As China becomes a greater source of funding on the global stage, the next step in providing funding is for governments and corporates to secure funding by issuing bonds in renminbi (RMB) to Chinese investors - so-called “Panda bonds.”
Panda bonds are the natural next step in Latin American funding from Asia, following the rash of offshore RMB issuance — Dim Sum bonds — that was seen five years ago, with Santander, América Móvil, CAF, and Cabei all issuing. Those bonds were all encouraged by the Chinese government, as part of its goal of internationalizing the RMB.
There was much discussion in the second half of last year about how “to catalyse the market, Latin America would need a pioneer to make a LatAm Panda bond issuance debut.” CAF — which helped pioneer Samurai bond issuance into Japan in the early 1990s — had been in talks with investors last year, waiting for a change in regulations to allow multilateral lenders to issue renminbi-denominated debt.
But now Panama has stepped onto the field, with Finance Minister Dulcidio De La Guardia saying his country was looking to place up $500m in a benchmark bond the second half of 2018. The proposed bonds, up to 10 years in maturity, are aimed at Chinese investors.
Panama vies with Chile for the lowest yielding issuer in Latin America, which allows it look at opportunities for cheaper borrowing that are unavailable to borrowers the market sees as riskier. With Chinese investors looking beyond their domestic market, Panama could be very attractive. Thanks to that demand, Panama expects to be able to borrow at a quarter or half a percentage point lower than equivalent dollar bonds.
But the big winner here may be China, and new People’s Bank of China, whose new head Yi Gang has made it clear he wants to reform the Chinese financial system, liberalizing and allowing for greater foreign participation, and fulling integrating the RMB as a global reserve currency.
If Panama moves forward, this first Panda may be joined by many more, soon.
China compra 27.7% de principal empresa eléctrica en Chile afianzando presencia en América Latina. — Energia Limpia Para Todos
China Southern Power compra participación en chilena Transelec tras autorización de gobierno asiático — Géstion
China’s Southern Power buys stake in Chile’s Transelec — Reuters
State-owned China Southern Power announced it will be purchasing 27.7% of Chilean Transelec, the nation’s largest electric power company, for $1.3b. Transelec’s over 10,000 km of powerlines serve 98% of Chile’s population.
Old Mutual offloads Latin American businesses to CMIG International — City A.M.
El gigante chino que llega al país de la mano de Old Mutual — El Tiempo
Old Mutual to sell Latin American businesses to Singapore-based holding company CMIG International for undisclosed sum — Proactive Investors
China Minsheng LatAm deal — Global Times
China Minsheng Investment Group International has purchased all of Old Mutual’s Latin America practice for about $300m, adding over $15b to its global portfolio. The deal includes Old Mutual Colombia, a pensions, life insurance, mutual funds, and stock brokerage business; Old Mutual Mexico, a life insurance and mutual funds business; and Aiva, an investment advisor and a distribution platform for independent financial advisers in Latin America.
World Upside Down’: As Trump Pushes Tariffs, Latin America Links Up — New York Times
EUA suspeitam que Brasil compre aço da China para depois reexportar — Folha de S. Paulo
E.U., Brazil, South Korea and others get temporary exemptions from Trump's steel tariffs — Washington Post
The Times points out how President Donald Trump’s anti-Latin America rhetoric during his campaign pushed the region to dial back some of its own protectionist measures and seek to create closer regional and international commercial ties. Adverse effects of this protectionist wave are evidenced by Mercosur’s trade negotiations with Europe, Canada, the Pacific Alliance, and the latter’s talks with New Zealand, Australia, Singapore, and Canada as potential signatories. The US suspects Brazil is buying Chinese steel to later reexport it, serving as pretext to maintain the recent tariffs. As a result, the “United States is leaving a void, and that void may be filled by China,” per Chilean President Sebastián Piñera. However, the newly-announced steel tariffs exempt Mexico, Brazil, and Argentina, so we’re left guessing what is next.
Japão e Coreia do Sul ficam satisfeitos com explicações do Brasil sobre carnes de frango e peru — O Globo
Etchevehere: En abril firmo el protocolo para las carnes enfriadas a China — Agrovoz
Primer embarque de carne de cerdo a Japón — El Sol de Salamanca
Following on the December agreement, Argentina’s minister of agroindustry will sign next month the sanitary protocol necessary to allow the export of frozen meat (with bone) to China; following health safety grievances by Japan and South Korea over Brazilian poultry, the Asian nations are satisfied with inspections conducted by the Federal Police; and Mexico’s state of Guanajato exported its first shipment of pork to Japan.
T-bones to China: A Conversation with Michael Derham, a Partner at Novam Portam — Wilson Center Argentina Project
Benjamin Gedan of the Woodrow Wilson Center’s Argentina Project was kind enough to ask some questions on the growing beef trade between Argentina and China:
Q: In January, Argentina’s ambassador to China, Diego Guelar, celebrated an “historic” agreement related to Argentine beef exports to China. What has changed in the trade relationship?
