Investments guarantee Chinese access to soy, oil and other badly needed resources
Blades slicing through the morning heat, the helicopter rose from the tarmac and swept into a cobalt sky, high above Rio’s Guanabara Bay.
It powered north-east over deserted beaches, dense Atlantic rainforest and fishing boats that bobbed lazily in the ocean below. Then finally, 80 minutes on, the destination came into view: a gigantic concrete pier that juts nearly two miles out into the South Atlantic and boasts an unusual nickname: the Highway to China.
Dotted with orange-clad construction workers and propped up by dozens of 38-tonne pillars, this vast concrete structure is part of the Superporto do Acu, a £1.6bn port and industrial complex that is being erected on the Rio coastline, on an area equivalent to 12,000 football pitches.
Reputedly the largest industrial port complex of its type in the world, Açu is also one of the most visible symbols of China’s rapidly accelerating drive into Brazil and South America as it looks to guarantee access to much-needed natural resources and bolster its support base in the developing world.
When Acu opens for business in 2012, its 10-berth pier will play host to a globetrotting armada of cargo ships, among them the 380-metre long Chinamax – the largest vessel of its type, capable of ferrying 400,000 tonnes of cargo.
Millions of tonnes of iron ore, grain, soy and millions of barrels of oil are expected to pass along the “Highway” each year on their way east, where they will alleviate China’s seemingly unquenchable thirst for natural resources.
“This project marks a new phase in relations between Brazil and China,” Rio’s economic development secretary, Julio Bueno, said during the recent visit of about 100 Chinese businessmen to the port complex, which is being built by the Brazilian logistics company LLX and should receive billions of dollars of Chinese investment.
This new phase of engagement with Brazil and South America, is part of China’s “going out strategy” – an economic and, some say, diplomatic push for Chinese companies, many of them state-run, to invest abroad, snapping up access to minerals, energy and food by pouring the country’s colossal foreign reserves into overseas companies and projects.
China is expected to overtake Japan as the world’s second largest economy this year and may already be the world’s greatest energy consumer. Now it is set to become Brazil’s top foreign investor, with its companies plowing $20bn into the country in the first six months of 2010, compared with $83m in 2009. A recent study by Deloitte predicted that Chinese investments in Brazil could hit an average of about $40bn a year between now and 2014, with companies throwing money at sectors ranging from telecommunications, infrastructure and farming, to oil, biofuels, natural gas, mining and steel manufacturing.
“Relations with Brazil in all areas have entered a new era,” Qiu Xiaoqi, China’s ambassador in Brazil, recently told the state news agency Xinhua.
The surge in China’s South American spending is not just a Brazilian phenomenon. Ecuador has already signed around $5bn of bilateral deals with China this year, including $1.7bn to help build a hydro-electric dam and $1bn investments for oil exploration and infrastructure projects. That compared with Chinese investment of just $56m in 2009.
Chinese companies have sunk $1.4bn into mining operations in Peru this year, while in April Hugo Chávez announced that the Chinese, already major sponsors of Venezuelan oil exploration, had agreed to open a $20bn credit-line for the “Bolivarian revolution”.
Michael Klare, author of Rising Powers, Shrinking Planet, a book about the growing tussle for global resources, described today’s China as “the shopaholic of planet Earth”.
“The Chinese authorities understand that to sustain the country’s continued growth, they will have to ensure that its industries are provided with adequate supplies of energy, minerals, and other basic raw materials,” he said. But the “going out” strategy went far beyond business transactions, he added.
“They seek to fashion a multipolar world in which no single power – read the United States – plays an overwhelmingly dominant role. To this end, they seek to bolster ties with rising regional powers like Brazil and South Africa.”
In Sao Joao da Barra, the city nearest to Acu and one of Rio state’s poorest regions, the Chinese presence is being felt even before Brazil’s Highway to China is complete.
Keen to impress, LLX staff at the Açu port lay on hot water and Mandarin interpreters for visiting Chinese dignitaries. Sao Joao da Barra’s town hall, meanwhile, has started offering free Mandarin lessons to locals interested in working with the wave of Chinese guests that is anticipated.
“You should see a 10-year-old boy saying, ‘I understand … the Chinese are coming and when the Chinese industries come I want to work for them and if I speak Mandarin I’ll have a competitive advantage on the others’,” beamed Eike Batista, the billionaire entrepreneur behind the superport and one of the most vocal cheerleaders for Chinese advances into Brazil. “[It is] wonderful.”
Leonardo Gadelha, LLX’s CFO, said during a recent tour of the port: “This is part of a Chinese strategy of going to the market more and more. They are already a very considerable presence in Africa and we are now going through this moment in Brazil.”
The Highway to China lay “in the middle” of this blossoming relationship with China, he said, adding: “We are betting that … this will continue growing.”
Not all Brazilians, or indeed western governments, share such enthusiasm.
“There are many in Washington who worry about China’s growing presence in Africa and Latin America and claim that this poses a threat to America’s long-term strategic interests,” said Klare, noting, however, that the US’ “fixation” with Afghanistan and the war on terror meant there had been virtually no reaction.
In Brazil meanwhile China’s arrival has prompted cries of neo-colonialism. “The Chinese have bought Africa and now they are trying to buy Brazil,” the prominent economist Antônio Delfim Netto complained in a recent interview with the Estado de Sao Paulo newspaper, warning that it was a “grave mistake” to allow a foreign state to buy “land, minerals [and] natural resources” from another sovereign power.
Batista, Brazil’s richest man, rejected such criticism, saying: “The association between Brazil and China is a two-way highway.” Chinese companies such as Wuhan Iron and Steel had committed to helping build a $5bn steel mill at the port complex, rather than always shipping out primary resources to process at home, he pointed out. “You want to get three tonnes of raw iron ore, [so] produce one tonne of steel in Brazil,” he said. “That philosophy is sinking in and is great for both sides.”
Neither would Chinese companies be allowed to flood the complex with hordes of foreign workers as had happened in Africa, said Gadelha, the CFO.
“If it was up to them they would bring lots of Chinese workers as they are used to doing,” he admitted. “[But] Brazil’s legislation is very strict in this sense.”
Batista suggested that rather than complaining about China’s courtship of Brazil, western powers should urge their own companies to pay more attention to the region themselves.
“In the last 15 years or so the [American and European] CEOs have stopped coming here and that is why they are a little bit behind,” he said. “We are pushing European companies and saying: ‘You’re not really understanding what is happening in Brazil’.”
“Don’t put Brazil in the same bag as our neighbours,” he added. “We are not Central America. We are not Venezuela. We are not Argentina.”
Source: The Guardian