Outlook for country still promising in long run, insiders say
Chinese companies in Brazil have been hit by the current economic problems in the South American country and the sharp fall in the Brazilian currency, the real, but they still have confidence in the country in the long run, insiders told the Global Times on Wednesday.
Brazil's economic turmoil is affecting Chinese companies operating there, but the growth outlook is still promising, Pan Faming, general manager of China-Brazil Investment Development & Trade Center, told the Global Times.
The country was recently among the fastest-growing economies in the world, but is now mired in recession. Brazil's economy shrank by 3.8 percent in 2015, its biggest decline since 1990, Reuters reported in March.
The country's GDP declined 1.4 percent in the first quarter of 2016, and is expected to contract by 1.3 percent by the end of the second quarter this year, data provider Trading Economics said on Wednesday.
"We are being affected by an unstable economic and political situation in Brazil," Wang Wei, head of the PR department at Chinese auto maker Chery Automobile Co, told the Global Times on Wednesday.
Chery's auto production and sales volume in Brazil are likely to drop, as the country's economy is getting worse and the Brazilian real keeps falling, according to Wang.
The Brazilian real depreciated by 36 percent in 2015, domestic news portal bjnews.com.cn reported on Tuesday.
"The depreciation directly reduces our revenue because we get less yuan for the same amount of Brazilian real," Wang noted.
Outlook still bright
However, Brazil is still seen as a country with considerable potential. The country has the largest auto market in South America, Wang said, noting that Chery will continue to invest in Brazil and accelerate its localization process.
Pan agreed, saying that the current recession could also bring investment opportunities for Chinese companies. When a country goes through economic difficulties, the value of local assets often falls, attracting investors seeking lower prices, according to Pan.
There has been a wave of investment by Chinese enterprises in Brazil in recent months, with 20 billion Brazilian real ($5.58 billion) having been spent in the last six months, Xinhua News Agency reported in May.
The country still lacks infrastructure - especially roads, railways, ports and power transmission - which curbs economic and social development, so there is considerable demand for more infrastructure, Pan said.
Brazil loses over $100 billion in logistics costs each year due to the lack of infrastructure, People's Daily reported on February 16, citing Chinese Ambassador to Brazil Li Jinzhang.
China's HNA Group bought a 23.7 percent stake in Brazilian airline company Azul Brazilian Airlines, according to a statement on HNA's website on November 24, 2015. The deal makes HNA Azul's largest single shareholder.
China Three Gorges Co (CTGC), a domestic hydropower giant, paid 13.8 billion Brazilian real in January 2016 for the rights to operate two hydropower plants in Brazil for 30 years, China Three Gorges Project News reported in January.
The CTGC deal is barely affected by the turbulent Brazilian economy, as the power sales volume and prices were already settled in the contract, a source close to the issue told the Global Times on Wednesday, noting that the depreciation risk for the Brazilian real had already been taken into account ahead of the deal.
He said that the current situation has been beneficial for CTGC because the Brazilian currency has shown signs of appreciation since the decision on May 12, 2016 to impeach President Dilma Rousseff.
