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Chinese investment in Chile sparks opportunities, concerns – Al Jazeera English



Santiago, Chile – Two years ago, Chinese moviegoers started eating Chilean blueberries instead of popcorn at the cinema. The treat — called “Blue Pop” and served in small red-and-white-striped boxes — was the brainchild of the Chilean Blueberry Committee, which hoped to make the South American-grown fruit a must-eat in the world’s most populous country.

It worked. The Asian market has accounted for 37.8 percent of Chile’s fresh fruit exports during the 2020-21 season to date, according to the Chilean Association of Fruit Exporters (ASOEX).

The proportion of Chile’s fresh fruit exports going to Asia has grown 16.4 percent year-over-year, allowing China to surpass the United States as Chile’s top destination for fruit exports.

Blueberries are just one example of the growing ties between the two economies. Chinese companies in the country provide 5G mobile phone service, distribute electricity and operate banks, among other activities.

Now there are medical investments in the works as well.

In August, Chinese firm Sinovac announced plans to invest $60m to build a vaccine manufacturing plant in the Santiago Metropolitan Region.

Once up and running, the plant will be capable of producing 60 million doses of Sinovac’s CoronaVac vaccine, officials said, and it is targeted to start operations in the second quarter of 2022. The company will also build a research and development centre in the northern region of Antofagasta.

Chilean Health Minister Enrique Paris called the announcement “a happy day for Chile; but not only for Chile, because the factory will be able to produce vaccines for export to Latin American countries that have experienced difficulties in acquiring them”.

But China’s interest in Chile has also provoked unease — especially when it comes to investment in strategic sectors of the country’s economy — as well as concerns from traditional trading partners like the US and Canada that they are getting left behind.

An engine for growth

China is Chile’s largest trading partner, and trade between Chile and China has become one of the most important engines of the Chilean economy, which is beginning to show signs of recovery as the economic effects of the coronavirus pandemic fade.

Solar panels stand in the Quilapilún solar energy plant, a joint venture by Chile and China, in Colina, Chile [File: Esteban Felix/AP Photo]

“There is a long-standing economic, political and institutional relationship between the two countries,” Andres Rebolledo, an economist and former Chilean minister of energy, told Al Jazeera.

“The Chilean government has made a systematic effort for years to attract Chinese investments — it has sought them out and encouraged them,” he added.

InvestChile, a government agency that promotes foreign investment in the country, listed 30 projects from China in its portfolio at the end of the first semester of 2021 — projects worth a total of $5.64m, half a million dollars more than those from the US.

Total investments from Chinese firms add up to some $690m, and of those, energy and infrastructure represent $3.8m and $1.2m, respectively.

“Chinese investment has arrived in Chile later than other countries, and it continues to grow,” Andres Rodriguez, director of InvestChile, told Al Jazeera.

China’s Foreign Minister Wang Yi (left) and Chile’s President Sebastian Pinera (right) met at La Moneda presidential house in Santiago, Chile on July 27, 2019, for talks about free-trade negotiations, among other topics [File: Esteban Felix/AP Photo]

“That’s why it attracts attention today, but we have a very important historical portfolio of investment from the United States, Spain or Canada, which continue to be the main investors in Chile,” he added.

Despite the ongoing coronavirus pandemic, five new projects from Chinese firms have been added this year, including an ambitious public works investment portfolio with some $14bn earmarked for the 2020-2024 period, signalling a growing appetite by Chinese firms to invest in the sector.

Rodriguez added that InvestChile supports the arrival of Chinese companies and intends to continue to put “Chile on the map for Chinese investors”.

InvestChile, in turn, has created its own tracker of Chinese investments, which lays out which sectors are receiving investments and how much. The tech, mining, financial and food sectors all have prominent positions.

That is consistent with findings from a recent report by the United Nations Economic Commission for Latin America and the Caribbean, which posits that China’s goal is to acquire “strategic assets in infrastructure sectors” thereby “increasing its presence in the Chilean market”.

Opposition to investment

But not everyone is happy with China’s increased interest. Some analysts and politicians have called Chinese investments in the country’s electricity sector threats to “Chilean sovereignty”.

