China to Play Bigger Role in Domestic Growth

China is not only Brazil’s largest trading partner, but it now represents the third-largest source of FDI flows into the country, says Persio Arida, a managing partner at BTG Pactual’s asset management group. A former Brazilian central bank governor and ex-president of the country’s national development bank BNDES, Arida emphasized the strength of LatAm’s domestic demand as a driver of the region’s economy, a fact that Chinese investors are increasingly heeding. “People see [LatAm] as an export oriented economy, but that is not true,” Arida adds. “With the exception of Mexico, domestic demand is growing faster than GDP. It is a process China will go through, but it is already happening [in LatAm]. This does not mean commodities are not important, but LatAm is less affected by trade than most people imagine.” This comes as Chinese companies start to look beyond commodities and increasingly focus on manufacturing investments as well. For instance, car company Chery Motors, air conditioning manufacturer Gree, and motorbike manufacturer Zongshen have all set up shop in Brazil. “Our strategy was to purchase a local Brazilian brand called Kasinski, and we have tried to make Brazil our base for South America,” says Ying Zuo, senior vice president, overseas business, at Zongshen Industrial Group. The region’s low savings rate will mean that it will continue to depend on foreign capital from high-savings countries such as China. “LatAm will need foreign savings and must be open and friendly to foreign capital,” adds Arida. Arida and Ying spoke last week at LatinFinance’s 3rd Latin America China Investor Forum in Beijing.