TOP 5: LATAM INFRASTRUCTURE IN 2018

As part of its recent push to incorporate Latin America into its global Belt and Road Initiative, China is investing heavily in infrastructure projects in Brazil, Chile, and Argentina. Here are five of the most intriguing.

A Chinese ship is loaded with soybeans at Port of Santos May 19, 2015. REUTERS/Paulo Whitaker


Latin America is still the second largest recipient of Chinese investment of any region in the world, despite the fact that this total investment is just half of what Ethiopia alone receives.

The largest trading partner of Brazil, Chile, and Peru, China has loaned more than USD140 billion to the region for infrastructural projects in the past decade alone.

Capital-rich and infrastructure-savvy, it has exactly what its Latin American trading partners most desperately need. And they, rich with foodstuffs and raw materials, have what China needs to feed and house its 1.3 billion people.

These are five of the biggest infrastructure projects China is financing to bring Latin America's raw materials to market.

Train to the Clouds: Argentina's Belgrano Plan

Though Argentine president Mauricio Macro originally pledged to disentangle his country from a series of grand bargains his predecessor had struck with Beijing, actions have proved louder than words since he took office.

Hoping to get out of Cristina Kirchner's agreement to borrow USD4.7 billion from China to build a dam on the Santa Cruz river in Patagonia, Macri soon learned that recipients of Chinese largess oughtn't be picky.

Part of a larger USD20 billion package in loans for infrastructure projects agreed upon in 2014 alone, Macri soon learned that if the hydroelectric project didn't go ahead, funding for the 'train to the clouds' (Argentina's fabled San Martín railway network) would also be cut.

Starting in Buenos Aires and stretching north to Salta near the Bolivian border and west to Mendoza on the Chilean, Argentina's San Martín rail network connecting the capital to the Andes, the Argentine hinterland (and some day the Pacific) is in desperate need of life-support.

Hence the national importance of the Chinese pledge to pump USD2.4 billion into the ailing network.

It is also now a crucial part of President Macri's larger 'Belgrano Plan,' set to reinvigorate the economies of Argentina's neglected ten northern provinces with USD16 billion in investment over the coming decade. This includes 250,000 new housing units and 1,100 new early childhood centers in addition to the railway upgrades.

Overseen by China Railway Construction Corp, the infrastructure upgrades will deploy High-Output Plants to 726km of the network's 1,626km, bring in new rolling stock, update 120 bridges, and create 26,000 jobs, according to the Argentine Ministry of Labor.

Under the deal China has already sold Argentina 3,500 wagons, of which 2,500 have been delivered, and 107 locomotives, which will be handed over in the first half of 2018. Once completed, the upgrades are expected to boost cargo moved from 2.3 million tons today to 13 million a year by 2024.

With upgrades already complete on the first 500km of track, the Argentine government reported that railway freight was already up 70% in the first trimester of 2018 on last year.

Chile-Argentina trans-Andean tunnel

In keeping with the broader trend of connecting the Andean with the Atlantic regions of South America, a Chinese consortium including the state-owned Power China and the Chinese Communications Construction Company put forward a bid in February to build a 13km tunnel under the Andes to connecting Chile's Pacific Coquimbo region with the Argentine province of San Juan.

Both important mining regions, the Agua Negra (black water) tunnel would take an estimated 10 years and cost USD1.5 billion.

Unlike many other cross-border routes, it would be able to operate year-round. Marking a huge breakthrough in cross-Andean travel and infrastructural ties between Latin America's third and fifth-largest economies, it would also significantly facilitate the transportation of Argentine commodities back to China.

In competition with major Spanish and Italian firms for the bid, the official tender for the project is scheduled to begin in September. The Inter-American Development bank has already lent Argentina USD130 million and Chile USD150 million toward the tunnel's completion.

Trans-Amazonian Railway, or Trans-Andean?

In 2015 there was much buzz in the air over a proposed Chinese-planned Trans-Amazonian railway to connect the Peruvian Pacific with Brazil's Atlantic Açu port across a vast 5,300km stretch of South America, much of it rainforest.

Though China's then-prime minister Li Keqiang concluded a 2015 tour of South America with promises from Peruvian and Brazilian leaders that feasibility studies were fast on track, little has come of the project since then.

Designed to help bring Peruvian and Brazilian grain and raw materials quicker to the Chinese market, recent (Peruvian) estimates have put the project at USD60 billion—surpassing even that of the Three Gorges Dam (USD59 billion).

Generating a large deal of negative publicity for its expected impact on indigenous groups and the rainforest, the railway's announcement coincided with Brazil's worst recession in decades.

