The Chinese Role in Renewables in Latin America

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While China is still heavily dependent on traditional sources of energy, its ascendancy in the renewable energy sector is nothing less than remarkable. True to form this is a perfect mixture of necessity, policy, and investment. What does this mean for Latin America and the Caribbean? Like most Chinese companies, China's renewable energy companies are fanning out into the world in order to export excess capacity and project China's soft power.

This week Huawei announced that it will supply 75MW of string inverters — to convert solar DC energy to AC energy — to AES Tietê, Brazilian subsidiary of AES. This news was followed by JinkoSolar’s announcement that it has secured a $108m loan to begin construction of the 130 MWLa Viborillas Solar Park in Jalisco, Mexico. The loan syndicate included Natixis, The Bank of Tokyo-Mitsubishi UFJ, BBVA Bancomer, Intesa Sanpaolo, Sumitomo Mitsui Banking Corporation and Société Générale.

This news punctuates the leading role that Chinese companies have established in the renewables space in Latin America. Setting aside traditional low-carbon footprint projects like hydroelectric dams — that firms like China Three Gorges, China State Grid, and China Gezhouba have actively pursued for years now — wind and solar projects have quietly become an area in which Chinese companies are leading in the region, and Chinese names are quickly leading the market.

Jinko has been in the region for a while, providing everything from large utility solar farms to smaller rooftop projects in countries like Honduras. Jinko’s commitment to supply 579MW of solar modules to Brazil after winning 2015 auctions led it to build a local factory, a move that was deferred by the country’s ongoing economic crisis.

China’s Envision Energy led the charge into Argentina’s renewables, securing 185MW of the 708MW in the first round of Argentina’s renewables promotion programme Renovar, including some of the largest wind farms in Neuquén and Rio Negro.

Sinovel, the world's second-largest wind turbine supplier, inked a deal two years ago with Desenvix, a subsidiary of the Engevix engineering group to provide turbines for a 34.5 MW wind farm in Sergipe, Brazil.

Goldwind — the largest wind power company in China — has been active throughout Latin America. The 270MW Penonomé I and II wind projects, on Panama’s southern coast, are some of the largest in the region. At the 33MW Bío Bío, Chile, project they provided preferred equity and non-recourse project financing. And the Goldwind turbines at Ducal-Membrillo and Huayrapamba wind farms in Ecuador are — at 2,900 meters above sea level — some of the highest in the world.

And Sky Solar has been active, with projects in Chile of and Uruguay. Its Chile efforts have been the recent acquisition of 24MW in existing projects, while the Uruguay work has been the development of up to 100MW in greenfield projects, to say nothing of the proposed 300MW of solar generating capacity in Chile's Atacama desert.

Like many its peers, Sky Solar has also been active in courting both private and multilateral financing. US-based private equity firm Hudson Clean Energy Partners invested $50m in the projects in Chile and Uruguay. The Uruguay projects (in Paysandú, Salto and Río Negro) have also been supported by the IDB, along with the China Co-Financing Fund and the Canadian Climate Fund for the Private Sector. Likewise, Goldwind has gotten $300m in International Finance Corporation (IFC) financing for the second phase of Penonomé, and last year IDB Invest provided $28m for Jinko’s San Juan Solar Power Project in Argentina.

And it’s not just Chinese sources looking to boost renewables in Latin America. The Japanese Bank for International Cooperation (JBIC) actively advertises its willingness to look beyond projects by Japanese companies for green projects:

In addition to supporting the business activities by Japanese companies, JBIC will continue to provide financial support for efforts aimed at global environmental preservation by making most of the GREEN operations.

What’s next for funding renewables in the region? There are efforts to try to finance rooftop renewable projects in Jamaica via the blockchain. Much like cell phones leapfrogged the incumbent landline gap 20 years ago, renewables should leapfrog the existing energy gap in Latin America? Chinese firms are set to play a key role in making that become a reality.

