Changes in China’s investment strategy in Brazil

The Chinese government’s plans to make the country carbon neutral by 2060 are likely to change the profile of acquisitions made by Asian companies in Brazil in the coming years.

This trend will see clean energy and technology assets gain popularity, while oil and gas investments will certainly lose some of their luster.

In the short term, these effects are not yet noticeable, but Brazil is celebrating the fact that Chinese investment in the country last year returned to levels seen before the COVID-19 pandemic.

Chinese companies invested a total of US$5.9 billion in Brazil in 2021, more than triple the US$1.9 billion reported in 2020, according to data compiled by the China-Brazil Business Council (CEBC). .

A total of 28 projects and acquisitions made by Chinese companies were mapped by CEBC in Brazil last year.

Tullio Cariello, director of research at CEBC, spoke to BNamericas about the scenario for China’s investment in the country going forward.

BNamericas: After the recovery in 2021, what are the expectations for the volume of Chinese investment in Brazil this year and next?

Carrillo: It is difficult to say that we will have as high investments as in 2021, because last year there were two big deals in the oil sector.

But talking about the number of operations [28 in 2021]it is possible to achieve similar numbers, and if this happens, it will be heavily influenced by the information technology sector, which has attracted the interest of Chinese investors.

BNamericas: Why is ICT in Brazil starting to attract the interest of Chinese companies?

Carrillo: Chinese companies have started to understand better how the technology environment works in Brazil, what the startup world is like, fintech here, how vibrant this sector is. And they also realized that in Brazil the use of technology is very intense among the public.

Also, Chinese companies investing in technology here are not tied to the government, so they can also make decisions more quickly when market conditions are favorable.

BNamericas: Apart from ICT, what other segments are likely to attract interest from Chinese companies?

Carrillo: There is still great potential for exploration by Chinese firms in the Brazilian agricultural sector.

In addition, in the long term, sustainability-related assets such as renewable energy, solar panel manufacturing and vehicle electrification will be areas of growing interest for the Chinese in Brazil.

Another sector that has not yet seen such expected participation from Chinese companies is infrastructure, but I also believe that this will increase, this movement will gain strength with Chinese companies buying infrastructure companies that are already established in Brazil , because China has great experience in construction.

BNamericas: How are changes in China’s economic model affecting investment in Brazil?

Carrillo: Indeed, there is a shift in China’s economic model, which is now more focused on strengthening the domestic economy than promoting international expansion. Currently, China is more involved in attracting projects to the country than investing abroad.

But here in Brazil, we will see their investment program more focused on IT assets and, looking more in the medium term, we will see the Chinese more engaged in investments with a sustainable footprint, such as those in clean energy.

China has commitments to become carbon neutral and that will force them to invest, even here in Brazil, in assets related to renewable energy, green hydrogen. This trend is likely to reduce investment in fossil fuel energy assets.

BNamericas: How could the results of Brazil’s presidential election in October affect Chinese investment in the country?

Carrillo: Assume that the election is currently between two candidates; Lula [Luiz InĂ¡cio Lula da Silva] and [Jair] Bolsonaro.

In the Bolsonaro government, we have seen a lot of anti-China rhetoric, especially at the beginning of his administration. Over time, these criticisms have diminished, and today there are sectors of the government that see China as a crucial partner, as is the case with the agricultural sector.

In an eventual Lula-led administration, Brazil and China should be more politically friendly than under the current government, based on what we saw in the previous PT [Workers’ Party] administrations.

But whatever the government is next year, China will continue to make investments here.

BNamericas: We are seeing the election of more leftist presidents in Latin America lately. Could this bring the region closer to China?

Carrillo: For many years, China has shown great interest in investing in the region, and this is happening regardless of the ideological leanings of any government.

I believe that economic issues continue to overshadow political biases regarding the countries of the region in which they invest.

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