In the second quarterly report on the Macau Forum, Lucy Corkin explores developments between China and Portuguese-speaking countries. From China’s burgeoning trade and investment relationship with Brazil and its continued engagement with Angola, Corkin explores Mozambique’s new strategic relationship with Beijing.
Despite the ensuing global economic downturn, Beijing has spared no effort in further developing relations with the Community of Portuguese-speaking countries (CPLP). It was announced last month in the report issued by the Permanent Secretariat of Forum Macau that over 100 high-level visits had been conducted between China and the Portuguese-speaking member countries in 2008. Particular attention in the report was drawn to the three meetings that had taken place between Chinese President Hu Jintao and his Brazilian counterpart Luis Inácio ‘Lula’ da Silva. Brazil is China’s largest trading partner in the CPLP, with total trade in 2008 reaching US$48.6 billion. China is expected to overtake the US as Brazil’s largest trading partner, given that the financial crisis has hit Brazil’s northern neighbour hard and Brazil–US trade has already faltered.
China will become increasingly important for Brazil as the Latin American country is, according to the Brazilian National Confederation for Industry, expected to enter a technical recession this quarter, with almost zero growth this year. In May this year, while trade volumes of soy, iron ore and oil – which collectively make up nearly 80 per cent of Brazil’s exports to China – are expected to remain the same, the falling prices of soy and particularly crude oil are projected to lower Brazil’s export value to China by 12 per cent. Boosted by the announcement of China’s economic stimulus package, however, the price of iron ore is expected to increase by 13.7 per cent. Brazil’s Vale is on track to deliver a record 30 million tonnes of iron ore to China in the first quarter of 2009.
Brazil’s agricultural exports to China totalled nearly US$600 million this March, representing a 52.5 per cent increase from the previous year. During President Lula’s coming visit to China, a deal was supposed to be struck that would open up China’s markets to Brazilian pork. The emergence of the vH1N1 virus, known as swine flu, may however delay this process. China is the largest producer and consumer of pork meat globally.
China and Brazil announced in April the extension of their programme of cooperation in research, which currently covers aeronautical engineering, energy – notably bio-diesel – and environmental studies. Reportedly, Brazil’s Banco Nacional de Desenvolvimento Económico e Social (BNDES) will sit on the business council to be formed by Qinghua University’s Brazil–China Centre for Innovative Technologies, Climatic Change and Energy. Such joint research will benefit the Chery group. The company’s world chairman Lin Tongyao has announced that his company intends to have an automotive factory constructed in Brazil by 2012. In order to fully capitalise on the Brazilian market however, Chery first has to develop ‘flexi-fuel’ technology, or car engines with the ability to run on gasoline, bio-fuel, or a combination of both.
China’s relations with Angola remain vitally important for the latter’s reconstruction programme, of which Chinese state-owned banks are the largest financiers. Chinese construction projects are continuing steadily, with almost of US$4 billion of China Exim Bank’s loans having been disbursed to date. One of the latest contracts is between Angolan utility provider Empresa de Distribuição de Electricidade (EDEL) and the Chinese National Machinery Import and Export Corporation (CEIEC) to reconstruct and expand Luanda’s electrical grid. An Angolan consortium called Progest will be subcontracted to the project as according to agreed stipulations, all such Chinese-funded projects may allow local participation of up to 30 per cent of the contract.
Mozambique also seems to be looking to China as a strategic financier in the economic downturn. China was reportedly the second largest investor in the southern African country after its neighbour South Africa in 2008. In order to capitalise on this trend, two seminars bringing together Mozambican and Chinese investors together have been held in the capital city of Maputo this quarter. The Mozambican Centre for Investment Promotion (CPI) is reportedly analysing more than 20 proposals from Chinese companies. Interestingly, Macau has made it onto the 2008 list of the top 10 investors in Mozambique, largely on the back of gambling mogul Stanley Ho’s investments such as Banco Moza. Stanley Ho dominated the Macau gambling industry for more than 35 years before his monopoly was broken. The Ho family owns three of the six gaming licences in Macau and controls about half of the sector's market share. Stanley has since branched out into various investments in Portuguese-speaking Africa, notably Angola, Guinea-Bissau and Mozambique.
