China Post | Monday, January 17, 2011
By Diana Renee, dpa
RIO DE JANEIRO, Brazil -- Fifteen years after signing a strategic partnership bilateral agreement, China is all the rage in Brazil, and finds itself on the cusp of displacing traditional partners as the main external investor in the large South American country.
According to Charles Tang, president of the Brazil-China Chamber of Trade and Industry, the Asian giant could become the main source of foreign direct investment in Brazil in 2011, as up to December planned business projects added up to some US$25 billion.
The Asian country is, in addition, the largest market for soya and iron from Brazil, and is a big client of the mining giant Vale. China's insatiable demand for commodities has been, in the last few years, one of the factors that have allowed Brazil to weather the international financial crisis of 2008.
However, China's growing appetite is beginning to cause worry in Brazil, particularly as it relates to land acquisition in areas where soya is grown, and is generating mistrust in the private sector and even in the government.
"There is a lot of land speculation on the part of China, Japan and even the United States. There are many countries that want to buy (land) in Brazil, in Latin America, in Africa and this worries all of us," the Brazilian Minister for Agricultural Development Guilherme Cassel said recently.
Cassel believes that these acquisitions threaten the countries' "food security."
"For a country to have control over its territory is a matter of national security, of sovereignty and it is in addition an issue of food security. We have a lot of very rich land and we have to have control over it," he said at a recent (Common Market of the South) Mercosur meeting on family farming.
The growing presence of Chinese capital in the rural areas of Brazil also worries the president of the National Confederation of Industry (CNI), Robson Andrade, who believes that the phenomenon could represent a threat to the food factories of the country.
"The Chinese, do they want to buy land here to grow soya and manufacture oil in the country or to export soya, produce the oil in China and export it back to Brazil?
"Chinese investment is welcome, but provided that they have the same competitive conditions as we do," he said.
Chinese investment in Brazil also extends to the mining and petroleum sectors.
The Asian country recently acquired two companies in the mining sector -- Itaminas, bought for US$1.2 billion and Sul America Metais, bought for US$390 million. They also invested US$400 million to gain minor partner status in MMX owned by the wealthy businessman Eike Batista.
Last May the state-owned Sinochem acquired 40 percent of the oil field controlled by the Norwegian company Statoil and in October it paid US$7.1 billion to Spain's Repsol for its operations in Brazil.
The closeness between Brazil and China began in 1993, when the then president Jiang Zemin, during a visit to Brasilia, announced the establishment of a strategic partnership arrangement between the two countries.
Two years later, then Brazilian president Fernando Henrique Cardoso travelled to Beijing and threw Brazil's support behind China's entry into the World Trade Organization (WTO).
At the end of the last century, China had already become Brazil's main Asian trading partner, and in 2004 the government of Luiz Inacio Lula da Silva took another important step towards strengthening bilateral relations, by signing a document that recognized China as having a market economy.
Save for a law enacted in August that added to the restrictions to land acquisition on the part of foreigners, the government of Lula da Silva declined to institute drastic measures to restrict the presence of Asian capital in Brazil.
However, many analysts believe that in-coming president Dilma Rousseff will not be able to avoid the pressure to enact protective measures to the economic sectors that feel threatened by competition from Asian products.
Heavy pressure in this sense is coming from the ranks of the powerful Federation for Industries in the State of Sao Paulo (FIESP), which charged that competition from Chinese products has forced many of its member factories out of business.
"Brazil is facing a process of deindustrialization. We have already noticed dramatic situations in which factories have no choice but to close down here in Brazil, move to produce in China and act in Brazil as distributors.
"This is happening in the auto-parts and textile factories in Sao Paulo, in shoe plants of Novo Hamburgo (Rio Grande do Sul) and Franca (Sao Paulo)," pointed out the economic director of FIESP, Roberto Gianetti da Fonseca.
