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Chinese Investors leading FDI inflows into Brazil

In its quest to fuel its rapid economic growth and expansion, Chinese investments have increased tremendously in Brazil, reported the Washington post. In its strategy to ensure a steady supply of resources for development, Chinese state firms are on a globe trotting prowl for investments and so far Brazil appears to be a favorite target. The Asian economic tiger has over $2 trillion in its foreign reserves and is encouraging state firms to seek growth outside of China to supplement the reduced growth domestically.

Brazil is a crucial destination for investment as regards the Chinese strategy of securing enormous supplies of natural resources for developmental needs. In the first half of 2010, Brazil had about $20 billion worth of foreign direct investment inflows from China. That marked an increase of over ten times when compared to preceding Chinese FDI inflows into Latin America’s fastest growing and biggest economy.

Subsequently, the first 2010 half investments of China into Brazil might as well put the Asian Tiger as the top foreign investor into Brazil this year, an improvement from its previous position last year in which China came 29th. Currently, foreign investments from China can be witnessed in infrastructural projects such as the building of the port on the Atlantic coastline, about 175 miles north of Rio de Janeiro state.

The two mile port is aimed at accommodating huge Chinese vessels that will transport iron ore for China’s steel industry that is experiencing a dramatic increase in demand as the country grows and expands economically. It is expected that most of the infrastructural investments in the project, inclusive of the factories such as a steel mill, shipyards, an automobile plant, plants for the manufacture of oil and gas equipment; all will be undertaken by the Chinese at massive investment costs.

The new investment will result in a “factory city” for which most of the plants will be investments by the Chinese. Other than infrastructural development projects, Chinese companies have as well invested heavily in Brazil’s electric power supply business with the purchase of stakes in the country’s power grid to power their steel mills, car plants and telecommunications infrastructure.

Additionally, some Chinese grain firms are keen to buy land in Brazil for the production of soybeans. It is speculated that some firms are seeking land as vast as 600,000 acres of Brazilian outback. China’s foreign direct investments into Brazil are increasing by the day and it remains to be seen how the shifting alliances will play out, as developing nations look to China, as opposed to the US for development.

28 July 2010.