Brazil–China Relations in the 21st Century by Maurício Santoro

Author:Maurício Santoro
Language: eng
Format: mobi
ISBN: 9789811903533
Publisher: Springer Singapore
Published: 2022-03-21T16:00:00+00:00

3.3 Case Study: Chinese Investment in Brazil’s Electrical Sector

Research by Boston University’s Center for Global Development discovered that Brazil is the foreign country where China has invested more money in electrical energy. This section analyzes these investments and concludes that what explains Chinese interest in the sector is a combination of Brazilian natural resources and advanced technology that makes China’s firms very competitive in this market.

Chinese FDI in Brazil’s electrical sector is about US$36.5 billion, the majority of all its investment in the country, around 50%. They are concentrated in hydropower, which is the most important part of the national energy matrix. Almost all of them are the result of SOEs, especially State Grid and China Three Gorges Corporation (Barbosa 2020; Cariello 2019; Schutte 2020).

Both firms have a sizeable part of their foreign assets in Brazil—more than 50% of State Grid and over 30% of China Three Gorges (Schutte 2020, p. 101). It is a fact that deserves explanation, for most of Chinese FDI in electrical energy is usually concentrated in its near abroad, in countries that are part of the Belt and Road Initiative and have close ties to Beijing, such as Pakistan. The high level of commitment to the South American nation shows the strength of the Sino-Brazilian partnership and how it helped to pave way to the investments.

Chinese FDI in Brazil started to grow after the 2008 global financial crisis and the intensification of China’s Going Global policy to stimulate the internationalization of its firms. In the 2010s, Brazil became the 5th top recipient of its FDI, behind United States, Australia, United Kingdom and Switzerland. In general terms, this was a good macroeconomic time for Brazilians, with good levels of growth and low inflation. Political stability and the creation of BRICS also helped to make Brazil more attractive to Chinese capital and to ensure Beijing of a positive diplomatic environment.

Another important factor was the changes in Brazil’s juridical framework, which created an open scenario for FDI, no matter its national origin. In the 1990s and 2000s, Brazilian presidents implemented liberal reforms which opened the electrical sector to foreign companies. The Chinese were part of a larger trend (Vanderlei 2018).

China was well positioned to take advantage of the new conditions, for the hydropower sector was an important part of Sino-Brazilian relations since the 1980s. At the time, one of the goals of Deng Xiaoping’s Four Modernizations policy was the expansion and transformation of the electrical sector. The Chinese perceived Brazil as an important reference due to its excellence in engineering and to the success of high-profile public works such as the Itaipu dam—then, the biggest of the world (Cai 2020).

In one generation, the Chinese reversed the trend and became themselves the teachers to Brazilians. They developed a sophisticated technology called ultra-high voltage transmission (UHF), which allows for cheaper, safer and cleaner conduction of electricity through large distances (Cohen 2019). State Grid and China Three Gorges became firms with a high degree of internationalization, operating in many countries and environments, well financed by Chinese development banks.

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