Latam is sheltered from Chinese company asset sales

Up Front

This article is available in Chinese: 中国公司接下来是否会售拉美资产

Last week's news about insurance company An Bang — and recent headlines about HNA, Dalian Wanda, and Fosun — show that the Chinese government is increasing it’s oversight of activity by Chinese firms overseas. The block-buster news has shown Chinese firms calling off purchase of or selling off assets such as tech companies, the Golden Globes, and even Atlético Madrid. In the most extreme case — such as that of the famed Waldorf-Astoria hotel in midtown Manhattan — ending up with assets ultimately, if indirectly, under government ownership. Officially these moves have been spurred by overhanging debt and liquidity concerns at these companies.

This flurry of activity has people scratching their heads and asking: after over a decade of purchases in by Chinese firms in the region, is Latin America next? Is the foreign direct investment (FDI) pipeline going to dry up?

While there are regular reminders that policymakers in Beijing are not afraid of bold moves, we see three reasons why the impact of this shift in policy on Latin America will be less than one might think:

  • First, many of the big Chinese firms in Latin America are State-Owned Enterprises (SOEs). As a result, definitionally they are going to act more in line with the policy goals of the Chinese government. Of the companies that are seeing the biggest impact from Chinese government influence — An Bang, HNA, or Fosun and others investing in Silicon Valley — all are private sector actors that Beijing may feel it has less control over.
  • Second, Beijing is OK with outbound FDI as long as companies “stay in their lane.” The recent trend has been focused around "business that is not related to the core business of the Chinese investor.” An Bang’s forays into Hollywood and La Liga have been far afield from the company’s core insurance business. Traditional Chinese investment focus in Latin America has been in sectors that are core to the buyer’s business — think Minmetals getting into Peruvian copper, State Grid buying generation and transmission assets in Brazil and Chile, Fosun’s purchase of Brazilian asset managers, or even Didi’s acquisition of fellow ridehsare app 99.
  • Finally, Beijing wants to push investment that is in line with Belt & Road. This week’s approval of China Merchant’s Port (CMPort) acquisition of the Paranaguá Container Terminal is a sign of things to come. As Latin America continues to be in the shadow of the Belt and Road Initiative, FDI by Chinese companies into logistics and transportation infrastructure is not going to be reigned in by Beijing. HNA may be looking to sell $16b in real estate and hotel assets, but last year’s stake in Rio’s Galeão Airport is likely to be untouched. Likewise, Chinese company activity in railways and rolling stock from Argentina, Brazil, Chile, and Panama will continue.

While China may love spending money on the flash that Latin America has to offer, we think Chinese FDI into the region will continue to focus on core competencies, to Latam’s benefit.

Top Stories

首次涉足拉美 招商局9亿美元控股巴西第二大港 — 财新网 (Caixin)
Parceria com empresa chinesa para controle de porto é firmada no Congresso — Senado Noticias
PARANAGUÁ: Parceria com empresa chinesa para controle de porto é firmada no Congresso — Parana Cooperativo
Empresa chinesa adquire por R$ 3,2 bilhões controle de 90% do terminal de contêineres do Porto de Paranaguá — Noticias Agricolas
China Merchants Port (CMPort) has gotten Brazilian approval for taking a 90% stake of the Paranaguá Container Terminal port in Southern Brazil, the nation’s second largest. Brazilian Senator Wellington Fagundes is quoted as saying he thinks\ the $990m acquisition will benefit both countries, as well as the rest of the continent.

滴滴公布新一轮架构调整及人事任命 — JRJ
Didi Chuxing is beefing up its presence in Latin America, following the acquisition of 99 in Brazil and the planned launch of operations in Mexico. Tony Qiu, former general manger and strategic senior director will be the new leader of international business unit.

China’s Fosun confirms US$52m purchase of Brazilian asset manager — International Investment
Chinas’s Fosun has closed its acquisition of Brazilian financial services company Guide Investimentos for $52m. Following last week’s acquisition of French fashion house Lanvin, should we expect more from Fosun in the future?  Says an analyst: “Fosun is regaining pace – it seems like a signal that political pressure is easing for the company.”

