“We must have the tools to make decisions quickly,” explained Pimentel, as he prepared to meet the Chinese minister of Commerce, Chen Deming, who is known as someone with a vast and profound knowledge of Brazil and its economy. “Deming is someone who wants to resolve problems,” said Pimentel.
With regard to bilateral trade, Pimentel said he was satisfied with the volume of Brazil-China trade in 2010, which reached more than US$ 30 billion and should rise to US$ 37 billion in 2011. However, he expressed concern with the fact that around 80% of Brazil’s exports to China were concentrated in only three products: petroleum, soy and mineral ores.
Pimentel pointed out that minister Deming has said that Brazil has good products with good quality, but the Chinese are not aware of them. So, the Brazilian business community must get to work and spread the word about their capabilities, he explained.
Meanwhile, Paulo Tigre, of the National Industrial Confederation, has his own recipe for better trade performance. “Brazil has to reduce or remove bottlenecks, get a tax reform in place and increase investments. We have to do our homework. We need less red tape, a better educational system and we must reduce our costs,” he declared.
Investments
Brazilian and Chinese businessmen met in São Paulo this last weekend to discuss investment opportunities. Representatives of the two groups declared that there was a strong desire to increase Chinese investments in Brazil.
The São Paulo meeting was a direct result of president Dilma Rousseff’s recent visit to China and was followed by a meeting in Brasília, Monday, May 16, where a memorandum of understanding was signed.
According to the president of the National Industrial Confederation (CNI), Robson de Andrade, after initial contacts with the Chinese delegation it was clear that they are interested mainly in making investments in Brazil in the areas of agribusiness and mining. Andrade declared that the Brazilians were trying to get the Chinese interested in putting money into infrastructure and technology industries.
“We want them to invest in the manufacturing segment so we can increase our exports of higher aggregate value goods to China, goods that call for more intense labor and technology,” explained Andrade, adding that the Chinese have expressed interest as well in airports, railroads, highways and other construction that will be part of the World Soccer Cup and Olympic Games (both will be held in Brazil – the first in 2014, the latter in 2016).
Mauricio Borges, the president of the Brazilian Agency for the Promotion of Exports (Apex-Brasil), said there are expectations that deals will be closed with the Chinese for investments in technology. “They are still studying the situation in Brazil, where they see various opportunities not only in mining, but also in technology,” he said.
Meanwhile, the president of the São Paulo Manufacturers Federation (Fiesp), Paulo Skaf, pointed out that at the moment Brazil exports mostly mineral ore and soy to China while importing manufactured goods, which is definitely not an advantage for Brazil. “As it stands now, it is not a good trade relation for Brazil. Another problem is the exchange rate. Our currency is strong, the Chinese currency is weak, which robs us of competitivity. We want to aggregate value and create jobs in Brazil,” Skaf declared.
Liu Zuo Zhang, the director-general of the China Investment and Promotion Agency, said the objective of the visit by Chinese businessmen was to promote mutual investments. He pointed out that last year China invested at least $90 billion abroad and that the tendency is for that amount to grow.
China became Brazil’s biggest trade partner in April 2009. In 2000, total bilateral trade, China – Brazil, totaled $2.3 billion. In 2010 it reached $56.3 billion.
Infrastructure
Rapid expansion in trade and investment between the two emerging economies has brought tensions, especially from Brazilian manufacturers who complain that cheap Chinese imports are destroying their competitiveness.
Last year China surged to become the biggest direct investor in Brazil but it has been concentrated in commodities rather than in infrastructure or high-tech areas that create the higher-value “smart jobs” Brazilian President Dilma Rousseff wants.
Chinese Trade Minister Chen Deming, who is leading a delegation of more than 40 companies in Brasilia, said his country’s firms were eager to tap booming consumer demand in Brazil.
“We have the intention and the will to broaden our investments, in infrastructure, green technology, high-technology and tourism. We had deeper discussions,” he told a news conference.
He added Chinese firms were in talks for about 1 billion US dollars in new investments, including a 200 million USD plan by Sany Heavy Equipment International to set up local production.
Brazilian executives who met members of the Chinese business delegation said there was a major interest in investing in Brazil’s overloaded port and grain-storage infrastructure to reduce the cost of Chinese imports.
Chen Deming’s visit is a follow-up to President Rousseff’s trip to Beijing last month in which she secured concrete promises that China would seek to buy more from Brazil than just raw materials such as iron ore and oil.
The countries signed deals in areas ranging from defense to agriculture, as well as plans for developing infrastructure as Brazil prepares to host the 2014 World Cup and the 2016 Olympics.
Rousseff returned with pledges of investment, including a plan by Taiwanese electronics giant Foxconn to invest up to 12 billion USD to dramatically increase production of Apple Inc’s products in Brazil. Brazilian businesses also want to open up Chinese markets for value-added exports.
Brazil has a trade surplus with China but only because of its huge exports of commodities, which made up 83% of Brazil’s sales last year
Brazilian Trade Minister Fernando Pimentel told the news conference that Brazil expected to expand its exports to China by about 20% this year, up from 30.8 billion USD in 2010. He estimated Chinese investments in Brazil this year would total 8 billion, down from around 17 billion USD last year.
Chen Deming said that Brazil’s exports to China “should be diversified” and that China would welcome an increase. But he also cautioned that Brazil needed to open up and diversify its own economy in order to expand its export base.
“There is a big interest among Chinese executives in investing more in Brazil. There has to be an environment favorable for foreign investment … that way we can create more jobs in Brazil,” he said.