The Catch to the Caribbean’s China Connection

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Overshadowed by the seemingly-imminent trade war and today's Summit of the Americas, reporters from the Caribbean have been on a month-long trip to China to better understand the country and its increasing presence in the Caribbean basin. The group is there to better understand China and its increasing presence in the Caribbean. This is not by chance.

China's interest in Latin America's larger economies makes headlines. From infrastructure to agribusiness, to raw materials, and even new markets, these investments have captivated the attention of politicians and investors throughout the world. What is often overlooked is the expanding presence China is playing in the economies of the Caribbean. Put simply, Beijing is paying outsized attention to the Caribbean in terms of trade and investment.

A partial list of recently completed or underway projects driven by Chinese investment and construction in the Caribbean would include: the north-south highway, Goat Island/Portland Bight port, the Alpart alumina works, the Monymusk Sugar Factory, and the Government Oval in Jamaica; the Government House and airport expansion in Trinidad and Tobago; the storied Bahamar resort, completed by China Construction, the North Abaco Port Project, National Stadium, the Nassau Airport expansion, highway connecting it to Nassau, and The Pointe hotel. More ambitious projects include: St Lucia’s massive Pearl of the Caribbean resort and a national development plan for Grenada.

For many Caribbean-basin governments and decision-makers, China is seen as a new source of funding for critical infrastructure projects and an opportunity to push diversification of their economies.  Indeed, Jamaican PM Andrew Holness last year saw China’s Belt and Road Initiative (BRI) as something that "could be quite beneficial to Jamaica”:

“[BRI] a very beneficial, but very noble expression of not just the Chinese aspiration for development, but the development of economies right across the world through a cooperative and inclusive strategy.”

However, while lending from Chinese institutions may offer new sources of funding, on terms different from incumbent funders, it is far from an unlimited blank check. And while there is often talk of “win-win” projects, decision-makers should be mindful of China’s goals, not just their own.

One of China’s overriding goals in its “going out” policy during the two previous five-year plans, and now in the BRI, is exporting excess capacity. This includes financing, construction capacity, expertise and other factors. Caribbean countries, in particular, have learned that this includes the exporting of labor, to the detriment of the underemployed in host countries.

In addition to using foreign investment to address domestic policy concerns, China also sees the potential soft power gains to be made. These can include gains in its ongoing diplomatic recognition tussle with Taiwan, incentivizing smaller governments to vote along with it at the UN and in other fora, addressing global poverty, and generally stepping into a global economic leadership role at a time when traditional leaders are missing in action.

With all that said, decision-makers in the Caribbean basin would be wise to keep some lessons in mind:

  • Recognize that Chinese companies and government institutions will not fund all projects, but most often those that are seen as in-line with stated priorities: food and energy security, logistics and transportation.

  • It is not enough to sign covenants  — whether on local content, employment, or other issues — with companies and feel the issue is settled. Effective oversight of their compliance with the issue is important, as well (this is true for all foreign companies, not just those from China).

  • Finally, headline figures for Chinese funding in the Caribbean may not be all that they appear. As Brookings’ David Dollar noted last year: "within Latin America and the Caribbean, large amounts of China’s ODI go to the Virgin Islands and the Cayman Islands. These money centers are certainly not the ultimate destination for all of this investment."

Ultimately China's involvement in the Caribbean basin as a trade partner and investor is a good thing. Diversification usually is. What remains to be seen is whether China's willingness to address the region's infrastructure gap is a process that ends up being a sustainable "win-win" in the long term.

