Why Chinese Companies Are Pouring Money Into Brazil
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Hello and welcome to another edition of the China Global South podcast, a proud member of the Sinica podcast network.
I’m Eric Olander.
Today, we’re going to focus on the surging economic relationship between China and Brazil. It’s been a topic of mounting concern in the United States, where Chinese soybean buyers once accounted for 60% of the U.S. market.
Now, get this. So far this year, the Chinese haven’t bought a single soybean from the U.S., literally nothing. And that’s a big problem for U.S. farmers in places like Nebraska and Arkansas that now don’t know what they’re going to do with a bumper crop and have nowhere to sell it.
Here’s how one farmer in Arkansas described the dire situation in an interview on the cable news channel MSNBC:
“We’ve got a real disaster with this tariff deal.
I mean, we produce 40% more agricultural products in this country than we can consume domestically.
One in every four rows of soybeans in every field in the entire United States of America has to go abroad.”
China is the largest importer of soybeans in the world. They import 61% of the world’s market. Last year, we sent around $12 billion, I think $14 billion worth of soybeans the year before.
“For the first time in 20 years, China’s bought zero soybeans and zero new crop corn out of this country. Zero? So we went from $12 billion to zero. Where are they buying the soybeans? Brazil.”
You see, we lost 42% of our market share in the first tariff war. In Trump’s first tariff war, the Chinese went to buying their soybeans from Brazil. They invested billions of dollars in Brazilian infrastructure.
They have moved into Africa and they’re going to commercially farm in Africa since we left with USAID. They moved their Belt and Road program into Africa. So we’ve pretty much lost the Chinese market share. $12 billion to zero.
And now there’s more bad news for U.S. farmers. Last week, the Chinese government cleared the way for Brazilian sorghum to be imported, which is yet another commodity that the Chinese used to buy from the United States.
But beyond food, overall trade between China and Brazil this year is coming on very strong, with lots of Chinese technology and cars heading to Brazil and critical minerals and other resources going the other way.
But it’s not just trade that’s doing well. Chinese investment in Brazil is also going up a lot. A new report by the China-Brazil Business Council found that Brazil was the leading recipient of Chinese investment last year among emerging economies and third worldwide behind the U.K. and Hungary.
There’s a lot of investment now going back and forth between the two, but especially from China to Brazil.
Let me give you a few highlights of this new report:
- Total Chinese investment in 2024 amounted to $4.2 billion.
- That’s up 113% from the previous year.
- The total number of projects also increased by 34%.
- There is no indication that this trend will slow down anytime soon.
- 2025 looks very promising as well.
Well, let’s dive into that report now with the lead author, Tulio Cariello, who is the director of content and research at the Brazil-China Business Council.
Tulio, congratulations on the report. It got a lot of news coverage this past week, and it’s great to have you back on the show again.
“Thank you, Eric. It’s a pleasure to be here. I’m a big fan of the show.”
Well, it’s wonderful to have you back. There’s been a lot going on since the last time that you and I spoke. Let’s talk about this report in 2024.
Again, the top-line number was $4.2 billion of investment, a stunning 113% increase from 2023. You guys wrote that that was one of the sharpest jumps since 2007.
I mean, this is an astonishing increase. What do you think is responsible for such a big, strong growth?
I mean, again, let’s be careful here. This all happened before Trump was in office, so we can’t actually put this to the Trump effect and what’s going on in 2025. This is about 2024.
Tell us why you think this number went up as much as it did.
“Yeah, that’s right, Eric. Well, part of this growth came from projects in the electricity sector, which are usually very capital-intensive.”
And it wasn’t just hydropower that, in terms of stock, will still dominate the investments in the electricity sector, but also new initiatives in solar and wind energy, both areas that have been especially attractive to Chinese investors in Brazil in the last years.
And at the same time, even though there is a clear trend of Chinese investors focusing… More on renewables, as we know, there were also considerable investments in the oil sector, close to a billion dollars last year, especially from China National Offshore Oil Corporation. It may sound paradoxical, but China still relies heavily on fossil fuels because the reality is that, in order to invest in the energy transition, they need energy. And much of that energy still comes from fossil fuels.
Besides that, mining also gained new momentum. So what we saw was an increase in investments in electricity, especially renewables, along with oil and mining. All of these are capital-intensive sectors, as I mentioned, and that explains the sharp rise compared to the previous year.
It’s also worth noticing that the number of projects, as you mentioned, in general, was higher than ever, which also helped push the total value of investments to a new level, right?
Right.
So in terms of the number of projects, that increased quite a bit. And that’s important because in the past, sometimes there were a few big projects that could push the value of the total investment higher. But what you saw was that more projects, more companies are coming in.
Tell us about the numbers of projects and why that’s important.
As you mentioned, we saw a record of 39 projects confirmed, some of them brand new projects starting last year, and others continuing from previous years, just like the investments from BYD, Great Wall Motors that started their investments some years ago.
So these projects cover a range of sectors, actually. But manufacturing really stood out, especially in the automotive industry, which has been key to attracting new investments. It’s not just BYD or Great Wall Motors. There are other companies, especially car makers, that are very interested in the Brazilian market.
We also had projects in the production of electrical equipment, most of them linked to energy transition. It’s a very clear trend. In fact, last year, we reached a record number of manufacturing projects in Brazil — it was eight projects in total.
But electricity remains the leading sector for Chinese projects. Many companies here have been diversifying and expanding their activities. For example, we have China Three Gorges, State Grid, CPFL, which is originally a Brazilian company that was acquired by State Grid a few years ago. Now they’re a Sino-Brazilian company, let’s say, and they no longer focus only on hydropower, which is their core business. Instead, they are investing more and more in other renewable sources, especially solar and wind.
So once again, the sector breakdown, according to your report:
- Electricity was the top sector, with companies like State Grid
- Oil and gas
- Automotive manufacturing
- Mining, including critical and non-critical minerals
- Transport, including rail, metro, and high-speed rail
Which of these sectors, when you looked at the data, surprised you the most in terms of growth?
The oil sector.
Oil sector came second place, right?
Yes.
So I believe the oil sector, because we know that China has this trend of investing more and more in renewables recently, but they are very interested also in the oil sector. As I mentioned, they need energy to invest in the energy transition. That’s why they are looking for new projects in Brazil.
China National Offshore Oil Corporation is particularly involved here in Brazil. We also have Sinopec, CNPC, all of those big companies in the oil sector have a very strong presence here in the country.
The investments in mining are also very interesting to notice, because mining is a new frontier for Chinese investments, not only in Brazil but in other countries. We have this dispute between China and the US concerning critical minerals. China dominates this market and has a very high appetite for this kind of investments abroad. Brazil has many resources that could be useful for China when we talk about mining. The mining sector also came to my attention as a very promising area for new investments, but especially the oil sector.
Well, on the energy and oil sector, Brazil has consistently been in the top 10 of China’s largest oil suppliers. It has consistently been that way for a long time. So this is actually not a new phenomenon. It is very interesting that as the Chinese have shifted out of Africa into the Gulf, buying from Brazil has stayed consistent.
That maybe explains why you have so many of the big oil and gas players, as you pointed out:
- Sinopec
- CNPC
- China National Offshore Oil Corporation (CNOOC)
- Others
So some changes in the total value, a lot of growth there, the total number, a lot of growth there. And then you also noticed in the report how where the Chinese are investing in Brazil is also changing. Traditionally, they’ve liked the industrial and the urban hubs in the Northeast, but you noticed in 2024, they started to venture further afield.
Tell us a little bit more about the geography of Chinese investment in Brazil.
Yeah, this is actually one of the most interesting findings of the research. Last year, 14 Brazilian states received Chinese investments. That’s six more than the year before, and one of the highest numbers we’ve ever recorded.
