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China's Brazilian shopping spree

Chinese investment in Brazil has ballooned to more than $25 billion this year.

A worker checks the sugar cane harvest in Usina Santa Elisa farm in Sertaozinho, June 6, 2008. (Nelson Almeida/AFP/Getty Images)

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RIO DE JANEIRO, Brazil — They’ve snapped up iron mines in the south, bought into oil fields off the coast, and they may be trolling for 850,000 acres of farmland, too.

While Chinese investors spent the last decade buying up natural resources across Africa, this year they’ve begun an unprecedented shopping spree in Brazil. In less than 12 months, Chinese investment has jumped by orders of magnitude — from a registered $82 million in 2009 to more than $25 billion in planned projects reported so far this year.

“It’s the first year where big, big investments — tens of billions of dollars — have been announced,” said Kevin Tang, a director at the Brazil-China Chamber of Commerce and Industry. “This decade will be one where we see an investment boom between China and Brazil.”

Chinese companies have announced more than $25 billion in Brazilian investment deals to date in 2010, according to a tally of deals tracked by the government and reported in the press. Billions more are reportedly in negotiations. 

Experts say China’s interest in resource-rich Brazil could be a boon, but only if the government ensures the bulk of the money goes toward Brazilian industrial production rather than raw materials. Others call China’s move a wake-up call to the United States and other developed nations. In the global race for natural resources like oil, analysts say, finding renewable sources of energy is the only way to win in the long run.

“China’s needs for resources, especially energy, are going to grow exponentially in the decades ahead. And the fact is the world doesn’t have all that much more to give,” said Michael Klare, a professor of peace and world security studies at Hampshire College in Massachusetts and author of the book “Rising Powers, Shrinking Planet.”

“There will be greater competition for what remains of the world’s resources.” Klare said. “And this will lead inevitably to friction until and unless we in the West, and China and India move very rapidly to more energy-efficient, more resource-efficient modes of living. And there’s a lot of talk about that but not a lot of real progress.”

Instability, corruption and oppression in many of the world’s biggest oil-producing nations are oft-cited reasons for America’s need to find renewable energy sources. But China’s seemingly insatiable appetite for resources should be another motivation, said Charles Wolf, senior economic adviser at the non-profit think tank The RAND Corporation. Wolf says the search for alternatives is well underway.

“We should be moving and we are,” he said. In that sense, China’s ever-growing demand for natural resources “may be a problem, it may be an opportunity.”

Many Brazilian analysts agree. This year’s investment surge is just the latest demonstration of the increasingly close relationship between Brazil and China, which surpassed the United States last year to become Brazil’s biggest trading partner.

“The expansion of trade and of investment is very beneficial for the country, with one qualification,” said Sergio Amaral, chairman of the China-Brazil Business Council. “Sometimes you don’t know whether the investments are looking for Brazil as a market or whether they correspond to strategic purposes of the Chinese government.”

Amaral, a former minister of development, industry and foreign trade, notes that even private Chinese companies have very close ties to the Chinese government, and some of the investments here have been undertaken by state-owned Chinese companies.

“The economic exchanges between the two countries are increasing fast,” Amaral said. “Sometimes I have the impression that the Brazilian government is not as well prepared as it will need to be to cope with the new situation — a new nature and a new magnitude of investments.”

He says the government needs to ensure the various agencies in charge confirm the Chinese are investing on the merits, and not for strategic purposes like fixing prices of raw materials.

The government also must try to channel the Chinese cash into sectors that will help the Brazilian economy grow, he said. Selling manufactured goods tends to provide more jobs and economic growth for the country making those products. They make up about 90 percent of what Brazil imports from China, while Brazil chiefly sends back raw materials like iron ore, oil and soy.