Mon, Aug 08, 2011 - Page 11 News List

East Asia looks to South America’s rising nations

LATIN LOVERS:Resource-rich and highly populated countries such as Brazil have been attracting interest from Japanese, Chinese and South Korean businesses


When Japanese beverage giant Kirin said last week it would take a large stake in Brazil’s Schincariol, it was the latest example of Asia’s growing thirst for South American markets and resources.

In the same week, China’s JAC Motors (安徽江淮汽車) said it would invest US$900 million in an auto plant in Brazil, a fellow BRICS (Brazil, Russia, India, China and South Africa) nation and the continent’s economic powerhouse, lauded widely as a hot investment destination.

China — seeking energy, mineral and food resources worldwide — has overtaken the US to become Brazil’s largest trading partner and was the biggest investor there last year, injecting about US$30 billion.

Its Asian rival, Japan, is equally looking to South America for resources as well as markets, as the island nation’s population is fast ageing and declining, forcing its companies to look elsewhere for consumer markets.

“Companies long dependent on domestic demand are now going abroad, given that the home market is shrinking and we cannot expect high growth in Japan,” said Hideyuki Araki, economist at the Resona Research Institute.

With its rich resource base and rising foreign investment, “Brazil is one of the BRICS with high growth and rising income,” Araki said.

“Its beverage market and demand for other products are expected to grow,” Araki said.

Japan’s Kirin Holdings said on Tuesday last week it would spend more than US$2.5 billion on a company that holds a majority stake in Schincariol, Brazil’s second-largest beer brewer and third-largest soft drink maker.

Companies in Japan have recently been hurt by a soaring yen, which makes their exports more expensive — but on the flip-side, the strong currency has allowed Japan Inc to go on corporate shopping sprees abroad.

Toru Nishihama, senior economist at Dai-Ichi Life Research Institute, said resource-rich Brazil, which also boasts strong aviation and automobile industries, is seen as South America’s favored investment destination.

“Brisk domestic demand on the back of Brazil’s growing population is attractive for Japanese firms,” he said.

“Japanese firms may increasingly move to emerging economies to make products to be consumed locally,” he added.

Brazil, a population giant with 7.5 percent economic growth last year, has attracted growing buzz as it also readies to make a splash on the world stage by hosting the 2014 World Cup and the 2016 Olympic Games.

South Korea — Japan’s fierce competitor in the auto, electronics and machinery sectors — has also honed in on South America, and has forged ahead by signing free-trade pacts with Pacific Rim nations Peru and Chile.

This year, a group of Japanese and South Korean companies, including Nippon Steel and Posco, agreed to pay US$1.95 billion for a 15 percent stake in Brazilian metal miner Companhia Brasileira de Metalurgia e Mineracao.

However, no one has been more a more enthusiastic investor in Brazil than China. Brazilian Deputy Minister of Development, Industry and Foreign Trade Alessandro Teixeira said last month China was expected to pour in another US$9 billion this year.

Half of that investment is expected to go into Brazil’s high-tech sector, a move away from the farming and mining sectors long favored by Chinese capital, Texeira told the state-run China Daily.

Two-way trade with China hit US$56.4 billion last year. Roughly 70 percent of that was in raw materials such as soybeans and iron ore, but Teixeira said Brazil also wants to boost trade in medium and high-end technology.

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