Now, in general, it’s important to remember that since Chinese companies first started investing in Brazil, the Southeast region has attracted most of the projects. And that’s largely because of São Paulo. It’s the richest state. I mean, it’s, in many aspects, the Brazilian economic engine.
But what’s really striking is that we see Chinese companies looking beyond the Southeast, showing interest in states across all regions of the country. The Northeast region, for example, has been a major destination. It has come right after the Southeast region every year since we started monitoring the Chinese investments in Brazil.
And in 2019, it even took first place. So that has to do with the efforts of governors from the Northeast region who have consistently reached out to China, traveling there, receiving delegations here.
There is a clear understanding across the political spectrum in those states. Even when there are ideological differences, that China is a key partner and a source of cooperation in many areas, especially when it comes to investments.
What’s the relationship like between the Chinese companies and some of these local governments and communities?
In other countries like Peru, the mining companies have had problems. There have also been some issues in mining communities in the Congo and elsewhere.
What would you describe the relationship between the Chinese and local stakeholders in these new areas that the Chinese are investing in in Brazil?
Well, in general, the relationship is very positive. I believe those are regions that need investments.
We have some bottlenecks here in Brazil, especially in infrastructure. So investments in infrastructure, for example, are key for developing those regions.
The Northeast region of Brazil is very promising for renewables as well, as we have very good weather in that region.
We have even some projects in:
- Solar energy
- Wind energy
coming from those companies, but also in the manufacturing industry.
Some of those states are actually trying to attract more investors from abroad.
Of course, it’s not only Chinese. We have here investors from other countries as well, even the U.S. By the way, the U.S. is a very important foreign investor in Brazil overall.
How does it compare between the Chinese and the U.S.? Do you have any numbers on that by any chance? Just so we can get some context for where the Chinese measure up against the U.S.?
Yeah, I don’t have official numbers about the U.S. investments.
Okay.
Yes.
Do you have a sense of, is the U.S. larger?
In terms of stock, the U.S. is for sure number one investor in Brazil because they’re investing here for a long time.
China arrived in Brazil about 20 years ago to invest in the country, while we have some American companies that are operating here for 100 years, actually.
For a century.
So it also happens when we talk about companies from Europe.
They have a very strong presence here because they have this tradition of investing here.
So China is a newcomer, let’s say.
But when we talk about the influx of investments year by year, we see that in some years, Chinese companies are actually competing with Americans in terms of number of projects or value invested in general.
Answering your question, I believe that the relationship between the states of Brazil and the Chinese are very positive overall.
There is also something worth noticing: the Brazilian states realized that they don’t need the federal government to talk with the Chinese at a higher level.
They can do it at a government, state government level, and it has been happening for a long time.
We also have some states of Brazil that already have representative offices in China to attract investments.
São Paulo did that.
São Paulo, by the way, as I mentioned, is the largest recipient of Chinese investments in Brazil.
So they are looking for those partnerships every year.
Yeah, that’s interesting.
One of the trends that we’re seeing in Africa is that on the Chinese side, it’s subnational actors as well that are taking more of an active role.
So provinces like Shandong and Guangdong are coming over.
Also cities like Chongqing and Shanghai are leading investment delegations.
Are you seeing the same thing that just as in Brazil, it’s at subnational level, but also the Chinese partners now are less from the central government and more and more from provinces and big cities like Chongqing?
Exactly.
Actually, in my personal experience in Brazil-China Business Council, we received much more delegations from cities and provinces than from the central government. And it’s very common that we receive those delegations trying to build new partnerships in the country, offering opportunities even for Brazilians to invest in China in those cities or provinces. So in general, it’s very decentralized, let’s say.
I believe it’s interesting to notice that China is not a monolith, let’s say, right? It’s much more common to see provinces and cities coming to Brazil to start new partnerships in general.
Yeah, that’s very interesting.
Well, let’s talk about the kind of investment. So there’s really two kinds of investment:
- Brownfield investment: investment in projects that are already existing. The Chinese would take over an existing Brazilian company.
- Greenfield investment: starting up new things like the BYD factory that they’re building there.
How much did we see in brownfield and how much did we see in greenfield in the report that you just completed?
Yeah, most of recent projects here are greenfield investments, meaning Chinese companies coming to Brazil to start from scratch, let’s say. But we also see companies that have been here for some years expanding their operations. So overall, there’s been less activity in mergers and acquisitions in recent years.
This is very clear in the electricity sector. When Chinese companies first entered this market in Brazil, many of them came in by buying existing companies, winning auctions, that kind of strategy. Once they had acquired those Brazilian firms or even foreign ones operating here, they moved on to modernizing those assets. But now we’re seeing a stronger push towards new electricity generation projects, especially in solar and wind power.
Another point is that Chinese companies are much more familiar today with Brazil’s business environment. They have major law firms working for them. They know how the bureaucracy here works, and we have a lot of bureaucracy in Brazil. So in the end of the day, they are less dependent on local partners now.
So in general, it’s very common to see a Chinese company come to Brazil, buying assets here, which is mergers and acquisitions, right? Or brownfield investments. And they start modernizing or expanding the business that could be considered by many aspects as greenfield, because it’s actually a new investment, even though it’s in an existing facility, let’s say.
You know, one of the areas on both greenfield and brownfield is manufacturing. And again, I mentioned this BYD factory. It’s been very controversial, this factory, given that there were accusations of slave labor in the construction of the factory. But it does highlight the drive that Chinese companies are pursuing in terms of relocating more of their manufacturing closer to their customers in places like Brazil.
How much, again, is this manufacturing push that the Chinese are doing, not just in Brazil, but across the global south? How much is that factoring into all of this investment surge that you’re seeing in Brazil in 2024?
I believe China can be a key partner in Brazil’s re-industrialization through investment projects, right? Chinese companies bring capital, technology, and they are interested in key sectors for us, like economy and energy, infrastructure, new technologies. So there’s a lot of opportunity there.
But we can’t ignore the challenges. As you mentioned, there are some controversies. The first challenge, in my opinion, is that the relationship is still very unbalanced, right? So it’s that old story:
“export mostly commodities and import high-value industrial goods.”
Without a clear industrial policy from Brazil, this imbalance could continue to hold back the development of our own industry. So in that sense, I believe the Brazilian government has launched initiatives that I mentioned in our report, like Nova Industria Brasil, that could be translated as something like new Brazilian industry or something like that, which could be an important milestone in setting these priorities for Brazilian industry.
Another point is the competitiveness of Chinese companies, because on the one hand, that’s positive. They arrive with investment capacity. They bring scale and they bring technology and they can help integrate Brazil into global value chains. So sectors like EVs and renewables could benefit from that.
But on the other hand, this competition can also put pressure on local industries that are not yet able to compete on equal terms with those Chinese companies, right? So take the steel sector, for example, which has been struggling with Chinese competition. Many of our companies face higher costs, less access to financing. And in general terms, they have difficulties in driving innovation. And when they go head to head with these Chinese giants, they risk losing market share, actually.
So in the end of the day, that could mean de-industrialization instead of re-industrialization. And then that’s probably one of the reasons why the Brazilian government in certain areas has decided to put some tariffs on Chinese imports to restrict the flow coming into the country. Steel, I think, is one of the areas. Certain types of steel products coming from China have been tariffed. And so there’s some protective measures that seem to be going on there.
Let’s look forward. We’re into 2025 now. I’m sure you’re doing the research for this year’s report. Is there any indication that the momentum from 2024 is going to slow in 2025?
I started the top of the show talking about soybeans and agriculture, where the Chinese are buying up a lot. They’re buying sorghum now. We’re talking about increases in beef exports. Any sense that the momentum will slow in 2025, especially given everything that’s going on in the geopolitical competition?
Actually, I believe it’s going to be stronger this year. Actually, I’ve recorded some projects, and I believe we are going to see a lot more investments in clean energy here in Brazil, especially in solar and wind generation, and even in the production of equipment for these industries, like solar panels, wind turbines, and other components in general.
This is particularly true now, since clean energy is a state priority in China itself and Brazil. And I believe also manufacturing is a very promising area. We’ve seen reports of companies interested in producing:
- electric bicycles
- smartphones
- trains
- trucks
Many of those products are still just plans, but the level of interest is very clear.
And we also have to mention the mining sector, which is, I believe, one of the most promising areas for 2025 and even for the next year, especially because of these geopolitical tensions we’ve been seeing. And especially because we are talking about critical minerals in general that are key for a high-tech industry, defense industry, that it’s not of interest only for the Chinese, but also for the U.S., for example, right?
Yeah. Just a question about the manufacturing side again. Just something that occurred to me. Are they building factories in Brazil only to sell to the local Brazilian market, or are they using Brazil as a gateway into Mercosur or other South American markets as well?
Yeah. In general, the investments in manufacturing are much more concentrated in the local market because Brazil has a considerable consuming market. We have a relatively big middle class, especially when we consider the regional aspect, when we talk about other countries around here. But some companies do have some projects to start using Brazil as a hub of exports.
It’s very common to see Chinese companies doing that in other countries. I mean, they start investing in a country, generally a global country in the global South, to sell to industrialized countries like the U.S. It’s very common in Mexico, for example. We know that Chinese are investing in Mexico in the manufacturing industry.
And actually, Mexico is a very interesting case because it’s not like other countries in Latin America, like Chile or Peru, that have been receiving investments in the mining sector and natural resources in general. The investments in Mexico are very clearly directed to the manufacturing industry. And sometimes they use all the structure that Mexico and the U.S. built in the last years to access the American market, right?
And the U.S. government is aware of that. And sometimes they will try to make it difficult for the Chinese companies that are based in Mexico to export to China. But in general, in Brazil, the Chinese investments focused on manufacturing industry are much more direct to the local market, right? I don’t know if there are actually many Chinese companies investing here in manufacturing that are exporting those products.
Well, I mean, the beauty of the Brazilian market is it’s like Indonesia and Nigeria, these are huge domestic markets. And they’re no doubt very appealing for the Chinese, particularly as they’re encountering more and more difficulties in the G7 markets and increasingly in other global South markets.
So at the time of this recording, there’s been a back and forth between Mexico, the United States, and China over the Mexican government’s proposal. And maybe by the time that the show airs, it’s passed to put a 50 percent tariff on Chinese EVs in order to accommodate the U.S. The relationship between Lula and Trump has gotten so bad that it seems unlikely that the Brazilians will do much to accommodate the Americans and try to restrict Chinese investment in Brazil. That seems unlikely. And the Americans just don’t have the leverage on Brazil that they have on Mexico. So that’s probably unlikely.
But let’s talk about politics very quickly. In many South American countries, we’re going to see presidential elections or prime minister elections, changes of government.
- Colombia
- Bolivia
- Chile
all have elections coming up. China is going to be an issue. Brazil has an election coming up. Lula’s polls before Trump were a little shaky. They’ve gotten stronger now. Lula is obviously very close with the BRICS and China. Bolsonaro, his predecessor, was very anti-Chinese and very critical of the Chinese. Yet investment, despite that rhetoric, still kind of continued and trade still flourished.
What role do you think China will play in an election in Brazil? That’s a very interesting question, I believe. In general, one very interesting aspect of Brazilian foreign policy is that it has certain continuity, right? Because we have a very strong institution here when we talk about foreign policy.
In general, even though we change the government, as you mentioned, Bolsonaro was more anti-China, while Lula is more pro-China. We still see investments coming. We see the trade flourishing. Especially in the Bolsonaro government, we actually saw the highest records of bilateral trade ever, right? Even though the negative rhetoric concerning the Chinese here during Bolsonaro’s government.
