China seeks to build rail­ways in Brazil to ship out com­modi­ties

The Political and Business Daily - - EDIT - AN­THONY BOA­DLE

BRAZIL hopes that dur­ing a visit by Chi­nese Pres­i­dent Xi Jin­ping it can boost ties with its big­gest trade part­ner be­yond the ex­change of com­modi­ties for man­u­fac­tured goods, but that may be wish­ful think­ing.

Ac­cords China will sign with Brazil when Xi meets with Pres­i­dent Dilma Rouss­eff fo­cus on im­prov­ing in­fra­struc­ture to make sure raw ma­te­ri­als China is hun­gry for make it to port, with rail­ways a top pri­or­ity.

Brazil­ian officials are por­tray­ing Xi’s state visit as a mile­stone in deep­en­ing a strate­gic part­ner­ship that will lead to Chi­nese in­vest­ments in Brazil's man­u­fac­tur­ing in­dus­try.

Trade be­tween China and Brazil soared to $83.3 bil­lion last year from $3.2 bil­lion in 2002, with iron ore, soy and oil mak­ing up the bulk of Brazil­ian ex­ports.

The Chi­nese have been mak­ing in­vest­ment prom­ises for years and failed to de­liver. Three years af­ter an­nounc­ing plans to in­vest $2 bil­lion in a soy-crush­ing plant and a gi­ant stor­age hub in western Bahia, Chongqing Grain Group Corp has only man­aged to bull­doze a 100-hectare (250-acre) field.

There have been few suc­cess sto­ries in the trickle of in­vest­ment that has come in. Dongfeng Mo­tor Cor­po­ra­tion, one of China's largest au­to­mo­tive groups, has shelved a plan to build a 1 bil­lion Brazil­ian reais ($450 mil­lion) truck fac­tory in Brazil af­ter fall­ing out with its Brazil­ian part­ner.

An­a­lysts say the Chi­nese are not in­ter­ested in in­vest­ing in man­u­fac­tur­ing in Latin Amer­ica, es­pe­cially in Brazil where la­bor costs are high and reg­u­la­tory hur­dles abound.

"The Brazil­ians have to un­der­stand that Brazil is not ter­ri­bly at­trac­tive," said Rior­dan Roett, Western Hemi­sphere direc­tor at the Johns Hop­kins School of Ad­vanced In­ter­na­tional Stud­ies in Wash­ing­ton. "There is no growth in credit and the govern­ment has not de­liv­ered on prom­ises to im­prove in­fra­struc­ture. The Chi­nese are very much aware of that."

Un­less Brazil can be­come more com­pet­i­tive, Chi­nese in­vest­ment will go to Asian coun­tries, or those in the bur­geon­ing Pa­cific al­liance, like Mex­ico, Roett said.

Brazil­ian officials say China wants to en­ter part­ner­ships to build rail­ways to ship grains and min­er­als to Brazil­ian ports.

Projects un­der con­sid­er­a­tion in­clude rail­ways to the ports of Il­heus in the state of Bahia and Itaqui in Maran­hao, which are closer to the Panama Canal and would lower freight costs.

China is also in­ter­ested in study­ing a rail­way across the An­des to the Pa­cific coast of Peru, which could shorten the trade route sig­nif­i­cantly, a trade min­istry of­fi­cial said.

Brazil­ian officials ex­pect no progress dur­ing Xi's visit in re­solv­ing an im­passe over China's re­fusal to al­low gi­ant, bulk iron ore car­ri­ers used by Brazil's Vale SA to dock at Chi­nese ports, forc­ing the miner to trans­ship car­goes from ports in the Philip­pines and Malaysia and in­creas­ing its costs.

Brazil­ian ef­forts to man­u­fac­ture goods in China have also run into prob­lems. China has not ap­proved plans by Brazil's big­gest bus maker Mar­copolo to build a fac­tory or plane maker Em­braer to re­fit its plant in Harbin to make E-190 pas­sen­ger planes.

—Reuters

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