Brazil consolidates as main South American destination for Chinese investment, shows unprecedented study – China, Terra do Meio

Even with the aggressive diplomatic rhetoric in Brasilia, Chinese investment in Brazil grew 117% in 2019. Under the effects of last year’s pandemic, the numbers declined ($ 7.3 billion last year to $ 1.9 billion, down 74%), but not enough to threaten South America’s leading investment destination position (47% of all investments), totaling $ 66.1 billion in the series history 2007-2020. The figures were revealed by an unprecedented survey by the Brazil-China Business Council (CEBC), released Thursday (5).

The survey shows that, since 2007, Chinese companies have already completed 176 projects in Brazil, 31% of which are in the electricity sector. State Grid and China Three Gorges, two state-owned electricity giants, keep the largest share of investments there outside China, at 48% and 60% respectively.

Study author, CEBC researcher and content director Túlio Cariello, says the attraction of significant contributions to Brazil’s power sector is a combination of factors: China’s tradition of infrastructure investment , the need for growth of these state-owned enterprises across national borders and a more stable business environment compared to other developing countries.

“The need for these Chinese companies to internationalize coincided with a time when Brazil was opening up its electricity sector. It is obvious that Brazil presented uneven economic indicators, but compared to Latin America or Africa in general, energy here is a stable field, with good engineers and a mature regulatory framework. These are the determining factors in this attraction, ”he says.

The researcher explains that even with the drop in contributions last year – a global trend caused by Covid-19 – the Brazilian electricity sector has been the destination of 97% of confirmed Chinese investments in the country. These are statistics so superior that, according to him, “this is a case that must be seen apart from other companies.”

“China is not alone. There are similar investments from Spain, Germany and France, for example. What draws attention here is that the Chinese present themselves as competitive not only for capital, but also for the field of technologies which are not dominated by many countries like the UHV [ultra-alta tensão, capaz de otimizar a distribuição de energia elétrica a longas distâncias], which is very beneficial for modernizing our energy matrix, ”he explains.

Just behind energy, the manufacturing industry (which includes the chemicals, machinery and cellulose sectors) stands out with 28% of confirmed projects. Often cited as essential to Chinese food security, agriculture and animal husbandry retain 7%, with a highlight on the entry of state-owned giant Cofco, which maintains activities from origin to transportation of soybeans and soybeans. sugar cane in Brazil.

Attacks on China have not reduced Chinese appetite

With the onset of the pandemic, 2019 has been a particularly tense year diplomatically for Sino-Brazilian relations. Federal MP and chairman of the House of Representatives’ foreign affairs committee, Eduardo Bolsonaro, fought with Chinese Ambassador Yang Wanming, while cabinet members and President Jair Bolsonaro himself blamed China of “biological warfare”. Despite this, the volumes brought by the Chinese to Brazil have been on an upward trajectory since the start of the current government. For Cariello, the data shows that China’s pragmatism and long-term thinking has proven successful and should withstand short-term raids.

“A lot of these investments started a long time ago, didn’t they? I really don’t see them [os chineses] putting the brakes on, I don’t think a Chinese company building a transmission line in Brazil is now stopping work because Bolsonaro said something bad about China. What ultimately matters to the market, in China and the rest of the world, is profit, ”Cariello predicts, adding that 2021 data, while not consolidated, shows Chinese companies continue to hold up. auctions for the management of factories. and transmission lines.

More mature and more comfortable with Brazilian legislation, the Chinese investor is already proposing to undertake from scratch, the construction of factories and the establishment of new operations in the country. According to CEBC, mergers and acquisitions (called “brownfields”) still account for 70% of all contributions to Brazil since 2007, but there are significant changes when analyzing data referring to ongoing projects: 48% d ‘between them are “greenfield”, that is to say, totally new. This tranche alone represents the creation of 34.5 thousand direct jobs, while 40% in “brownfields” maintained the positions of 140.1 thousand others. The remaining 12% correspond to joint ventures.

With the expansion of the technological frontier in China, Cariello believes that there is now a new opportunity forming for the Chinese in Brazil: advanced technology. With this, it should become more common to see brands there in areas such as telephony, internet of things, electric and autonomous vehicles and artificial intelligence.

“Huawei, which is the world leader in 5G technology, has had a presence in the country for a long time and is expected to gain market share, despite the political difficulties linked to auctions. For many other regions, Brazil will be an interesting market. There is a cultural element involved in the fact that Brazilians love social media, games, trade a lot of cellphones, and the app market here is huge. It is therefore the sector to follow from now on.

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