20 May 2015 | Wednesday
By Bruno Peres, Eduardo Campos, Lucas Marchesini and Daniel Rittner | Brasília
Amid much fanfare, President Dilma Rousseff and Chinese Premier Li Keqiang signed 35 bilateral agreements on Tuesday with clearly strong political impact, but leaving unclear how much China will really invest in Brazil in the next few years. Most of the announcements signal mere investment intentions that depend on studies or biddings. Despite the conditions, the $53 billion package brought by the Chinese was celebrated as a victory among the Brazilian government, now trying to revert a wave of pessimism over the economy.
“We want to consolidate relations with China, based not only in our comparative advantages in commodities, but opening new areas,” Ms. Rousseff said. In all events she participated, the president cited the construction of a transoceanic railroad linking Brazil and Peru.
The project provides one example of unclear deadlines or commitments. The project's viability study, paid by China, should be ready by May 2016. Until then nobody knows whether the 4,700-kilometer venture is really doable.
The real measures announced were China's opening to Brazilian beef and the confirmation of a sale of 22 of Embraer's E-Jets series to Tianjin Airlines. Announced last year, it lacked approval from Chinese officials. The contract is worth $1.1 billion at list price and carries an option for another 18 aircraft.
Other agreements, like the one signed by state-owned utility Eletrobras and China Three Gorges Corporation present a little more than willingness to negotiate partnerships in future auctions, especially of the São Luiz do Tapajós (Pará) dam, which still lacks the green light from environmental regulator Ibama.
Another electricity project showed how strong gestures took the lead over absolutely indispensable rites. During a ceremony at the Presidential Palace, Ms. Roussef and Premier Li presented the cornerstone of a transmission-line project – erected by China's State Grid in partnership with government companies Furnas and Eletronorte – that will distribute power from the Belo Monte dam to urban centers in Brazil's heavily populated Southeast region. Yet the transmission line still hadn't received its previous environmental license, expected in the next few days, and which declares the project environmentally sound. It also does not have the installation license, mandatory document for the start of any construction project.
All of these reasons encourage reading the $53 billion figure as investment intentions, as underlined by Ambassador José Alfredo Graça Lima, general undersecretary of policy II at the Foreign Ministry and one of the visit's main organizers. “It includes projects that have already started, are maturing or may be financed.”
The Chinese brought other promises in addition to the investment plans. The most important is agreeing to lend $50 billion from state bank ICBC to a list of priority sectors: railroads, highways, ports, airports, renewable energy and housing.
Caixa Econômica Federal will managed and structure the funds. It's unclear whether the money will finance a fund or bilateral loan. “We have 60 days to present a working proposal,” says Márcio Percival, vice president of finance and controllership at Caixa. One crucial point remained unexplained: if the money will also be available to infrastructure projects where the Chinese are not partners or winners in potential biddings, and don't supply equipment.
Mr. Li made an unexpected last-minute suggestion to Ms. Rousseff: creating a bilateral productive cooperation fund of $20 billion, also focused on infrastructure and production investments. The government’s experts hadn’t previously discussed the issue and none dared to detail it.
Cláudio Puty, International Affairs Secretary of the Planning Ministry, said all the money announced by the Chinese delegation signals there are profitable opportunities in Brazil. “And it's something easily linkable to the concession package we'll announce in June,” he says.
Speaking at the end of a meeting of the Brazil-China Business Council, the premier sought to dismiss fears of a Chinese offensive and said the country “will not impose any political condition” in relations with South-American countries. Mr. Li had already issued a tranquilizing message after a signature ceremony at the Presidential Palace, Ms. Rousseff on his side. “We would like to co-operate to lower infrastructure costs in Brazil and generate local jobs,” Mr. Li said, being interpreted by diplomats as responding to insinuations that China wants to soften labor laws to export heavy labor to countries receiving investments.