May 30, 2013

Chinese Officials Frustrated when Trying to Invest in Brazil

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

China is the number one destination for Brazilian soybeans with as much as 70% of the soybeans produced in the state of Mato Grosso destined for the Asian country. In the neighboring state of Mato Grosso do Sul, as much as 80% of the soybeans exported are headed for China. Since Brazil exports more soybeans to China than any other country, Chinese officials are keenly interested in reducing the cost of transporting the soybeans from the interior of Brazil to China.

Numerous company executives and Chinese officials have been to Mato Grosso in recent years exploring the possibility of investing in the state's logistics such as grain silos, railroads, and ports as a way of reducing transportation costs which can be more than US$ 3.00 a bushel to get the soybeans from the interior of Brazil to one of Brazil's ports.

On a recent tour of the state with the Soybean and Corn Producers Association of Mato Grosso (Aprosoja), a Chinese executive, Lin Tan, expressed his frustration in trying to invest in Mato Grosso's infrastructure. The executive stated that it is very difficult trying to navigate the labyrinth of Brazilian regulations and burdensome bureaucracy.

He expressed his dismay that there is not a "go-to" person that can help facilitate the negotiations such as there is in China. Many Chinese investors arrive in Brazil with the intentions of investing, but become discouraged when negotiations bog down in sometimes conflicting and contradictory regulations. Environmental regulations and indigenous rights are especially troublesome because they are much stricter in Brazil compared to China.

Brazilian soybean producers themselves often complain that the federal government has not established clear priorities for agricultural development and that there are a multitude of Ministers with overlapping authority that often establish conflicting rules and regulations.