The Chinese are coming to Latin America, and there's a party waiting for them. They've been visiting for a while, but this trip is different.
State Grid is in talks to acquire a stake in the Brazilian utility CPFL Energia from a troubled construction company, Camargo Correa, Bloomberg News reported. The deal makes a lot of sense for the Chinese power company.
More than 70 percent of the $80.3 billion of assets the Chinese have bought in Latin America were concentrated in raw materials or finance, the latter mainly institutions that handle trade finance, according to data compiled by Bloomberg. The biggest transactions followed the same pattern. The underlying strategy was to secure China's supply of commodities.
State Grid's possible deal with CPFL may solidify its position in Brazil's transmission market and help the government-owned company win mandates to build connections in the world's sixth-largest nation by area. Given that the seller needs quick cash, State Grid is probably buying CPFL cheap, too.
China itself has little to gain from the deal. That's why troubled Brazilian enterprises will be happy to hear about it. If Chinese state-owned companies start evaluating potential acquisitions in Latin America by their business value rather than their strategic importance to Beijing, the list of targets is long.
Perhaps, for a start, China Telecom should have a look at Oi, one of Brazil's largest mobile operators, which just filed for a record $19 billion bankruptcy and might like a deep-pocketed foreign suitor at almost any price.
There are several companies that would benefit from yuan support, many of them good assets available at low prices that don't necessarily have strategic value for China.
So if Chinese SOE bosses are flocking to Rio de Janeiro, Sao Paulo and beyond for bargains, rather than to fill ships with raw materials and goods -- welcome, there's plenty on offer.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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