Published on: Friday, May 17, 2024As ties with the West sour, foreign investments may be China’s best bet to stay on good economic terms with the rest of the emerging world. Shut out of US markets and under fire in Europe, China’s electric carmakers are zeroing in on the countries where they’re welcome. One of the big ones is Brazil.
“Chinese brands must invest outside China,” in order to “avoid making protectionism more severe,” says Ricardo Bastos, Great Wall’s institutional relations director in Brazil. In an interview at the company’s Sao Paulo headquarters — furnished with bright red and yellow sofas, and a ping-pong table that’s popular with Chinese workers — Bastos says he sees Brazil as a gateway to the whole region, “from Mexico, Columbia, Argentina to Peru.” Latin America’s car market is worth almost US$130 billion.
Still, BYD and Great Wall won’t have everything their own way in Brazil. And even under President Luiz Inacio Lula da Silva, a longtime friend of Beijing, there are government-imposed hurdles they’ll have to jump through. There’s been a stark divergence in the economic history of the two countries. Brazil’s auto industry dates back more than a century, to when Ford built a plant there, and it once propelled economic growth. But manufacturing has shrunk rapidly since the 1980s — just when China’s factories were taking off and driving Brazil’s raw materials exports.
What’s more, to export made-in-Brazil cars to other Latin American countries without tariffs, producers need to source about half their components locally. If they can’t meet that criteria, BYD and Great Wall risk losing their price edge. That’s an example of how the arrival of foreign carmakers can bring knock-on benefits for Brazil — including in employing and training workers, a key priority for Lula.
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