Top Stories

Latin America caught in middle as US-China trade war looms — South China Morning Post
U.S., China rivalry poses risks, benefits for Latin America — Reuters
Rivalidad entre EEUU y China impacta en comercio e inversión en América Latina — Swissinfo
Perú: ¿Por qué la disputa comercial China-EEUU es una oportunidad para Latinoamérica? — América Retail
La disputa comercial EEUU-China y sus consecuencias en la región — El Observador
Brazil soy exporters set to win big from U.S.-China trade spat — Reuters
China podría comprar más soya a Brasil y Argentina — El Economista
Brasil pode “aproveitar” tensões comerciais entre EUA e China — Portal N10
Why China Is Hungry For Brazilian Soy — Forbes / Stratfor
La guerra comercial China-EEUU abre oportunidades a la fruta de Chile — Marco Trade News
Disputa entre EUA e China poderá ajudar o Brasil pontualmente, diz Fazenda — IstoÉ
China assures Caribbean amid jitters over looming trade war with US — Jamaica Observer
Perú no se verá afectado por guerra comercial entre EE.UU y China — El Economista
Guerra comercial: Las implicancias sobre la economía peruana — RPP Notícias
As the China-USA trade war ensues, “the US is forcing countries in the region to choose between the US and China,” says our friend Margaret Myers at the Inter-American dialogue. Officially Latin American governments are keeping their heads down. Analysts are more positive, but caution that the region could not fully replace American production of products such as soy. Brazilian soy, in particular, is seeing record highs, but even if it were to reach 100% in exports, it would not meet China’s demand.

China Pide a EU no arrastrar a América Latina a una guerra commercial — Expansión
Chinese ambassador warns U.S. not to drag Latam into trade dispute — Reuters
Strong words from China. Ahead of this week’s Summit of the Americas, Jia Guide — Chinese Ambassador to host country Peru — warned the US not to keep Latin America out of their trade discussions, saying it would show “contempt not just for China but also Latin America.”

Japón inicia acciones para ratificar el CPTPP — El Comercio
Japón y México activan las gestiones para ratificar el CPTPP — Marco Trade News
Tratado Integral de Asociación Transpacífico en vigencia a fines del 2018, prevé Mincetur — Andina
The Japanese government has moved to begin the ratification process for TPP, and Mexican President Enrique Peña Nieto has already asked his senate for ratification. The treaty needs 6 nations for ratification, and Peru’s Foreign Trade Ministry thinks it’ll get done before the end of the year.

Brasil, China e Índia fazem mais da metade dos investimentos em energia limpa — Época
A UN report points out China, India, and Brazil were responsible for over half of investments made towards renewable energy in 2017, while investment in the developed world fell by 18% reaching its lowest level since 2006.

Latin America needs an infrastructure upgrade — The Economist
The Economist argues that setbacks such as Lava Jato, burdensome red tape, and abusive public private partnerships (PPPs), have left Latin America with dozens of unfinished projects. Despite higher global interest rates, the region should be encouraged to invest by realizing the cost-effectiveness of promoting sustainable projects and by China’s investment (as we discussed above), which has surpassed that of the World Bank and IDB combined.

Después de 20 años, la Argentina importará soja desde Estados Unidos
Argentina’s drought is hitting the country hard, exacerbating prices and changing flows. For the first time in 20 years, the country will import soybeans from the US. The 120,000 tons are expected to arrive late this year, during Argentina's off-season.

Marfrig compra fatia da National Beef e se torna 2ª maior empresa de carne no mundo — Folha
Brazilian Marfrig, the country’s second largest food processing firm, purchased 51% of American National Beef for $969m. Marfrig will now have access to National Beef’s markets in Japan and South Korea, markets that are currently closed to Brazilian meat exports.

China — LAC

Mercado Libre招商峰会将在深圳举办 — ebrun
Comercio electrónico tiene gran oportunidad de crecimiento en América Latina, según Mercado Libre — América Economía
Latam internet titan Mercado Libre is stealing a page from Alibaba’s book. They’re hosting an summit in Shenzhen next week, April 19, to promote the Latin American e-commerce market for Chinese sellers. Sean Summers, regional vice-president, says “the countries in Latin America are in different spots on the same curve for the development of e-commerce”. He further believes the industry can grow as it reacts against Chinese demand and the economy, seeking to increase the region’s e-commerce penetration, currently at 5% compared to China’s 20%. Sign up today.

