When China's President Xi Jinping travels through Brazil this week, he will see airports and other projects financed mainly by the Brazilian government.
But, with Brazil's economy slowing and government accounts strained, China is looking to play a larger role in funding critical infrastructure to help move South America's largest country forward.
In Brazil for Monday's start of a meeting of the so-called BRICS nations in Fortaleza, Chinese officials are expected to announce investments in Brazil's transportation, energy and food sectors in coming days.
Those projects—which could include railroads, power plants and oil drills—stand to benefit both nations, according to Charles Tang, chairman of the Brazil-China Chamber of Commerce based in São Paulo.
"China has a strong interest in Brazilian commodities, so they want to invest in railroads in Brazil to reduce transport costs," Mr. Tang said. "This is a win-win situation, because the Brazilian government wants to attract investments in infrastructure."
The leaders of the BRICS—Brazil, Russia, India, China and South Africa—also are expected to announce progress on a development bank and a financial-aid fund, both funded by the group.
But, Brazil's relationship with China is expected to be the focus. After the BRICS summit ends Wednesday, Mr. Xi is staying on for a state visit.
Brazil's Trade and Development Minister Mauro Borges said the nations are looking to change the way the two countries interact economically. Brazil wants to export more higher-valued products to the Asian nation. China is Brazil's largest trading partner, having bought $21.8 billion in Brazilian exports last year, mostly commodities such as iron ore and soybeans.
"China will continue to be an important partner" in commodities, Mr. Borges said, but "we want to broaden the role of our exports" to the country.
Brazil's economy has posted weak economic growth since 2010; GDP is projected to expand less than 1% this year. Analysts point to the lack of investment in logistics and transportation infrastructure as one of the main barriers to growth.
Chinese leaders and the country's state-owned enterprises have, for years, been trying to lock up vital natural resources around the globe, according to Margaret Myers, director of the China and Latin America program of the Washington-based think tank Inter-American Dialogue.
In the past, Chinese companies went on buying sprees, trying to purchase farmland, mines and other assets. That approach sometimes alarmed target countries worried about national security. Negative reactions to that approach, including a limit on foreign by Brazil, changed China's tactics, Ms. Myers said. Chinese firms are now purchasing stakes in processing plants instead of trying to grab soy farms, for example, she said.
"There's a much more sophisticated approach to investing. It's a matter of inserting oneself into the production chain in various forms to try to control costs, cut out middlemen and ensure access," said Ms. Myers.
China's appetite for assets overseas could fit well with Brazil's growing need of foreign capital to upgrade its infrastructure.
The investment gap in Brazil is huge, and the country's efforts to finance new projects has, until recently, been carried out mostly through three big state-owned banks which have lent billions of reais to Brazilian companies.
The main source of capital has been Brazil's National Development Bank, or BNDES, which last year alone lent 190 billion Brazilian reais ($85.31 billion). But most of its funding comes from the National Treasury, and Brazil is under pressure to save more taxpayer money to pay down debt.
The government has already been turning to public-private partnerships such as the road and rail concessions to try to reduce the pressure on its budget. More Chinese project financing would be a boon at a time when analysts are looking at Brazil's budget numbers with growing concern.
Chinese companies are already playing a role in developing Brazil's huge pre-salt oil deposits, a task that Petróleo Brasileiro SA, PETR4.BR +0.94% the government-controlled, debt-laden local oil company, can't handle alone.
In October, Brazil sold the rights to develop a field to a consortium of Royal Dutch Shell RDSB.LN +0.90% PLC; Total SA FP.FR +0.36% ; two of China's largest energy companies, Cnooc Ltd. 0883.HK 0.00% and China National Petroleum Corp.; and Petrobras.
The Brazilian government is also looking to its own companies boost exports of higher-value products to China in the near future, Mr. Borges said. Raw materials exports bring in less money than sales of finished products, and Brazil wants to move up the production chain from selling iron ore and soybeans.
Brazil is trying to export products such as processed food, pulp-and-paper products and airplanes to Chinese buyers, he said.
The minister said that a contract to sell Brazilian airplanes to Chinese airlines is likely to be signed during Mr. Xi's stay.
"We don't want to substitute products in our trade [with China]. We want to broaden it," Mr. Borges said.
He said Brazil has "a lot of competence" in processed foods, and has also developed genetic technology that allows for faster development of trees for paper production. These are niches where Brazil seeks to improve exports to China, the minister said.
