Political Risk Latin America Blog @PolRiskLatam

Brazil/China economy: Rebalancing the relationship

Posted in News and Articles, Political Risk by politicalrisklatam on April 14, 2011

by The Economist Intelligence Unit, April 13th, 2011.

Sino-Brazilian commercial ties have expanded rapidly in the last decade, and China is now Brazil’s top trading partner—and was its biggest foreign direct investor in 2010 (with FDI worth around US$15bn). However, the relationship is seen as unbalanced, with Brazil exporting mostly commodities and importing manufactured goods from the Asian giant. President Dilma Rousseff took a step towards correcting this imbalance during a five-day visit to China that began on April 11th. She signed 22 co-operation agreements, some designed to open China’s market to higher-value-added goods.

The Rousseff administration wants to diversify Brazil’s exports and convince China to lower its substantial formal and informal barriers to the import of manufactured and processed goods. For example, China buys huge quantities of soybeans from Brazil, but does not import much processed soy products. Of Brazil’s US$56bn in sales to China last year, around 75% was commodities, with iron ore being the top export item. Similarly, some 90% of Chinese FDI in Brazil is in natural-resources sectors.

Accompanied by a large contingent of Brazilian businessmen and officials, Ms Rousseff was clear in her message to her Chinese hosts: she wants a “qualitative jump” in what Brazil sells to the Asian powerhouse, with a major increase in value-added and processed goods. The government also wants Chinese investment in Brazil to be more diversified, to include not just extractive industries but also high-tech manufacturing. (continue reading… )

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