Beijing is seeking to position itself as a leader in the electricity sector in Latin America through strategic investments and acquisitions, taking advantage of gaps left by other companies, Uruguayan news site Latinoamérica 21 reported.
“This could generate technological and economic dependency on China, which would allow Beijing to become a superpower with global influence,” Latin America expert Luis Fleischman, a sociology and political sciences professor at Palm Beach State University in Florida, told Diálogo on July 18. “This is an ambition for which Xi Jinping has made special efforts.”
According to the Center for Global Development Policy at Boston University (BU), during several decades China has been financing electric power plants worldwide, through foreign direct investment and loans from the China Development Bank and China Export-Import Bank.
China’s strategy in Latin America is clear: “to own the light,” Latinoamérica 21 reported. According to BBC Mundo, Beijing has invested large sums of money to acquire consolidated assets instead of building from scratch, taking advantage of the exit of European companies and the decline of companies linked to the Lava Jato (Car Wash) scandal, a corruption case with multiple ramifications that in recent years has involved prominent public figures in Brazil and which had Petróleos do Brasil as one of its epicenters.
Chinese companies and policy banks back 648 overseas power plants, representing 1,423 individual power generating units, providing a total of 171.6 gigawatts of power generation capacity in 92 countries, the BU indicated.
According to its data, Chinese firms made inroads into Brazil’s electricity sector with 114 merger and acquisitions and debt financing projects. They also carried out 10 deals in Chile and Mexico respectively, three in Peru and two in Ecuador.
Between 2017 and 2021, China acquired 71 percent of companies in Latin America, for a total of $44.4 billion, Latinoamérica 21 reported. China’s control in the region stands out compared to other corporations’ investment in the electricity sector, which reaches only 7 percent.
China seeks control through “soft power” to make other countries dependent. The projects under the Belt and Road Initiative give Beijing strategic and political advantages, Latinoamérica 21 added.
Italian energy group Enel announced in April that its subsidiary Enel Peru agreed to sell its stake in two energy assets to China Southern Power Grid International (CSGI), which represents a concentration of the electricity distribution market in the city of Lima, Peruvian newspaper El Comercio, reported.
Enel Peru covers just over half of Lima’s population, Reuters reported. In 2020, China’s Three Georges Corporation acquired Luz del Sur, which provides energy to the other half of Lima. The National Society of Industries of Peru (SIN) expressed its concern over the sale and purchase agreement between CSGI and Enel Peru
The Peruvian government should consider all the implications of allowing two foreign state-owned companies to control 100 percent of the electricity distribution service, in a key strategic sector for the country’s economic development, SIN said in an April 11 statement.
This is not about the creation of a monopoly in private hands but the creation of a monopoly in the ownership of electricity distribution in the hands of a foreign power, which could expose consumers to excessive prices as a consequence of the absence of competition, SIN warned.
“China’s energy dominance can generate widespread discontent, as seen in Pakistan and other countries in Asia,” Fleischman said. “Chinese companies displace local companies, causing environmental and economic consequences. China’s expansion is at the expense of local industry.”
In addition to Peru, Beijing is also showing interest in Colombia. In April, a delegation from China Yangtze Power International visited Bogotá to meet with authorities and explore the local market. In this country, China has no participation in the electricity distribution sector, according to Chilean news site DF SUD.
Direct investments in electric companies have replaced government-to-government loans in Beijing’s strategy to expand its influence in Latin America. These loans present an uncertain return scenario. In addition, several southern countries are at risk of default, Latinoamérica 21 reported.
“The lack of debate and transparency in agreements between China and Latin American governments, especially leftist ones, could lead them to engage in problematic business without realizing it and lead the population to later discover the harmful consequences of Chinese intervention,” Fleishchman said.