Conventional wisdom says China plans ahead. Right now, as it works to secure food supplies for the next 50 years, China is getting more active in Brazil, the world’s third-largest grain producer and one with significant untapped capacity to expand cultivated land.
China has been ramping up agricultural investments. In 2016, ChemChina raised eyebrows with a $43 billion bid for Syngenta, a major producer of seeds. It later snapped up Adama, an Israeli pesticide maker with a strong presence in Brazil, for $1.5 billion.
Also that year, China’s CMOC bought Copebras, a mining company that extracts phosphate a key ingredient in fertilizers. Pengxin Group spent $200 million to acquire 57% of Fiagril, a grain-trading company. Last year, Pengxin subsidiary Hunan Dakang paid $253 billion for special purpose vehicle DKBA, which owns 54% of Belagricola, a diversified agricultural services provider.
The moves have helped Beijing dodge some of the impact of its tariff fight with Washington. Brazilian grain exports to China have increased due to the trade war. Yet, this business boost could easily vanish if the big countries back down.
till, these are only China’s opening bids in Brazil. With these timely acquisitions, China has built its own system of inputs and grain commercialization in Brazil. It says to agricultural producers from the Brazilian midwest and south: You have now another option to the huge traders who dominate the grain sector.
Beijing’s next step could be actual land purchases. Although Brazilian law strictly limits foreign ownership of land, the law is flouted with secret private contracts. Foreigners own large tracts of Brazil, with such contracts tucked away awaiting a government that will overturn the ban.
China’s invasion doesn’t always raise hackles locally. These investments are welcome if the Brazilian government enforces regulations and limits in particular, pressing Chinese companies to boost Brazil’s exports of higher value-added products.
We have water, land, sunshine, two harvests a year and tropical agriculture technology but we have no money.
It doesn’t matter if China owns 5 million hectares, as long as Chinese investors bring technology and innovation with their capital. Brazil should cut tough deals demanding, for example, a more stable piece of the Chinese market for Brazilian businesses. This is a opportunity management and both the countries will get benefited. China is getting technology big money, new techniques to improve the yield. Brazil land is very fertile and therefore outputs will be very large. Benefiting global food requirements and also tremendous improvement in quality of cultivation.
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