Venezuelan President Nicolás Maduro took a quick trip to Beijing last week to meet with his counterpart President Xi Jinping as well as Chinese Prime Minister Li Keqiang. The Novam Portam team has spent enough time on the back patio of the Tamanaco Hotel to generally steer clear of business in Venezuela, but this news was a little too on our beat to ignore.
While the timing of the visit was a surprise, it was not unexpected. Maduro is playing the trip as a big win, our view is that China came out of the meetings with the upper hand. And we’re not talking about the one seasoning Maduro's steak at Salt Bae's restaurant.
To state the obvious: Venezuela — and the Maduro government in particular — is out of options. Maduro went to China instead of Russia because China has money and Russia doesn’t. And China is moving while the US is distracted. As former Venezuelan diplomat Diego Arria said: "I think they have taken the temperature of the area, and what other countries might do. There's no doubt they're getting bolder.”
What exactly was agreed upon in Beijing is still remarkably unclear. Depending on who you asked, the two countries signed between 14 and 28 agreements, on everything from a strategic alliance on gold mining to establishing a China-Venezuela Business Committee to pushing the China-CELAC Forum. And the pitch wasn’t just for the Chinese government: “I invite Chinese investors who believe in our country Venezuela, to invest in our country,” said Maduro.
The Chinese government presented the agreement through the prism of the Belt and Road Initiative (习近平同委内瑞拉总统会谈 两国签署共建“一带一路”合作文件 - 中国一带一路网), which Venezuela is now the eighth country in the Western Hemisphere to join this year.
Venezuela claims that they agreed to $5b in investment in the oil sector, which Venezuela can pay back in either cash or oil. But neither the Chinese government nor state media said anything about new funds for Venezuela.
However, both sides agree that their interests in Venezuela’s fabled and faltering oil sector will now be more intertwined. The two countries agreed to a “memorandum for cooperation in Ayacucho bloc 6,” without providing details. But the biggest deal was the purchase of a 9.9% stake of mixed enterprise Sinovensa by a Chinese company, adding to the already 40% owned by China National Petroleum Corporation (CNPC). A source at Venezuela state oil company PDVSA also said: "oil services and procurement at Sinovensa would be handled by Chinese companies,” giving China effective control over the firm.
No price tag was given for the stake, and observer think that with nowhere else to turn, Venezuela may have had to agree to whatever China said: “up against the ropes, Maduro surrenders to China and cedes it a big part of the oil business.” The photo up top also sums up Maduro's bargaining position succinctly.
Our friend Boz at Hxagon expects effective China control of Venezuela’s oil sector for the foreseeable future:
"The conditions of the deals remains private, but they likely negotiated control of the production, management and export of oil from specific fields in Venezuela, a de-nationalization of the country's oil wealth into the hands of a foreign power. While the deal shows that Beijing believes Maduro will remain in power for some time to come, they are also hedging their bets by placing conditions in this deal that will make it extremely difficult for a future post-Maduro government to push them out."
As Latin America grapples with what to do about the failed state that is Venezuela, it needs to accept the fact that the Venezuela problem can’t be solved without working with China.
拉美成中国海外投资第二大目的— East Money
According to Zhao Bentang, Director of the Americas Department at China’s foreign ministry, Latin America will become the second largest destination for Chinese overseas investment, after Asia. He says that in the first half of this year, the trade volume between China and Latin America reached US$145.3b, a year-on-year increase of 21.5%.
How the U.S. can better balance Chinese investment in infrastructure— Global Americans
America Latina, en el centro de la pelea de Estados Unidos y China— La Politica Online
América Latina, en el centro de la pelea— El Territorio Misiones
¿América Latina sigue siendo el “patio trasero” de Estados Unidos?— Dominio público
Latin American diplomats: Is there anyone we can talk to?— McClatchy Washington Bureau
Dispatches from the trade war this week reflect those concerns about the US’ distraction in Latin America.
With the China-US trade war, demand for liquid natural gas from the US in Japan and Mexico — as well as demand for Brazilian corn and soy in China — has buoyed shipping through the Panama canal.
Cámara de Representantes de Australia aprueba CPTPP— Vietnam Plus
Japón y Chile dan primeros paso para echar a andar el TPP-11— Forbes México
The TPP rolls forward. Australia has begun the process of ratification, and Japan and Chile agreed to early implementation. Japan, Singapore, and Mexico have already ratified.
YZJ forms new Panama venture with Mitsui & Co— Trade Winds
Empresas de Japón y China llegarán a Panamá— Forbes México
Japanese and Chinese companies are investing in Panama, with China's Yangzijiang Shipbuilding (YZJ) joining Mitsui in a $13.2m venture.
China — LAC
智利为中企打开拉美市场提供有利环境— East Money
Avanza en Chile Protocolo de Modificación del TLC con China— América Economía
Chile avanza en gestiones con China y Rusia para exportaciones "sin papeles” — América Economía
Chile, China agree to enhance cooperation, deepen partnership— The Santiago Times
Chile is moving forward on ratifying FTA 2.0 with China. Additionally, they are looking to establish “paper free” exporting to China.
More details on SQM’s objection to Tianqi and Chile’s agreement last week, centered on the fact that the agreement won’t do enough to limit the impact of the deal on the lithium market.
Hunan Dakang International is looking to sell its Brazil biodiesel unit.
Even thought it is not operating at full capacity yet, iron giant Vale is looking at expanding the S11D project in the Amazonian state of Para to meet Chinese demand.
China Southern Airlines President and CEO Tan Wan Geng says his company sees growth in Latin America.
Scepticism over La Brea dry dock— Trinidad Express
The CHEC/La Brea dry dock deal in Trinidad is getting opposition pushback.
An Argentine perspective on China’s investment strategy towards Latin America, and how securing natural resources is the main goal.
Our friend Enrique Mantilla of the Argentine Exporter’s Chamber talk about the potential of China’s market to drive Argentine exports.
Du Jiahao, Secretary General of the Communist Party of Hunan Province, led a delegation that met with Dominican Republic President Danilo Medina.
Empresa chinesa volta a Uberaba para avaliar possível investimento— Jornal da Manhã
Hanergy Thin Film Power Brasil continues to look at potentially investing in Uberaba, Minas Gerais.
Modelo fintech de China, con potencial para crecer en México— El Economista
An interview with Miguel Herrera of Quona Capital talking about finch in Latin America from the perspective of China’s success.
Brazilian soy exports to China are up 15%, thanks to the trade war.
Puno: China sería el nuevo destino de quinua peruana— La República
Peru’s Exporters Association ADEWX expects a deal on quinoa to be signed with China by the end of this year.
Uruguay opens a consulate in Guangzhou.
Over the weekend China hosted a China-Latin America Forum on Industrial Capacity Cooperation.
México planea revivir la ruta comercial de la Nao de China— Dinero en Imagen
Is Mexico planning to relaunch the Manilla Galleon route?
Didi has opened in Guadalajara, after having already launched in Toluca and Monterrey.
Bank of Brazil and HKMA sign fintech agreement— Central Banking
The Central Bank of Brazil and Hong Kong's Monetary Authority have agreed to promote technological innovation in finance.
Capital chino llega al Estado de México— El Economista
Mexico City and the State of Jalisco have captured 56.5% of the Chinese investment in Mexico over the past two decades.
Filling the Infrastructure Gap— ReVista
Filling the Infrastructure Gap— The Dialogue
Our friend Margaret Meyers at The Dialogue provides a sobering perspective on the potential for Chinese infrastructure investment in Latin America.
Dubafresh and Frutival saying what we’re thinking.
Perspectivas de la cooperación chino-peruana— El Peruano
Chinese Ambassador to Peru Jia Guide discusses the potential from Chinese-Purvian cooperation.
Korea — LAC
In Uruguay last week, Mecosur and South Korea started the first of an expected four rounds of FTA negotiations.
Chile supports Korea’s joining the Pacific Alliance as an associate member.
Mexico-Korea commerce set for smooth sailing— Korea Herald
Mexico and South Korea celebrated a solid relationship and bilateral trade, despite no FTA.
Chile seeks greater presence in SK— Fruit Net
Chile is looking to export more citrus and avocados to Korea.
Japan — LAC
Ecuador gets bilateral loan from Japan— Latin Finance
Japanese Prime Minister Shinzo Abe visited Ecuador this past week, and agreed to a 25-year $70m loan to advance power efficiency and delivery systems there.
CARICOM and Japan exploring further cooperation— Caribbean Community
Japan and the Caribbean Community talked about promoting the Caribbean in Asia.
India — LAC
An interview with the Bolivian ambassador to India.
ASEAN & Oceania — LAC
Petronas Lubricants International has launched a Center for Excellence in Research and Technology in Latin America outside of Belo Horizonte.
GCC — LAC
Dubai-Panama maritime tie-up potential explored— GDN Online
The Dubai Chamber of Commerce and Industry’s representative office in Panama held an event to push ventures between maritime and logistics companies in Panama and Dubai.