Brazil: China Connection II
economics | by Edward Hugh | 23 Mar, 2004 at 05:54 AM | comments (0) | trackback (0)

Brazil's Foreign Minister Celso Amorim is currently in China lobying for finance to aid in the construction of railroads, roads, agriculture and mining in order to speed the flow of soybeans, meat and minerals to China. Regular Southern Exposure readers will be well aware of the China soya impact : in fact Brazilian exports to China soared 80 percent to $4.29 billion last year. China's steel needs are, of course another element. Lula da Silva is using all of this this as leverage for financing to reduce bottlenecks on roads, railways and ports to boost exports and revive the Brazilian economy. Amorin is even proposing, apparently, a joint hunt for uranium. All of this also fits in very well with arguments Stephen Frost has been making recently about the growing importance of China's outward gaze.

Brazilian agriculture and trade ministry officials have proposed projects to Chinese trade and investor delegations over the last several months, including rail links to Chile's Pacific coast and stakes in a 1,500-square-kilometer (580-square-mile) soybean farm in northeastern Brazil.

China Grain & Oils Group, a unit of the State Grain Administration, plans to send a team to Brazil in April to establish a joint venture to grow soybeans to be shipped back to China, said Luan Yinjian, an official at the company. The company hasn't settled on a partner yet or decided how much land it's prepared to lease or buy.

``Brazil has a lot of land and weather that's favorable for soybeans,'' Luan said. ``The U.S. market is too mature.''

China imported 3.82 million metric tons of soybeans in the first two months of this year, up 88 percent compared with a year earlier. That's up from an 83 percent increase for full-year 2003.

Rio de Janeiro-based Vale do Rio Doce is spending about $2 billion a year, in part on roads, rails and ports to ship more ore to China. While Brazil has doubled the size of the nation's soybean crop since 1997, overburdened rails and roads will make it difficult to keep up with demand from China, said Jose Luiz Glaser, who runs Cargill's soybean business in Brazil.

``The biggest obstacle to growth is a lack of infrastructure,'' Glaser said in an interview in Sao Paulo.

The Brazilian government is counting on a proposal in congress to create incentives for private companies to help fund government infrastructure projects to lure Chinese investment, Jose Amauri Dimarzio, executive secretary of Brazil's Agriculture Ministry, said in an interview last month. The lower house of Brazil's congress passed the bill last week.

``China is interested in building railways and also financing producers,'' Dimarzio said in Brasilia. ``The projects are excellent. We just need this partnership proposal to reduce the time to build them.''

A group of Brazilian executives traveled with Amorim to discuss ventures with Chinese companies.

State-controlled Brazilian oil company Petroleo Brasileiro SA and China National Petroleum Corp. held talks to form an oil exploration venture, while airline Viacao Aerea, known as Varig, opened an office in Beijing during the trip, according to Joppert, first secretary in charge of political affairs at Brazil's embassy in Beijing.

Vale do Rio Doce officials held talks about a proposal to build a $1.5 billion steel plant with Baosteel Group Co. in northern Brazil.

``There's a huge entrepreneurial delegation in town, holding parallel meetings with Chinese officials in their specific fields,'' Joppert said.
Source: Bloomberg

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