Sino-Dependency? Brazilian Oil Exports To China Surge

The world's second-largest economy is now Brazil's top customer for oil, but also its most important buyer of soybeans, iron ore and cellulose.

Sino-Dependency? Brazilian Oil Exports To China Surge
Renata Agostini and Alvaro Fagundes

SAO PAULO â€" Chinese imports of Brazilian oil have increased more than threefold this year, turning Beijing into Brazil's best customer for crude. Perhaps unsurprisingly, this spectacular upsurge comes as oil giant Petrobras is bolstering its ties to China to secure crucial investment. In the past month alone, the state-owned company received $7 billion in credit from Chinese banks.

Between January and May 2015, Brazil sent 5.4 million tons of oil to the Asian country. That's 35% of all Brazilian exports during that period, and the biggest purchase made by any country. By comparison, the United States, the biggest importer of Brazilian oil last year, only bought half of what China did in the first five months of 2015.

This sudden boom helped Brazil's oil sales reach a new record high, 80% more than for the same period last year. But revenues are nonetheless down because the per-barrel price of oil has fallen 40% over the last 12 months.

The trend is also significant because it's not limited to oil, and it increases Brazil's reliance on Chinese demand in general. The world's second-largest economy is now Brazil's best customer for four of the country's 10 top export products, after becoming the most important buyer of soybeans, iron ore and cellulose.

The beginning of a beautiful friendship

Trade between Brazil and China began to grow in the last decade but only boomed when prices of basic products rose worldwide. Back in 2000, exports to the Chinese market amounted to little more than $1 billion. Last year, they topped $40 billion, driven by soybeans and ore.

Beijing started taking an interest in Brazilian oil in 2009. That year, while then-President Lula da Silva was visiting, the country freed up $10 billion to invest in Petrobras through the China Development Bank. The loan came together with an agreement to provide oil to China's Sinopec, which owns refineries across the country, for the next 10 years.

The next year, Chinese companies started to establish themselves in Brazil. Sinopec invested in energy company Repsol's Brazilian branch while Sinochem â€" another Chinese state-owned company â€" acquired 40% of Brazil's Peregrino offshore oil field from Norway's Statoil.

China National Offshore Oil Corporation (CNOOC) and CNPC, also controlled by Beijing, followed in their footsteps in 2013 when they participated in a worldwide consortium to explore the Libra oil field, which lies deep in the Atlantic under a thick layer of salt, about 200 kilometers off Rio de Janeiro. Both companies hold 10% in the consortium while the operator Petrobras controls 40%.

This year, amid a massive corruption scandal, Petrobras once again turned to Beijing to ask for money. Two loans for a total of $7 billion were approved to rescue the Brazilian company.

"This suggests that more Brazilian oil will travel to Asia," says Virendra Chauhan, an analyst for British consultancy company Energy Aspects. "Considering the financing difficulties Petrobras is facing, Brazil has no choice but to turn to China for more loans in exchange for more oil."

Oil represented a mere 0.5% of all Brazilian exports to China, in terms of value, 15 years ago. That figure now stands at 13%. And counting.

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In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.

It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park


Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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