In 2019, the Chinese credit to Latin America and Caribbean (LAC) countries was 1.1 billion dollars, down from 2.1 bn in 2018,
Greenfield FDI announcement was 12 bn, up from 1.7 bn in 2018,
Mergers and Acquisitions was 4.3 bn, down from 9.2 bn in 2018
Trade was 315 bn dollars, up from 306 bn in 2018- both exports and imports have gone up
Credit
The 1.1 bn sovereign credit in 2019, focussed on hard infrastructure and energy sector development including:
- 600 million dollars lent to the Dominican Republic for improvements to the country’s electricity distribution system,
-236 million to Argentina for purchase of rail cars,
-200 million to Suriname to upgrade its International Airport
-104 million to Trinidad and Tobago to develop the Phoenix Park Industrial Estate in which Chines companies will put up manufacturing/assembly work.
The cumulative total of Chinese credit to the region since 2005 is estimated at 137 billion dollars of which 119.4 bn was given in the decade 2010-19.
The cumulative total of Chinese credit to the region since 2005 is estimated at 137 billion dollars of which 119.4 bn was given in the decade 2010-19.
The sovereign credit given by China Development Bank (CDB) and China Eximbank to LAC governments and state-run companies fell to 1.1 billion in 2019 from its peak of 36.6 billion dollars in 2010 and mid peak of 21.5 billion in 2015.
The reasons for the steep decline:
-Venezuela, the biggest debtor has reached its saturation point with 62 billion dollars while its repaying capacity has been severely degraded by domestic crisis and US sanctions.
- Instead of big ticket items in a few countries, the Chinese have now started giving small amounts to more countries
- financing is given in many cases directly to Chinese companies instead of giving direct to LAC governments
Besides CDB and Eximbank, the Chinese are giving credit through other regional funds such as the China-LAC Industrial Cooperation Investment Fund (CLAI Fund), China-LAC Cooperation Fund (CLAC Fund) and Special Loan Program for China-Latin America Infrastructure.
In addition to co-financing projects and regional funds, China’s four major commercial banks Industrial and Commercial Bank of China (ICBC), Bank of China, Agricultural Bank of China, and China Construction Bank are increasingly active in Latin America
Investment
The annual greenfield FDI announcement had climbed from 3.1 bn in 2010 to 10.1 bn in 2014 and had gone down again to 1.7 bn in 2018 before the dramatic jump to 12 bn in 2019.
Among the largest deals announced in 2019 were:
- Cosco Shipping investment of 3 billion in Peru’s Chancay port project
- TBEA Group’s 2.3 bn JV with Bolivian state company for Lithium production. This is subject to the ongoing political changes in the country
- Huawei’s project to build a second electronics factory in the Sao Paolo state of Brazil with an investment of $800 million
- Hutchison Port Holdings announced a new $450 million cargo port in Veracruz, Mexico, using blockchain technology to allow for more transparent monitoring of the flow of cargo.
- China Three Gorges Corp’s 438 million dollar San Gabán III hydroelectric project
Mergers and Acquisitions
In 2019, Chinese companies spent 4.3 billion on M&A deals in LAC, the lowest sum since 2016 when it was a record 17.5 bn dollars after which it went down to 9.2 bn in 2018.
The major deals were:
- A consortium of three Chinese companies (Hubei Energy Group Co., CNIC Corp., and China Three Gorges Corp.) purchased the Chaglla hydroelectric dam in Peru from Brazilian Odebrecht, for 1.39 billion
- Joyvio Agriculture Development Co Ltd, a private Chinese agricultural processing company, bought a nearly-complete stake (99.8%) in the Chilean Australis Seafoods SA for $985.8 million
- China General Nuclear Power Corp bought the Brazilian Gamma project, which consists of two solar parks and a wind farm, from Italian firm Enel for 779 million.
Trade
China’s trade with LAC region increased to 315 billion dollars in 2019 from 306 bn in 2018. China’s exports increased to 151 bn from 148 bn while its imports went up to 164 bn from 158 bn.
Mexico has overtaken Brazil as the largest destination of Chinese exports to the region. In 2019, China exported 46 bn to Mexico as against 35 bn to Brazil. But Brazil remains as the largest exporter to China with 79 bn while Mexican exports were just 14 bn.
Mexico has overtaken Brazil as the largest destination of Chinese exports to the region. In 2019, China exported 46 bn to Mexico as against 35 bn to Brazil. But Brazil remains as the largest exporter to China with 79 bn while Mexican exports were just 14 bn.
China’s imports of soybeans, corn and other agrocommodities are likely to be affected by the recent Chinese agreement to buy more ( 200 bn) of these from the US in the next two years.
Global Economic diplomacy projects
More countries from LAC region have signed on to the Belt and Road Initiative (BRI) and the total is now 19. BRI signatories include Bolivia, Chile, Ecuador, Guyana, Peru, Suriname, Uruguay, Venezuela, Jamaica, Antigua and Barbuda, Barbados, Cuba, Dominica, the Dominican Republic, Grenada, Trinidad and Tobago, Costa Rica, El Salvador and Panama.
Ecuador has become the first Latin American signatory to Asian Infrastructure Investment Bank (AIIB)
Ecuador has become the first Latin American signatory to Asian Infrastructure Investment Bank (AIIB)
Sources
More information and analysis available in the following:
Scaling back: Chinese Development Bank Finance in LAC, 2019 by Margaret Myers and Kevin Gallagher
China -Latin American economic Bulletin 2020 Edition by Rebecca ray and pedro henrique Batista Barbosa
Trade map of ITC, Geneva
No comments:
Post a Comment