China in Latin America
The BRICS group of five nations—Brazil, Russia, India, China and South Africa—held its sixth annual summit this year from July 14 to July 16 in Fortaleza in the northeastern Brazilian state of Ceará and in Brasilia, the Brazilian capital. The main business for the five nations' leaders was formalizing their agreement on a plan to create a development bank to serve as an alternative to lending institutions like the International Monetary Fund (IMF) and the World Bank, which are largely dominated by the US and its allies. Although the project will need approval from the countries' legislatures, the BRICS leaders indicated that the group's lending institution would be called the New Development Bank, would be based in Shanghai and would be headed for the first five years by a representative of India. The bank is to start off in 2016 with $50 billion in capital, $10 billion from each BRICS member. The BRICS nations will maintain control of the bank, but membership will be open to other countries; in contrast to the IMF and the World Bank, the New Development Bank will not impose budgetary conditions on loan recipients.
Nicaragua's Commission for the Development of the Grand Canal on July 7 approved a route for the proposed inter-oceanic canal through the Central American country. The waterway, to be built by Chinese company HKND, is slated to run from the Río Punta Gorda (South Atlantic Autonomous Region) on the Caribbean Coast to Brito (Rivas department) on the Pacific coast—a route more than three times as long as the 48-mile Panama Canal. The Commission said the canal will be operational by 2020, but questions have been raised on how the Hong Kong-based company plans to finance the project, estimated at $50 billion—nearly four times greater than Nicaragua's national economy. The canal is to be privately owned and operated. Ecologists have raised concerns about impacts on Lake Nicaragua (also known as Cocibolca), Central America's largest lake and an important fresh-water source for the country. There are fears the the water used by the canal's locks could seriously deplete the lake. The Río San Juan, which feeds the lake and forms the border with Costa Rica, would be dammed to feed the locks. Costa Rica has formally demanded the right to review environmental impact studies for the project before work begins. The Rama-Kriol indigenous people, whose territories in the Punta Gorda river basin would be impacted, are demanding to be consulted on the project. (La Prensa, Nicaragua, July 17; Tico Times, Costa Rica; July 15; Nicaragua Dispatch, Reuters, El Financiero, Mexico, July 8)
Cuba's new Foreign Investment Law went into effect on June 28, as was planned when the National Assembly of Popular Power passed the measure in March. The government is hoping to generate some $2.5 billion in investment each year under the law, which cuts tax rates for foreign investors from 30% to 15% and guarantees that most foreign-owned companies will be exempt from expropriation. Investment is expected to be focused on light industry, packaging, chemicals, iron and steel, building materials, logistics and pharmaceuticals; much of it will go to the Mariel port, 40 km west of Havana, which is being developed as a major "free trade zone." The government is currently studying 23 proposals for projects from Brazil, China, Spain, France, Italy, the Netherlands and Russia. The new law doesn't allow for private Cuban citizens to invest, and Cubans will work for the foreign companies through state-owned employment companies, not directly. (La Jornada, Mexico, June 29, from DPA, AFP, Prensa Latina; Global Post, June 29, from Xinhua)
Mexican authorities on May 1 announced the seizure of a ship carrying 68,000 tons of illegal iron ore bound for China—hailed as the latest blow in a crackdown on the contraband mineral sideline by the Knights Templar drug cartel. Federal police were apparently tipped off by an anonymous phone call after the ship left Lazaro Cárdenas, the Pacific port in conflicted Michoacán state. Authorities detained the ship, the Jian Hua, off Manzanillo, the next major port up the coast, in neighboring Colima state. The ship's crew produced documents showing it had authorization to transport the iron ore. But authoriites said the paperwork listed a legal mine that was not the actual source of the contraband ore. The company operating the ship, China's Fujian Huarong Marine, has been given one month to prove to authorities that the ore was extracted legally. Mexican authorities say they have seized more than 200,000 tons of illegal iron ore so far this year, most of it headed for China.
In a move being openly portrayed as part of a race with the US-backed Trans-Pacific Partnership (TPP) for hegemony in the Asia-Pacific region, China has set up a working group to study the feasibility of a Free Trade Area of the Asia Pacific (FTAAP). The proposal comes ahead of a meeting in May of trade ministers from the Asia Pacific Economic Cooperation (APEC) forum, which China will host. Wang Shouwen, an assistant commerce minister, assured: "We think there will be no conflict between the FTAAP and the region's other FTAs under discussion." But reports note that the news comes just as progress of the TPP has snagged over Japanese insistence on protecting its agricultural and automotive sectors. Chinese President Xi Jinping in October said at the APEC business forum in Indonesia that Beijing will "commit itself to building a trans-Pacific regional cooperation framework that benefits all parties"—an obvious veiled criticism of the TPP. (Tax News, May 5; AFP, April 30)
Mexican authorities on March 4 announced the seizure of 119,000 tons of iron ore—with an estimated value of $15.4 million—along with 124 bulldozers, backhoes and trucks at Michoacán's Pacific seaport of Lázaro Cardenas, following tips about drug cartels exporting black-market ore to China. More than 400 federal police and military troops were involved in the coordinated raids on 11 processing facilities in the port city. Six Chinese workers at the sites were arrested, apparently on immigration charges. The federal security commissioner for Michoacán, Alfredo Castillo, told Periódico Digital that the ore is being tested to determine which mines it came from in order to crack down on the operation. In November 2013, the Mexican Navy took control of Lázaro Cardenas to cut off illicit exports for the Knights Templar drug cartel. (Metal Miner, March 7; Mining.com, Port Technology, March 4)
Construction of a interoceanic canal in Nicaragua has been delayed by a year and will "probably" begin in 2015. The head of the canal authority, Manuel Coronel Kautz, announced Jan. 4 that more time is needed to carry out feasibility studies and choose a route. President Daniel Ortega, who promotes the project as key to Nicaragua's "economic independence," had projected construction to start in May 2014. (BBC News, Jan. 4) The setback comes as Chinese workers brought in by HK Nicaragua Canal Development Investment Co Ltd are swelling the population of Brito, a small town projected as the canal's Pacific terminus, in Rivas department. (IBT, Dec. 12)
The current expansion of the Panama Canal will allow close to 90% of the world's 370-vessel liquified natural gas (LNG) fleet to pass through by 2015, the Panama Canal Authority announced Oct. 30. Currently the canal can accommodate only 8.6% of the global LNG fleet. Voyages to Asia from the US will cost 24% less than longer routes, according to the authority. The US, now the world's top natural gas producer due to extraction from shale rock, is projected to become the third-largest LNG exporter by 2020. Excavation to double the Panama Canal's capacity, which began in 2007, is said to be 64% complete. (Bloomberg, Nov. 4; Platts, Oct. 30; IBT, Sept. 20)