CVM manda State Grid desembolsar R$ 1 bi a mais pela CPFL Renováveis — Valor
State Grid of China’s offer to acquire Brazil’s CPFL Renovaveis judged too low — PV Magazine
CPFL Energias Renováveis informa renúncia de diretor presidente Gustavo Sousa — Reuters
Someone screwed up, to the tune of a billion reais. Last year China’s State Grid offered to buy a majority stake in CPFL Energia, Brazil’s biggest private electric company, along with its (publicly listed) renewables subsidiary CPFL Renováveis.  This week the Brazilian Securities & Exchange Commission (CVM) demanded the public offer for CPFL Renováveis shares by tripled to R$16.69 ($5.13), adding an almost R$1b ($307.1m) to the acquisition cost. In the wake of the ruling, CPFL Renováveis head Gustavo Sousa said he was retiring to “pursue new professional opportunities;" State Grid’s Brazilian subsidiary is expected to challenge the ruling.

Argentina fires on Chinese vessel 'fishing illegally' — Fox News
Guardacostas argentinos abren fuego contra barco chino — Publimetro
Argentina dispara a barco chino que pescaba ilegalmente — El Nuevo Herald
Video: Argentina dispara al casco del barco chino que pescaba ilegalmente — iProfessional
The Argentinian coast guard claims it opened fire on a Chinese vessel illegally fishing in its waters last Thursday, followed by a fruitless 8-hour chase. No one was injured in the process. Following last year’s catch-and-release of a Chinese fishing boat in Ecuadorian waters, this won’t be the last time such an incident happens.

Deuda de Bolivia con China crece, es mayor a 7 mil millones de dólares — Eju
Is Bolivia the next Ecuador? Chinese ambassador to Bolivia, Liang Yu, has said Chinese investment is planned to surpass $7b, mostly in infrastructure and industrial plants for sugar, potassium, and lithium. Bolivian bilateral debt with China has octupled to half a billion dollars over the past decade.

Mnuchin: Trump rejoining the TPP is 'on the table' —The Hill
Continuing with their apparent 2018 goal of policy confusion, Treasury Secretary Steven Mnuchin has said rejoining the TPP is “on the table,” following President Donald Trump’s withdrawal from the deal a week into office last year. However, former Commerce Secretary Carlos Gutierrez is pessimistic: "I can’t see this happening when Trump admin is about to announce the first step in a global trade battle."

China-LAC

投资32亿美元!中国新能源企业对拉美新能源市场态度积极 — News-In-En.com
A profile of the potential of China's Trina Solar company and their interest in the Chilean solar energy space. You Hongming, vice president of Trina Solar company says that “maybe some of us have prejudice about Latin America and think it is relatively backward or developing. But matter of fact, many infrastructure and business idea of Latin America’s legal and policy system are perfect.” Alvaro García-Maltrás, head of Latin America’s reginal markets for Trina Solar upstream market says: “The growth in photovoltaic (PV) projects over the past five years was largely driven by open and competitive bidding in the region while the PV price continues to decrease.”

董秀成:一带一路投资风险非常大 — Sina
An interesting pushback on the Belt & Road hype. Energy economist Dong Xiucheng (董秀成), Director of the Oil and Gas Industry Development Research Center at China's University of Petroleum) questions the hosannahs sung for the Belt and Road Initiative — he thinks the project contains big risks for China. “I believe it is very risky, high starting point, wide range, deep impact on everything and everyone.” He thinks the expansion of Belt & Road to a global - not regional - project waters down it’s meaning. Per Dong, he sees the following risks:

  1. Geopolitical risk
  2. Country national policy and state institutions risk
  3. Commercial risk
  4. Ethnic and cultural contradictions/conflict
  5. Enterprise capability risk

Addressing those risks, he suggest the following to China:

  1. Focus on risk assessment
  2. Top-level design with communication coordination, including domestic and international coordination
  3. Deal with all kinds of competitive cooperation including international conflict
  4. Energy diplomacy
  5. Establish a multilateral mechanism for evasion and get private enterprises involved
  6. Strengthen military forces

Panamá abre las puertas de América Latina a China — Dirigentes Digital
Interview: Panama aspires to be gateway to LatAm for Chinese tourism — Xinhua
Panamá puede potenciar turismo chino hacia América Latina, afirma ministro — Panama On
Panama is eager to become China’s point man in Latin America. This week the country will be featured at the International Tourism Fair in Guangzhou, hoping to familiarize the Chinese with the small country. Next month Air China will start biweekly flights to Panama City.

