Big Chinese soy project in Brazil: so far, just an empty field
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.
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 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, Bunge Ltd, Cargill Inc and Louis Dreyfus Corp.
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.
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