Chinese investments in Brazil plummeted 74% last year, to USD 1.9 billion, the lowest level in six years, according to a survey by the Brazil-China Business Council.
The fall of Chinese investment in 2020 was greater than the total drop in net direct investment in the country, of around 50%, according to data from the Central Bank. In 2019, Chinese investments in South America´s largest economy totaled USD 7.3 billion.
The report, which is released annually but was delayed in 2020 because of the pandemic, attributes the lower flows last year to the result of the global recession that affected foreign investment in Brazil and in the world in general.
“This fall can be interpreted more as a cooling of global investment flows abroad, which fell 35% in 2020, than as a result of bilateral political friction,” says the document. “The deteriorating political environment between Brazil and China in 2020 does not appear to have affected bilateral economic relations.”
Tulio Cariello, author of the study and director of content and research at CEBC underlined that there were even institutional progress, with the reactivation of Cosban, the commission that represents the main mechanism of bilateral dialogue.
The report also highlights the action of the States, particularly in the Northeast, in the search for Chinese investments. In 2019, seven governors or vice-governors from the nine states in the region made official visits to China and Maranhão promoted a mission with 54 businessmen to the Asian country.
“The States of Brazil have already realized that they do not necessarily need to go through Brasília to make this type of initiative, to attract foreign investment. In the case of the Northeast, this is very clear”, said Cariello, noting that decentralization of efforts contributes to increasing investments.
In 2019, the Northeast was, for the first time, the region that received the most Chinese investments in the country, accounting for 34% of confirmed projects. Considering the stock of contributions already made by China, however, the Southeast is the main recipient, with the State of São Paulo (city pictured above) concentrating 31% of the total projects.
The electricity sector increased its leadership in attracting Chinese investments last year, absorbing 97% of the value of contributions. The highlights were projects by State Power Investment Corporation (SPIC) – involved in the development of the Açu thermoelectric park, in the state of Rio de Janeiro -, by CGN Brasil Energia – which is implementing wind farms in Bahia – and by State Grid.
In the financial sector, the research draws attention to a capital injection of 222 million reais made by the Bank of China in its Brazilian branch and to the inauguration of a banking operation by XCMG, the largest manufacturer of construction machinery in China.
Looking ahead, the CEBC estimates that China’s presence in the electricity sector tends to remain predominant in the coming years, but with the prospect of investments also growing in areas such as logistics, ports, construction and transport.
Regarding potential investments in the 5G area, in which China and the US are globally involved in a complex political and economic dispute, the survey highlights its potential, along with that of projects linked to artificial intelligence, digital economy and internet of things. “There are opportunities for innovation on the bilateral agenda that could benefit from China’s growing advance in the new frontiers of information technology”, the CEBC says.