China to invest US$50 billion in Brazilian infrastructure projects

China will invest US$50 billion to help overhaul Brazil’s ageing infrastructure, Brasilia said, ahead of an official visit by Premier Li Keqiang.

“There are US$50 billion in new projects,” said Jose Graca Lima, Brazil’s undersecretary of state, who oversees Asia and Oceania.

“We shall have to await the end of the visit to expand upon which projects,” he said, without providing details.

The Industrial and Commercial Bank of China Ltd. (ICBC) plans to start a fund of up to $50 billion, to be managed by Brazil’s state-owned bank Caixa Economica Federal, for investing in infrastructure projects in the South American country, according to a person familiar with the situation.

Battling a fifth straight year of poor growth and mired in a bruising graft scandal involving state oil giant Petrobras, Brazil is seeking to revamp its sagging infrastructure ahead of next year’s Rio Olympics, the first Games to be held in South America.

A Brazilian government source said Brazil, Latin America’s biggest economy, was determined to overhaul its dilapidated roads, railways, airports and ports ahead of the Olympics.

The cash infusion from China is likely to cover various sectors, including transport and energy.

Li arrives in the capital Brasilia next week for the official visit, during which he will also travel to Rio de Janeiro, before touring neighbouring countries.

The premier will visit Colombia, Peru and Chile on the South American swing, aimed at boosting Beijing’s influence in the region.

Trade between the two BRICS nations jumped by a factor of 13 between 2001 and 2013, reaching US$83.3 billion.

Brazilian exports outstripped imports from China by US$8.72 billion in 2013 as the South American giant benefited from high Chinese demand for commodities.

The two countries also hope to bring to fruition an ambitious scheme to create a railroad stretching from Brazil to Peru, allowing Brazilian exports to be shipped to China more expediently.

The proposed rail link would stretch some 3,500 km from the port of Santos to the Peruvian Pacific port of Ilo.

Graca Lima said the complex scheme would take some three to four years to realise, but assured it is advancing.

The countries are also expected to announce the delivery of 22 jets from Brazil’s Embraer to China, part of a larger order of 60 airplanes from the world’s number three commercial aircraft developer.

Graca Lima said Rousseff and Li would ink a series of accords on various political issues, along with four major commercial agreements and as many as 30 investment deals.

SOURCES – South China Morning Post, Wall Street Journal