China has been involved in a number of projects throughout Latin America, including Argentina, Ecuador, and Brazil, also acquiring wind power assets in the region. Experts warn that China’s impact in Latin American energy is impactful, ambiguous, and risky
[Dialogo Americas] A recent paper published by Florida International University, The New Silk Road in Science: China’s Science Diplomacy in the Americas, highlights Beijing’s predatory interest in the region on various front, including in the energy sector, both in electricity and renewable energies.
Between 2005 and 2022, “approximately two-thirds of total lending to Latin America and the Caribbean from Chinese policy banks went toward energy projects. While most of this went into traditional fossil fuel investments, China provided several loans to expand the region’s alternative energy sector,” the report notes.
According to the Washington-based think tank Inter-American Dialogue, 36 of the 67 loans granted by Chinese commercial banks to the region between 2007 and 2021 were for the energy sector. Eleven of these were for renewable and hydroelectric energy. While the loans do not come directly from Chinese government entities, Chinese commercial banks align their lending with Beijing’s priorities.
“It’s not surprising that China has been trying to make inroads into the region’s energy sector. We are already seeing a growing Chinese presence in the lithium sector and Chinese electric vehicles are invading the Latin American market. Beijing has invested significantly in regional energy projects, including hydroelectric and solar projects, because it sees the energy transition as crucial to its own development and geopolitical goals,” Adam Ratzlaff, an expert on inter-American affairs and author of the report, told Diálogo.
The risks of China’s monopoly over the energy supply chain, from generation to transmission to retail, not only include the threat to national sovereignty, but also price manipulation and control of the energy supply of countries of the region and, therefore, of their economies as well.
Power grids
The extent to which China controls the electricity grids of several countries has become a major point of concern in the region.
According to British weekly The Economist, over the past five years, 75 percent of Chinese mergers and acquisitions in Latin America have involved power supply operations. “The threat is not so much that China might turn off the power, but that it has acquired a tool to exert more subtle geopolitical pressure. China is trying to create a situation in which it modifies Latin America’s external environment to suit its interests,” The Economist reported.
Brazil is the most recent example. In 2023, the State Grid Corporation of China (SGCC) won the most expensive tender in the country’s history, with a $3 billion investment to build and control some 1,400 kilometers of transmission lines in the northern states of Maranhão, Tocantins, and Goiás. Since 2010, State Grid has become, through a series of acquisitions, the owner of more than 16,000 km of transmission lines, including the section connecting the Belo Monte Hydroelectric Plant in Pará state to the country’s south.
In Peru, following a series of acquisitions, state-owned companies, including China Southern Power Grid (CSPG), have come to control the distribution of all electricity in the capital, Lima. In Chile, China controls more than two-thirds of the entire energy sector through two state-owned companies, State Power Investment Corporation (SPIC), and State Grid International Development (CSGID).
According to geopolitical news magazine The Diplomat, “investing in the energy sector is another way for China to create economic leverage through infrastructure projects to support the expansion of other projects on Beijing’s agenda.” In Chile’s case, according to The Diplomat, other projects include lithium and copper exploitation, with China capturing close to 70 percent of these exports.
Domestic reports from other countries, such as that of the Philippine government made public in 2019, denounce the risks of China-controlled power grids. According to the report, the biggest danger is the Chinese government’s “total control” over State Grid transmission lines, including the “ability to disrupt national power systems” with a simple switch.
“While Chinese financing and trade may seem attractive to Latin American countries, their leaders must carefully weigh the economic and security risks when a foreign country — or even a company — establishes a monopoly over energy infrastructure. This can lead to higher energy costs and even a lack of sovereignty for these countries,” says Ratzlaff.
Photovoltaics
In recent years, China heavily invested in what is referred to as the “new three,” namely electric vehicles, lithium-ion batteries, and solar panels. According to The Economist, by 2021 its exports of these products to Latin America already amounted to $5 billion. Up to 99 percent of the solar panels used in the region are Chinese.
“Any monopoly situation is not good for the development of the solar industry in the Americas because you are tied to a single supplier who often does not share technology with local producers,” Michael Brennan, an expert on energy issues and former chief policy advisor for North American energy policy and infrastructure coordination at the U.S. State Department’s Bureau of Energy Resources, told Diálogo.
