Firms must learn to adapt to Latin American country's market: experts
Brazil has seen a steady growth in Chinese investments despite the country's economic turmoil, experts said Monday, noting that Chinese companies tend to commit long term to the Latin American country due to its large market.
The comments come after reports say some Chinese companies are eager to "go global" in expanding their presence in Brazil.
China's State Grid International Development, a subsidiary of State Grid Corporation of China, announced Friday that it will buy a 23 percent stake in Brazil's largest power distributor CPEL Energia SA, media reported.
On Saturday, China's Three Gorges Corporation announced it was taking control of two of Brazil's largest hydroelectric dams, according to a statement posted on the company's website.
Also, Dakang Pasture Farming Company, a private firm based in Central China's Hunan Province, said it would invest $200 million in Brazilian agricultural company Fiagril Ltda, a majority stake and the first private investment in the country's agriculture industry, according to media reports.
"Chinese investors are attracted to Brazil's huge market potential. China has the technology and money but lacks resources, while Brazil has the opposite - the two countries complement each other," Lu Shanming, a manager at the investment department of China-Brazil Investment Development and Trade Center, told the Global Times Monday.
Lu noted that Chinese capital is often invested in Brazil's infrastructure, cars and energy.
Brazil's economy began to slow in 2014, the People's Daily reported in April. Economic growth is forecast to slide by 3.5 percent in 2016, it said.
"Although many Chinese investors are affected by Brazil's slowing economy, they believe the country continues to have great potential," Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations, told the Global Times on Monday.
"For instance, Chinese automakers remain bullish because of Brazil's huge demand for vehicles," Lu noted.
However, in 2013, the Brazilian government increased the industrial product tax by 30 percent on foreign automakers which assembled cars in Brazil, on condition that the localization rate of car components they produce is lower than 65 percent, Lu said.
The policy increased the cost of Chinese car exports, thereby prompting Chinese automakers to set up assembly plants in Brazil, according to Lu.
But Chinese companies also face many other challenges in Brazil. These include a difference in business environment, cultures, laws and thought patterns, which make it harder for Chinese firms to do business there, experts said.
"It still takes time for Chinese companies to understand the differences and blend in the local community," Lu said.
Chinese companies are welcome in Brazil, Chen said, "but companies thinking of entering the market should weigh their options amid Brazil's unstable economic and political situation."
