Suspension of Brazil rail project doesn’t signal shift in economic ties with China

By Hu Weijia Source:Global Times Published: 2018/2/12 22:23:40

Brazil's reported decision to halt a planned railway to transport exports bound for China through Peru has sparked heated debate at a time when some countries are vigilant over Chinese investment, citing national security concerns. The market's major concern is whether the decision signals a shift in Brazil's attitude toward Chinese investment.

At an estimated cost of $80 billion, the railway's biggest problems are its high costs and environmental protection issues, not factors such as worries about an increased Chinese presence. Jorge Arbache, vice planning minister for international affairs in Brazil, was quoted by Reuters as saying that "the project was stopped because it was extremely costly and the feasibility study was very unsatisfactory."

Since 2018 is an election year in Brazil, a political component to the decision cannot be ignored, although an open attitude toward foreign investment seems still the main tone in the country. Arbache was quoted by another Reuters report as saying that "Brazil has much less investment than we need... we need foreign investors." Asset prices remain low after a recession in recent years, and fresh investment is urgently required to extend Brazil's recovery into this year.

In 2017, China invested $20.9 billion in Brazil, the most since 2010, Reuters reported. China's investment has poured into the country in recent years and both governments are handling it carefully. It is important to properly handle issues relating to the planned railway to avoid any impact on investor confidence.

It is widely expected that there will be an infrastructure investment boom connected to the Belt and Road initiative as China and countries and regions along the route promote the initiative. An inevitable result of the rapid expansion of infrastructure investment is an increased number of projects that have been temporarily shelved for a variety of reasons. The market doesn't need to make a fuss about temporary setbacks, and business elites in China and Brazil should remain patient and confident.

Chinese investors will look more carefully before investing in major infrastructure projects, with more of a focus on debt-repayment ability and sustainable operation. Projects that can create jobs for local people are important. So is sustainable investment expansion, which will help maintain market confidence.

The author is a reporter with the Global Times.


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