China’s Development Finance

China’s Development Finance

During the last decade, Chinese companies expanded their investments in strategic sectors (infrastructure, agriculture and mining) at highly sensitive territories such as the Brazilian Cerrado and its Amazon region. Despite the Chinese growing foothold in Brazil, the available information about the volume, type and impacts of its investments is still scarce, due to methodological inconsistencies or lack of transparency. Nevertheless, according to official estimates, in 2017 the inflow of Chinese investments into the Brazilian economy alone reached US$ 24.7 billion. Even though these figures seem to confirm a general trend, the type of Chinese investments in Brazil has changed in recent years from green to brown-field. Indeed, in 2016, while 53% of these investments were channeled through Merger &Acquisitions, only 27% were greenfield investments. This shift means that these investments are not necessarily contributing for domestic capital formation neither for transferring new technologies for the Brazilian market.

 

As per their sectoral distribution, Chinese companies concentrate their investments in Brazil in three main sectors: (i) extractive industries (including oil and gas as well as mining and metals); (ii) infrastructure (including transport, energy utilities and alternative sources of energy); (iii) agriculture. This sectoral distribution also has territorial impacts, once the investments converge to two sensitive biomes: Cerrado and Amazon.

 

Considering the volume, sectors and territorial location, the socioenvironmental risks and threats against the democratic governance associated to these investments are noteworthy. Moreover, against the backdrop of deep transformations within the Finance for Development (FfD) field, these investments may be part of a race to the bottom dynamics, in which instead of adopting established socioenvironmental standards Chinese companies contribute for disrupting and flexibilizing national policies and regulation.

 

Hence, this project aims at contributing for aligning Chinese financial institutions and companies in Brazil with internationally agreed socioenvironmental standards. To achieve this goal, the BPC team will try to fill policy and knowledge gaps addressing the following problems:

 

  • Limited access to data and evidence-based analysis on Chinese investments in Brazil;
  • Lack of systematic assessment of socioenvironmental impacts of Chinese investments in Brazil (particularly related to deforestation, flexibilization and vulnerable groups’ rights);
  • Absence of dialogue spaces for key stakeholders (Chinese companies and financial agents,government, CSOs and affected communities).