A: As a linchpin of his economic reform agenda, President Mauricio Macri has worked to reorient agriculture towards exports. Last year, after lengthy negotiations between Argentina’s SENASA (Servicio Nacional de Sanidad y Calidad Agroalimentaria) and China’s AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine), Argentine producers of high-quality, bone-in meat – such as T-bones, chops and ribs – gained access to the Chinese market for the first time. Previously, Argentina had only been able to export lower quality processed beef.
China — LAC
滴滴与优步竞争再升级 拉丁美洲成为角力新战场 — Huanqiu
How China’s ride-hailing giant Didi plans to challenge Uber in Mexico — Reuters
ENFOQUE-Gigante chino Didi Chuxing aspira a derrocar a Uber en México — Reuters
Empresa de transporte china ‘roba’ empleados a uber para ganar terreno en Mexico — Reporte Indigo
Didi is fighting Uber in Mexico, poaching employees and sends reconnaissance agents to ride incognito with Uber.
海航正式开通北京至墨西哥城直航 — Xinhua
Puente aéreo China-México promoverá la interconectividad — El Financiero
El nuevo aeropuerto: clave para la diversificación comercial de México — El Economista
Direct Mexico City flights to begin — ECNS
Hainan Airlines’ long awaited Beijing-Mexico City route, the first continental connection without layover, began this week. Mexico’s New International Airport of Mexico (NAIM) is another key component of its mission to increase commercial diversity, but the massive development does not yet have a completion date.
Empresa china lanza construcción de puerto brasileño como principal inversionista — Xinhua
Consortium led by Chinese group starts construction of port in Brazil — Macau Hub
In a joint venture with Brazil’s WPR and Lyon Capital, China Communications Construction Company (CCCC) began construction of the port of São Luis, in which CCCC has a 51% stake. The $245m port will serve as the main exporting point of grains to Asia, Europe, and Africa.
中国互联网企业扎根巴西 — People.cn
Profiles of some of the Chinese tech companies moving into Latin America, like Baidu, Alibaba, Didi, and Meitu. According to Demira Verozzo, general manager of Meitu Brazil, the innovative beauty app realized that localization is a key part for Chinese companies in the region. In their case:
“There is a certain aesthetic difference between Chinese and Brazilian users. We made adjustment of our product such as Meitu application has a whitening function based on Chinese preference, but Brazilian prefer tan healthy skin color, though we establish a beloved tan function.”
China stays on the sidelines as Venezuela spirals downward — Reuters
While China Development Bank (CDB) is likely to extend credit to Venezuela to allow it to keep current on existing loans, China does not plan to lend any new funds and Venezuela still owes almost $20b.
China’s Xinjiang Goldwind signs first Brazil contract -executive — Reuters
China’s Xinjiang Goldwind inks its first turbine deal in Brazil, although the value and buyer has not yet been disclosed. Already active in Chile and Panama, Goldwind is also considering bidding in the next auction for the rights to build and operate other renewable energy projects in Brazil.
Durando busca inversión de empresa automotriz de China — Milenio
José Rosas Aispuro, Governor of Mexico’s Durango state, sought automotive investment in his recent China trip.
Vuelo inaugural de Air China hacia Panamá llegará el próximo 29 de marzo — Xinhua
Panamá espera recibir 50.000 turistas chinos en 2018 — Estrategia y Negocios
In other flight news, the first China-Panama flight, by Air China (connecting via Houston), begins next week. Panama expects to attract 150k tourists by 2019 because of the new route.
Empresarios de América Latina se reúnen en Panamá para avanzar en agenda común — El Diario
Panamá resalta los beneficios de las relaciones con China en CEAL — Metro Libre
The Business Council of Latin America (CEAL), hosted an event in Panama last week to explore the regional panorama and build a common agenda for the future. The presence of the Chinese ambassador to the country, Wei Qiang, emphasized Panama’s new commercial orientation.
JAC Motors proyecta elevar 20% ventas en América Latina en 2018 — América Economía
JAC Motors’ General Manager David Zhang says the Chinese manufacturer seeks to increase its sales in Latin America by 20% in light of recently introduced models.
Importadora china se instala en Chile y entra al negocio de cerezas y arándanos — Economia y Negocios
Chinese Shenzhen Kingship is setting up shop in Chile to build a processing plant to produce 150 containers of cherries and 100 containers of cranberries in the next season, hoping to be able to export to China, Japan, and South Korea.
Brazilian soy market eyes Asian expansion through Panama deal — Agri Census
Brazil’s Mato Grosso soy producers have reached an agreement with the Panama Canal Authorities that will put them on the map as they increase access to market and commercial activities information. The deal will allow Aprosoja, the soybean association, to cut travel time to China.
Embajador: Argentina es socio estratégico integral de China — Xinhua
In an interview with Xinhua, Diego Guelar, Argentinian ambassador to China, spoke optimistically about the region’s comprehensive efforts to curb corruption and the positive relationship of the region in China, grounded in “the construction of a cooperative community for the future.”
