China and Brazil confirm trade and investment deals worth billions

http://www.theguardian.com/world/2015/may/19/china-brazil-trade-deals-billions

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Chinese premier Li Keqiang lifted the wraps Tuesday on a multibillion-dollar series of trade and investment deals with Brazil, as Beijing looks to invest $50bn in South America’s largest economy.

The news unveiled on the Chinese official visit is a huge boon for Brazil as it endures a fifth straight year of low growth after a period of rapid expansion fueled by an Asian demand for commodities that has since slowed.

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Li’s host, President Dilma Rousseff, hopes Brazil can direct Chinese cash to overhaul decaying infrastructure as the country’s tourist magnet Rio de Janeiro prepares to host South America’s first ever Olympics next year.

Headlining deals agreed on Li’s first official visit to Latin America were a pair of finance and cooperation deals worth $7bn for Brazil’s state-owned oil firm Petrobras.

Brazil’s government has been hit by a huge graft scandal embroiling its flagship company over the past year, but the oil giant received a boost earlier this year in signing a $3.5bn financing deal with the China Investment Bank.

Despite becoming Brazil’s number one trading partner in 2009, amid an exponential rise in two-way trade, China currently ranks only 12th in terms of actual investment in Brazil, prompting Brasilia to seek deeper economic ties.

The Chinese are notably supplying new metro trains and catamarans to the Olympic host city and Li will visit Rio on Wednesday to inspect those investments before leaving Thursday for Colombia ahead of trips to Peru and Chile.

Li’s tour, aimed at underpinning growing Chinese influence in Latin America, comes just days after Beijing signed accords worth $25bn and $22bn with fellow BRIC developing nations. But the Brazil package is worth more than those combined.

At their talks, aside from the Petrobras agreements, Rousseff and Li also signed a range of deals designed to further bilateral cooperation on trade, investment, agriculture, energy and transport, official sources said.

Brasilia and Beijing also finalized a $1.3bn accord to sell 22 Brazilian Embraer commercial jets to China’s Tianjin Airlines, Embraer said in a statement, while Brazil’s Vale, the world’s biggest iron producer, announced extended cooperation with China on maritime transport of iron ore.

Vale said it would expand an existing accord by selling four ore carriers to China Merchants Energy Shipping Co Ltd without giving a figure for the agreement.

Further topics on Tuesday’s agenda ranged from lifting an import ban on Brazilian beef to an ambitious project to build a railway from the key southeastern Brazilian port of Santos more than 3,500 km (2,200 miles) to the Peruvian Pacific port of Ilo.

In Brazil, Beijing sees even greater scope to bolster bilateral trade, which has grown exponentially over the past decade, with the Asian giant becoming Brazil’s main trading partner in 2009.

Trade between China and Latin America as a whole exploded from barely $10bn in 2000 to $255.5bn in 2012.

Sino-Brazilian trade mushroomed from $6.5bn in 2003 to $83.3bn in 2012, though China is just the 12th largest investor in Brazil.

Ahead of Li’s arrival Monday evening, Jose Graca Lima, head of Asian affairs in the Brazilian foreign ministry, explained that a “second generation” of Chinese investment is under way, switching from trade in raw materials to heavy industry and infrastructure.

Facilitating the movement of imports from Brazil – and similarly that of its own exports to Latin America – is a key Chinese aim. That desire lies behind the mooted Chinese-financed $10bn railway project.

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The planned line, stretching either across Brazil and into Peru or potentially via a shorter route into Peru via Bolivia, would go through Amazonia, sparking environmental concerns.

“If we consider Brazil’s investment portfolio, then clearly a project of this dimension is justified,” Trade Minister Armando Monteiro told AFP in an interview Monday.