Asia eyes South America for resources, markets

When Japanese beverage giant Kirin said this 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 said it would invest 900 million dollars in an auto plant in Brazil, a fellow BRIC 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 United States to become Brazil's largest trading partner and was the biggest investor there last year, injecting about $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, refering to the group of emerging market giants Brazil, Russia, India and China.

"Its beverage market and demand for other products are expected to grow."

Japan's Kirin Holdings said last Tuesday it would spend more than $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 favoured 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."

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 $1.95 billion for a 15 percent stake in Brazilian metal miner Companhia Brasileira de Metalurgia e Mineracao.

But no-one has been more a more enthusiastic investor in Brazil than China. Brazil's deputy development, industry and trade minister Alessandro Teixeira said in July China was expected to pour in another $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 favoured by Chinese capital, Texeira told the state-run China Daily.

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

Chinese telecom equipment maker ZTE's industrial park near Sao Paulo helped its 2010 sales revenue reach $600 million in Brazil, a figure expected to grow to $1 billion this year, the China Daily said.

In April, Brazilian President Dilma Rousseff said during a visit to China that Chinese telecom equipment maker Huawei had announced it would build a $300-400 million research centre near Sao Paulo.

Trade in agricultural products is also expected to rise as China seeks to secure supply of grains and oilseeds to meet growing demand at home.

"China has an ongoing need to secure soybean and corn supplies that matches well with South America's productive strengths," Rabobank's Food & Agribusiness Research and Advisory said in a July 28 report. "Brazil has more resources that could be put into crop production than any other country in the world."

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