China's economic restructuring curbs trade with Brazil

Updated: 2014-10-12 02:41

By JI YE in Rio de Janeiro(China Daily Latin America)

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Bilateral trade between China and Brazil is slowing down mainly because of the effect of economic restructuring in China, said experts.

China has been Brazil's largest trade partner since 2009 and Brazil is China's ninth-largest trade partner worldwide and the largest in Latin America

Last year, China's investment in Latin America was about $16.5 billion, one-sixth of China's total foreign investment. Latin America is China's second-largest foreign investment destination.

At present, China's investment in Latin America is mainly in the oil, gas, mining and agriculture sectors. For Brazil, as of the end of 2013 China's total investment in energy, mining, agriculture, infrastructure, manufacturing and other areas was $17.64 billion. Nearly 100 Chinese companies are in Brazil.

In the first half of this year, export and import of goods between the two countries increased 7 percent year-on-year, a sharp drop from the 43.6-percent growth in the same period three years ago.

Sun Yanfeng, a researcher with the China Institutes of Contemporary International Relations, attributes the slowing of trade to economic restructuring in China.

"China is gradually eliminating energy-intensive industries and moderating the speed of its economic growth. This has translated into declining demand for Brazilian natural resources," Sun said.

Although the pace of growth in bilateral trade is expected to continue dropping, Sun said he sees opportunities for Chinese and Brazilian authorities to place more attention on the added value of their products and exploring new fields of trade. He cited iron ore as an example.

"China's demand for raw iron ore will decline with the shrinking of its energy-intensive industries, but it will need more of the processed iron ore products that Brazil can export," said Sun.

China's decreasing demand for natural resources also comes at a time when Brazil is looking to move away from resource-centered industries.

Now Brazil is boosting investment in transportation, infrastructure, agriculture, information, logistics and innovation in science and technology, and that will need greater involvement from China.

Francisco Mauro Brasil de Holanda, director of the East Asia department in the Brazilian Foreign Ministry, said China's investment has turned from mining, soybean and oil to high-tech, car and heavy equipment manufacturing.

The most anticipated cooperation with China is in infrastructure, especially railways and ports, Mauro said.

China has a mature technological system for infrastructure construction and has made significant accomplishments in the area, which is what Brazil and other Latin American countries need, he added.

Murilo Ferreira, CEO of Brazil's Vale, the world's largest producer and exporter of iron ore, is optimistic about China-Brazil cooperative relations.

At the annual meeting of the China-Brazil Entrepreneurs Committee in July, Ferreira said China is a long-term strategic partner whose economic development has provided Brazilian mining exports with great opportunity.

Roberto Luis Troster, former chief economist of the Brazilian Banking Federation, said that China's foreign investment helps a country improve national productivity and create more job opportunities.

Countries like Brazil need foreign investment, therefore China's investment is very welcomed in Brazil and the prospect for China's foreign investment is optimistic, he said.

But Troster said that foreign investment requires more patience. He said China's foreign investment is still in its infancy. Facing a complex investment environment, China needs to accumulate more experience and to develop an appropriate investment strategy, he explained.

A survey of done by the Brazilian financial magazine EXAME showed that two-thirds of Brazilian entrepreneurs who responded said they treat China as "partners and the future."

Roberto Rigobon, of the Sloan School of Management at the Massachusetts Institute of Technology in Cambridge, Massachusetts, and an expert on Brazil's economy, said that China's investment in Brazil should take into consideration the concept of mutual development and eliminating each other's misunderstandings while making friends with Brazilians.