Peruvian president Pedro Pablo Kuczynski, elected a year later (before resigning in March), also opposed the project for being too expensive and environmentally detrimental.

Ironically, these objections may have partially paved the way for the major announcement in December 2017 that a Swiss-German consortium was going forward with plans to build a separate trans-South American railway several hundred miles to the south.

Planned to traverse 340km of Peru, 1,521km of Bolivia, and 1,900km across southern Brazil to the Sao Paulo port of Santos, at 3,755km the route is considerably shorter, bypassing the Amazon, and will connect landlocked, mountainous, largely inaccessible, and poverty-stricken Bolivia with both the ocean and Brazil.

In a huge blow to Chinese ambitions, Bolivian President Evo Morales traveled to Switzerland in January to sign an MoU with Swiss president Doris Leuthard and the rest of the Swiss-German consortium, including Swiss railway firms and Germany's State Secretary of Transport, Building, and Urban Development, Rainer Bomba.

With the technical secretariat scheduled to begin work in January, all three South American countries have greenlighted the project. It is scheduled to be finished by 2025, just in time for Bolivia's 200th anniversary.

High-speed train from Santiago to Valparaiso

In January a Sino-Chilean consortium led by China Railway Group Limited (CREC) and Chile's Sigdo Koppers and Latinoamérica Infraestructura proffered an unsolicited proposal to President Michelle Bachelet for a USD1.6 billion highspeed railway between Santiago and Valparaiso.

Connecting the capital with the country's chief Pacific port and second-largest city in 45 minutes, the train would cut the 127km journey by more than half. Not only did the consortium claim it was ready to start building tomorrow; it would also be entirely privately financed.

Calling itself Tren Veloz Santiago (TVS, or Highspeed Train Santiago), the consortium has not revealed what kind of ownership or investment arrangement has been reached between CREC and Sigdo Koppers, a Chilean engineering and mining conglomerate with over 10,000 employees.

Whatever the case, the offer was not only generous (on paper), but extremely timely. Only two weeks later Santiago hosted the second ever China-Community of Latin American and Caribbean States (CELAC) Forum.

Attended by 33 country representatives, it was if nothing else a rhetorical coup for Beijing. On the one hand, Chilean foreign minister Heraldo Munoz praised China for playing a “very constructive role in addressing" the “complex and uncertain times" in which we're living.

On the other, Chinese foreign minister Wang Yi used to opportunity to express his country's desire to bring the Belt and Road Initiative to Latin America first and foremost through major infrastructure projects.

While the inaugural high-speed train (200km/hour) would be a much welcome addition to Latin America's richest country, it would not be the first time the Chinese pursued such a bargain.

In 2014, it made headlines after winning a contract to build Mexico's first high-speed railway between Mexico City and the rich, industrial center of Querétaro some 210km away.

Yet within hardly six months, the much-publicized deal was canceled.

While the government cited budget shortfalls from the crash in commodities prices, namely oil, there had been much public furor after it emerged that a member of the consortium had sold President Peña Nieto's wife a USD7 million property in Mexico City on the eve of signing the contract.

After much speculation that Chinese bidders had also been given 11 months' notice of the bid and met with Mexican foreign minister Luis Videgaray (then finance minister) 10 days before the official tender was launched, Siemens, Mitsubishi, and Bombardier each pulled out, leaving the Chinese-led consortium the de facto winner.


USD20 billion Chinese-Brazilian infrastructure fund

Chinese Premier Li Keqiang greets Brazil's President Dilma Rousseff during a meeting at the Planalto Palace in Brasilia, May 19, 2015. REUTERS/Ueslei Marcelino


The Chinese invested USD12 billion in Brazil 2016 and USD20.9 billion in 2017, according to Brazil's planning ministry, an eight-year high. This included the creation in 2017 of a USD20 billion bilateral infrastructure fund, three quarters of which will be funded by China and the remainder by Brazil.

Chinese investment correlates strongly with the health of Latin America's largest economy. In 2014, as global commodity prices began to go south, Chinese investment in the country dwindled to practically nothing.

In 2015 and 2016, Brazil's economy contracted by nearly 10%, its worst recession in history.

With the Chinese-backed infrastructure fund now accepting major bids since January, Brazilian vice planning minister for international affairs Jorge Arbache hopes to have five approved before the end of the year.

Top among these will be a bid by a consortium of Chinese state-owned firms to build the 1,100km Ferrogrão railway from the country's central western grain-producing regions to the northern Para port of Miritituba, according to Adalberto Vasconcelos, secretary of PPI, the government's public-private partnerships program.

The project is estimated to cost USD3.89 billion.