Asian Investors Order Out For Brazilian

Early in August, Japanese beverage and beer giant acquired a massive stake in Brazil’s Schincariol, part of a growing hunger for South American commodities by Asian investors. For example, that same week, China’s JAC Motors announced it would invest $900 million in a Brazilian auto plant. Brazil, Russia, India and China (BRIC) have all been deemed hot investment properties at roughly the same stage of development. Brazil is widely viewed as the manufacturing powerhouse of South America, though it’s unstable fiscal policies are a worry to some. China, in desperate need of energy, mineral and food resources worldwide, has surpassed the United States, becoming Brazil’s largest trading partner and the largest investor there in 2010, injecting about $30 billion.

China’s more developed rival, Japan, is also turning to South America for resources and markets, as the erosion of the island’s working population continues. “Companies long dependent on domestic demand are now going abroad, given that the home market is shrinking and we cannot expect high growth in Japan,” commented Hideyuki Araki, an economist at the Resona Research Institute, a privately-owned Japanese corporation. Araki added, “Brazil is one of the BRICs with high growth and rising income,” which makes it a natural market both for labor and consumption. Japan’s Kirin Holdings announced August 2nd it would spend more than $2.5 billion on a company which holds a majority stake in Schincariol, the second largest beer brewer in Brazil, and the nations third largest beverage producer. Skyrocketing yen in Japan has hurt companies looking to export, but allowed Japanese industry to expand their holdings abroad. Resource-rich Brazil has been a favorite destination for the flush investors.

These contributions seem paltry, however, when one considers the investments of the elephant in the room; China. No other country has been a more enthusiastic investor in Brazil, whose officials expect $9 billion in Chinese investment in 2011, half of which will go towards high-tech. This would shift the terms of trade with China away from roughly 70 percent raw materials and agricultural exports. The Chinese continue to look to the country for it’s agricultural needs. “China has an ongoing need to secure soybean and corn supplies that matches well with South America’s productive strengths,” Rabobank’s Food & Agribusiness Research and Advisory stated in a report published July 28. “Brazil has more resources that could be put into crop production than any other country in the world.” Perhaps the country can parlay it’s agricultural might into a tech sector large enough to compete globally. Either way, smart money in the region is on Asian investment.

Posted by Linda Roberts on Aug 8 2011. Filed under Global Finance, Headlines. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry