Chinese companies set up 89 joint ventures in Brazil by the end of 2005

19 April 2007

Sao Paulo, Brazil, 19 April – Chinese companies set up 89 joint ventures in Brazil with total investments of US$151.5 million until the end of 2005, according to a report in Brazilian newspaper Valor Economico, citing figures from China’s Trade Ministry.

Brazilian companies, in their turn, set up a higher number of partnerships – 384 – but invested less, around US$144.3 million.

The paper said the Chinese investments were mainly focused on consumer goods, where it was easy to use cheap components imported from Asia on a wide scale.

“producing in Brazil means avoiding the heavy import taxes charged from bringing in the finished product: 16 percent for mobile phones, 18 percent for air conditioning units, 16 percent for telecommunications equipment. Chinese companies want to expand their activities on the international market. It is expensive to import the finished product. This is why they have set up in Brazil,” said Paul Liu, president of the Brazil-China Chamber of Economic Development.

According to Valor Economico, “the Chinese company Gree is an example of the Chinese investments that are slowly starting to reach Brazil. Gree’s air conditioning factory is located in Manaus, in northern Brazil.”

With 13 million air conditioning units sold every year all over the world and turnover of US$2 billion, Gree decided to manufacture a small part of its production in Brazil and, in June 2001, invested US$20 million in a unit in Manaus – its first outside of China.

“If it was a question of only competing by price, we would not manufacture in Manaus. Our aim is to set up roots,” said Yue Haiping, Gree’s genera;-director in Brazil.

“The company’s strategy is to increase the number of products made in Brazil and use the factory to export to Latin America. But this has not yet been possible. For the time being we are not exporting from Brazil, because it is worth importing directly from Asia. We have also increased the import of components considering the favorable exchange rate. Our competitors have done the same,” Yue said.

As well as Gree other Chinese companies have set up in Brazil such as AOC (monitors), Huawei (telecommunications), ZTE (telecommunications), Hao Bao (motorcycles), SVA (electronics), amongst others.

The vast majority of Chinese consumer goods companies that set up in Brazil opt for the route already taken by US, European, Japanese and Korean companies: the Manaus duty free area.

The package of tax incentives is truly favorable, mainly in terms of buying raw materials from abroad: import tax exemption, exemption from tax on industrialized products (IPI), exemption from tax on circulation of goods (ICMS), suspension of Social Security payments (PIS/Confins), and a 75 percent reduction on tax on profits until 2013. (macauhub)