Stanley Ho first entered the Guinea-Bissau market in 2007 where his company Geocapital acquired a majority stake in the country’s largest bank, Banco da África Ocidental (BAO), by purchasing Portuguese Montepio Geral’s 60 per cent share. He moved onto Mozambique six months later launching Banco Moza, retaining a 49 per cent share. The coup de grace came in October 2008 when Geocaptial entered into a joint-venture holding company with Angola’s state-owned oil company Sonangol called Geopactum with a 49.9 per cent stake. The investments through this holding company are also primarily in banking such as Angola’s Banco Privado Atlântico (BPA), which is the Angolan partner of Millenium BPC, Portugal’s largest private bank. Stanley Ho has recognised the strategic advantage Macau has as a platform for Asian investment into lusophone Africa and wants to take advantage of this platform to facilitate such deals. It was announced in June last year that Geocapital planned to invest US$40 billion in the bio-fuels industry in lusophone Africa by 2018.
Macau itself has been hit hard by the financial crisis. The number of visitors to the gaming mecca fell by another 9.6 per cent this quarter. Doubtless many are pinning their hopes on the announcement that the 10th International Indian Film Awards (IIFA) will be held in Macau in mid-June. The ‘Bollywood Oscars’ looks set to be a gala event.
Although no Macau Forum meetings are scheduled for this quarter, the third meeting of the CPLP on environment and territory was held in Lisbon from 27 to 29 April. Promoted by the Portuguese Ministry for Environment, Territory and Regional Development, the event’s agenda comprised discussion of the Kyoto Protocol, the Montreal Protocol and the establishment of a network of environmental NGOs.
Simultaneously in São Tomé, the inaugural Parliamentary Assembly of the CPLP took place. This meeting has apparently been in the pipeline since 1996, but was only advanced two years later with the establishment of the Forum of Parliaments of Portuguese-speaking Language (FPLP) in Lisbon. The Angolan delegation also proposed the inclusion of the Parliamentarian Women Network in the statutes of the Parliamentary Assembly of CPLP. The Parliamentary Assembly also tackled the sticky issue of Portuguese citizenship and the free movement of people and goods. Results from the session are already bearing fruit. The Mozambican minister for Tourism, Fernando Sumbana after an audience with Angolan Prime Minister Paulo Kassoma, announced that national carriers TAAG (from Angola) and LAM (from Mozambique) would establish direct flight routes between the countries’ capitals. Brazilian airline Air Puma is also looking to establish routes to Luanda from São Paulo and Recife; the current direct route leaves from Rio de Janeiro. This is due to Brazil’s considerable commercial engagement in Angola. Brazilian construction firms, notably the giant Odebrecht, are heavily involved in Angola’s construction industry. Despite the economic downturn, Angola is hosting the African Cup of Nations in January 2010 and is investing US$1 billion in related infrastructure in a bid to boost its tourism industry. China’s Shanghai Urban Construction group has been contracted to build four 40,000-capacity stadiums in Benguela, Lubango, Cabinda and Luanda at a cost of US$600 million. The remaining US$400 million will be used to upgrade infrastructure such as airports and the construction of some 30 new hotels. This is not the first prestige event China has been a part of in Angola. In 2007, Angola hosted the African basketball championships Afro-basket. China National Electric Import and Export Company (CEIEC) was contracted to build four basketball stadia in Cabinda, Benguela, Huila and Huambo provinces, financed by the Chinese credit line.
For the Angolan government, such projects are important politically, both externally in asserting the regional influence the country feels is its due as well internally in galvanising the nation through the universal love of sport. Amid concerns that the Chinese credit line is being used to fund prestige projects, it is expected that the event will boost the economy through the tourism it will encourage. Brazilian construction companies Sequência and OAS plan to build four hotels as the demand for accommodation in the run-up to the international sporting event increases.
* Lucy Corkin is a PhD candidate at the School of Oriental and African Studies (SOAS) and resident Macau Forum analyst for Fahamu’s China in Africa programme.
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