青岛走进巴拿马开展合作交流引当地关注 — People.cn
A write up of last months’ agreements between Qingdao and Panama. Rumor has it a second delegation will be headed to Panama in April.

Mobike llega a CDMX para frenar la polémica contra las bicicletas compartidas — Hipertextual
Mobike, the Chinese bike-sharing company, launched in the Mexico City neighborhood of Miguel Hidalgo. After only a week, the local government has already requested more bikes.

Turning tides: Chinese cash flows into Latin America — Axios
Axios' cheat sheet on Chinese investment in Latin America covers familiar ground (if you read this), but has a couple of nuggets, like: China’s global investment reached $217b in 2016, catching up to the US’ $311b.

China's Huawei set to lead global charge to 5G networks — Reuters
China’s Huawei is set to become the world’s largest 5G network and already has 25 memorandums of understanding with countries around the world to trial their equipment. What’s missing? Latin America.

出海记|中国企业走出去新闻2月排行:吉利、招商局、福田上榜 — 参考消息 (Cankaoxiaoxi)
Media company Cankaoxiaoxi reviewed the coverage of 42 Chinese companies “going out” to Latin America in 15 publications such as (Reuters, the Wall Street Journal, AFP) and ranked them according to factors such as size of the company, impact of the incident comprehensive assessment, overall performance and so on. Their top ten Chinese firms in the region are: Geely, China Merchants Group, Foton, UnionPat, OPPO, YINGLI, BY-HEALTH, BYD, ZTE, and JD.com. Interestingly, they suggest Chinese SMEs looking to goto Latin America should talk to their big brothers for lessons learned.

Mexico looks to boost trade with China as NAFTA talks falter — China Dialogue
Are we to expect a burgeoning love affair between Mexico and China? As NAFTA talks falter, Qiu Xiaoqi, Chinese ambassador to Mexico, says relations are ripe for a trade agreement. But Enrique Dussel Peters, of the Centre for China-Mexico Studies (UNAM), says China represents only 1% of Mexico’s exports and an FTA would also spark environmental and social challenges.

墨西哥物流市场:等待真正的创新 — 36 Kr
Following their announced partnership earlier this year, Magma Partners and Kr Space are doing some deep sectoral dives. Firs up: the Mexican logistics market. They note that even though FedEx, UPS, DHL, etc., have invested millions of dollars in Mexico, logistics in Mexico has not seen substantial innovation and progress in the past 20 years — as anyone who has followed a Pemex tanker truck up a windy two lane road will tell you. While they see an opportunity for Chinese logistics firms to go into the market — unless infrastructure is improved, bottlenecks will remain.

Argentina apunta al turismo chino… a través de México — Forbes
José Gustavo Santos, Argentinian Tourism Minister, made his way to Mexico City to launch a deal with Mexico to target Chinese tourists. Argentina receives about 62k tourists from China, but lacks a direct flight. By joining forces with Mexico, it hopes to increase that number to 150k.

Los vinos de Australia y Chile conquistan China, quinto consumidor mundial — Marco Trade News
China is the fifth largest wine consumer in the world, and Chile and Australia are taking over its imports. China just became Chile’s most important wine importer and Australian imports have increased by 63%, but China is also investing int he industry — Changyu Pioneer Wine recently purchased a majority share in Australia’s Kilikanoon winery and last year bought three vineyards from Chile’s Bethia group.  Salud!

Galleons Passage to leave China next Tuesday —loopTT
Galleon's Passage leaves China, headed for T&T — loopTT
Trinidad & Tobabgo’s long-awaited ferry — Galleon’s Passage — finally left China on Tuesday, Feb 26, following delays and Chinese New Year celebrations. Let’s hope nothing happens on it’s month-long voyage to Port-of-Spain.

Agri-Food Trade Grows Between Mexico and China — Prensa Latina
Mexican agricultural exports to China increased 54%, reaching $321m in 2017.

Dole and Camposol Bring “Peruvian Flame Mangoes” to Market in China —Fresh Plaza
Peruvian Camposol and Dole have teamed up to offer Chinese consumers ‘Peruvian Flame Mangoes’ right in time for the Spring Festival.

Investigan un presunto "dumping" con prendas traídas de China, Brasil y Perú — La Voz
The Argentinian Secretary of Commerce has begun an investigation on supposed denim dumping by Brazil, Peru, and China.

