Comment

Business ties between China and Brazil have prospered considerably after China joined the World Trade Organization (WTO) in 2001. Former Brazilian president Luiz Inacio Lula da Silva had during his official visit to China in 2009 said that China was Brazil's most important and biggest business partner.

During the last 10 years bilateral trade increased more than 18 times, reaching $36.9 billion in 2009 and showed a 56 percent yearly growth in 2010 to $56.3 billion. Brazil basically exports commodities to China, such as iron ore, petroleum and soybean, while China mostly exports manufactured goods to Brazil, such as machines, electric equipment and materials.

Around 55 Brazilian companies have started to invest in China with more than 90 percent of them through representative offices and the rest through joint ventures and wholly foreign-owned enterprises. Fifty Chinese companies have established their offices and factories in Brazil, mainly through partial mergers and acquisitions (M&As, 46 percent), greenfield investment (23 percent), full M&As (21 percent) and joint venture (10 percent).

The main challenge for Brazilian companies in China is to develop tolerance for timing and Chinese business culture. Brazilian firms must be flexible in changing corporate philosophy and business mindset, and develop products and services for the domestic market rather than exports.

"Think globally, act locally" has become a popular adage among multinational corporations. Brazilian entrepreneurs need to learn the lesson of "building the relationship first", a key concept for success in China, besides making more efforts on social gatherings with Chinese peers.

For Chinese companies investing in Brazil, the main challenge is the legal environment, especially the complex tax system and the procedures to win a bid. Companies also need to be aware about their corporate social responsibility, besides having a clear business schedule for getting business license and project approvals from government departments.

Chinese entrepreneurs face some difficulties in Brazil to purchase land in rural areas, acquire rights to explore mines and also cope with all the laws and regulations established by the Brazilian government, such as the new tax regime, which was increased to 30 percent on automobiles if 65 percent of the automobile are not produced within Brazil or Mercosul member nations, among other conditions.

In this sense, Brazil and China still need to have better mutual understanding and it may be improved through COSBAN the High Level Committee on Sino-Brazilian Coordination and Cooperation, established in 2006, under supervision of both vice-presidents, to develop the relationship between both countries in 11 segments, which among them are trade and economic cooperation, in accordance with the Joint Action Plan (2010-2014).

Economic tension comes naturally as a result of the increase in trade between both countries. However, developing bilateral channels such as COSBAN may diminish it, improving communication and may be an alternative to reduce trade protection against each other - as for instance, applying for anti-dumping, safeguards and other compensatory measures - because these are only temporary remedies for the inevitable increase of bilateral trade between these emerging economies, especially in rich opportunities for mutual benefitsl.

From "Brazil-China: new opportunities for strategic partnership" of Lula's mandate to "Brazil-China: beyond complementarity. Partnerships for mutual benefits" of Rouseff's mandate, the Brazilian government is also making its best efforts to have a clear proactive response and develop a long-term strategic relationship with China, not only seeking cooperation, but also partnership and defining policies for the best development of bilateral relationship.

Definitely, since China entered the WTO, numerous business opportunities have been created for both countries. Nonetheless, mutual understanding and knowledge exchange are still essential to have harmonic bilateral relationships and develop a better business environment.

The author is the chief representative of the Beijing Office of Duarte Garcia, Caselli Guimares e Terra Advogados. The opinions do not necessarily reflect those of China Daily.