Brazil x China Investment Letter

Brazil is the largest country in South America and the 5^th largest country in the world (territory area), a homeland for approximately 190 million people. The consolidation of the democracy within the political system since the 1989´s presidential election has created institutional conditions for the establishment of a positive enviromment for long term investments so Brazil has become an attractive port to foreign capitals (in 2009 the country was the 14^th largest FDI destination according to Unctad).

Brazil’s economy is the largest in South America with GDP of US$ 1.7 trillion and per capita income moving up to $ 10,000 in 2010. The Central Bank predicts growth of 5% in 2010 and inflation of less than 5%. In the recent years Brazil has become an important source of raw materials to Chinese companies and, at the same time, China has been selling increasing volumes of industrialized merchandise to Brazilian distributors.

In paralell to the growing flow of commerce, Chinese capital has been actively seeking for overseas investment in strategic segments such as energy, infrastructure and agriculture,  with the purpose to secure a flow of essential supplies to its giant domestic market. In this sense, Chinese capitals are presently an important economic component to several countries in Africa and Latin America.

Specifically in Latin America, huge investments have been materialized in the past few years such as :  the Sinopec-Cubapetroelo joint  venture to explore oil on the Caribbean island (2005), the Minmetals $ 500 million investment in the Cuba (2005) and $ 550 million capital injection in the Chilean Codelco (2005), the Shengli Petroleum´s  USD 1.5 billion deal with the Government of Bolivia to explore oil and gas for the next 35 years, the Andes Petroleum Consortium USD 1.4 billion take over of the Ecana´s pipeline structure in Ecuador,  the Aluminium Corporation of China USD 800 million take over of the Peru Copper Inc (2007), the China Development Bank USD 10 billion funding to the Brazilian Petrobras in exchange for 10 years secured oil supply (2009), the China-Venezuela USD 16 billion agreement also to secure oil´s future supply,  the giant oil dealer CNOOC $ 3 billion capital injection in the Argentine Brida Holdings and the recent USD 5 billion Wuhan Steel inflow to back up the building of a plant in the state of Rio de Janeiro. In the countryside of Brazil, chinese investment corporations have been purchasing soy and cattle farms in the North and Central regions.  State Grid, is making a  $1.7 billion investment in the Brazilian electricity transmission field. Sany Heavy has announced investment plans as high as $200 million to build a plant in Brazil as economic infrastructure projects may boom due the necessary works for the 2014 soccer World Cup and 2016 Olympics.  Brazil emerged from the recent global financial crisis as a strong economy with solid fundaments for a long term and sustainable GDP growth with controlled inflation. Democratic institutions are very well established in the nation´s politic system and juridic estability has been consolidated in the past three decades. High quality human resources, competitive industries and huge potential for agribusiness development are also remarkable aspects of Brazil. 

True Source Honey