Agribusiness, infrastructure opportunities are plentiful

As China's economic diplomacy has expanded across the globe over the past decade, Latin America has received its share of attention. Relations between China and the region have grown, and nowhere is that clearer than in Brazil.

As China's largest trade partner in the region, Brazil received President Xi Jinping last year during the BRICS summit.

Premier Li Keqiang's visit will come at a sensitive time for Brazil, which is currently being rocked simultaneously by environmental, political and economic crises.

Yet through it all, Brazil has been able to find a reliable partner in China. Trade between the countries totaled $83.3 billion in 2013 and $77.9 billion last year. The reduction is a result of a drop in the international price of commodities and the devaluation of the Brazilian real. Although Brazil's trade surplus has eroded from $8.7 billion to $3.3 billion, under stable prices and a stable currency Brazil should continue to benefit from bilateral trade.

Although much of the commerce between the two countries centers on commodities, China's urbanization and transition to a consumption-based economy present Brazil with a good opportunity to diversify its exports.

Brazil's competitive agribusiness sector has already been taking advantage of the opening. Cotton and leather were Brazil's fastest-growing exports to China last year, and poultry, beef and even pork are set to post strong growth this year.

Brazil's Association for the Promotion of Exports took a delegation of representatives of 30 Brazilian agribusiness and food and beverage companies to participate in trade fairs in Guangzhou and Shanghai from May 4 to 8. Li will be accompanied by a group of 150 business executives from diverse sectors of the Chinese economy during his visit.

Aside from commerce, investments will also feature prominently on the agenda. Li is expected to witness the signing of a number of deals that were first discussed during Xi's visit last year. The emphasis of these investments will be infrastructure.

Li's visit provides Brazil with timely opportunities. It desperately needs to upgrade its infrastructure, whose deplorable condition results in inefficiency, uncertainty and prohibitive transportation costs within the country. Railways, hydroelectric dams and electricity transmission lines are projects for which Chinese companies are especially well-suited.

One project in particular would seem to fit neatly into China's "One Belt, One Road Initiative", based on historic Silk Road trade routes, which appears at first glance to promote Eurasian integration and development but also shows global promise. A transcontinental railway envisioned to link Brazil's Atlantic Ocean ports with Peru's Pacific ports could facilitate the integration of markets in the interior of the continent and improve the supply chain logistics of export-oriented enterprises. It would also reduce dependence on the Panama Canal.

No strategy is without risks - and the environmental impact of building a railway or a dam in the Amazon rain forest must be taken into account - but by and large Brazil appears to stand to benefit from these investments.

At the same time, its companies could seek opportunities in China, particularly in value-added categories such as food service and fashion, where strong Brazilian brands could stake their claims in the Chinese market.

Market analyst with Euromonitor International based in Rio de Janeiro, Brazil

(China Daily 05/19/2015 page3)