Una nueva “Xina”, por Patricia Castro Obando — El Comercio
El Comercio’s long-read on Xi Jinping, by Patricia Castro Obando, highlights Xi's proposition to serve as secretary of the Chinese Communist Party, president of the Central Military Commission, and head of state; by holding the three reins, Jinping will be able to set forth his goals for reshaping China.
China’s Tango with Latin America and the Caribbean: A Conversation with Evan Ellis — Sound Cloud
CSIS’ ChinaPower podcast takes a tour d’horizon of China in Latin America with our friend Dr. Evan Ellis, of the US Army War College Strategic Studies Institute.
The challenges of Chinese investment in Latin America — World Economic Forum
This year’s World Economic Forum on Latin America theme, “Shaping the New Narrative,” certainly pushed China’s influence in the region to the top of the agenda. Lourdes Casanova, Director of the Emerging Markets Institute at Cornell’s Johnson School of Management, says the integration is further deepened by China’s state-owned companies purchase of private firms and its new investment in the service industry. Latin America must now adapt its behavior to Chinese penetration, which has offset long term Western operations in the region: it must partner and compete with its largest investor.
Mitsui eleva apuesta por Chile y adquiere participación en matriz de Hertz — La Tercera
Japan’s Mitsui has reached an agreement to purchase 49% stake in Argentina’s Mitta, the parent company of the country’s largest rental car firm.
Japanese grocers warm to frozen veggies from China and Peru — Nikkei Asian Review
Rising prices of fresh produces has encouraged Japanese supermarket chain Inageya to market Peruvian asparagus and Chinese spinach, along other imported from foods, to its customers.
Perú firma acuerdo con Japón para desarrollo de las TIC — Géstion
Peru’s Ministry of Transport and Communications has reached an agreement with Japan’s Internal and Communications Ministry, in which the latter will collaborate with Peru in the development of its information technology and communication services.
Empresas brasileiras fazem negócios de US$63,7 milhões na Foodex, no Japão — Export News
Prospective business deals reached by Brazilian companies at Japan’s FoodEx are expected to reach $63.7m in the next 12 months.
Colombia podrá exportar aguacate Hass hacia Japón en los próximos meses — El Pais
Aguacate hass colombiano busca un lugar en la mesa de los japoneses — El Espectador
Colombia “one step away” from exporting Hass avocados to Japan — Fresh Fruit Portal
Japan will join the list of countries importing hass avocados from Colombia, barring any complications from the inspection of Colombia’s production areas.
La japonesa NSK Warner inicia operaciones en Silao — El Financiero
Japanese auto manufacturer NSK Warner has begun operations in its second plant located in Guanajuato.
Café colombiano conquista el mercado surcoreano y expande su presencia en Asia — Marco Trade News
Jung Ah Jang, commercial director for Korean coffeehouse chain Angel-in-us, visited Colombian coffee exporter Amativo in hopes of getting more of Juan Valdez to Seoul.
PM promotes Hyundai Rotem in Brazil — Korea Times
South Korean Prime Minister Lee Nak-yeon met with São Paulo’s Mayor João Doria to explore further commercial ties, especially as it relates to the Rio-São Paulo high speed rail project. Lee is pushing Hyundai Rotem, a railway vehicles manufacturer, to participate in the project by supplying up to $400m in subway trains.
Korea urged to join revived TPP trade pact — Korea Times
Analysts strongly advise Korea to join the CPTPP in light of President Trump’s increasingly protectionist measures. Troy Stangarone, senior director at the Korea Economic Institute (KEI), stresses it should be South Korea’s priority to join the agreement once the deal is implemented.
S. Korea proposes economic consultative body with IDB — Yonhap News
Korea proposes economic consultative body with IDB — Korea Herald
Korean Finance Minister Kim Dong-yeon proposed a consultative body with the Inter-American Development Bank to bolster ties between the regions in a meeting with IDB’s president, Luis Alberto Moreno. An MOU was signed to raise $300m for joint financing and an agreement was reached about the creation of a program for human resource exchange.
Posco Daewoo wins $60mn vessel design order in Peru — Pulse News
Korean trading firm Posco Daewoo Corp. won a $60m to provide design and material packafe for the construction of a multipurpose vessel for the Peruvian navy.
Lithium-rich Argentina invites Indian firms — The Hindu Business Line
Aware of India’s push for electric cars, Argentina’s Undersecretary of Mining Development, Mario Osvaldo Capello, has approached Indian authorities about investing in Argentina’s lithium mines. Capello promoted the country’s vast reserves of over 3m tonnes.
Saudi investment experts, businessmen to visit T&T —Loop TT
The Trinidad-Saudi Chamber of Commerce (TSCC) first Annual Business Forum took place on March 21, furthering the promotion of trade and commerce between the regions. Key objectives were to discuss ways to move out of oil and gas dependency, expanding opportunities for export, and increasing engagement.