China Tianqi responde a Bitran y asegura que “no controla ni controlará” la industria global del litio — Pulso
China Tianqi acusa “errores" en demanda para bloquear compra de parte en minera chilena SQM: medios — Swissinfo
Bitrán e interés de empresa china en comprar parte de SQM: El Estado debe preocuparse
Valente tras reunión con embajador Chino por SQM: “Chile es un país abierto a las inversiones” — Diario Financiero
Embajador de China se reúne con Ministro Valente en medio interés de Tianqi por minera SQM — Pulso
China’s Tianqi continues to look at the Chilean lithium sector. Lawyers sat down with Chile’s national competition authority (FNE) to “correct erroneous information espoused in Corfo’s request”. Eduardo Bitrán, former executive director of Chile’s Economic Development Agency (CORFO), points out the danger of the acquisition is control over the Atacama salt fields, as projections for Tianqi and American Albemarle say they could attain 80% of the lithium market by 2020. Despite Bitrán’s grievances, Minister of the Economy José Ramón Valente is supportive of the purchase; in a meeting with the Chinese ambassador in Chile, Xu Bu, Valente said “any company that comes to Chile and adheres to Chilean legislation will be welcome”.

联想2018誓师大会在美国罗利启幕 北美拉美亮眼业绩助力联想复苏 — ITtime
Latin America is driving Lenovo’s profits. In its annual report to shareholders, it notes that its PCs are in the top three in 11 countries including Brazil, Mexico, Argentina, and Peru. In the tablet and smartphone segments it is top three in 9 and 4 countries, respectively, including Brazil, Mexico, Argentina, and Peru. Annual sales growth in Latin America is eight times faster than the overall average.

La competencia china de Uber llegó a México — El Tiempo
Didi llega, finalmente, a México: inicia período de prueba en Toluca — Hipertextual
ACTUALIZA 1-Didi, el rival chino de Uber, arranca en México con recluta de choferes — Reuters
Didi Chuxing has launched a Mexican website website to start attracting drivers and consumers in Toluca. They’ll have to make smart moves in order to fight Uber’s 87% hold of the market.

KERUI Petroleum Wins the Largest UPGN Project in Brazil — PR Newswire.
Petrobas is back in the game. The Brazilian Petroleum Corporation held its first public oil project bid since 2014, signed by Chinese Shandong KERUI Petroleum Equipment Limited for $600m for a gas processing plant in Rio de Janeiro. KERUI is the first private Chinese company to reach such a deal. The project will be the largest natural gas treatment in Brazil.

Nuevo servicio de carga desde Hong Kong a Miami — Loginews
Southern Air inaugurated its first Hong Kong-Miami commercial flight last week, making it the the sixth airline to do so.

Why China should help solve Venezuela’s deepening crisis — Asia Times
Should, but will it? International Crisis Group’s Michael Korvig argues Beijing should join in backing the Lima Group to address the ongoing Venezuelan disaster.

Las marcas chinas llegan en masa a la Argentina: radiografía del nuevo mercado — TN
A survey of Chinese cars in the Argentina market.

Investimento chinês na América Latina é recorde — Estadão
Data compiled by the Global Development Policy Center at Boston University reports that China spent a record $17.5b in acquisitions in Latin America in 2017.

Comissão de Relações Exteriores aprova acordo aduaneiro entre Brasil e China — Senado Noticias
The Brazilian Commission of Foreign Relations approved an agreement between Brazil and China over cooperation between domestic customs authorities and information.

Brasil estuda abrir processo na OMC contra barreiras chinesas ao açúcar — Exame
The Brazilian government is looking into going to the World Trade Organization (WTO) with grievances over Chinese protectionist measures on Brazilian sugar. The tariffs, implemented last year, reduced exports by 88%. In light of the trade kerfuffle between US and China, Brazil will have to tread very carefully if it pursues this all the way to the WTO.

Galleons Passage leaves Hawaii tomorrow — Newsday TT
US coast guard inspects Galleon Passage — Newsday TT
Galleons Passage was scheduled to leave Hawaii on April 11 to head towards Mexico, but was held up by the US Coast Guard.

Nueva era para la cooperación China-América Latina — Excelsior
Chinese Ambassador to Mexico Qiu Xiaoqi pens an article extolling a new era of cooperation between China and Latin America.