—Jeffrey T. Lewis in São Paulo contributed to this article.
http://online.wsj.com/articles/chin...-in-funding-brazils-infrastructure-1405288036
But, with Brazil's economy slowing and government accounts strained, China is looking to play a larger role in funding critical infrastructure to help move South America's largest country forward.
In Brazil for Monday's start of a meeting of the so-called BRICS nations in Fortaleza, Chinese officials are expected to announce investments in Brazil's transportation, energy and food sectors in coming days.
Those projects—which could include railroads, power plants and oil drills—stand to benefit both nations, according to Charles Tang, chairman of the Brazil-China Chamber of Commerce based in São Paulo.
"China has a strong interest in Brazilian commodities, so they want to invest in railroads in Brazil to reduce transport costs," Mr. Tang said. "This is a win-win situation, because the Brazilian government wants to attract investments in infrastructure."
The leaders of the BRICS—Brazil, Russia, India, China and South Africa—also are expected to announce progress on a development bank and a financial-aid fund, both funded by the group.
But, Brazil's relationship with China is expected to be the focus. After the BRICS summit ends Wednesday, Mr. Xi is staying on for a state visit.
Brazil's Trade and Development Minister Mauro Borges said the nations are looking to change the way the two countries interact economically. Brazil wants to export more higher-valued products to the Asian nation. China is Brazil's largest trading partner, having bought $21.8 billion in Brazilian exports last year, mostly commodities such as iron ore and soybeans.
"China will continue to be an important partner" in commodities, Mr. Borges said, but "we want to broaden the role of our exports" to the country.
Brazil's economy has posted weak economic growth since 2010; GDP is projected to expand less than 1% this year. Analysts point to the lack of investment in logistics and transportation infrastructure as one of the main barriers to growth.
Chinese leaders and the country's state-owned enterprises have, for years, been trying to lock up vital natural resources around the globe, according to Margaret Myers, director of the China and Latin America program of the Washington-based think tank Inter-American Dialogue.
In the past, Chinese companies went on buying sprees, trying to purchase farmland, mines and other assets. That approach sometimes alarmed target countries worried about national security. Negative reactions to that approach, including a limit on foreign by Brazil, changed China's tactics, Ms. Myers said. Chinese firms are now purchasing stakes in processing plants instead of trying to grab soy farms, for example, she said.
"There's a much more sophisticated approach to investing. It's a matter of inserting oneself into the production chain in various forms to try to control costs, cut out middlemen and ensure access," said Ms. Myers.
China's appetite for assets overseas could fit well with Brazil's growing need of foreign capital to upgrade its infrastructure.
The investment gap in Brazil is huge, and the country's efforts to finance new projects has, until recently, been carried out mostly through three big state-owned banks which have lent billions of reais to Brazilian companies.
The main source of capital has been Brazil's National Development Bank, or BNDES, which last year alone lent 190 billion Brazilian reais ($85.31 billion). But most of its funding comes from the National Treasury, and Brazil is under pressure to save more taxpayer money to pay down debt.
The government has already been turning to public-private partnerships such as the road and rail concessions to try to reduce the pressure on its budget. More Chinese project financing would be a boon at a time when analysts are looking at Brazil's budget numbers with growing concern.
Chinese companies are already playing a role in developing Brazil's huge pre-salt oil deposits, a task that Petróleo Brasileiro SA, PETR4.BR +0.94% the government-controlled, debt-laden local oil company, can't handle alone.
In October, Brazil sold the rights to develop a field to a consortium of Royal Dutch Shell RDSB.LN +0.90% PLC; Total SA FP.FR +0.36% ; two of China's largest energy companies, Cnooc Ltd. 0883.HK 0.00% and China National Petroleum Corp.; and Petrobras.
The Brazilian government is also looking to its own companies boost exports of higher-value products to China in the near future, Mr. Borges said. Raw materials exports bring in less money than sales of finished products, and Brazil wants to move up the production chain from selling iron ore and soybeans.
Brazil is trying to export products such as processed food, pulp-and-paper products and airplanes to Chinese buyers, he said.
The minister said that a contract to sell Brazilian airplanes to Chinese airlines is likely to be signed during Mr. Xi's stay.
"We don't want to substitute products in our trade [with China]. We want to broaden it," Mr. Borges said.
He said Brazil has "a lot of competence" in processed foods, and has also developed genetic technology that allows for faster development of trees for paper production. These are niches where Brazil seeks to improve exports to China, the minister said.
—Jeffrey T. Lewis in São Paulo contributed to this article.
http://online.wsj.com/articles/chin...-in-funding-brazils-infrastructure-1405288036
