadores en Perú, Uruguay y Nicaragua — W Radio
Japón nombró a nuevo embajador para el Perú — Radio Nacional
Yasuhisa Suzuki, nuevo embajador de Japón en Nicaragua — Confidencial
Novo embaixador do Japão no Brazil visita Maringá nesta sexta — O Diário
Last week the Japanese government announced new ambassadors for Peru, Uruguay, and Nicaragua. This follows on the recent arrival of a new ambassador in Brazil. These representatives are hitting the ground running, with Yasuhisa Suzuki highlighting his country’s commitment to Nicaragua through public works projects sponsored Japan International Cooperation Agency (JICA), and Ambassador Akira Yamada will be making a trip to Maringá, in Brazil's Paraná state.


Chilean lawmakers to visit India next week — The Santiago Times
Chile parliamentarians to visit India, focus on astronomy, women’s issues, tech — Financial Express
Seven Chilean parliamentarians will be visiting India next week, with a focus on trade and investment, astronomy, women’s issues and technology. The trip comes ahead of an India-LAC Conclave that is supposed to happen this June or July in Santiago.

ASEAN & Oceania-LAC

Australia's QBE sees record $1.2 bln loss on catastrophes — Reuters
QBE enlists adviser for potential sale of Latin America operations — The Australian
Australia’s biggest insurer QBE Insurance Group reported an annual loss of $1.2b (USD), thanks to payouts around massive California wildfires, storms in Australia and Hurricane Maria. As a result, it is putting it’s Latin America operations on the auction block.


Grandes petroleras participarán en licitación campos en aguas profundas México — Reuters MX
Qatar makes foray into Mexican oil, wins 4 blocks — Financial Times
Qatar Petroleum, the world’s largest producer of liquefied natural gas, took 4 fields together with Shell this week in an auction for crude fields in the deep waters of the Gulf of Mexico. This is Qatar Petroleum’s first investment in Latin America.

Emirates to fly to Santiago via Brazil — Gulf News
Emirates airlines is (almost literally) doubling down on its South America bet. Starting in July, it will add another five flights to its current daily schedule from Dubai to São Paulo. Those additional flights will connect onward to Santiago in Chile.

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