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China to make billion-dollar investment in Brazilian port of Sao Luis

PortandTerminal.com, November 15, 2019

BRASILIA, BRAZIL – Reuters is reporting that China will make a $1 billion investment in the Brazilian port of Sao Luis via China Communications Construction Company, two sources with direct knowledge of the matter said on Wednesday.

During a visit by Chinese President Xi Jinping to Brasilia this week, China is expected to announce a $1 billion investment in the port of Sao Luis by state-owned China Communications Construction Company (CCCC). President Xi is in Brazil for the annual BRICS summit, a gathering of the leaders of Brazil, Russia, India, China and South Africa. 

In 2018, CCCC began work on a new greenfield port at Sao Luis, the capital of the state of Maranhão on Brazil’s northeastern coast. The four-year-long construction project has a projected cost of about $250 million; two Brazilian partner companies, WPR and Lyon Capital, own a combined 49 percent minority stake in the venture.

The deal at the Port of Luis will be part of the largest foreign direct investment into Brazil this year, one of the sources said, without revealing any figures.

The deal is certainly good news for the Bolsonaro government. Earlier this month, major global oil firms snubbed a second Brazilian oil auction in a row on Thursday, passing up promising offshore blocks and forcing officials to reconsider a bidding system that gives a privileged position to state-run Petroleo Brasileiro SA.

The new port’s primary objective is to increase the region’s capacity for shipping Brazilian soybeans to overseas markets. China is the largest customer for Brazilian soy exports, and it is also Brazil’s largest trading partner overall.

The Chinese are not buying in Brazil, they are buying Brazil

Jair Bolsonaro. President of Brazil (claim made during elections in Brazil)

The expected announcement marks a change in direction for the Brazilian government. President Jair Bolsonaro campaigned on a nationalist, anti-China platform, questioning Chinese intentions and Beijing’s growing economic power in Brazil. He repeatedly warned that “the Chinese are not buying in Brazil, they are buying Brazil.”

However, his rhetoric has changed since the election, and on Thursday his top economic official signalled that Brazil wants to strengthen – not scrutinize – its trade ties with China. 

Paulo Guedes, Brazilian Economy Minister

“We are talking to China about the possibility of creating the free trade area with China as well while talking about joining the OECD,” Brazilian Economy Minister Paulo Guedes told Folha de S. Paolo. “I don’t care if . . . we balance [trade], increasing exports by 50 percent and imports doubling or even tripling. What we want is even more integration.”

Located in the northern state of Maranhao, the port of Sao Luis serves the central, northern and northeastern areas of Brazil, and is connected by the Norte-Sul/Carajas railway. According to one source, CCCC’s investment will include spending on the railway.

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