Brazil construction boom to bring opportunities for China

Updated: 2014-02-10 05:54

(China Daily Latin America)

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With the 2014 FIFA World Cup and 2016 Olympic Games coming up, Brazil is experiencing soaring growth in the construction industry, which may bring huge opportunities for Chinese construction material suppliers, reports say.

"Brazil is the biggest country in South America with a population of 198 million," said Lu Weijie from Beijing Holine Exhibition Co Ltd, quoted in Cifnews Weekly. "In recent years, the Brazilian construction market has taken up nearly half the size of the Latin American market.

Brazil construction boom to bring opportunities for China 

With FIFA World Cup and Olympic Games coming up, construction industry in Brazil sees an 8.67 percent forecasted annual growth from 2013 to 2017, according to a Timetric report. ZHANG YANG / FOR CHINA DAILY

"Therefore there is an unparalleled opportunity for Chinese construction material companies," added Lu, who last year organized Chinese enterprises to attend Construir Rio, an annual global construction industry trade show in Rio de Janeiro.

For Brazilian construction material suppliers, the turnover is expected to grow at 4.5 percent in 2014 thanks to the government stimulus, a recovery in the housing market as well as progress in infrastructure construction, according to Brazilian media Valor quoting Brazilian Association for the Construction Materials Industry (ABRAMAT).

The whole construction industry in Brazil also sees huge potential with an 8.67 percent forecast annual growth from 2013 to 2017, according to a report by Timetric, a London-based global business information service.

Against the promising prospects there are several disadvantages for local suppliers, which might turn out to be opportunities for their Chinese counterparts, according to Lu.

"First, the price of many products in Brazil are six to eight times the price of similar Chinese products," Lu said.

Domestic construction costs also saw continuing increase in recent years. According to Brazil's National Index of Construction Costs (INCC), the costs have increased about 7 percent annually for the past three years, with 7.82 percent for the year of 2013.

"Secondly, Brazilians (manufacturers) have not yet possessed the capability and technology to produce certain fine products as often seen in China," Lu said.

Graham Robinson, executive director of Global Construction Perspectives, told China Daily that the main issue with the Brazilian construction market is the lack of foreign competition throughout the construction supply-chain, including contractors, specialists and construction materials companies.

"This causes a lack of innovation as domestic Brazilian companies tend to dominate the market, and there is a lack of concentration in the market for foreign players," Robinson said.

However, together with the opportunities for Chinese suppliers in Brazil there come risks too. Brazil has been charging a couple of anti-dumping taxes on Chinese products, which would increase their selling price in Brazil.

The latest list include a $1717.91 per ton charge for the reduced indigo blues dye, an increased $835.47 per ton charge for seamless carbon steel tubes, as well as a $1.34 to $4.66 per kilogram interim tax on ceramic utensils.

The lack of proper channel to secure the construction material market might be another hurdle for Chinese companies, according to Robinson.

"The main issue, with a lack of foreign contractors, will be how building materials companies from China will form and develop relationships with contractors," said Robinson, emphasizing that overall the Brazilian economy, the construction sector in particular, is in need of reform.

"The levels of bureaucracy provide real business barriers," he said.

In addition, the Cifnews Weekly report mentions that many Chinese exporters feel that the Brazilian buyers are very slow in payment, orders and shipment confirmation.

There are also factors on Chinese suppliers' side that could potentially limit their business in Brazil, according to a salesperson, known as Penn, from Hongyuan Waterproof Materials Co.

Penn said that many Chinese products are without certain international quality certification, which might incur problems after sales and in turn tarnish the brand.

He said customer service is another weakness for Chinese suppliers. "Chinese companies seldom care about this aspect. They think the deal is done after selling the products and don't bother to keep the customers," said Penn.

Zhang Yang contributed to this story and can be reached at