A gameplan for resource based Economies
After China completed the purchase of Standard Bank in LatAm(ICBC pending shareholder approval), we indicated a hope that this was in response to oversaturated of biolateral trade in fickle resources that have imprisoned the Economic ambitions of China, Brazil, Australia and Russia. Russia, though bouncing back , has yet to show a gameplan, fighting systemic deficiencies, while Brazil seems to have managed a little better after having cut interest rates thrice this year.
China has been accused of dumping in Brazil too, Brazil putting it in writing that its trade with its largest partner has to be more broadbased than in iron, oil and coal as is now. China, has been eager to spread its dominion after having spent 4 years pushing developmental aid into Africa, and economically it wants to diversify into Yuan based trading with a significant universe of its trading
partners to hedge against the dollar and prove its resilience as a global alternate currency.
China’s FDI in Brazil has jumped to a $27 bln this year, frontrunning by Sinopec on a $7 bln establishing the discomfort however with exposures only in energy and resources as Brazil struggles to balance the boat into a longer lasting economic machine, investing in larger welfare payments and promoting growth economics even during a high inflation event. FDI deals in infrastructure have also been encouraged by the Chinese government and while the pace of infrastructure creation in Brazil needs to be speeded up, it will not be looking at a developmental role for China. (More on China FDI in Brazil independently this week)
CCB is right next to ABC and ICBC in size, outgrowing BOC in ambition and international business. It is now looking for a purchase in Brazil to provide a Yuan option to Brazil’s exporters and importers dealing with China. ICBC however, is setting up branches in Brazil and Peru having acquired in Argentina, its deal with Standard Bank still awaitis shareholder approval. CCB is yet to identify the target and is hoping to work with Felaban (Federation for Latin American Banks) and Brazilian regulators to get permits and licenses faster inorganically
FT’s coverage in Brazil is much more closer to the ground. Reference articles below worth a good read.
- China Bank completes Standard Bank Argentina purchase | Advantage Dealbook (advantages.us)
- Deal momentum in China: CAT, GS buy/sell stakes (advantages.us)
- What’s Drawing Equipment Makers to Brazil? (fool.com)
- Emerging markets flex their muscles: Sao Paulo’s Safra brings Samba to Switzerland’s Sarasin: (danielenskat.wordpress.com)
- Brazilian ETF looks attractive after 23% downturn this year (business.financialpost.com)