Chinese investment, by other means | The Asian giant …

The way China invests in Latin America has evolved in recent years, from the preeminence of direct “state-to-state” loans, to greater deployment of Chinese banks in the region, to participation in public tenders. and the purchase of local businesses. This is one of the main findings of a recent study by Boston University and the Inter-American Dialogue think tank.

The table depicted does not imply a decline in the role of the Chinese investor, although it does show a type of connection that attempts to break away from political affinity and focus on business opportunities. This is particularly true of the shutdown of the tap of funds to Venezuela.

Income channels

For the fourth year in a row, in 2019, the China Development Bank (CDB) and China EximBank, official Chinese institutions responsible for the management of foreign investments, withdrew their loans to Latin America. These are operations that experts qualify as “sovereign investments” since it is the Chinese state that lends directly to another state through the aforementioned agencies. The year before the pandemic, such credits were verified to the region for $ 1.1 billion, the lowest value in the past decade. The distance is enormous from the peak of 2010, with more than 35 billion dollars in loans, of which 21.4 billion correspond to Venezuela.

Since 2005, China’s sovereign financing in the region has accumulated $ 137 billion. But while the average loan for last year was 275 million, the average for the period 2016-2019 was 864 million and 1.7 billion from 2005 to 2015.

“One of the main reasons for the decline in this type of investment is that China is no longer acting as a lender of last resort to the region’s most fragile economies, such as Venezuela. In contrast, Brazil and Ecuador have received significant “oil loans”, which have been reduced since 2014 “, explains the report” The development of Chinese investment in Latin America “, published by The Inter-American Dialogue and Boston University.

Consulted by this newspaper, Margaret Myers, director of the “Asia and Latin America” program of the Inter-American Dialogue and co-author of the article, explained that “although China’s sovereign financing in Latin America has declined considerably since 2015, this is only part of the story. Chinese commercial banks such as ICBC and Bank of China are increasingly active in the region and support the participation of Chinese companies in a wide range of sectors. Many expect some sort of boom in Chinese investment in the region in the coming years through the purchase of financially troubled companies. “

“Sovereign loans” are usually made through large political agreements between countries and where the fine print is often reserved, unlike in public tenders, which require the details of the contract to be exposed.

Instead of the official CDB and EximBank banks, the main funding now comes from Chinese commercial banks that are even establishing themselves in the region, such as the Industrial and Commercial Bank of China (ICBC), Bank of China, Agricultural Bank of China. and China Construction. Bank, associated with large energy, mining and construction companies. Thus, in 2019, there was a maximum Chinese investment in physical assets in the region, with $ 12 billion.

Case in the region

Mega-tenders for infrastructure projects. In Argentina, the construction of two dams on the Santa Cruz River for 4.73 billion dollars by the consortium led by the Gezhouba company is of particular importance. In the field of renewable energies, Power China won the tender for the 300 megawatt Cauchari solar park in Jujuy, the largest in South America, as well as other solar parks in Salta and Córdoba and projects in Chubut and La Rioja.

This chapter presents the significant investments of China in the mining sector throughout the region through concessions granted by national or provincial states.

In Colombia, the Autopistas Urabá consortium, led by China Harbor Engineering Company, is developing an investment of $ 652 million. China also partially funded the construction of the Ituango hydropower plant in the Antioquia region, which suffered an accident that delayed its start-up. In Brazil, Three Gorges Corporation owns 17 hydropower plants and 11 wind farms and is the seventh largest electricity producer in the country.

In Peru, Sinohydro is participating in the “Amazon Waterway” project, questioned by indigenous communities. On the other hand, a Chinese company won the contract for the construction of the San Gabán III hydropower plant in Puno, with an investment of 438 million dollars.

Purchase of businesses and disembarkation. In Argentina, acquisition of Bridas by China National Offshore Oil Corporation (CNOOC) for 3.1 billion dollars and Occidental Petroleum by Sinopec for 2.45 billion dollars, both in 2010. Thus, China participates in the exploitation of Vaca Muerta, for example. The local impact of COFCO’s global purchase of Noble and Nidera is also highlighted. In the banking sector, in 2016, ICBC bought Standard Bank for $ 600 million.

In Brazil, the Chinese Three Gorges Corporation bought local company Duke Energy in 2017 for $ 1.2 billion. In January 2020, China Merchants Port acquired 90% of TCP Participaciones, which operates the terminal in Paranaguá, the second largest port in Brazil, for $ 935 million.

In Chile, Southern Power Grid bought 28 percent of the shares of the power company Transelec, while in Colombia, Sinochen operates in hydrocarbons by buying Emerald Energy. In Peru, Cosco Shipping Ports has purchased 60% of the Portuario Chancay Terminal and will invest $ 3 billion with the local mining company Volcan for the development of an export port hub.

Sovereign credits. Despite the image of retraction in the face of tenders and corporate purchases, Argentina has big plans in this chapter. He signed an agreement to continue the railway renovation with Chinese financing, for a total amount of 4695 million dollars, which is in addition to the existing investments of the Asian country in this file. The project to build the fourth Atucha III nuclear power plant by the China National Nuclear Corporation, which comes from the second government of Cristina Fernández, also stands out. Another highlight of the “state-to-state” investment relationship is the $ 18 billion currency swap, renewed in August 2020.