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 In 2011, Chongqing Grain Group Corp announced plans to build a
soy crushing plant, railways and a giant inland storage and
transportation hub to export goods back to China. The total
price tag: $2 billion.
Yet today, the company has only managed to bulldoze a
100-hectare area on which the crushing plant might one day
stand. Even that project is on hold, though, and shrubs are
starting to grow back on the cleared terrain.
The stalled plans are an example of the difficulties facing
once-promising Chinese investments here. Brazil's notorious
bureaucracy, its slowing economy and a deep-seated mistrust of
China's hunger for land and commodities all appear to explain
why the field is still empty.
A Reuters investigation last year found that after a rush of
investment announcements in recent years, as many as two-thirds
of Chinese projects in Brazil face lengthy delays or never get
off the ground.
The government of Bahia state says the Chongqing Group's plans
are still moving forward — slowly.
"It's just in bureaucratic processes," said Josalto Alves,
spokesman for Bahia's agriculture department. He said the plant
needed approval from a municipal government as well as
environmental licenses.
It's unclear whether Chongqing has abandoned the other elements
of the project. Representatives for the company in China and at
its subsidiary in Bahia, called Universo Verde, declined
repeated requests for comment.
Alves said the company is still evaluating infrastructure
projects, although other local officials told Reuters that
Brazilian companies are likely to build a railway and
transportation hub.
Margaret Myers, program director for China and Latin America at
the Inter-American Dialogue, a Washington-based think tank,
suspects the delays are about more than red tape.
Chongqing Grain Group originally planned to not only build the
plant, but also acquire large expanses of surrounding farmland,
according to Brazilian media reports.
At the time, Brazilian legislators expressed worries that China
was interested in securing as many natural resources as it
could, with little benefit to Brazil, one of the few countries
in the world with new land available for agriculture.
Myers said the Chongqing project was widely perceived as a "land
grab."
As negotiations for its terms were underway in 2010, the
Brazilian government tightened restrictions on foreign land
ownership — a move that officials privately said was mostly
aimed at China.
SCALING BACK
Brazil's slowing economy has also prompted many foreign
investors to scale back their projects here.
In 2010, Brazil's economy grew 7.5 percent and some believed it
was set to join the ranks of developed nations by the end of
this decade. But because of poor infrastructure and a stagnant
government reform agenda, the economy has averaged just 2
percent growth since then.
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Hungry to revive growth, other officials have been much more
welcoming of the Chinese. Bahia's state government spent years
wooing Chongqing Group and even has an office in China.
China buys the bulk of soy shipped from Brazil and neighboring
Argentina and is Brazil's top trading partner.
Chinese agricultural companies appear to be changing their
approach following recent challenges, however. Instead of
controlling the entire soybean production chain, as they aimed
to do in Bahia, they have focused recently on acquisitions of
existing trading houses.
On Wednesday, China's largest grain trader COFCO Corp agreed to
pay $1.5 billion for a majority stake in Singapore-based Noble
Group Ltd's <NOBG.SI> agribusiness. The purchase followed
COFCO's February agreement to buy a 51 percent stake in Dutch
grain trader Nidera, in what was the first major purchase in a
trading house by a state-owned Chinese agricultural company.
COFCO will now be able to purchase soy supplies from Brazil and
other top producers directly, and process them into animal feed
at home. That would allow the Chinese to avoid working with the
big four grain brokers ADM <ADM.N>, Bunge Ltd <BG.N>, Cargill
Inc <CARG.UL> and Louis Dreyfus Corp <LOUDR.UL>.
That may be more viable than trying to get into the farming game
in Brazil, where U.S. and European based trading firms have
crushed and brokered soybeans for decades.
In western Bahia state, plants owned by Cargill and Bunge
already have deals to buy soybeans from local producers.
"The industries are very well established and it is hard for
newcomers to come in, even those as persistent as the Chinese,"
said Carlo Lovatelli, head of Brazil's crushing association
Abiove.
The town of Barreiras will analyze Universo Verde's proposal for
the crushing plant plan soon, Adalto Soares, a spokesman for the
mayor's office, said this week.
The plant would be integrated with a new industrial district
planned for the city that would include a dry port and railway — now likely to be built by Brazilian firms, he said. (Additional reporting by Dominique Patton and Niu Shuping in
Beijing; editing by Brian Winter and Kieran Murray)
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