Jul 21, 2014

Brazil President discusses Infrastructure with Chinese Counterpart

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian President Dilma Rousseff met with the Chinese President Xi Jinping last week in Brasilia to discuss trade between their two countries and the possibility of Chinese investments in Brazilian infrastructure improvements. One of the proposed projects discussed was a rail line linking the city of Lucas do Rio Verde in central Mato Grosso with the city of Campinote in the neighboring state of Goias. In Goias the railroad would connect with existing rail lines linked to ports in northeastern Brazil.

This new railroad is just the latest in a long list of proposals designed to move grain from landlocked Mato Grosso to various Brazilian ports. China has a vested interest in these projects because Mato Grosso is the leading grain producing state in Brazil and Brazil is China's major supplier of grain and iron ore. Currently, the majority of Brazil's grain exports are transported to the ports by truck over long distances and at very high costs. The goal of these projects is to reduce the cost of transporting these raw materials by 30% to 40%.

President Rousseff has indicated that Brazil needs to invest R$ 240 billion reals to modernize the country's inadequate infrastructure. Her proposal to achieve these investments is to privatize many of Brazil's railroads, ports, airports, and highways. This privatization is achieved through a series of auctions where companies can bid on these various transportation projects. In that light, she informed the Chinese president that Chinese companies would be welcomed to participate in these auctions and she assured the Chinese president that their potential investments would be fully protected under Brazilian law.

For his part, the Chinese president announced that China is lifting the embargo of Brazilian beef imports that was imposed due to sanitary concerns. As a result, Brazil is expecting to export between US$ 700 and US$ 1.2 billion worth of beef to China in 2015