Chinese Companies Believe Latin America Holds Potential for Green Energy Development

In April 2023, the Brazilian government established partnerships between Brazilian and Chinese companies
According to the special advisor at BYD, Brazilians are concerned about the environment and energy transition

Alexandre Baldy, special advisor at BYD, comments on the company's performance in Latin America

By: SiiLA News

03/05/2024

In recent years, we have seen Asian giants making their mark in Brazil, such as Shopee, TikTok, BYD, Huawei, and others, in a significant movement that we can call the second wave. The first occurred in the 1980s and 1990s, with Japanese companies like Honda, Nintendo, Sony, and others. Now it's the turn of Chinese companies, which are driving the national economy forward.

However, this partnership is not one-sided. In April 2023, the Brazilian government established partnerships between Brazilian and Chinese companies. The agreement involved companies such as JBS, Odebrecht, Eletrobras, BMV, Vale, Suzano, among others on the Brazilian side, and on the Chinese side, Power China, Jac Motors, HRH, Bank of China, Tianjin Food Group, SPIC, among others.

This agreement will mainly boost the renewable energy sector, with a highlight on the agreement involving Petrobras, SPIC, Power China, and Bank of China. Sustainability is one of the Chinese focuses, not only in Brazil but throughout Latin America.

A survey conducted by Intelligence in Research and Strategic Consulting (Ipec) at the request of the Institute of Technology and Society of Rio (ITS) in 2023 revealed that 52% of Brazilians are very concerned about the environment. This concern is seen as an opportunity, as the research showed that 56% of people would stop using a product that harms the environment, and 12% already use renewable and non-polluting energy.

According to Alexandre Baldy, special advisor at BYD, a 100% electric vehicle manufacturer, Brazilians are concerned about the environment and energy transition, and this can already be felt within the company's business.

"In Brazil, consumers already have this commitment and see the real possibility of buying an electric car that combines sustainability, comfort, technology, and economy. It's still early days, but the increase in sales indicates that we are on the right path. In 2023, in Brazil, sales grew almost 70% compared to 2022, and the company sold more electric cars last year than all its competitors combined," says the advisor.

The space left by Ford was taken over by the Chinese company. In October 2023, BYD purchased the former factory of the American automaker in Camaçari, Bahia. At the time, an investment of R$ 3 billion was announced. In addition to the factory, the company occupies the Condomínio Multitech in the city of Campinas.

Challenges

Despite the growth in investment in Latin America, the Chinese economy has been suffering due to a real estate crisis. According to Goldman Sachs, the country's annual growth rate could drop from 4.5% this year to 3.7% in 2027. However, the government and companies have been forming partnerships, which could consequently curb these declines.

According to China's Minister of Commerce, Wang Wentao, during the 13th WTO Ministerial Conference, the country is committed to meeting the goals of the UN's 2023 Agenda and assisting nations in achieving economic and industrial progress.

According to Alexandre Coelho, a Ph.D. in International Relations from IRI-USP, Non-Resident Specialist at Observa China, and former Legal Consultant at the Bank of China, Chinese companies see Latin America as a strategic point for commercial and political expansion, as it is a region abundant in natural resources.

"Chinese and Asian companies have been significantly focusing on Latin America for a series of strategic reasons. Firstly, the region offers an abundance of natural resources that are essential for the economic expansion of China and other Asian countries. This includes minerals, oil, and agricultural commodities, all necessary to sustain industrial growth and feed the Asian population. Additionally, Latin America represents an emerging market with a growing middle class, presenting opportunities for Asian companies in sectors such as technology, infrastructure, and renewable energy," he says.

Coelho also emphasizes that, in addition to the economic factor, advancing commercial ties with Latin America benefits Chinese geopolitics. Increased influence in the region allows China to gain political allies and reduce American hegemony.

"This may also be part of a broader strategy to create a global network of trading partners that support China's international ambitions, such as the Belt and Road initiative. Additionally, by diversifying its trading partners, China can reduce its dependence on traditional markets and minimize the risks associated with trade and political tensions, such as those experienced in the Sino-American relationship," he adds.

The production of batteries, whether for common batteries or car batteries, depends on lithium. According to a survey by Elements, the global demand for lithium increased by 283% between 2010 and 2021.

According to the US Geological Survey's 2023 Mineral Commodities Summary report, Chile holds 33.2% of the world's economically viable lithium reserves, while China holds 7.6%. Besides Chile, Argentina and Brazil also appear on the list, with 12.8% and 1.3%, respectively.

"The Chinese real estate crisis is a complex problem involving deep structural issues in the Chinese economy, such as high levels of debt among companies and consumers. Therefore, while investments in Latin America may offer some relief, they are not a complete solution to China's broader economic challenges," Coelho concludes.

In Brazil

The BYD advisor states that the company sees the South American market as having growth potential, especially with the Brazilian government's industry valorization program. Recently, the Chinese company acquired Ford's former factory in Bahia.

"We see South America as a potential market for BYD and for energy transition, and our plan is that, in addition to Brazil, the vehicles manufactured here can also be exported to neighboring countries. BYD's growth in the country converges with the objectives of the national industry valorization program. The company understands that this commercial movement, retail growth, and brand acceptance contribute to even greater investments in the country, with positive repercussions for South American trading partners," explains Baldy.

Last Wednesday (28), the company launched its new popular electric vehicle, the BYD Dolphin Mini. Baldy states that the Chinese automobile market has reached a high level of maturity and that BYD intends to "lead the electrification transition in transportation."

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