On November 17, 2015, the China National Nuclear Corporation (CNNC) and Argentina‘s Nucleoelectrica finalized a deal for China to finance and construct two nuclear power plants in the South American country. The total cost of the two plants will amount to some $15 billion. The first plant will use Canadian ‘‘‘Candu‘ technology, while the second is to use China‘s indigenous Hualong One reactor. For many Argentinians, however, this deal reinforces the belief that the country has developed an unhealthy reliance on China. The favored victor of the upcoming Argentinian presidential elections, Mauricio Macri, has already promised to review recent deals signed with China, if he is elected. Argentina currently has three nuclear reactors in operation, and these two additional reactors would give it a strong foothold in the Argentinian energy market.
These two projects are to be financed in large part by the Industrial and Commercial Bank of China, which will reportedly cover 85% of the total costs of the project, to be paid back over 18 years at an annual interest rate below 6.5%. The willingness of these Chinese companies and banks to offer financial terms of this kind to a country that has faced as much economic and financial turmoil as Argentina makes it difficult ‘‘‘ if not impossible ‘‘‘ for any Western competitors to compete. Indeed, they are unlikely to take on such a level of risk. China, however, may, in fact, have an agenda that is broader than examining this deal and making the relevant risk and return calculations in isolation, as the country is seeking opportunities to expand its nuclear technology exports, establish a credible position in the global market and take advantage of as many opportunities as possible. China has a stated goal of constructing 30 of the 200 nuclear plants that its economic planners believe will be under constructing worldwide by 2030.
In short, China‘s investments in Latin America underscore the willingness of its state-owned enterprises to pursue deals that have a level of risk that deters Western companies (or, at minimum, that have a clear impact on the terms that they are able to offer). Both Argentina and Venezuela, for example, are effectively locked out of international credit markets, yet have seen recent, large-scale Chinese investment. Deals such as these, containing non-market elements, namely the subsidized nature of Chinese state-owned enterprises and the unmatchable financial terms they offer, should be observed for their strategic motivations, not just their commercial ones.