Chinese Plan Investments and Loans for Brazil

Extending a lifeline to the beleaguered Brazilian president, Chinese officials announced a sweeping list of investment plans and loans in Brazil on Tuesday totaling dozens of billions of dollars, including in a contentious project for a railway to the Pacific that would cut through the Amazon rain forest.

The deals, announced during a visit by China’s premier, Li Keqiang, come at a crucial time for President Dilma Rousseff, who is dealing with a sluggish economy, austerity measures and a colossal bribery scandal involving the national oil company and her Workers Party.

For some foreign companies, the graft scandal has heightened perceptions that investing in Brazil is an uncertain proposition.

But Chinese banks and companies seem to remain sanguine about raising their profile in Brazil with new deals in energy, banking and agriculture, among other industries. Petrobras, the state-controlled oil company at the heart of the bribery scandal, is to get about $7 billion in Chinese financing.

Officials also said Chinese and Brazilian banks would create a joint $50 billion fund to invest in Brazil’s infrastructure. After leaving Brazil, Mr. Li plans this week to lay out investments in Chile, Colombia and Peru.

“China is seizing this moment to promote its own interests and diversify its approach to investing in Latin America,” said Margaret Myers, a specialist on China at the Inter-American Dialogue, a Washington policy group.

Some previously announced Latin American projects involving China have not materialized, and the same may be true for some of the new deals, according to trade specialists.

While work has started in Nicaragua on a canal backed by a Chinese billionaire, another venture floated in Colombia, for a railway to the Pacific, has not advanced.

The plan in Brazil for a transcontinental railway, aimed at reducing freight costs, has already prompted skepticism and resistance.

To begin with, Brazilian companies have been unable to complete some of their own megaprojects. One such project is the Transnordestina, a futuristic railway in northeast Brazil that was abandoned after it ran into a series of financial and bureaucratic hurdles. Over the past decade, the authorities envisioned building a bullet train to connect Rio de Janeiro and São Paulo by the 2014 World Cup. (The project remains on the drawing board.)

Previous ventures elsewhere in Brazil have been swallowed by the jungle.

One is the Madeira-Mamoré Railroad, built a century ago in the Amazon during the rubber boom; Brazilians called it the Devil’s Railway because of the thousands who died while building it. The new China-backed project might be built near that route, which cut through Brazil’s remote Rondônia State.

“One of the biggest problems with such a project is its impact on forests, which could complicate the permitting process,” said Paulina Garzón, director of the China-Latin America Initiative for Sustainable Investments, a group in Washington that raises awareness about the environmental impact of Chinese projects. “Another important question is whether a railway like this is truly needed, or if it’s a way to strengthen Chinese companies.”

Either way, the timing of Mr. Li’s visit is a sign of China’s efforts to bolster its position as Brazil’s leading trading partner ahead of Ms. Rousseff’s planned visit to Washington next month, when her government and the Obama administration are expected to ease tensions over revelations that the National Security Agency spied on Ms. Rousseff and her top aides.

Speaking to reporters in Brasília, the capital, while describing the deals with China, Ms. Rousseff said that Brazil and China should join forces to press for changes at multilateral finance institutions based in Washington, like the International Monetary Fund and the World Bank.

She said the two institutions “do not reflect in their governance the weight of emerging countries.”


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