The purchase of electric companies Chilquinta and General Electricity Company (CGE) by Chinese firm State Grid International Development Ltd (SGIDL) left more than 60 percent of Chile’s national electricity distribution market in the hands of SGIDL, which bought Chilquinta in October 2019 for $2.2m, and a year later reached an agreement to acquire CGE for around $5bn.

Last December, a group of Chilean congressional representatives expressed concern about these purchases, insisting on the need for stricter regulation of foreign investment.

The lawmakers also requested more information about the implications of the purchase and a report on how other countries are dealing with such acquisitions in strategic sectors.

Chinese President Xi Jinping (left) walked with his Chilean counterpart Michelle Bachelet (right) during a welcome ceremony outside the Great Hall of the People in Beijing on May 13, 2017, when Bachelet was attending the Belt and Road Forum for International Cooperation [File: Andy Wong/AP Photo]

In March this year, the National Economic Prosecutor’s Office (known as FNE, its acronym in Spanish) unconditionally cleared SGIDL’s acquisition of CGE, concluding that “the merger would not substantially lessen competition in the electricity generation, transmission and distribution markets.”

There is also a controversy about plans by Aisino Corp, a well-known Chinese consortium, to produce new Chilean identity cards, passports and personal databases for Chile’s Civil Registry and Identification Service.

Aisino bid $222m, the lowest offer of the five competing businesses, and a decision is expected to be made in October to determine which firm will start working on the identity cards in December.

But the Chilean Ministry of Foreign Affairs, which views the relationship with China favourably, stressed that it has a foreign investment strategy in place and welcomes investors from around the world so long as they abide by the rules.

That’s partly because the current situation has also been good for Chilean companies.

Chile’s exports increased 27.3 percent between January and July of this year compared to the same period of 2020, and China was the main buyer with a nearly 40 percent share of total exports, according to a foreign trade report issued by Chile’s National Customs Service. Indeed, China is the largest buyer of Chile’s minerals including copper.

Uncertain future

What role Chinese investment will play in the future in Chile remains to be seen, however.

Chile is in the midst of a period of political uncertainty and profound social change: the drafting of a new Constitution is underway, and presidential elections will be held in November.

Among the candidates are Gabriel Boric, a former student leader representing a coalition of leftist parties, and former social development minister and state bank president Sebastian Sichel, who won the primary on the right. Each is sure to present his own vision for the role of foreign investment in Chile.

Some investors are wrestling with the usual fears about what the upheaval of adopting a new constitution and embracing a new president might mean for foreign investment.

But others say these changes are part of a process that will follow its course.

“Chile is an open country with a diverse economy and several investors from different countries,” Longyan Shen, business director on the Asia desk of Ernst & Young Chile, told Al Jazeera. “The same happens with Chilean society, which has an open mind and an increasing diversity of people. This has allowed Chile’s success, and I believe that people will continue to want the best for the development and growth of their country. I am optimistic.”

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Ontario supports investment of $31.5M in Wellington, Perth county businesses – CTV News London



London, Ont. –

Ontario supports $31.5 million surge within the Southwestern Ontario economy with $2.6 million being invested in Wellington County through the Regional Development Program.

The investment by Wellington County manufacturers, which will build on domestic manufacturing is being supported by the Ontario government, will help to create 71 jobs and retain 150 jobs.

“Through the Regional Development Program, our government is making targeted investments in local manufacturers to help them create good, local jobs,” said Vic Fedeli, Minister of Economic Development, Job Creation and Trade in a statement.

“These projects are making a significant impact in communities and economies across the Wellington County region and Southwestern Ontario by helping to secure the private-sector investment that will support strong regional growth.”

The investments are as follows:

  • Weberlane Manufacturing is investing $4.8 million to build a new 115,000 square foot manufacturing facility in Listowel.
  • Nieuwland Feed & Supply is investing $16.2 million to consolidate its production facilities as well as build a second feed mill on the property.
  • Bold Canine is investing $6.5 million to expand and renovate its facility, purchase equipment, and invest in research and development.
  • Wellington Perforated Sheet and Plate is investing $3.9 million to develop new products, and produce more steel parts in-house.

The Regional Development Program for Eastern and Southwestern Ontario was launched by the government in November of 2019.

