Brazil has great infrastructure investment needs and gaps that private capital or even development banks cannot fill, so China’s infrastructure investment is sorely needed and welcomed in Brazil. The scope of Brazil’s infrastructure needs is huge, providing big opportunities for China’s engineering companies. Chinese state groups have seized opportunities by acquiring key infrastructure assets and preparing more bids. Strategically, Beijing regards Brazil as an important ally and a key potential market of over 200 million people, so increasing investment helps strengthen bilateral ties.
China sets up $20 billion Brazil infrastructure investment fund
In June 2022, China agreed to allocate $15 billion towards a bilateral $20 billion fund earmarked mainly for Brazil infrastructure projects. This fund was first proposed by Chinese Premier Li Keqiang in his 2015 Brazil visit. China moved quickly in setting up this fund and Brazil eagerly welcomed it, as the cost of capital is currently expensive for Brazil while infrastructure gaps are large.
China acquires key Brazilian power infrastructure assets
Chinese state companies have acquired controlling stakes in major Brazilian power transmission and generation assets. State Grid Corporation of China bought Brazilian utility CPFL Energia, obtaining huge transmission network assets. China Three Gorges Corporation purchased two large Brazil hydropower plants for $3.7 billion. More Chinese power companies are eyeing bids for other assets being privatized.
China viewed as white knight investor in troubled sectors
Some Brazilian electricity companies face unsustainable debt burdens, worsened by recession and past tariff cuts. Drought also badly impacted hydroelectric firms. China’s acquisitions and investments hence play a white knight role providing much-needed capital injections into troubled Brazilian infrastructure sectors.
Strategic considerations underpin China’s Brazil infrastructure push
Beyond commercial motives, Beijing sees Brazil as a vital ally and fulcrum for expanding business across Latin America. As Brazil lies in the U.S. backyard while U.S.-China ties grow tense, deeper China ties become geopolitically valuable. Hence major state drive for infrastructure and other strategic investment into Brazil.
China is making major strategic infrastructure investments in Brazil, welcomed by the Brazilian government. Chinese capital flows play a white knight role amidst Brazil’s infrastructure gaps and company debt troubles. Huge further bids are upcoming.