But now China poses as a very clear opportunity for Brazil, while the U.S., because of the Trump government, is in a very bad situation here when we talk about the general view of the Americans. The U.S. is actually a key partner, a historical key partner of Brazil. It was the first country to recognize the Brazilian independency. It’s a country that has been investing here for a long time, as I mentioned, that we have some companies investing here for a century already.
Probably we are in the worst moment of U.S.-Brazil relationship ever. I believe in general, China doesn’t interfere in Brazilian national politics. And it’s not sure in the case of Trump government right now, because he’s trying to make pressure, especially considering Bolsonaro’s trial now that it’s in the Brazilian Supreme Court.
You know, that’s OK. Yeah, I mean, but so the continuity is the most important thing that we’ve seen across administrations and across political parties. Whoever is leading the Brazilian government doesn’t seem to have too much impact on its relationship with China beyond the rhetoric that we hear. And I think that’s very interesting.
So looking forward into 2025, just as a forecast, you’re seeing very strong investment, very strong trade growth, and political continuity are the three themes that I’m hearing from you today.
“Yeah, that’s right. Those are the key aspects.”
And I believe now with this Brazilian efforts to re-industrialize, China comes as a very strategic partner, especially because we do need investments in this area. Right. But nevertheless, I believe the American firms in general, American companies still see Brazil as a very important destination for investments.
When we see the UN’s reports on foreign investments, we see that Brazil is usually ranked a top 10 country that has been attracting most of the investments abroad. So it’s not only the Chinese that see Brazil as a very interesting destination for investments.
But in general, I believe there are some sectors that will be key for the coming years, not only this year, for Chinese investments here. As I mentioned,
- energy sector
- manufacturing sector
- mining
are still very strong. We have companies here investing for a long time that have a very strong position in Brazil in the energy sector, manufacturing sector as well, but also mining.
I believe mining is one of the most promising sectors because Brazil has a range of minerals that are key to China right now, especially when we consider this renewable movement in China, energy transition, and so on.
We have:
- copper, that is a very important mineral for China
- iron ore, which is one of the most important commodities that we export to China and that is also key to the energy transition industry
- niobium
- red earths
Still, we don’t have a very developed industry on red earths here in Brazil. But anyway, I know that the Chinese are very, very interested in those minerals and they already have some ongoing investments in the mining sector. So it’s probably one of the key areas for the future. Well, this report is absolutely essential reading if you want to understand one of the most important, not only geopolitical, but now geoeconomic relationships that China has anywhere in the world today. Brazil is a major, major player.
The report, I only saw a Portuguese version of the report. Do you have an English report or is it just in Portuguese?
Yeah, we’re translating it right now. So I believe next month, maybe we will be publishing it in English as well. But thank goodness for ChatGPT. I took the report, put it into ChatGPT, and it came back in English perfectly and with no hallucinations. And so it was very useful.
So I will put a link to the Portuguese version of the report. Even if you don’t speak Portuguese, put it into ChatGPT and let it do the translation for you. Very, very important reading. And again, if you understand these trends, you’ll understand the politics behind them.
The report was written by Tulio Cariello and the team at the Brazil-China Business Council. Tulio is the director of content and research there. And we want to thank you again for your insights and for the great work that you’ve been doing.
“Thank you very much, Eric. I’ll be looking forward to new chats.”
Yes, it’s wonderful. We look forward to having you back.
I want to thank you for joining us on this edition of the show. We’ve been covering the world for the past few weeks, coming from India, the Middle East, now South America. This is the kind of work we do at the China Global South Project.
It does need your support, though. We have a team in:
- Asia
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By the way, we are just about to launch in the Americas with our new editor based out of Lima, Peru. Very excited that we’ll be doing it in Spanish. Unfortunately, Tulio, not yet in Portuguese, but hopefully one day we’ll launch in Portuguese as well.
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