Brazil leads Chinese investments in the world: US$5.9 billion last year, the highest since 2017

Chinese investment in Brazil reached US$5.9 billion last year, the highest since 2017, according to data released by the Brazil-China Business Center (CEBC).

The number represents recovery after the pandemic drop: in comparison with 2020, the high was 208%. The report indicates broad diversification of investments, reaching sectors such as information technology, oil, energy, and finance.

The data were released days after the Brazilian Minister of Economy, Paulo Guedes, stated that he did not want to see “the Chinese break our factories” during a lunch with agribusiness businessmen, which generated, according to experts, new uneasiness in the country’s largest trading partner and that, according to CEBC data, is strengthening as a major investor in Brazil.

MAIN DESTINATION

Brazil was the country that received the most investments from China in the world in 2021, with a 13.6% share of the total, followed by the Netherlands and Colombia.

Regarding project values, the petroleum area absorbed 85% of the total amount invested in Brazil in 2021, breaking the electricity sector’s dominance in terms of flow.

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This scenario reflects two substantial investments by the state-owned China National Offshore Oil Corporation (CNOOC) and China National Oil and Gas Exploration and Development Company (CNODC) in the pre-salt.

The survey also shows that 51% of Chinese investments entered Brazil via greenfield – focused on new projects.

According to the author of the study, Tulio Cariello, negative statements about China by members of the government could be avoided:

“Chinese investments have a long-term maturation, and Brazil is a relevant economy on a regional level, with a considerable consumer market, qualified labor in technical areas, and relative economic stability,” said Cariello.

He pointed out that, according to the stock of Chinese investments between 2007 and 2021, companies from that country announced 270 projects in Brazil, with a potential of US$116.5 billion. Of this total, 202 projects were carried out with US$70.3 billion.

Pedro Brites, professor at the School of International Relations of the Getúlio Vargas Foundation (FGV), points out that repeated statements in recent years by members of the Jair Bolsonaro government bring “instability and distrust” in the Chinese view of Brazil as a strategic partner.

For this year, he sees great potential for the continuity of investments in energy and information technology, besides an important synergy in the infrastructure and civil construction sectors.

Alexei Vivan, CEO of the Brazilian Association of Electric Energy Companies (ABCE), believes that investments will continue to grow:

“The Chinese accept some risk with a lower rate of return because they are looking in the long term, unlike other investors, who already want an initial return to show their shareholders,” he said.

It was not only Guedes who made a negative statement about China. President Jair Bolsonaro, Congressman Eduardo Bolsonaro, his son, and other team members have previously criticized the Chinese, which worries representatives of Brazilian agribusiness.

BIGGEST BUYER

China is Brazil’s largest buyer of products, totaling US$87.7 billion (31.28%) last year, especially in agribusiness products and minerals. In 2021 alone, there was a surplus on the Brazilian side of more than US$40 billion in trade with the Chinese.

“Brazil needs private investments not only from the Chinese, large buyers of our products but from any country,” said the president of the Brazilian Association of Soy Producers (Aprosoja), José Sismeiro.

In 2021, the Chinese Yangtze Optical Fibre and Cable (YOFC) acquired 100% of the shares of Belden Poliron, a company that manufactures special cables used in the petrochemical, chemical, and oil industries, among others.

“Less than six months after the acquisition, the investment in a new industrial unit in Pouso Alegre (MG) for telecommunications has already been approved,” said Reinaldo Jeronymo, the company’s CEO.

Great Wall Motors (GWM) bought the Mercedes-Benz car plant in Iracemápolis, São Paulo, to produce electric and hybrid cars. Pedro Bentancourt, director of the company in Brazil, affirmed that the country attracts Chinese because of the local market and for having qualified labor and suppliers.

SIX EXAMPLES OF CHINESE INVESTMENTS IN BRAZIL

INFORMATION TECHNOLOGY

In April 2021, the Chinese group Ant Financial, Alibaba’s fintech, bought 5% of Dotz, manager of loyalty programs. The companies should explore opportunities for digital solutions for small businesses and consumers.

OIL

In June 2021, Petrobras signed with Pré-Sal Petróleo S.A. (PPSA) and the Chinese CNODC and CNOOC the Búzios Coparticipation Agreement, for exploration in the Santos Basin pre-salt.

ENERGY

Shanghai Shemar Power Holdings won, in an auction in June 2021, a lot of energy transmission in the State of Rio de Janeiro. The project will have 100 km of transmission lines and will serve Niterói, Magé, and São Gonçalo.

AUTOMOTIVE

Great Wall Motors bought, in July 2021, the Mercedes-Benz car plant in Iracemápolis, São Paulo. The company intends to manufacture electric and hybrid cars and wants to invest R$4 billion (US$776 million) in the country until 2025.

ELECTRIC EQUIPMENT

In June 2021, Yangtze Optical Fibre and Cable (YOFC) acquired 100% of the shares of Belden Poliron, which operates in the manufacturing of special cables for petrochemical, chemical, offshore oil, and industrial automation systems.

FINANCIAL SECTOR

The Fosun group made new investments in the brokerage company Guide Investments in February 2021. The resources should be directed to technological innovation, new products, and service network expansion.

With information from O Globo