Brazil casts a bigger spotlight on China

Updated: 2012-10-17 13:20

By Chen Weihua in New York (China Daily)

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Brazil casts a bigger spotlight on China

As China becomes the largest export market for Brazil and as Chinese investment in the South American nation expands into the manufacturing and service sectors, Brazilian companies are also looking for ways to have a bigger impact in the Middle Kingdom.

Presently, only 0.06 percent of Brazil's total investment outflow is targeted at China. According to the latest survey by the China-Brazil Business Council, only 57 Brazilian companies are currently operating in China.

About half of them are service providers, such as Bank of Brazil and the law firm Felsberg and Associates. Twenty-eight percent, such as aircraft maker Embraer, are in manufacturing, with 21 percent involved in natural resources, such as Vale and Petrobras.

Claudio Frischtak, a consultant to CBBC, said the lopsided ratio in the amount of Chinese investments in Brazil to Brazilian investments in China is due to historic reasons.

"In the 1980s, the Chinese looked to improve efficiency in manufacturing and in those days, there were real opportunities for Brazilian companies to transfer their manufacturing knowledge and become a partner in the Chinese development," Frischtak told a conference held on Monday at the Council of the Americas in New York.

"Brazilian companies did not do that because they were fundamentally occupied by hyper inflation and other problems. They were struggling to survive. It was a lost decade," said Frischtak, who is also president of consultancy Inter.B.

When Brazilian companies were ready to invest in the Chinese market at the beginning of this century, they discovered a different China.

"If you are in car manufacturing, it's a different ballgame now. Chinese are doing the reverse. They are investing in car manufacturing factories, including in Brazil," Frischtak said.

Acknowledging that Chinese are extremely competent in manufacturing, both Frischtak and Sergio Amaral, president of CBBC, believe Brazil is very competitive in agriculture, which faces non-tariff barriers in China and in many other countries.

Frischtak said progress has been made lately when Brazilian firms engage in the meat processing industry in China. But Amaral, also a former Brazilian trade minister, expressed his concern over restrictions and licensing requirements in China. He cited as an example Embraer's inability to procure approval to produce its latest model of planes in China. He also said Vale, the mining giant, has not been able to distribute directly to Chinese buyers but through a few Chinese agents.

"The Chinese consumers get a very high price, but Vale gets a very low price," he said.

Amaral said these factors affect the competitiveness of Brazilian companies in China and he admits that the lack of integration of the Brazilian economy in Asia is a huge disadvantage. Another major hurdle is the fact that intra-Asia trade accounts for more than 50 percent of trade within the continent.

"On top of this trade integration, there is an integration of production chain in Asia," said Amaral, who added this has made it difficult for countries such as Brazil to export to Asia.

He also lamented high interest rates, an overvalued currency and an inadequate infrastructure as huge disadvantages for Brazil in China.

"We have an enormous challenge to increase our competitiveness," Amaral said.

While the survey finds successful Brazilian firms operating in China often have a good Chinese partner, it also said there must be better understanding of China by Brazilian companies and better preparation by Brazilian government institutions.

Sergio Trindade, a 2007 Nobel Peace Prize co-laureate and former United Nations assistant secretary-general for science and technology, said Brazil should pull more resources into China and Asia. He said Brazilian ethanol businesses could thrive in China.

"If you are really interested in Asia, you should be a shareholder of the Asian Development Bank. If you are really interested in China, you should learn Mandarin. It make a difference," said Trindade, who has made more than 60 trips to China and is often called Chun Dadi, which means spring all over the land, when he's in the country.

"In a nutshell, China will continue to be an important relationship for Brazil for the coming years. There is no question about that. Brazil needs China and China needs Brazil. The relationship is going to last," Frischtak said.