Japan out to regain influence over Brazil amid greater China exposure

Prime Minister Abe and top corporate officials visit the country to bolster economic relations

PUBLISHED : Tuesday, 05 August, 2014, 5:13am
UPDATED : Tuesday, 05 August, 2014, 5:13am

In the 1950s, Japan helped Brazil establish industries such as steelmaking and initiated key purchases of Brazilian iron ore. Now the Asian nation is seeking to regain influence in Latin America's largest economy, where China is the No 1 trading partner.

Japan has signed deals from energy to food and health care during Prime Minister Shinzo Abe's visit to the country, the first by a Japanese leader in a decade. Abe wants to strengthen ties with Brazil, where about 1.6 million people of Japanese descent live, as he urges his country's companies to seek more business outside their domestic market.

Top representatives from Toyota Motor, Nippon Steel & Sumitomo Metal Corp and Sumitomo Mitsui Financial Group Inc were among the business people accompanying Abe in Brasilia and Sao Paulo, the last destination of a nine-day tour through Latin American and the Caribbean. Brazil is important for Japan because it has industries such as infrastructure and is a safe jurisdiction, said Yutaka Kase, the chairman of commodity supplier Sojitz Corp.

"There are the conditions" to invest, he said in Sao Paulo, where he was part of the business delegation travelling with Abe. "Of course there are so many things to solve, but this is a country with more potential."

Sojitz, which in 2011 teamed up with Japanese and South Korean steelmakers to buy a 15 per cent stake in niobium producer Cia Brasileira de Metalurgia & Mineracao for US$1.95 billion, is now pursuing opportunities in agriculture and logistics in Brazil, Kase said.

Japan has in recent years lost ground in Brazil compared with European and South Korean companies in industries such as carmaking and electronics, said Luiz Fernando Furlan, Brazil's former trade minister and board member of food processor BRF SA. The four Japanese automakers operating in Brazil combined produce fewer cars than Fiat SpA, Volkswagen AG or General Motors, he said.

While trade between Brazil and Japan was double that of the Latin American nation and China in 2000, it was less than a fifth of the record US$83 billion that the latter pair posted last year. Purchases of iron ore and soybeans helped China become Brazil's biggest export destination.

Brazil can still profit from the "enormous" capacity of the Japanese companies to transfer technology, said Wilson Brumer, the former chief executive officer of steelmaker Usinas Siderurgicas de Minas Gerais SA.

"Japan and China are two partners where Brazil can have different approaches," Brumer said. "There is still a big space to be explored between Brazil and Japan, mainly among medium-size companies."