China Expands Domination of Brazil's Trade
China is looking to solidify its position as Brazil’s biggest investor and trading partner by expanding investments into that nation’s hi-tech sector. The push will help turn Brazil into a major growth market for China’s tech firms.
China has been Brazil’s biggest trading partner since 2009 when it displaced the U.S. Bilateral trade continues to boom, multiplying 16-fold between 2001 and 2010. But until recently about 70 percent of that has been in commodities. At Brazil’s urging China is now becoming Brazil’s biggest source of foreign direct investments.
As of the end of 2009 China’s cumulative foreign direct investment (FDI) in Brazil reached $12.67 billion, according to Brazilian banking giant Banco Bradesco SA. Of that 20 percent went to agriculture and and another 20 percent to mining. But now, at Brazil’s urging, China is moving to invest aggressively into its hi-tech sector, bringing its total investment in Brazil to $17 billion in 2010.
Brazil is an ideal base of operations for Chinese firms looking to tap South American growth. Not only does Brazil account for about 40 percent of the emerging continent’s output, its economy is outpacing the continent in growth. By the end of the decade Brazil is expected to account for 50 percent of the continent’s GDP.
Among Chinese tech firms that have seized opportunities to participate in Brazil’s tech-sector growth are telecom equipment makers ZTE and Huawei Technologies.
ZTE is using its industrial park in Hortolandia near Sao Paulo as a base of operations for selling to other S. American countries. It posted $600 million in sales last year and projects $1 billion for this year.
“The Brazil market accounts for about 9 percent of ZTE’s overseas revenue,” said Yuan Lie, president of ZTE South America Region. “The country is crucial for our company’s development in Latin America.”
In 1998 Zhuhai Gree Electric Appliances Inc became one of the first Chinese companies to enter the Brazilian market when it invested only $2 million to build a plant to manufacture air conditioners. Today Gree is the nation’s number four air conditioner maker, selling 400,000 units there last year while competing against major international brands like LG. Gree hopes to double the number this year.