Chinese investment not Brazil panacea

GMT 03:54 2015 Thursday ,21 May

Arab Today, arab today Chinese investment not Brazil panacea

Chinese PM Li Keqiang (L)
Brasília - AFP

Brazil may have received a $53 billion investment boost from China but the South American giant would be unwise to view investment from the Asian superpower as a panacea to its economic woes, analysts said.

Chinese Prime Minister Li Keqiang wound up a three-day visit to Brazil on Wednesday with a ride on a subway train made in China to be used on a new metro line in Rio de Janeiro ahead of the 2016 Olympics.

It came China agreeid a series of deals which Brazil hopes will help to jump-start its sluggish economy.

Brazilian President Dilma Rousseff has welcomed the investment, with her country's economy widely forecast to contract this year.

Li said China hoped to build factories in Brazil and would seek "to take on local personnel and train up Brazilian workers."

Beijing also intends to pursue an ambitious plan to link Brazil's eastern coast with the Peruvian Pacific coast via a transcontinental railway to facilitate the movement of Brazilian exports to China.

Trade Minister Armando Monteiro told AFP the railway link would cost around $30 billion.

Analysts warned that China did not always deliver on every mooted project -- although Kevin Gallagher, professor at Boston University, said Brazil needs the Asian giant.

"Growth projections are way down for the region, and the private sector is shying away. China is the only game in town for long run investment in the region," said Gallagher.

- Cautiously positive -

But he added that Brazil would have to manage carefully the debts it is taking on, with Brasilia deeming another $70 billion necessary beyond what China is offering to tackle inefficient infrastructure.

Luiz Castro Neves, former ambassador to Beijing and now curator of the Brazilian Center for International relations, warned that China's plans "are just intentions. The result of the (Li) visit was positive -- but you have to look at these things with caution.

"In the past several plans never left the drawing board," Castro Neves noted.

Headlining 35 deals were finance and cooperation agreements worth $7 billion for Brazil's state-owned oil firm Petrobras, a $1.3 billion accord to sell 22 Brazilian Embraer commercial jets to China's Tianjin Airlines and a raft of accords for iron producer Vale.

Yet Wednesday Brazilian officials accepted that the mooted rail link was notably a long way from seeing the light of day.

"It's an old project dating from 2004 and now being presented again, with many problems to overcome" such as the environment and land rights issues, said Reinaldo Guang, partner of Tozzini Freire, the law firm assessing China-related projects.

Guang pointed out: "In our experience with Chinese banks we know they are very cautious over handing out finance. They have very strict criteria and you don't always end up getting the line of credit. They will also prefer Chinese firms as it is much easier for a Chinese bank to analyse a local firm than a Brazilian one."

China, however, is on a mission to rise above its current 12th place in the investors' table in Brazil, even though Sino-Brazilian trade soared from $6.5 billion in 2003 to $83.3 billion by 2012.

Li was Wednesday headed to Colombia as Beiing pushes its links in South America.

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