In the wake of Chinese President Xi Jinping's visit to Brazil, the South American country hopes to strengthen ties with its biggest trading partner and take them beyond the commodity trade into manufactured goods, but that may be no more than a dream.
The deals that China will sign with Brazil when Xi meets President Dilma Rousseff on Thursday focus on improving infrastructure to ensure that the raw materials China craves reach ports, and the railways are an absolute priority.
Brazilian officials are painting Xi's state visit as a milestone in deepening the strategic partnership that will drive Chinese investment into Brazil's manufacturing industry.
Trade between the two countries increased from US$3,2 billion in 2002 to US$83,3 billion last year – iron ore, soybeans and oil make up most of Brazil's exports.
The Chinese have been promising investments for years and in vain. Three years after announcing plans to invest US$100 billion in a soybean processing plant in a large storage center in western Bahia, Chongqing Grain Group Corp has only leveled a XNUMX-hectare field.
There were few success stories in the few investments made. Dongfeng Motor Corporation, one of China's biggest automakers, shelved a plan to build a billion-real truck factory in Brazil after a falling out with its local partner.
Analysts say that the Chinese are not interested in investing in manufacturing in Latin America, especially in Brazil, where labor charges are high and bureaucratic obstacles are many.
“Brazilians have to understand that Brazil is not terribly attractive,” said Riordan Roett, director for the western hemisphere at the Johns Hopkins School of Advanced International Studies in Washington. “There is no growth in credit and the government has not kept its promises to improve infrastructure. The Chinese are very aware of this.” Unless Brazil can become more competitive, Chinese investment will go to Asian countries, or those in the burgeoning Pacific alliance such as Mexico, Roett said.
Brazilian officials say that China wants to enter into partnerships to build railroads to transport grains and minerals to Brazilian ports.
Among the projects under study are railroads to the ports of Ilhéus, in Bahia, and Itaqui, in Maranhão, which are closer to the Panama Canal and would reduce transport costs.
China is also interested in studying a railroad across the Andes to Peru's Pacific coast, which could significantly shorten the trade route, said an official at the Ministry of Development, Industry and Foreign Trade.
Brazilian officials are not expecting progress during Xi's visit on the deadlock over China's refusal to allow large iron ore transport ships used by Vale to use Chinese ports, forcing the miner to transfer shipments from ports in the Philippines and Malaysia and increasing your expenses.
Brazil's efforts to manufacture goods in China have also run into problems. China has not approved the intention of Marcopolo, Brazil's largest bus maker, to build a factory or plans by aircraft maker Embraer to modernize a unit in Harbin to build the E-190 planes.
Source: Reuters
