Published: February 8 2010 19:13 | Last updated: February 8 2010 19:13
Brazils mining company, Vale, is preparing to start operations in Mozambique as South Americas largest economy steps up its involvement in the scramble for Africas resources.
The remote town of Tete in central Mozambique sits on top of some of the worlds largest reserves of coal. With migrant workers and contractors flooding in to take advantage of the opportunities created by this multibillion-dollar Brazilian investment, Tete has become a boomtown, its infrastructure creaking under the constant flow of business visitors.
Brazil-Africa trade thumb
Every time I go, it gets more difficult, says Antonio Coutinho, a South African banker who is helping to finance an investment that could transform Mozambiques aid-dependent economy.
This is a small town that is trying to handle massive expansion. It must have been like this in Johannesburg during the gold rush. EDITORS CHOICE FT series: Building Brics - Jan-20 In depth: Africa and China - Sep-30 China seeks Africa joint ventures - Nov-09
Vales involvement provides the most striking evidence of Brazils growing interest in Africa. Chinese and Indian commercial ties with the continent are more developed and have attracted greater attention.
But Brazils arrival in Africa is part of the same pattern that has seen the continents traditional partners in the west compete against a range of emerging market players for resources and influence.
Building Brics
In the race for African passport stamps, Luiz Incio Lula da Silva, president of Brazil has nosed ahead of Hu Jintao, president of China, having visited 19 African countries in eight trips since coming to power in 2003, writes Jack Farchy in London .
But in economic terms Africas relationship with China remains its most significant among the emerging Bric nations (Brazil, Russia, India and China).
The value of trade between Africa and China jumped to $107bn in 2008, from $4.1bn in 1992, making it the continents second-largest trade partner after the US, Chinese companies have been investing aggressively in African natural resources, especially oil.
As a bloc, Bric trade with Africa has increased as a proportion of all the continents trade from 4.6 per cent in 1993 to more than 19 per cent in 2008. Economists at Standard Bank estimate that by 2030 almost 50 per cent of Africas trade will be with the Brics.
Luiz Incio Lula da Silva, the Brazilian president who took office in 2003, visited Africa six times in his first first five years in power.
Propelled by Brazils own demand for raw materials, trade has grown rapidly, with imports from Africa rising from $3bn in 2000 to $18.5bn in 2008. Nigeria and Algeria as well as Angola are key sources of imported oil. Brazils competitive food producers have found markets in countries such as Egypt, helping to boost So Paulos exports to Africa eightfold, from $1bn in 2000 to $8bn in 2008.
In Mozambique, Vale is working with Odebrecht, a Brazilian construction company, to develop the coal reserves, build a power station and construct rail and port infrastructure to bring the black rock to export markets.
At Moatize, the location for the mine where digging will begin at the end of this year, Vale estimates its initial investment will amount to $1.3bn (948m, 831m). Insiders say the total could eventually amount to several times that.
Vale and Odebrecht are not the only Brazilian companies involved in Mozambique. Two months ago, CSN, a Brazilian steelmaker, bought 16.3 per cent of Riversdale, an Australian mining company, in which Indias Tata Steel also has a substantial stake. This company is also planning a multi-billion dollar investment in the Tete area.
Odebrecht has become the largest private sector employer in Angola, with activities including food and ethanol production, offices, factories and supermarkets. Its executives enjoy direct access to Jos Eduardo dos Santos, president of Angola. Petrobras, Brazils state-controlled oil company, is also active in Angola, deploying its expertise in deep water drilling.
Cultural and linguistic connections have helped make Brazils development model especially attractive in Angola and Mozambique. Historic links with Lusophone Africa go back centuries.
Some 1.4m of the 3m black African slaves sent to Brazil between 1700 and 1850 came from Angola, and in the 1820s settlers in Angola and Mozambique and other Portuguese colonies applied to join the newly independent Brazil.
Brazils more recent success in reducing poverty through social welfare payments that are conditional on school attendance or visits to clinics has attracted interest in both countries.
They identify with us because we experienced similar problems to them in the past and have successfully adapted technology to local circumstances, says a Brazilian diplomat in Mozambiques capital, Maputo. They see Brazil as a model to be imitated.
Although Brazilian companies have invested a relatively modest $10bn or so since 2003, that total will probably rise sharply. The government is driving hard to persuade Brazilian companies to expand in Africa, especially since Mr Lula da Silva took office in 2003.
Brazils network of embassies on the continent has been expanded and dozens of business leaders have accompanied Mr Lula da Silva on his trips. The presidents stock in Africa is high, so much so that in July last year the African Union made him a guest of honour at its meeting in Libya.
Analysts at Standard Bank in Johannesburg argue there is a neat fit between Brazils resources and food industry expertise and the opportunities offered by Angola. And they argue that climate change could increase the value of Brazils African investments.
Because warmer weather could reduce the amount of cultivable land at home, food and ethanol producers could become more interested in expanding into Africa, especially countries such as Angola where land is plentiful.
Brazil is positioning itself to be Africas prime partner in its vital quest for greater energy and food security, says Jeremy Stevens, joint author of a recent research report.
Certainly for Brazils multinationals, the attractions are clear.
The thing about Africa is that sooner or later it will become a reality, said Roger Agnelli, president and chief executive of Vale.
Africa is the future of the worlds natural resources, along with South America.
Additional reporting by Jonathan Wheatley in So Paulo
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