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 Corp., Nippon Steel & Sumitomo Metal Corp. and Sumitomo Mitsui Financial Group Inc. were among the businesspeople accompanying Abe in Brasilia and Sao Paulo, the last destinations of a nine-day tour through Latin America 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 Tokyo-based commodity supplier Sojitz Corp.
“There are the conditions” to invest, he said during an interview in Sao Paulo, where he was part of the business delegation traveling 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 percent stake in niobium producer Cia. Brasileira de Metalurgia & Mineracao for $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 such industries 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 produce fewer cars combined than Fiat SpA, Volkswagen AG or General Motors Co., he said.
“Japan not only lost time in relation to China but also others,” he said. “Korean and Chinese companies are leading the electronics markets in the region.”
Abe’s first visit to Brazil coincides with a slowdown in the economy and a deterioration in investor confidence. Economists surveyed by Bloomberg forecasted the South American nation’s gross domestic product will grow 1.3 percent this year after an expansion of 2.5 percent in 2013. Japan’s economy is expected to grow 1.5 percent.
Brazilian costs including energy are too high, and the country needs to accomplish urgent tax reform to regain competitiveness amid slower growth, according to Toyota’s Chairman Takeshi Uchiyamada.
“Although I just said we believe Brazil is a market that should grow, it would be difficult for our business to keep investing if the economy stays stagnant, so we will be closely watching its growth,” he said in an interview in Sao Paulo.
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 $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. Usiminas, as the Belo Horizonte-based company is known, was established in 1958 after Brazil agreed to create a joint venture with Japan.
“Japan and China are two partners where Brazil can have different approaches,” Brumer said in an interview. “There is still a big space to be explored between Brazil and Japan, mainly among medium-size companies.”