According to Brennan, “with Beijing’s monopoly, the energy security of countries of the region is at risk because it is not them, but China, who makes the decisions on the development and use of resources. This scenario could even lead to trade disputes and energy wars.”
In a recent paper, Beijing’s Influence on Latin America’s Energy Mix is Growing, Washington-based think tank Atlantic Council indicates that if Chinese companies were to take over the entire solar energy value chain, Latin America would be excluded from the benefits of a green transition. “Even more worrisome, however, is the possibility that Beijing would use its monopoly of electricity markets to extract geopolitical concessions from the region,” the report indicates.
Beijing recently announced that it will open a photovoltaic panel factory of Chinese company Livoltek in Brazil’s Amazonas state. In addition, in July 2024, SPIC inaugurated the Panati Solar Complex in Jaguaretama, in the northern state of Ceará, and the Marangatu Photovoltaic Park in Piauí, also in the northeast of the country. The Chinese state-owned Power Construction Corporation of China (POWERCHINA) will build three solar power plants and a transmission plant in Mauriti, also in Ceará.
There is also the risk that solar panels could enable backdoor hacking of the power grid. According to a report by Washington-based risk analysis firm Ridge Global LLC, a breached inverter could not only disrupt power usage but could also be used to hack into the power distribution company or even access industrial control systems and the entire power grid. In addition, controlling multiple inverters could allow China to reduce power, decide on power flows, or even create an electrical overload on the grids. With this power, it can subject countries in the region to its economic and geopolitical agenda.
In Chile, Chinese state-owned electric car company BYD recently signed an agreement whereby solar energy captured in the Atacama Desert through the Oasis International project will be stored in its batteries. In Colombia, POWERCHINA inaugurated in April 2024 a photovoltaic park that for the first time in Latin America will supply energy to a refinery in Cartagena, in the Colombian Caribbean.
“China is trying to control the expansion of solar power with its below-cost exports to sustain Chinese employment and disrupt global competition. Latin American trade authorities should monitor the ‘dumping’ of solar panels, i.e., selling them below the Latin American market price, and ensure that China complies with World Trade Organization rules,” Brennan said.
Wind energy
In Brazil, in Camaçari, in the northeastern state of Bahia, a wind turbine factory of Chinese state-owned company Sinoma Wind Power has been in operation for the past few months. According to experts, this factory is strategic for Beijing’s interests in Camaçari, where China’s BYD is also building its first Brazilian automobile factory. The creation of this Chinese hub in a city of about 300,000 inhabitants has not been without problems. In March, according to union reports, Brazilian employees at Sinoma organized strikes and protests accusing Chinese management of verbal harassment, xenophobia, and labor rights violations.
Beijing’s construction of wind turbines has also come under scrutiny by experts.
“While access to these goods could allow Latin America and the Caribbean to more easily adopt green energy solutions, the expansion of cheap imports using regional raw materials risks creating a new form of economic dependency,” Ratzlaff says.
Nuclear energy
In addition, Beijing is expanding its energy strategy in Latin America in the nuclear sector through the China National Nuclear Corporation (CNNC), a state-owned company that also serves China’s military interests. According to its charter, CNNC “combines nuclear weapons production with civilian production.” The Chinese company has already shown interest in Brazil’s nuclear program, especially in the production of small nuclear reactors to support power generation and other industrial applications.
Recently, state-owned company China Nonferrous Trade (CNT) bought Mineração Taboca S.A. for $340 million in Pitinga, in the Brazilian Amazon. The company produces tin in an area with uranium deposits and other minerals.
Argentina, for its part, has halted its contract with China for the construction of its fourth nuclear power plant, Atucha III, which Beijing agreed to finance 85 percent. Among the many issues is the risk of dependence on China over enriched uranium for proper operation of the plant.
“The risk for Latin America is the possible Chinese dominance of materials, but also of infrastructure, a dominance that could deprive countries of the region of the ability to control their own national resources,” explains Brennan.
For the expert, Beijing seeks to control assets in the long term and often incorporates its own people, which leaves little room to maneuver for countries of the region and, sometimes, an impressive debt with China. These factors, together with the monopoly position in energy networks, risk pushing countries in the region into a position of dependence on China, which it can exploit for geopolitical and economic interests — a threat to security in the region.
[Wiew source]
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