Brasil e Alemanha se unem para fazer frente à China no mercado de terras raras — Terra
Brazil is working with Germany in order to develop it's rare-earth elements reserves, which is second only to China (who controls 90% of the market). The REGINA (Rare Earth Global Industry and New Application) project unites seven research institutions from each nation, creating potential for a shift in rare earth elements dependency for many countries, including Germany.

Comercio entre el Perú y China superó los US$ 20,000 millones. — El Peruano
China has been Peru’s main economic partner since 2014, and commercial activity surpassed $20b in 2017. Hao Qinmei at the Chinese embassy in Peru says the Belt and Road Initiative will only improve their bilateral relations.

China intensifica la compra de campos y Argentina es una de las preferidas — Cronista
China’s drier lands and dietary transformation are pushing more purchases of arable land in Latin America, Africa, and Southeast Asia; since 2012, about 9 million hectares of land have been bought.

Brazil grabs bigger share of China soybean imports from U.S. in January - customs — Reuters
Brazil’s soybean exports to China peaked in 2017 and seem to expand as it surpassed US imports in January, up 720% from one year ago.

China y el reino de los cielos — Clarin
Loris Zanatta tackles misperceptions about China’s involvement in Latin America in an op-ed. Arguing that it isn’t "just business," Zanatta claims that China continues to espouse the values it defies through the promotion of neoliberalism.

Rusia y China revisan relaciones con Latinoamérica y el Caribe — Radio La Primerisima
Chinese Foreign Ministry director general of the Department of Latin America and the Caribbean, Zhao Bentang, will hosting his Russian counterpart, Aleksander Shchetinin, in Beijing to discuss matters of interests and development in the region — maybe Rex Tillerson’s remarks will be used as an ice breaker?

Cuban cigar sales hit record as China demand surges — Reuters
Sales for Cuban cigars, from Habanos S.A., jumped 33% in 2017 on Chinese demand, leading to a 12% increase in the company’s revenue.

Empresa mexicana de chatbots se expande en China — Expansion
Mexican Chatbot company Yalo Chat, one of Facebook’s main partners, will be opening an office in Shanghai.

La civilización de China y la de América Latina se complementan a la perfección (Foro de Autoridad) — Spanish People Daily
You can add “One Canvas” to “One Belt, One Road”, as cultural exchange continues to increase between China and Latin America, through exhibitions, foreign literature, and higher demand for language courses.

Does China Understand Latin America Better than the U.S.? — China-US Focus
Our friend Margaret Myers at the Inter-American Dialogue says Latin America does not need lectures from the US on how to handle China. The US should focus on strengthening its ties to the continent by pursuing mutually beneficial demand driven policy.

Gov’t to Spend $12 Billion on Road Infrastructure Works — Jamaica Information Service
The Jamaican House of Representatives has approved $12b in funds for the Major Infrastructure for Development Programme (MIDP), which is being implemented by the Ministry of Economic Growth and Job Creation with funding support from China EXIM.

AL y China estrechan lazos comerciales —El Nuevo Diario
ECLAC recently released study on the region and China showing Mexico, Central America, and the Caribbean have a trade deficit, while Brazil, Chile, and Peru have surpluses — the rest of South America is close to equilibrium. This is due to the different resources the nations are able to export. 88% of Chinese investment in the region is on energy and mining, and the remaining 12% on agriculture, the financial sector, and others.

Pymes de Florencio Varela se unen para exportar a China. — El Cronista
Buenos Aires-based SMEs focused on petrochemicals, foodstuff, and leather manufacturers have begun exporting to Cantón, China, following agreements reached during the Zhuhai Summit last year.

Korea-LAC

Panamá y Corea del Sur eliminarán aranceles a la exportación — La Estrella
El 95% de los bienes sin gravámenes, gracias a TLC Centroamérica-Corea del Sur — El Nuevo Diario
Corea del Sur y Centroamérica firman Tratado de Libre Comercio — El Economista
Ventas a Corea del Sur podrían subir $44 mill con el TLC — La Prensa Gráfica
Plenty of continuous coverage on the recently signed South Korea-Central America Free Trade Agreement (FTA), which eliminates taxes for over 95% of traded goods between the 6 nations. El Salvador expects exports to South Korea to reach $44m.

