China banks boom in Brazil

Updated: 2015-06-25 03:53

By CHEN WEIHUA and MAO PENGFEI in Rio de Janeiro(China Daily Latin America)

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In 2009, China became Brazil's largest trading partner. In an effort to bolster trade through investment in resources and infrastructure, China has also been making the strategic move of investing in Brazil's financial industry. Such a move positions Chinese banks as trade finance and working capital providers in region, helping to facilitate trade opportunities between China and Brazil.

Brazil is China's largest trade partner in South America, with two-way trade reaching $86.67 billion in 2014. China's investment in Brazil topped $18.94 billion by the end of 2014.

As the two countries agreed to deepen cooperation, particularly in production capacity and equipment manufacturing, Chinese financial institutions are facing great opportunities to achieve full-scale development in Brazil, according to experts.

Most of China's big financial institutions have entered the Brazilian market and achieved rapid development there thanks to expanding cooperation between the two countries.

Also in 2009, Bank of China (BOC) opened the first branch in Brazil of a Chinese financial institution.

"China has surpassed the US to become the world's biggest market for products from Brazil," the bank said at the time. "BOC is dedicated to provide all kinds of financial services to Chinese companies in Brazil as well as Brazilian firms who want to do business in China."

BOC had set up its first representative office in Brazil in the late 1990s. The bank had obtained approval from the China Banking Regulatory Commission and the Central Bank of Brazil to set up a Brazilian branch in 2007 and 2008, respectively.

The Industrial and Commercial Bank of China — the largest commercial bank in China and the world's largest listed bank by market value, customer deposit and brand value — announced in January 2013 a new branch, the Industrial and Commercial Bank (Brazil) Limited ("ICBC Brazil"), in Sao Paulo, Brazil's largest city.

The establishment of a Brazil branch was another major step for ICBC in South America, having already entered the Peruvian and Argentinian markets. The network of branches in South America enables ICBC to better serve customers around the world.

In November 2013, China's second-largest commercial bank, China Construction Bank Corporation (CCBC), obtained a license in Brazil by acquiring a majority stake in Brazilian bank BicBanco, at a cost of $723 million.

The most recent example is from China's Bank of Communications (BoCom). During Chinese Premier Li Keqiang's visit to Brazil, CBC announced that it had reached an agreement with the Brazilian bank BBM to buy an 80 percent stake.

In the first international acquisition by BoCom, the Chinese bank will pay $173 million for the majority share. The deal is subject to approval by both nations' regulatory bodies.

"This acquisition will be a bridge of economic and financial cooperation between Brazil and China, and boost bilateral investment and trade," said Niu Ximing, president of the bank.

Other banks, even those that don't have retail services in Brazil, have already started doing business with Brazilian companies.

China Development Bank (CDB) has granted Brazil's oil and gas giant Petrobras a loan of $1.5 billion, the Chinese bank told China Daily on Monday.

The loan is part of a long-term financing agreement between Petrobras and the CDB, signed during Chinese Premier Li Keqiang's visit to Brazil in May.

The CDB promised $39.5 billion in loans to these projects, having lent $23.7 billion so far, according to the company.