Marcos Fava Neves
The China Brazil food bridge
By Marcos Fava Neves (chinadaily.com.cn)
Updated: 2009-08-31 18:12
Brazil has become much more important to China in the last 10 years. The flows of trade between China and Latin American countries rose from US$10 billion in 2000 to US$140 billion in 2008. Fifteen percent of Brazil's exports goes to China in 2009, up from eight percent just a year ago.
China and Brazil have strong complementarities and a long history of peace and acceptance. The Chinese community living in Brazil is enormous, recognized as hard workers setting up business and development in the last 50 years and are well integrated with the country's multiracial and multicultural society.
China is probably the largest developing nation, with the biggest improvement of living standards in the world. The new multicultural urban society with the 700 million new rural consumers in China represents a huge development, with growing income, and targeted by the Government with the recent announcement of opening 150 thousand stores in rural areas.
In this very positive scenario of development, China may face problems in securing food supply for its own growing, richer society. Problems relate to costs, clean water, water availability, soil conditions, land, to environment, and others.
Brazil is already the largest food exporter, and has 850 million hectares of land, with 350 million hectares arable. Only 70 million hectres are being used for crops, 200 million for pastures, and 80 million being new land to be conquered. In resume, there is at least 100 million hectares that could be converted to agriculture and biofuels production, in a sustainable way.
In the coming years Brazil has an opportunity to be the most important partner to supply food and biofuels. Soybeans exports from Brazil to China grew 27 percent in 2009 from a year ago.
Brazilian share in China's imports increased from 0.7 percent in 2003 to almost 3 percent in 2009, and it is expected to grow faster due to imports of poultry, beef and other protein sources and food, that are just starting.
The risks to produce food in Brazil are very low, almost zero, since the country is a large food producer and exporter, with plenty of land and food in the internal market, reducing risks of political or institutional changes, for example forbidding exports and expropriating assets as happened in several other countries. It is an open market, providing opportunities for Chinese companies to produce food in Brazil to export to China, in a safe way.
Another great opportunity is to make common investments so that Brazil can help China to address the environmental concerns, as Brazil has one of the cleanest energy matrixes in the world.
Ninety percent of all Brazilian new cars are bi-fuel, capable of running both on gasoline and ethanol. Of the fuel consumed in Brazil, ethanol accounts for 52 percent, and gasoline the remainder. By 2015, 80 percent of its internal market of fuels will be ethanol, produced in a sustainable way, from sugar cane.
The area used to supply 52 percent of Brazil's fuel today accounts only 1 percent of the arable land. So there are opportunities for Chinese companies to produce ethanol there, contributing to a major reduction of pollution in China.
China is also a producer of several products needed for Brazilian development, since China has technology, scale and expertise.
Since Brazil lacks the sources for investment, this is where China can participate. Logistics in Brazil is still a huge concern, especially in grain production areas, increasing the cost of commodities and food. There are also opportunities in roads, ports, airports, storage capacity, pipelines for ethanol, and several other investments. Another challenge, where Brazil is moving very fast, is to adapt food production towards international standards of sustainability.
It is clear that China and Brazil have a role in the future. China will be the world leader and most important economy in a few years. China and Brazil have a history of common respect, of admiration. It is a perfect match.
The countries should immediately work on topics related to one major question: "how to enhance future food trade in a win-win relationship?" The cooperation must come linking institutions towards a better future, doing research together, linking the business community in order to start and improve business, common investments, linking Universities in interchange programs and others. Put people together towards a development of a new world, with economic, environmental, human sustainability and with tolerance towards the difference. Let’s move!
The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil
The article reflects the opinion of the author only