Top Stories

México abre la puerta del TPP a EU... pero Japón, Australia y Malasia se la cierran — El Financiero
¿Qué dicen países del TPP-11 sobre posible retorno de EE.UU.? — El Comercio
Japón celebra las palabras de Trump sobre el TPP pero rechaza renegociación — El Economista
Tras amagar con regresar, Trump vuelve a criticar el Tratado Transpacífico: “Tiene demasiados riesgos” — Univision
US trade policy continues to make headlines. The White House leaked that President Donald Trump asked his economic team to look into the feasibility of the US joining the Trans-Pacific Partnership (TPP) — a year after he pulled the country out. Mexico says it's willing to engage a renegotiation of TPP — probably along the lines of the current NAFTA discussions — but Chile and Japan among others want the US to take it or leave it. Following a Mar-A-Lago meeting with Japanese Prime Minister Shinzo Abe, Trump tweeted that he doesn’t "like the deal for the United States. Too many contingencies and no way to get out if it doesn’t work. Bilateral deals are far more efficient.” Oh well.

拉美被要求中美间选边站?中方:贸易是自由恋爱,非强迫婚姻! — Huanqiu
The winners and losers (mostly losers) in a U.S.–China trade war — Axios
Amid Rising Tensions With US, China Looks To LatAm For M&A — Forbes
México sería el ganador si China pone aranceles a soya de EU — El Financiero
Brazil pork sales to China soar as U.S. ties sour — ECNS
EUA indicam que vão exigir cotas do aço do Brasil — Folha
Problema é excesso de produção, afirma secretário de comércio dos EUA — Folha
“La colaboración China-América Latina es un modelo de éxito” — El Peruano
US trade policy continues to continue to make headlines. Brookings’ David Dollar points out that it’s mostly losers in a US-China trade war. Chinese Ambassador to Peru Gui’de Jia scores easy points by saying China thinks "trade is free love, not a forced marriage,” and doesn’t want to make Latin America choose a side. In addition to affecting trade flows, Itaú Unibanco’s  Ricardo Villela Marino thinks that US protectionism will boost China to be the biggest source of M&A for Latin America. Mexican soy consumers and Brazilian pork exporters (up 151.6% to China over last year already, thanks to China lifting a ban) think they’ll benefit. And Brazil finds itself debating whether or not it should set quotas on its steel exports in order to be exempt from the 25% steel tariff imposed by the US.

美国抛出的是“橄榄枝”还是“荆棘”? — People.cn
The perspective from China on this and the impact on Latin America is telling: People’s Daily asks if the United States extending an “olive branch” or “thorns” to Latin America? President Trump making the United States priority number one has put the relationship between the U.S and Latin America into the lowest level. People’s Daily says that this has broken the heart of the US’ friend, Latin America. It advises with the saying adapted from Confucius:

交友之道贵于相互尊重
交友之道贵于平等沟通
交友之道贵于以诚相待
The principle of making friends is all about mutual respect
The principle of making friends is all about equal communication
The principle of making friends is all about honesty treatment

At Summit in Peru, U.S. is the unpredictable one, while Latin America’s biggest countries are the voices of reason — Miami Herald
Wilbur Ross: América Latina não precisa decidir entre EUA e China — Exame
Cooperación China-América Latina concuerda con intereses comunes, dije cancillería china — Xinhua
U.S. seeks to outshine China at Latam summit, without Trump — Reuters
US seeks to outshine China at Latin American summit in Peru, without Donald Trump — South China Morning Post
Read-outs from last week’s Summit of the Americas in Lima. US Commerce Secretary Wilbur Ross claims the US is not “making anyone choose between the US and China,” but reminds Latin America that it has a commercial surplus with the US, which imports higher-valued manufactured products, as opposed to China, with whom it has a deficit. Hua Chunying, spokesperson for the Chinese Foreign Ministry, responded to Ross’ comments by saying: “China is a good cooperative partner to Latin America, and no one knows it better than the people of Latin America.” The IMF’s Alejandro Werner worries a potential US-China trade war would “depress the global economy and lead to a recession that would slow demand for Latin America’s exports.”

Chile dice que Canadá "prácticamente confirmó" su intención de unirse a la Alianza del Pacífico — Reuters
Finally, Chile’s President Sebastián Piñera says Canada “practically confirmed” its intention to join the Pacific Alliance over the weekend at the Summit of the Americas. Let’s see where this goes.

Indian, Chinese oil companies look to invest in Ecuador, minister says — Reuters
Ecuador’s oil minister Carlos Perez confirmed Indian oil company ONGC Vinesh’s interest in buying a stake in Ecuador’s oil fields, stating a confidentiality agreement will be signed in the upcoming weeks. Perez also pointed out China National Petroleum Corp (CNPC) is interested in the development of an oil refinery at the Ishpingo, Tambococha and Tiputini (ITT) field.

China — LAC

Panamanian president advocates further boosting global trade — Xinhua
Panamanian President Juan Carlos Varela voices his support for the Belt and Road Initiative (BRI) in a statement to Xinhua: “We are firm believers in connectivity … through our canal, our ports and airports. We support all initiatives which strengthen connectivity.”

Grupo chino Fosun prepara compra de administradora general de fondos chilena — Economia y Negocios
China’s Fosun Group continues to expand in Latin America. According to local reports, it is looking to acquire a pension fund manager in Chile, and it plans to do diligence over the next couple of weeks. Fosun does not plan to spend as much as it did in Brazil, and has a contingency plan if it fails: private equity investments in mining and energy.

Ultiman acuerdo con China para exportar carnes congeladas y fruta — El Perfil
The deal on frozen and bone-in meat exports to China from Argentina will be signed next month. Fruit export discussions are also moving forward. Chinese Ambassador Yang Wanming assured China wants to “balance the scales” as Argentina currently has a commercial deficit with the Asian giant.

El grupo Car One importará la marca china Haval y Great Wall a la Argentina — iProfesional
Invasión china: 2 nuevas marcas de autos llegarán al país el mes que viene — Clarín
Argentine automobile dealership Car One will begin importing Chinese Haval cars, from the Great Wall Motors Company. Haval experienced 40% value growth in 2016 and is already present in Chile, Peru, Bolivia, and Uruguay.

China committed to helping Caribbean with poverty reduction — Jamaica Observer
In a meeting at China’s foreign affairs ministry, Hang Jing, Counsellor for the Department of Latin America and Caribbean, said China is prepared to keep supporting poverty alleviation in the region as they are aware of the common challenges and believe “no country can face up to these challengers alone, nor can they retreat to isolation.”

Piden a próximo gobierno mexicano fortalecer aún más relaciones comerciales con China — Xinhua
Mexico keeps getting grilled for greater relations with China. Ahead of national elections, José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth (IDIC), said in a press conference presidential candidates “will have to contemplate a strategy that can maintain a productive relationship within the NAFTA framework, while also building productive links with China” as they will inherit “contradictory commercial policy”.

China destacó el interés de invertir en Bahía Blanca — BAE Negocios
The Chinese Ambassador to Argentina, Yang Wanming, says the city of Bahía Blanca, Argentina, has “great potential” as it “constitutes a door for the exportation of many agricultural and oil products to China."

The World Wants Blueberries All the Time. Chile’s Excited — Bloomberg
Santiago-based Hortifruit is seeking to boost production to meet worldwide demand for blueberries. It is close to completing a deal to buy Peru's Grupo Rocio, the country’s largest blueberry producer, for $160m. Together with expansion plans in the US, Mexico, and China, Hortifruit expects to reach production of 200 million pounds, ideal for meeting Chinese demand where blueberries are sold for almost double the American rate.

Panama-China FTA Feasibility Study Concludes — Prensa Latina
Following the conclusion of a feasibility study, Chinese and Panamanian authorities foresee Free-Trade Agreement negotiations starting soon. Panamanian Minister of Trade and Industry, Augusto Arosemana, is expected to head to China in the upcoming weeks.

Panamá estudia construcción de tren hasta Costa Rica en coordinación con China — America Economia
Panamá estuda construir ferrovia até Costa Rica em parceria com a China — Época
Panama studies building train to Costa Rica with China — Reuters
Panama and China continue discussions for a passenger train to Costa Rica. The 450 km track would require a starting investment of $5b.

Barbados hosts high level Chinese business delegation — Barbados Today
A delegation from the China Chamber of International Commerce is in Barbados this week for a series of meeting aimed at expanding bilateral relations, attending a seminar organized by the Barbados Investment and Development Corporation (BIDC).

Argentina comprará 200 vehículos a China para potenciar red ferroviaria — Xinhua
The Argentine government announced the purchase of 200 electric passenger wagons from China’s CRRC to be added to the General Roca train line.

