[News] China's progress in the control of electricity distribution raises alarms in Chile

[FNX Magokiler]

With the acquisition of CGE, the main electricity operator in Chile, the Chinese regime will control more than half of the country's electricity distribution from Beijing, which has raised concerns in different sectors.

In April 2019, the first Chilean president, Sebastián Piñera, visited China just days after leading a repudiation event against Nicolás Maduro on the border of Venezuela and Colombia, together with his Colombian counterpart, Iván Duque, and in the presence of Juan himself. Guaidó. After this, and while developing his tour of Asia, he was consulted about his opinion about China, a country that has a communist regime. In this regard, Piñera replied: “We have been in diplomatic relations with China for 50 years. Each one has the political system they want to give themselves. What matters in this case is that between China and Chile we are seeking, with pragmatism, paths, collaboration that benefits both peoples, ”he said.

In the Chilean media, and from various sectors, the President's response was considered a contradiction. However, the same president defended his opinion. "Chile has not only diplomatic relations, but also friendship with all the countries of the world, and we have them with the United States, we have them with Europe and we also have them with China," he remarked.

 

At that time, Piñera said that that meeting “with the main public authorities of the Chinese Government, and with the main Chinese entrepreneurs and innovators, is something that does good for my country, that does good for Chileans, and that is why we are here".

On the same occasion, Sebastián Piñera, who traveled accompanied by various businessmen and even with his children, something for which he was harshly questioned in Chile, also held a meeting with his Chinese counterpart, Xi Jinping. With him, it signed an agreement with a strategic roadmap for 2019-2022, which includes work on 14 initiatives in areas such as economy and trade, transport, politics, science and technology, innovation, agriculture and telecommunications. In addition, it signed an agreement on trade defense and a protocol for the export of pears from Chile to China.

The foregoing serves to put in context the auspicious relationship that the Andean country maintains with the Chinese regime. From a trade perspective, this has been especially evident in the last two years, in which China has become one of the largest foreign investment partners. An achievement for the Piñera administration, which confirms an office dependent on the Chilean government installed in charge of promoting trade relations with the Asian country: China Desk Invest Chile. This was confirmed to the newspaper La Tercera Alicia Zhu, an investment promotion executive from the same department. "Despite the pandemic, five new projects from China have been added to our portfolio, adding 27 initiatives for US $ 4.47 billion at the end of the first half of 2020," he explained.

The latest and one of the most bombastic announcements for the Chilean economy is the sale of the most important electricity distribution company CGE to the Chinese state company State Grid International Development Limited (SGIDL). With the agreement, China would position itself in a market considered strategic in Chile, something that has attracted criticism from different sectors of politics. Thus, the official Senator of National Renovation (RN), Rodrigo Galilea, declared that “it is totally inadvisable for a state company, from any country, to be the owner of Chilean companies that are monopolies regulated by the State and when your counterpart is a company that it is from a State, it does not cost anything for that country to send its ambassador to ask for better tariff conditions ”, he declared.

With this latest incursion of SGIDL in Chile, in the electricity sector, it acquires a total of 96% of the largest energy distributor, and would control 52% of the national electricity commercialization in the distribution segment in general and 57% in that of domestic distribution.

The Chinese state company had already taken over in recent years a large part of the electric power companies in this country, in its different segments: in generation with Pacific Hydro, in transmission with Transelec and in distribution with Chilquinta, the latter acquired at the end of 2019 for $ 2 billion dollars.

Due to this aggressive monopolization of companies in the same category, the purchase of CGE will have to cross the barrier of the rules of the National Economic Prosecutor's Office and the Free Competition Court. But the Chilean authorities trust that they will be able to definitively close the purchase by February 2021.

The Minister of Energy of the Government of Piñera, Juan Carlos Jobet, in front of this purchase stated: “It is a clear and new sign that investors are looking favorably on the modernizations of the energy sector and that they trust the institutionality and rules of the game of our country ”.

And it seems like a generalized position. Foreign Minister Andrés Allamand responded to critics of the advanced Chinese trade in Chile, warning that it is something natural inherent to the good relations that have been maintained with Asians for 50 years. “Chile has long-term State policies where we have always reaffirmed our commitment to an open and non-discriminatory economy. There are countries that effectively limit foreign investment in certain areas. In any case, we pay attention to the regulations and reasons that other countries adopt in this matter. (…) “In the specific case of this investment (Electric), it must be considered that it is a highly regulated sector, where each company operates only in its concession area. The State sets the rates and closely monitors that all regulations are met, ”he declared.

For his part, the Minister of Economy, Lucas Palacios, calls for trust in the "solid" institutions in charge of regulating the markets of his country. “Chile has extremely robust legislation and institutions, with rules that govern both local and foreign companies. This legal framework protects the proper development of the different economic activities, which are subject to our regulations in defense of the interests of our country ”, says Lucas Palacios, he warned.

Senator Galilea mentions in his warning that Australia has faced China on trade issues, that the United Kingdom decided not to include Huawei in the deployment of its 5G network, a decision that Brazil is also evaluating as one of the main investment destination countries. Asia, and that the United States limited the expansion of Tik Tok in its territory, among others.

A mechanism to restrict the access of foreign capital or states in certain activities exists in several countries such as the United States, Australia and New Zealand, but not in Chile, as it is conceptually an open economy. However, it has emerged that some government officials admit that Chile would be studying it, in order to implement some type of specific filter for future commercial operations, especially those that are aimed at controlling the so-called strategic companies, such as the distribution of electricity. .