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U.S. equity portfolio manager explains seven-step investment process – Wealth Professional



The third step is identifying growth drivers. Sanders carries with him words from an old mentor – ‘always understand what drives top-line revenue’. For example, when Sanders first invested in Amazon back in 2003, when it was $17 a share, online penetration of retail sales in the U.S. was only 3%, but he believed that number was going to grow substantially over time. He met with Jeff Bezos who explained his competitive advantages – widest selection, lowest prices and convenience – completed his analysis and bought the stock. Sanders said: “That’s an example of a company that had a clear growth driver – penetration of its end market with offline retail going online.”

The fourth step is a financial statement analysis, getting into the nitty gritty of the balance sheets from a cash-flow perspective, while the fifth step is a management team assessment. Sanders is not interested in a company’s latest shiny product but instead wants to understand the key assumptions that go into his team’s investment process. ESG factors are also analysed at this stage, including how the board is made up and the compensation model.

Step six is critical and involves Sanders laying out four scenarios – best case, base case, bear, and worst, which are all five-year minimum discounted cash-flow models. The base case is what he thinks the stock is worth today, an estimate of cents on the dollar or intrinsic value. If Sanders believes a stock is worth $100 and it’s trading at $70, it’s 70 cents. He said: “We have this list of companies we’re following, and it’s ranked by cents on the dollar every morning. When stocks get to 70 cents, we recheck the analysis and we buy, and when stocks get up to 100 cents, we sell. That, in a nutshell, is our process.”

Every quarter these values are updated, in step seven, so it’s a moving target, underpinned by deep fundamental research that involves a 10-person team looking at one stock at a time before presenting it the team for debate.

While many investors focus on what is happening that quarter, Sanders told WP he thinks longer term, an approach illustrated by the crash of March 2020. He saw a health crisis, not an issue with the consumer, who ultimately drives the economy. Now in his third market cycle of managing money, the portfolio manager recognized that many elements were actually in good health, from millennials with no mortgages, a housing market at steady levels in the U.S. as it continued its recovery from the 2008 Global Financial Crisis, and a banking system that was doing well after 10 years of Federal Reserve stress tests.

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Surge Closes Investment into Contractor Connect – Business Wire



DALLAS–(BUSINESS WIRE)–Surge Private Equity LLC (“Surge”) announces investment into its 10th platform, Contractor Connect LLC (“CC” or “Company”), a B2B networking lead-generation platform within the home improvement and remodeling space. The transaction closed with debt financing provided by Modern Bank and Assurance Mezzanine Fund with BakerHostetler acting as lead counsel.

Since its founding in 2014, CC has connected hundreds of thousands of homeowners to local contractors through its proprietary lead aggregator, screening, and live-transfer platform. The Company primarily specializes in various home remodeling verticals including bathrooms, windows, roofs, gutters, and sidings. Its recognized brand is highly regarded across the 25+ states it currently serves. Founder Joseph Powless will remain on as both an owner and partner of the Company.

“COVID has accelerated work from home hybrid and full-time trends. People are now spending more time at home, increasing the demand for home improvement,” said Surge Founding Partner Thomas Beauchamp. “This sustained macro demand for the industry paired with our plan to launch into new verticals such as HVAC and solar give us a clear pathway to sustaining the historical 25% annual growth rate.”

About Surge Private Equity

Surge Private Equity is a Dallas-based private equity firm that seeks majority investments in growing businesses with $2-7.5MM of EBITDA. Together with its lending partners, Surge provides entrepreneurs with liquidity and investors with higher yields and greater accessibility through lower investment minimums. Surge primarily invests in companies where the seller will remain in an ongoing capacity.

About Modern Bank

Modern Bank, N.A. is a privately owned, entrepreneurial bank that provides flexible, competitive, and reliable senior debt financing solutions to commercial companies. Its experienced bankers specialize in working with lower middle-market companies and owners to provide low-cost cash flow-based financing solutions.

About Assurance Mezzanine Fund

Assurance Mezzanine Fund is a private investment firm providing $3 to $20 million customized growth capital solutions to profitable, lower-middle-market companies nationwide. We look to invest our funds in established companies operated by experienced and proven management teams with a history of building enterprise value.

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