A global rise in investment in Latin American countries continues to intrigue many governments abroad. One of the biggest potential ‘power-couples’ in this trend is Brazil and China.
Brazil’s president, Jair Bolsonaro, is known to have stood against cooperation with China in his campaign speech. Since taking office, however, Bolsonaro is expressing a change of heart. It is clear that Chinese investment stimulates economic activity, while also creating a handful of foreign investment opportunities. We explore what those opportunities are for China and Brazil.
Brazil’s attitude on China
Despite the surplus of investments pouring in to the country, Bolsonaro is famously skeptical of China’s involvement and interest in Brazil. Recently, Bolsonaro expressed his opinion rather blatantly, saying, “The Chinese can buy in Brazil, but they can’t buy Brazil.” In his campaign speech, Bolsonaro famously accused China of making predatory moves to exploit Brazil’s niobium resources for steel production.
Bolsonaro is now having to backpedal on his heavy anti-China stance, so Brazil can take advantage of the investments flowing in.
Bolsonaro and vice-president General Hamilton Mourao are now nurturing relationships with China to help lift Brazil out of a recession. The 2014-2017 recession brought about an 8% economic contraction within three years and an unemployment rate of 12.9%. The overwhelming sum of investments in Brazil has helped the country bounce back from their worst recession.
The ultimate goal for Brazilian politicians is to get Chinese investment numbers up to what they were before the economy hit a decline. After all, copious amounts of Chinese investments propelled Brazil into becoming the country with the greatest growth potential from 2000-2012.
Product of the power-couple
China’s economic interest in Brazil brought about waves of change in the economy, as well as international trade as a whole. Brazil has been the primary destination for Asian investments since 2000. At first, the strength of the country’s agriculture sector served as an enticing point for China. As a result, Brazil accounts for US$60 billion in Chinese investments out of a total of US$134 billion in all of Latin America. Recently, China is looking to develop other sectors of Brazil’s economy.
Out of US$60 billion invested in Brazil, over US$14 billion funded oil and gas initiatives in the country. Additionally, other sectors such as mining and metals, transportation, finance, and electricity received over US$5 billion each in investments.
As for the global economy, China’s involvement in Brazil plays a crucial role in upcoming changes and challenges. Firstly, investment and collaboration between the two BRICs nations leads experts to believe there will be a shift in global economic leaders. In fact, the combined economic power of BRICs should surpass that of the G6 alliance. Ultimately, this fuels a climate of strong opportunities for foreign investment in Brazil’s economy.
With trade and investments on the mind, Brazil is looking to integrate its economy with China’s further. Recently, Brazilian politicians began developing and negotiating bilateral trade agreements with its primary foreign investor. Moreover, the country hopes to use domestic advantages like the Pacific Alliance Free Trade Agreement and MERCOSUR to leverage agreements with China. Overall, Brazil is looking to continue and strengthen economic ties with China in the near future.
Opportunities within Brazil’s economy
The endless flow of investment in Brazil’s economy creates opportunities for investment and business development in the country. In March of 2019 alone, GDP in Brazil grew by nearly US$6.85 billion. Because China is long-term oriented, this type of growth in the economy will be consistent with the pace of Chinese investments.
One of the most steady industries for investment is Brazil’s agriculture industry. Most specifically, the soybean industry will continue to flourish and grow. Compared to 2017 numbers, China’s demand for soybeans from Brazil more than doubled in October of 2018. Chinese funding and consumption of this sector help keep the market consistent, predictable, and profitable. Moreover, the trade war between the U.S. and China makes Brazil a more attractive trade partner for agricultural needs.
Additionally, Brazil’s manufacturing sector is becoming a strong competitor in the global manufacturing industry. Investments in this industry created an environment in which Brazil could close in on the wage gap between domestic manufacturing plants and foreign ones. As a result, Brazilian manufacturers are now able to compete on a global scale for business. In order to continue this trend, investors are looking to fund human and fixed capital developments. Further investments and opportunities will help propel the country close to the top of the global manufacturing game.
Looking to the future
In terms of future investments, Brazil and China are working to expand other developing industries. Overall, foreign investment opportunities are arising in Brazil’s banking, communication, and coffee sectors.
Other opportunities for investment lie in Brazil’s oil and gas, mining, energy, and railway industries. China is gearing up to fund initiatives in all four sectors and is predicted to be successful and profitable in all endeavors. This comes with the understanding that China will help revolutionize the industries and how they operate in the giant of South America.
Team-up with the experts
China and Brazil are making waves in the global economy. They make excellent partners and complement each other’s economies perfectly. Chinese investments into Brazil are long-term, building solid foundations for ongoing commercial growth and development.
Biz Latin Hub is the key to getting involved in this lucrative partnership. Team-up with the experts to find out more about the economic opportunities in Latin America that lie ahead for your business. Contact us at [email protected] with any inquiries or interest in our back office services.