Gobierno mexicano dará apoyo financiero a inversores de Zonas Económicas Especiales — Xinhua
Mexican President Enrique Peña Nieto announced the country has opened a $2.7m fund for companies interested in the country’s Special Economic Zones, to spur interest from foreign investors.

China Offshore inicia trabajos en aguas profundas mexicanas — El Economista
China Offshore Corporation will invest $289m over the next 4-10 years to explore a deep-water bloc in Mexican waters, hoping to prove almost 500 million barrels in the area.

"América Latina y el Caribe y China: condiciones y retos en el siglo XXI” — RED ALC CHINA
The Autonomous National University of Mexico (UNAM) in Mexico City will be hosting the 4th International Seminar on Latin America and the Caribbean and China May 28-30.

Posible inversión china en el Bío Bío: embajador manifestó interés a intendente Ulloa — Bio Bio Chile
Chinese ambassador in Chile has voiced China’s interests in investing in the Bío Bío region of Chile.

Japan — LAC

Habría interés de Japón en invertir en minería y energías renovables — El Esquiú
Japanese Ambassador to Argentina, Noriteru Fukushima, met with Catamarca Governor Lucía Corpacci, to discuss possible commercial opportunities, including the region’s mining potential and financing for renewable energy projects.

Japón registró en febrero un superávit comercial de 6.000 millones de euros — El Diario
Japan registered a commercial surplus of $7.4b in February, with increased exports to China by 10.8% and to Brazil by 24.4%, and an 84.6% increase in its deficit with Chile.  

Miniso: el retailer oriental que llega al Perú con una innovadora propuesta comercial — Perú Retail
Japanese retail brand Miniso plans on opening 100 stores in Peru in the next 3 years.

Korea — LAC

Chile: Asoex requests improved FTA with Korea — Fresh Plaza
Ronald Brown, president of the Fruit Exporters Association of Chile (ASOEX), says bilateral renegotiation of Chile’s FTA with South Korea is paramount because subsequent Korean trade deals have given Chile’s competitors an edge. Aside from expanding Chile’s trade deals and relations, ASOEX seeks an overhaul of Chile’s agricultural export framework, such as by improving the work by agricultural attaches and increasing ProChile’s reach.

S. Korean delegation sent to Latin America to promote health care industry — Yonhap News Agency
A 34-member delegation from South Korea made their way to South America this week to promote health care companies’ inroad into the regional market. The delegation also plans to meet with the Inter-American Development Bank (IDB) to discuss joint regional projects.

Coreia do Sul deve abrir mercado para carne suína brasileira, diz governo — Folha
Brazil pork exporters are pushing talks to resume exports to South Korea.

India — LAC

International Energy Forum: Mexico eyes strong energy ties with India — Business Standard
“Indian companies can participate in the full value chain,” says Mexican Deputy Minister for Hydrocarbons Aldo Flores-Quiroga, in regards to the country’s energy sector. Mexico hopes India will participate in its growing gasoline market, especially due to its petrol deficit. India is expected to take part in an auction round of onshore conventional blocks in July.

GCC — LAC

Emirates revives prospect of world’s longest flight to Panama — Arab News
The Emirates push to expand to Latin America continues. “We are still looking at Panama. We had some conversations recently with a delegation from Panama,” Emirates Chief Commercial Officer Thierry Antinori told reporters in Dubai. Emirates has trumpeted the 8,590-mile (13,824km) route as the world’s longest, taking 17 hours and 35 minutes westbound.

Asean & Oceania — LAC

Brazil to resume meat exports to Indonesia — Xinhua
Brazil has also announced it will resume exporting meat to Indonesia, following the Asian country’s ban in March 2017 due to concerns about food security.

 

Latin America's digital economy beckons; will Singapore outfits go? — Enterprise Singapore
Singapore sees room for growth in Latin America’s emerging digital economy. Benedict Koh, regional director for Latin America and the Caribbean at Enterprise Singapore, sees sufficient demand and a landscape that is “fragmented and large enough to accommodate more solution providers,” and not just regional ones. Huge consumer and untapped markets may see an influx of Singaporean startups soon.

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