Brazil announces major Africa investment plan
By Ann Brown
The Network Journal
Brazil pledged major investments and a transfer of technology to Africa last month in order to repay a “solidarity debt” they have with Africa.According to former Luiz Inacio Lula da Silva, Brazil, which is the world’s sixth-largest economy, “owes its current strength to the more than 300 years of slavery during which we exploited the sweat and blood of millions of Africans.”
To this end, leaders of top state and private Brazilian companies with interests in Africa, such as oil giant Petrobras, mining conglomerate Vale and construction firm Odebrecht, pledged to increase investment in Africa during a Brazilian Development Bank (BNDES) seminar. Brazil’s leading investment bank Banco BTG Pactual also announced a $1 billion Africa investment fund, the biggest in the world, with capital collected in the country.
”It’s no secret that so called ‘South-South’ investment has been booming. Especially since the start of the economic crisis, investment flows out of the developed world have slowed or stagnated. At the same time, growth in places like Latin America, Africa and Asia has been robust, meaning that ambitious multinational investors have increasingly set their sights on these emerging markets — a full 60 percent of foreign investment from the BRICs (Brazil, Russia, India and China) is now going to other developing countries,” says Gabriel Sanchez Zinny, managing director at Blue Star Strategies, Washington, D.C., which leverages capital and project financing from international financial institutions and provides policy advice and counsel to foreign governments and political parties.
“Brazil is making a strategic decision to help its private sector accelerate this process.”According to the BNDES, there are great investment opportunities in Africa, particularly in the areas of agriculture and energy, transport, technology, farm equipment, telecommunications, the petrochemical and auto sectors as well as banking and pharmaceuticals.”
The Brazilian government and Brazilian multinationals are making a strategic investment in a potentially very lucrative market. Africa has been changing, and while it still offers a wealth of natural resources, the continent has also developed a significant middle class whose appetite for consumer goods will only increase,” says Zinny. “However, there remains an urgent need for both physical infrastructure — railways, ports, cell towers — and financial architecture that can finance further growth. Providing funds and financing to lay these foundations could pay big dividends if Africa’s growth reaches 6 percent, as it’s expected to.”
In recent years, Brazil has begun to invest aggressively in Africa. In fact, Vale, the world’s top iron producer, boasts $7.7 billion worth of investments in nine African countries. And Brazilian exports to Africa boosted to $12.2 billion last year, from $2.4 billion in 2002. Also, according to government statistics, trade with Africa increased from $4.3 billion in 2000 to $27.6 billion in 2011.”This could be a true win-win situation from Africa’s perspective,” notes Zinny. “Its growth over the past decade means that investors from across the developing world — especially China and Brazil — will intensify their competition for access to Africa’s consumer market, raising the continent’s standard of living and hopefully further boosting growth. Brazil’s willingness to shoulder some of the risk in order to push further into the continent shows the confidence they have and the increasingly important role that South-South investment flows are playing in driving development.”
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