China ups its commitments in Argentina and South America

China's goal at the G20 Summit was to push for increased trade, forge durable partnerships and commit finance to infrastructure projects in Argentina and beyond

China was keen to present itself as playing a positive role at the G20 in Buenos Aires, with President Xi Jinping putting forward a four point proposal which included upholding free trade and the rules based multilateral trading system.

After his much-anticipated meeting with US President Donald Trump, an effective 90-day truce in the trade war was agreed, with Trump delaying the imposition of new tariffs pending the outcome of negotiations.

Meanwhile, though the US side was focused on its trade relations with China, the delegation from Beijing was able to use bilateral side-meetings to press forward with the Belt & Road initiative - including with G20 host country Argentina.

As one of the world's major exporters of agricultural products such as soybeans, wheat and maize, Argentina is a natural partner for Belt & Road. China is already the biggest importer of its soybeans.

The economic crisis in Argentina has brought with it a greater need for assistance with major projects - and growing Chinese influence. Earlier this year Argentina negotiated a US$56 billion financing deal with the International Monetary Fund, but when it comes to critical infrastructure, China is its most important partner, bringing both construction expertise and financing.

China has been playing a major role in modernizing the decaying Argentine rail network. Early last year the first Chinese built locomotives were delivered for use on the Belgrano Cargas network, and China has also supplied rolling stock for the Buenos Aires Metro.

At present 1,600 kilometres of Belgrano Cargas rail track is being re-laid across six provinces, as part of the Belgrano Railroad Rehabilitation Project.

The first 500 kilometres of line has already been re-laid, connecting agricultural producers with the port of Rosario. In July of this year President Mauricio Macri attended a ceremony hosted by Belgrano Cargas to mark the completition of the upgraded line.

The 100 locomotives on order are manufactured by CRRC Qishuyan, a subsidiary of China Railway Rolling Stock Corporation, and are being financed by a US$2.5 billion credit facility via an agreement with China Machinery Engineering Corporation. Argentina has also ordered 3,500 new railcars, many of which have already been delivered.

The transport time for grains and agricultural products will be reduced as the modernized rail network takes shape.

China is also involved in the energy sector, including one of the biggest China backed projects being undertaken in all of Latin America - the hydro projects on the Santa Cruz river.

With a total investment of around US$5.3 billion, this is the largest overseas power project investment by a Chinese company.

As part of the Hydroelectric Exploitation Rio Santa Cruz project, the Condor Cliff and La Barrancosa dams are being jointly built by a consortium led by China Gezhouba (Group) and local firms Electroingenieria S.A. and Hidrocuyo S.A. The two dams are located around 200 kilometres downstream of the Perito Moreno Glacier.

The huge project will increase Argentina's total power supply by 6.5%, and will also help it cut back on dollar denominated oil imports.

Despite opposition from environmentalists, work is underway following a two year environmental impact assessment.

According to local press, Argentina and China are also close to signing a construction and financing agreement on the country's fourth nuclear power facility, known as Atucha III.

As far back as 2014 Nucleoelectrica Argentina announced a preliminary contract with China National Nuclear Corporation to build a new reactor, but progress has been slow ever since. The site already contains two Siemens pressurized heavy water reactors.

The project costs could reach US$8 billion. Buenos Aires based daily newspaper Clarin has reported that a US$6.5 billion loan is being discussed.

During his campaign for the Presidency, Macri said that he would review the overall relationship with China, as well as specific projects, and some of the terms of the Santa Cruz financing have been revised since he came into office in December 2015.

That followed criticism that Chinese companies were given too favourable terms by his predecessor, Cristina Fernandez.

Date

5 Dec 2018

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