Thursday, 16 September 2010


Brazil's huge new port highlights China's drive
into South America

Investments guarantee Chinese access to soy, oil and other badly
needed resources

Wednesday 15 September 2010

The 'super port' in Sao Joao da Barra is the largest port investment
in Brazil and will have capacity for the largest ships in the world.
Photograph: Douglas Engle/Australfoto Blades slicing through the
morning heat, the helicopter rose from the tarmac and swept into a
cobalt sky, high above Rio's Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic
rainforest and fishing boats that bobbed lazily in the ocean below.
Then finally, 80 minutes on, the destination came into view: a
gigantic concrete pier that juts nearly two miles out into the South
Atlantic and boasts an unusual nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up by dozens
of 38-tonne pillars, this vast concrete structure is part of the
Superporto do Acu, a £1.6bn port and industrial complex that is being
erected on the Rio coastline, on an area equivalent to 12,000
football pitches.

Reputedly the largest industrial port complex of its type in the
world, Açu is also one of the most visible symbols of China's rapidly
accelerating drive into Brazil and South America as it looks to
guarantee access to much-needed natural resources and bolster its
support base in the developing world.

When Acu opens for business in 2012, its 10-berth pier will play host
to a globetrotting armada of cargo ships, among them the 380-metre
wide ChinaMax – the largest vessel of its type, capable of ferrying
400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of barrels of
oil are expected to pass along the "Highway" each year on their way
east, where they will alleviate China's seemingly unquenchable thirst
for natural resources.

"This project marks a new phase in relations between Brazil and
China," Rio's economic development secretary, Julio Bueno, said
during the recent visit of about 100 Chinese businessmen to the port
complex, which is being built by the Brazilian logistics company LLX
and should receive billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America, is part
of China's "going out strategy" – an economic and, some say,
diplomatic push for Chinese companies, many of them state-run, to
invest abroad, snapping up access to minerals, energy and food by
pouring the country's colossal foreign reserves into overseas
companies and projects.

China is expected to overtake Japan as the world's second largest
economy this year and may already be the world's greatest energy
consumer. Now it is set to become Brazil's top foreign investor, with
its companies plowing $20bn into the country in the first six months
of 2010, compared with $83m in 2009. A recent study by Deloitte
predicted that Chinese investments in Brazil could hit an average of
about $40bn a year between now and 2014, with companies throwing
money at sectors ranging from telecommunications, infrastructure and
farming, to oil, biofuels, natural gas, mining and steel

"Relations with Brazil in all areas have entered a new era," Qiu
Xiaoqi, China's ambassador in Brazil, recently told the state news
agency Xinhua.

The surge in China's South American spending is not just a Brazilian
phenomenon. Ecuador has already signed around $5bn of bilateral deals
with China this year, including $1.7bn to help build a hydro-electric
dam and $1bn investments for oil exploration and infrastructure
projects. That compared with Chinese investment of just $56m in 2009.

Chinese companies have sunk $1.4bn into mining operations in Peru
this year, while in April Hugo Chávez announced that the Chinese,
already major sponsors of Venezuelan oil exploration, had agreed to
open a $20bn credit-line for the "Bolivarian revolution".

Michael Klare, author of Rising Powers, Shrinking Planet, a book
about the growing tussle for global resources, described today's
China as "the shopaholic of planet Earth".

"The Chinese authorities understand that to sustain the country's
continued growth, they will have to ensure that its industries are
provided with adequate supplies of energy, minerals, and other basic
raw materials," he said. But the "going out" strategy went far beyond
business transactions, he added.

"They seek to fashion a multipolar world in which no single power –
read the United States – plays an overwhelmingly dominant role. To
this end, they seek to bolster ties with rising regional powers like
Brazil and South Africa."

In Sao Joao da Barra, the city nearest to Acu and one of Rio state's
poorest regions, the Chinese presence is being felt even before
Brazil's Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water and
Mandarin interpreters for visiting Chinese dignitaries. Sao Joao da
Barra's town hall, meanwhile, has started offering free Mandarin
lessons to locals interested in working with the wave of Chinese
guests that is anticipated.

"You should see a 10-year-old boy saying, 'I understand … the Chinese
are coming and when the Chinese industries come I want to work for
them and if I speak Mandarin I'll have a competitive advantage on the
others'," beamed Eike Batista, the billionaire entrepreneur behind
the superport and one of the most vocal cheerleaders for Chinese
advances into Brazil. "[It is] wonderful."

Leonardo Gadelha, LLX's CFO, said during a recent tour of the port:
"This is part of a Chinese strategy of going to the market more and
more. They are already a very considerable presence in Africa and we
are now going through this moment in Brazil."

The Highway to China lay "in the middle" of this blossoming
relationship with China, he said, adding: "We are betting that … this
will continue growing."

Not all Brazilians, or indeed western governments, share such

"There are many in Washington who worry about China's growing
presence in Africa and Latin America and claim that this poses a
threat to America's long-term strategic interests," said Klare,
noting, however, that the US' "fixation" with Afghanistan and the war
on terror meant there had been virtually no reaction.

In Brazil meanwhile China's arrival has prompted cries of
neo-colonialism. "The Chinese have bought Africa and now they are
trying to buy Brazil," the prominent economist Antônio Delfim Netto
complained in a recent interview with the Estado de Sao Paulo
newspaper, warning that it was a "grave mistake" to allow a foreign
state to buy "land, minerals [and] natural resources" from another
sovereign power.

Batista, Brazil's richest man, rejected such criticism, saying: "The
association between Brazil and China is a two-way highway." Chinese
companies such as Wuhan Iron and Steel had committed to helping build
a $5bn steel mill at the port complex, rather than always shipping
out primary resources to process at home, he pointed out. "You want
to get three tonnes of raw iron ore, [so] produce one tonne of steel
in Brazil," he said. "That philosophy is sinking in and is great for
both sides."

Neither would Chinese companies be allowed to flood the complex with
hordes of foreign workers as had happened in Africa, said Gadelha,
the CFO.

"If it was up to them they would bring lots of Chinese workers as
they are used to doing," he admitted. "[But] Brazil's legislation is
very strict in this sense."

Batista suggested that rather than complaining about China's
courtship of Brazil, western powers should urge their own companies
to pay more attention to the region themselves.

"In the last 15 years or so the [American and European] CEOs have
stopped coming here and that is why they are a little bit behind," he
said. "We are pushing European companies and saying: 'You're not
really understanding what is happening in Brazil'."

"Don't put Brazil in the same bag as our neighbours," he added. "We
are not Central America. We are not Venezuela. We are not Argentina."


Beijing's deals

Brazil In November 2009 Brazilian energy giant Petrobras signed a
$10bn loan deal with China's Development Bank. As part of the deal
Petrobras will guarantee the supply of 200,000 barrels of oil per day
to China over the next 10 years. Chinese companies and state banks
pumped around $20bn into Brazil in the first half of this year

Venezuela Hugo Chávez, pictured, unveiled a $20bn credit line from
China's Development Bank to fund the "Bolivarian revolution" in April

Ecuador The country has already signed around $5bn of bilateral deals
with China this year, including $1.7bn to help build a hydro-electric
dam and $1bn investments for oil exploration and infrastructure
projects. In 2009 direct Chinese investment in the country was just

Peru Chinese companies invested $1.4bn in mining operations in Peru
during the first four months of this year, making China the country's
second largest trade partner

1 comment:

David M. Ginsberg, Esq. said...

I share similar sentiments and have my own China friendly blog. The URL is
David Ginsberg