Nearshore Americas

China Says It Wants to Broaden Brazil Investment, Trade; Local Manufacturers Wary

Source: International Business Times

China moved to smooth its lopsided economic relations with Brazil on Monday, saying it was open to more Brazilian exports and that Chinese firms will broaden their investments in Latin America’s largest economy.

A rapid expansion in trade and investment ties between the two emerging market giants has brought tensions, especially from Brazilian manufacturers who complain that cheap Chinese imports are destroying their competitiveness.

China surged to become the biggest direct investor in Brazil last year but its targets have been concentrated in commodities rather than in infrastructure or high-tech areas that create the higher-value “smart jobs” Brazil wants.

Chinese Trade Minister Chen Deming, who is leading a delegation of more than 40 companies in Brasilia, said his country’s firms were eager to tap booming consumer demand in Brazil.

“We have the intention and the will to broaden our investments, in infrastructure, green technology, high-technology and tourism. We had deeper discussions,” he told a news conference.

He said Chinese firms were in talks for about $1 billion in new investments, including a $200 million plan by Sany Heavy Equipment International to set up local production.

Brazilian executives who met members of the Chinese business delegation said there was a major interest in investing in Brazil’s overloaded port and grain-storage infrastructure to reduce the cost of Chinese imports.

Chen’s visit is a follow-up to Brazilian President Dilma Rousseff’s trip to Beijing last month in which she secured concrete promises that China would seek to buy more from Brazil than just raw materials such as iron ore and oil.

The countries signed deals in areas ranging from defense to agriculture, as well as plans for developing infrastructure as Brazil prepares to host the 2014 World Cup and the 2016 Olympics.

Rousseff returned with pledges of investment, including a plan by Taiwanese electronics giant Foxconn to invest up to $12 billion to dramatically ramp up its production of Apple Inc’s products in Brazil. Brazilian business also want to open up Chinese markets for value-added exports.

Brazil runs a trade surplus with China — but only because of its huge exports of commodities, which made up 83 percent of Brazil’s exports last year.

Brazilian Trade Minister Fernando Pimentel told the news conference that Brazil expected to expand its exports to China by about 20 percent this year, up from $30.8 billion in 2010. He estimated Chinese investments in Brazil this year would total $8 billion, down from around $17 billion last year.

Sign up for our Nearshore Americas newsletter:

Chen said that Brazil’s exports to China “should be diversified” and that China would welcome an increase. But, in a veiled criticism, he added that Brazil needed to open up and diversify its own economy in order to expand its export base.

“There is a big interest among Chinese executives in investing more in Brazil. There has to be an environment favorable for foreign investment … that way we can create more jobs in Brazil,” he said.

High labor costs, taxes, and heavy bureaucracy have long been a barrier to investment in Brazil. Foxconn is still seeking tax breaks and other concessions from Brazil’s government before committing to its expansion plan.


Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

Add comment