Japan — LAC

Mexico raises longer-term yen funds via 4-part Samurai — NASDAQ
Mexico has raised ¥135b ($1.26b) through an issuance of Samurai bonds (yen-denominated bond issued in Japan), with maturities of five, seven, 10 and 20 years.

MUFG planeja vender fatia de US$ 435 mi no Bradesco: Font — Bloomberg
Japan’s Mitsubishi UFJ Financial Group (MUFG) plans to sell nearly half of its 2.5% stake in Banco Bradesco for $435m. MUFG has a commercial cooperation agreement with the Brazilian bank and serves as its main loan unit.

EVA, el brasier que detecta el cáncer de mama se venderá en Japón — Forbes
Sostén mexicano que detecta cáncer llegará a Japón este año — Excelsior
A Mexican bra designed to detect breast cancer early will start being sold in Japan by end of the year. Julían Rios, executive director of Higia Technologies, has been working on this project for 16 years, focused on cancer detection through artificial intelligence.  

Japan angles for space in Brazil with Mercosur deal — The Brazilian Report
Japan is focusing on Brazil, Mercosur’s laggard partner when it comes to free trade, to get an FTA with the Southern Cone done.

Empresários japoneses conhecem oportunidades de investimentos no Ceará — Governo do Estado do Ceará
Brazil’s northeastern state of Ceará received the Japanese ambassador to Brazil, Akira Yamada, together with Japanese businessmen to discuss invesment in Ceará’s Zone of Processing and Exportation (ZPE), the country’s first free trade zone.

Visita Sinaloa embajador de Japón en México — Linea Directa
Japanese Ambassador to Mexico Yasushi Takase visited Governor Quirino Ordaz Coppel and a retinue of local businesspeople in Sinaloa.

Korea — LAC

Aumenta comercio con Corea del Sur — El Vigia
Más productos mexicanos con posibilidades de acceder al mercado coreano — Marco Trade News
A delegation from the Busán-Jinhae Free Trade Zone ministry met with officials from Mexico’s ministry of agriculture (SAGARPA). The free trade zone’s commissioner, Yang Hyun Jin, says Mexico’s focus on export capacity makes it viable for South Korea to increase imports of products such as avocado, mangos, oranges, limes, and papayas.

Asoex pide a Direcon mejorar acuerdos comerciales con Corea del Sur — PortalPortuario
Chile’s savvy fruit exporters association ASOEX is leaning on the country’s trade negotiator Direcon to revamp the FTA with South Korea. Chile signed an “FTA 2.0” with China last year.

India — LAC

Indian, Chinese oil companies look to invest in Ecuador, minister says — Reuters
Per Oil Minister Carlos Perez, Indian oil company ONGC Videsh is looking at buying a stake in oil fields in Ecuador and may also participate in an upcoming tender for the Intercampos blocks

India, Peru to hold next round of free trade agreement talks this week — Live Mint
India and Peru continue to move forward on Free Trade Agreement discussion. Bilateral trade between the nations increased to $1.77 billion in 2016-17 from $1.52 billion in the previous fiscal. Among the top ten commodities of India’s export to Peru are motor vehicle, cars, products of iron and steel, cotton yarn and fabrics. While the imports include bulk minerals and ores, gold, fertilizers crude and zinc.

ASEAN & Oceania — LAC

Why international investors are clamoring for multifamily real estate in Mexico — The Investor
JLL’s Hector Klerian argues that CCLA’s partnership with Singapore’s sovereign wealth fund GIC, shows confidence in Mexico’s real estate sector. Klerian foresees more interest in Mexico’s rising multifamily home market due to advantageous investment conditions.

El atractivo de China para la carne ovina chilena — Economía y Negocios
Chile is looking to elbow New Zealand and Australia — who supply 98% of mutton imports to China — aside by revamping its sheep industry exports to meet increasing China demand.


Dubai Chamber to Open Argentina Office in 2018 — Business Wire
Dubai’s Chamber of Commerce and Industry will soon open a representative office in Buenos Aires, it’s second in Latin America. This is part of the Chamber’s “ambitious strategy to expand its presence in Latin America and identify trade and investment opportunities in the region”, says President and CEO Hamad Buamim.

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