Chaufa - Season of Giving
Milei meets a senior Chinese official, PRC donations in LAC, CCP ethnic affairs official in Nicaragua and Venezuela, and Honduras FTA update
Hi! Welcome to Chaufa, a China-Western Hemisphere Newsletter by CPSI.
Today’s Edition covers December 11 to December 17.
This Week’s Top 5 Stories:
On the second day in office, Argentine President Milei met with the the Vice President of the PRC’s National People’s Assembly Standing Committee, Wu Weihua, and sent a letter to Xi Jinping asking to speed up access to a currency swap.
Chinese embassies took to donating goods to local governments and organizations this week, including:
A range of basic foodstuffs to Artemisa province in Cuba. (Xinhua)
More than 10,000 tons of ammonium sulfate fertilizer and 7000 tons of cereals to the El Salvadorian Ministry of Agriculture. (Prensa Latina)
Roughly 150 food hampers to local families in Trinidad and Tobago
$100,000 to fight forest fires to Bolivia.
Additionally, the PRC-based firm Sinopec donated 500 Chinese books to the University of Ecuador. (Xinhua)
China's State Grid won a series of auctions to build and operate 1,500 kilometers of transmission lines in Brazil that will transmit electricity from northeastern generation to southern cities.
State Grid is already a major presence in Brazil’s electricity sector, holding 24 transmission concessions, 19 by itself and five in joint ventures, and operating more than 16,000 kilometers of power lines.
Honduran and Chinese negotiators met last week for the third round of FTA negotiations, completing negotiations on an early harvest agreement. (Global Times)
Trade negotiations started this June, just months after Tegucigalpa broke off relations with Taipei this past spring.
China’s Western Hemisphere FTAs
With the news that Honduras had completed an early harvest agreement in its free trade negotiations with China, the PRC is likely to conclude its sixth FTA in the hemisphere within the next year or two (People’s Daily). However, while all of these agreements share underlying free trade provisions, they have come from different motivations.
China’s first two free trade agreements in the region were with Chile in 2005 and Peru1 in 2009 – like the recent Ecuador FTA, these agreements were motivated by pro-market governments who were looking to expand their market access around the globe. It’s not a coincidence that just as China signed its FTAs with Santiago and Lima, the U.S. Trade Representative had just signed its own agreements with these South American countries.2
On the other hand, Costa Rica, Nicaragua, and the possibly soon-to-be-signed Honduras FTAs all came out of recent changes in diplomatic relations.3 Costa Rica launched FTA negotiations one year after it recognized Beijing over Taipei, and it concluded talks in 2011. Similarly, Nicaragua started pursuing an FTA just after flipping ties in 2021, concluding an early harvest agreement in 2022 and signing the FTA just this past August.
What have been the effects of these trade agreements? Considering Chile’s example, which has had the most time to adapt to its FTA with China, exports have increased by not necessarily diversified. At the top-level, its exports to China increased tenfold, from $3.34 billion in 2004 to $36.6 billion in 2021, though the mix of Chile’s exports has stayed roughly the same, with refined copper and copper ore dominating China’s Chilean exports in 2004 and in 2021.4
This isn’t to say that no diversification has happened – fresh fruits and vegetables like Chilean cherries now make up more than 5% of the South American country’s shipments to the PRC, rising from a fraction of a percent in 2004. While the FTA has likely benefited Chile’s economy to some degree, it hasn’t necessarily been an engine for the country’s growth, suggesting limitations to the benefits for other countries in the region as well.
Politics and Society
The Chinese ambassador to Chile joined senior colleagues from the CCP to meet with members of Chile’s communist party to discuss ideological disagreements, future cooperation, and enhanced communication between the two parties.
Canada’s foreign ministry criticized China’s recent aggression against the Philippines in the South China Sea, prompting a rebuke from the local Chinese embassy.
The U.S. Embassy in Costa Rica will host a regional conference on protecting 5G networks right as the Costa Rican government has effectively banned Chinese firms from participating in its new telecommunications networks.
Yucatan’s governor met with China’s ambassador to Mexico and the president of the Bank of China in Mexico to discuss commercial, infrastructure, and education issues.
A new Colombian Senate friendship group with China was established, and it will be led by Senator Gloria Inés Flórez from President Petro’s Colombia Humana party.
Investment, finance, and infrastructure
U.S. officials have raised concerns with the Mexican government over the growing presence of Chinese auto investments in the country, fearing that these investments “give producers in China a valuable foothold in the region.”
Relatedly, Chinese firm Xinquan will build a new $100 million autos parts plant in the central Mexican state of Aguascalientes that will reportedly create 700 new jobs.
The Canadian House of Commons committee passed a resolution calling for a review of a recent Chinese critical minerals investment, while a parliament report recommended the government produce an official list of Chinese companies unsuitable for investment due to human rights concerns.
Trade and technology
Gansu province and the Uruguay’s Florida department held a forum on commercial cooperation in the agriculture and livestock sectors, as well as on economic and trade cooperation more broadly. (Xinhua)
China’s ambassador to Montevideo said that Beijing is still willing to sign an FTA with Uruguay, though it views it as “a very special case” given Mercosur’s opposition, while China’s customs administration approved Uruguayan farmers to export lemons to the country.
The Dominican Republic newspaper Hoy ran an article arguing that Chinese firms are increasingly displacing Dominican-owned small businesses.
Three of Taiwan’s diplomatic allies, Belize, Guatemala, and Haiti, called for the country’s inclusion at COP during this weekend’s COP28 events.
The Taiwanese embassy in Belize sponsored a number of events this week, including a Christmas toy-sharing event, a training workshop on preventing the spread of a banana fungus, and a laptop donation. The embassy in St. Lucia also sponsored a youth investment forum.
The Taiwanese foreign ministry expressed hopes for a “smooth government transition” in Guatemala and for any disputes to be resolved “peacefully and via a democratic process” following the recent attempt by the Guatemalan prosecutors to undermine the country’s democracy.
The Taiwan Electrical and Electronic Manufacturers' Association (TEEMA) and Mexico's National Auto Parts Industry (INA) signed an MOU that could possibly lead to additional Taiwanese investments in the country.
Paraguay’s national police received a donation of 600 motorcycles from the Taiwanese government.
Analysis and Opinion
Sharon Cho at Bloomberg found that Chinese independent oil refiners are suffering as other international refiners snap up cheap Venezuelan oil after years behind sanctions.
That’s it for now! See you next week.
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Interestingly, then-Vice President Xi Jinping was the Chinese official who signed the FTA in Beijing in 2009.
Similarly, Ecuador attempted to pursue an FTA under the Lasso government, but the Biden Administration notably refused.
It could be argued that Costa Rica straddles both camps, as the country has a historical inclination to signing FTAs around the world.
That said, Chile actually went back down the value chain in its trade with China, with refined ore slipping from 49 to 18%, while unrefined ore rose from 26% to 54% of exports by value.