China Expands Influence in South America with Acquisition of Brazil’s VLCC Terminal

China’s presence in South America continues to grow as China Merchants Port Holdings Co. recently announced its agreement to acquire Brazil’s only privately operated Very Large Crude Carriers (VLCC) terminal. This strategic move underscores China’s commitment to expanding its footprint in the Latin America region while solidifying its global position.

On February 28, China Merchants finalized a deal to purchase 70 percent of Vast Infraestrutura, the operator of the onshore crude oil transshipment terminal in the Port of Açu. Situated within close proximity to Brazil’s major offshore production fields, the Port of Açu is a crucial industrial deep-water port capable of accommodating VLCCs, making it a key asset not owned by Petrobras.

The acquisition agreement entails an initial payment of approximately $448 million, with a maximum cap of $714 million based on cash adjustments and other considerations. Additionally, milestone payments totaling $56 million are contingent on obtaining operating licenses by the end of 2026 and 2027, along with potential earn-out payments of around $160 million based on the terminal’s performance over five years until the end of 2029.

China Merchants’ strategic focus on exploring new growth opportunities for its port business is further bolstered by this acquisition, following its purchase of TCP Participaçoes, a Brazilian container terminal operator, in 2017. These developments align with China Merchant’s regional expansion strategy.

Vast Infraestrutura’s parent company, backed primarily by U.S.-based EIG Global Energy Partners, established the terminal a decade ago, securing lucrative agreements with major energy players like Shell. The terminal currently handles 30 percent of Brazil’s crude oil exports, processing an average of 560,000 barrels per day with a licensed capacity of 1.2 million barrels per day. Notably, the terminal’s strategic location, three berths for efficient operations, and dedicated fleet of tugs contribute to its operational success, yielding a net profit of approximately $43 million before taxes in 2023.

China’s expanding presence in Latin America has garnered significant attention, prompting reactions from global leaders like former U.S. President Donald Trump, who raised concerns about China’s involvement in Panama and the Panama Canal ports. Recently, China celebrated the inauguration of the Chancay megaport project in Peru, signaling its broader efforts to exert influence in South America and reshape global trade routes.

In response to pressure from the United States, Panama announced its decision not to renew participation in China’s Belt & Road initiative. Furthermore, the country’s attorney general filed a legal petition to declare the port operations contract with China’s Hutchison unconstitutional, reflecting the complex geopolitical dynamics at play in the region.