The State of S. Paulo - 02/08/2011
With the survival of their companies increasingly threatened by unfair, and often predatory, competition from similars coming from China, Brazilian businessmen are looking for alliances with the Chinese "enemy". There is an increase in the number of managers of national companies that, in order to reduce costs and gain conditions to face the competition with those imported from Asia, are supplying themselves with Chinese machines and supplies, cheaper than the similar ones produced here. And they do so with the support, and even the encouragement, of business entities such as the National Confederation of Industry (CNI), who have harshly criticized China's unfair commercial practices and the ineffectiveness of the measures eventually taken by the Brazilian government to protect domestic production .
In an interview with the newspaper Valor, the president of CNI, Robson Andrade, said that Brazil needs to speed up measures to strengthen industrial production, such as increasing the severity of the penalties for dumping and irregular imports, especially from China. But the CNI is among the main business entities that have been organizing caravans of managers of Brazilian companies of various sizes to shop in China, as the State (31/7) showed, in a report by Raquel Landim.
There is no contradiction between what the CNI president says and what the entity does. In both cases, the aim is to ensure that Brazilian industry is able to face increasingly fierce foreign competition and, at the moment, worsened by the devaluation of the dollar, which reduces the price in reais of imported products. In both cases, a serious warning to the government is implicit: under the current conditions, for many industries it is better to import than to produce domestically.
Some figures show the pace at which Brazilians' interest in Chinese inputs, components and machines grows to lower operating costs. From 2009 to 2010, the number of visas for Brazilians going to China to do business increased from 7.467 to 11.724, an increase of 57% (data refer to the January-October period of each year). Many Brazilian businessmen, however, travel to China for business, but on tourist visas.
Another data that suggests an increase in direct purchases made by Brazilian businessmen from Chinese suppliers is the number of companies that apply for registration as importers. This year, the country should gain 5 new importers, a record increase. In addition to commercial companies, industrial companies also start importing to replace machines or domestic supplies and even buy final products, to resell in the country, as a way to reduce costs and increase their profit margin, noted the vice president of the Trade Association Exterior of Brazil, José Augusto de Castro.
In some segments of the industry, the numbers are worrying. Of the 72 manufacturers of industrial valves affiliated with the Brazilian Machinery Industry Association, 80% declared that 100% of what they sell is imported products. Six years ago, the rate was 40%. There is no way to produce domestically in conditions to compete with imported.
The increase in imports by industrial companies certainly results in job cuts in Brazil. The pernicious effects of these imports on the industry's labor market, however, are not yet clear. The growth of industrial production, although at a slower pace than last year, continues to open jobs, which helps to disguise the problem.
But the growing interest of Brazilian industrialists in Chinese products makes it clear that, if the country does not face the issue of the loss of competitiveness of the economy, the economic and social losses will be much greater and more lasting. The exchange rate is responsible for this loss, but it is a cyclical problem. There are others, structural, that need to be taken seriously by the government and society, such as the high cost of taxes, labor and financing for investments.