Chile launches its fresh fruit export offer in South Korea — Fresh Plaza
How do you say “Chile Week” in Korean? The Association of Chilean Fruit Exporters (ASOEX) will be carrying out a campaign in Korea’s E-mart supermarket to highlight Chile’s diverse offerings, including table grapes, cranberries, and cherries. Korea is Chile’s third major fruit importer in Asia.

Japan-LAC

Bachelet destaca en Japón el valor del TPP en su último viaje como presidenta — El Diario
Presidenta Bachelet y emperador Akihito destacan la relación entre Chile y Japón — La Tercera
Bachelet regresa a Chile tras última gire presidencial —SIPSE
Japón y Chile cooperarán para acelerar la aplicación del TPP11 — La Vanguardia
During President Bachelet’s last trip abroad in Tokyo, she singled out TPP as an “engine to overcome protectionism” and, together with Prime Minister Shinzo Abe, boasted Argentina’s successful relationship with Japan. China may be leading in foreign investment, but Japan is making large diplomatic strides as well. Bachelet will be handing her government to Sebastián Piñera on March 11, three days after the TPP is expected to be signed in Santiago. Foreign Ministers Toshimitsu Motegi and Heraldo Muñoz have agreed they will do their best to get TPP off the ground as soon as possible, emphasizing Chile and Japan as the moving forces behind the deal.

Representante do Ministério das Relações Exteriores do Japão visita Brasil e Peru — Portal Mie
Japón dona ambulancias y vehículos a los bomberos — El Peruano
Iwao Horii, Japanese Vice-Minister for Foreign Affairs, will be making trips to Brazil and Peru. In São Paulo, he will visit the recently inaugurated $100m Japan House, paid for by Tokyo, and offer Lima and Madre de Dios region in southeast Peru $119m in fire engines and ambulances.

Argentina – Japón: Faurie destacó el crecimiento del número de empresas japonesas en nuestro país — Ministerio de Relaciones Exteriores y Culto República Argentina
In the celebrations of the 120 years of diplomatic relations between Argentina and Japan, Argentine Foreign Minister Jorge Faurie remarked that in the past two years there has been a 100% increase in the presence of Japanese firms in his country.

Ecuador presentará en México y Japón su oferta culinaria — El Telégrafo
Ecuador will be promoting its culinary prowess next month at the Feria Internacional Expo Antad 2018 in Guadalajara, Mexico, and at Foodex Japan.

Chile firma Memorándum de Entendimiento en Deporte y Actividad Física con Japón — Cooperativa
Also around Bachelet’s trip, Chilean Sports Minister Pablo Squella and Daichi Suzuki, head of the Japan Sports Agency, signed a MoU on the promotion of sport and physical activity.

Compañías japonesas proyectan inversiones millonarias en minería y petróleo — Marco Trade News
Argentina's Horacio Reyser, Economic Relations Secretary, affirmed Japanese investment potential could reach $20b in 10 years. Now it’s up to Argentina to become more cost competitive.

India-LAC

Bunge's coveted Argentina plants lure ADM takeover approach — Reuters
About 60 percent of Argentine soyoil went to India and Bangladesh last year. ADM is looking to buy 22 soy-crushing plants that feed that trade from Bunge for $16b.

India to double state purchases of oilseeds, pulses to help farmers — The Star
However, the Indian government may be looking to stop that flow of oil. India imports most of it’s vegetable oils from Brazil and Argentina, along with Malaysia and Indonesia. Over the next five years, the state is going to buy 190 billion rupees (US$2.9 billion) worth of those oils from local farmers to try to stymie those imports.

ASEAN & Oceania-LAC

Perth stopover on world-first flight linking South America and Asia to boost WA tourism — The West Australian
Norwegian Air Argentina — the newly established local brand of Norwegian Air —  is looking at a route connecting South America and Asia, with Perth, Australia as a stopover.  Approval for the Buenos Aires-Perth route has been received, and now the airline is looking for rights to fly on to Singapore. Argentinian ambassador to Australia, Hugo Gobbi, said this route “would be a real game changer for both Argentina and Australia,” and in a more macro scale, all three continents.

GCC-LAC

How Dubai is building bridges and partnerships in Latin America — Arabian Business
Dubai can fill gaps in Latin America economies — Al Ghurair — Gulf News
The Second Global Business Forum on Latin America was hosted in Dubai this week. Majid Saif Al Ghurair, Dubai Chamber chairman, said they plan to open new offices in the continent and they are “well aware of what the growth opportunities in Latin America can offer.”

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