What is the business climate for foreign companies operating in or exploring Brazil? Specifically, what is the Brazilian business climate for Chinese companies?
G7 COUNTRY TRADE COMMISSIONER FOR OIL & GAS
Brazil remains China’s most important trade partner in LATAM, but the arrival of an openly pro-US president has generated frictions in that relation. However, China is still a priority market for Brazil’s exports (mainly agricultural, oil, and mining) and Brazil has become a significant receptor of Chinese FDI. The change of government in the US could likely result in an opportunity to re-ignite Brazil-China relations and boost growth and market entry of Chinese companies in critical areas such as infrastructure, energy generation and distribution, extractives and telecommunications. Some sectors in Brazil remain wary of China’s “predatory trade practices,” but the current crisis has put the country in a situation where the partnership can’t be avoided.
SENIOR EXECUTIVE AT A MAJOR BRAZILIAN MULTINATIONAL
Chinese companies, such as State Grid, Powerchina, SPIC, CCCC, CTG, CNPC, CNOOC, SINOPEC, DAKANG and COFCO, started operating and invested more than US$100bn in Brazil in the last few years. Some Chinese companies have become prominent players in both the energy and agribusiness sectors. The current Brazilian government does not share the same political view of China, but this doesn’t inhibit Chinese companies looking to invest in the country. On the contrary, the government welcomes any new investment. Although, any newcomer should pay attention to antitrust and anti-competition regulation if it plans to enter the sector where Chinese companies have a large market share. It is also important to note that China is our largest commercial partner and largest investor.
POLITICAL RISK CONSULTANT AND SENIOR ADVISOR AT USAID
Two factors that any foreign company should consider before doing business in Brazil are powerful incumbency and the protection of intellectual property. Chinese companies are no less than vulnerable to self-protective measures. Both Brazilian and incumbent foreign company owners take against new entrants and especially foreign competitors. While the market size and value-added via exports make Brazil an attractive climate, each sector must be evaluated for specifics. Partnering with established enterprises and investors can help, but be aware of local laws and politics. National use of WTO and WIPO exceptions to each party’s advantage. Discrete opportunities must weigh the potential for corruption at micro and macro levels, as reported by various trusted international institutions.
EXECUTIVE DIRECTOR AT A CONSULTANCY
Brazil-China business climate has never been as good as its current standing. The current US-China trade war has helped Brazilian exporters. Brazilian exports to China are mostly related to iron ore from Vale, a Brazilian multinational mining company which is the largest world’s iron ore supplier. Vale sells iron ore to the Chinese steel industry, accounting for more than half of global production. Brazil is also the largest exporter of agriculture commodities and meat to China, competing globally with Australia, Europe and the United States. Conversely, China exports industrialized products in Brazil, such as cars, in cooperation with the CAOA group, home appliances, and equipment. China participates in the energy and telecommunication business in Brazil as an investor.
LATAM ANALYST AT A THINK TANK
Bolsonaro’s administration has been attempting to improve the climate for foreign business, especially with the EU trade agreement and the U.S. trade facilitation deal. However, since the Covid crisis, these elements of his agenda have stalled, and his recent dismissal of Petrobras leadership suggests that things will go from bad to worse for business in 2021. Initially, Bolsonaro was highly critical of China and an expanding Chinese role not only as the country’s largest trading partner but as an investor. Bolsonaro’s views have not shifted, but he has to face the reality of being increasingly shunned by organizations from Europe and Biden-led America. This means that Chinese partners, who voice clearer respect for sovereignty, are better placed to both trade and invest in Brazil.