--Mozambique is African country with most Brazilian investments
--Vale planning to spend $8.2 billion in Mozambique
--Vale, Petrobras, Eletrobras eyeing new Africa projects
By Diana Kinch
Economic and political ties with African countries have become "strategic" for Brazil, Fernando Pimentel, the country's development, trade and industry minister said Thursday.
Former President Luiz Inacio Lula da Silva recognized the importance of forging closer links with Africa, and current President Dilma Rousseff has visited Africa to cement ties, Pimentel said during a seminar on investment opportunities in Africa in Rio de Janeiro.
In Africa, Mozambique currently attracts the most Brazilian investment, with mining company Vale SA (VALE, VALE5.BR) planning to spend about $8.2 billion in coal mining and rail facilities, while Ghana is another important investment destination for Brazilian capital, Pimentel said.
Brazil's Foreign Trade Board Camex recently granted $2 billion in capital for Angola, he said. The funds form part of a credit line set up in 2011 by Brazil to promote African agriculture via farmers' purchases of Brazilian agricultural equipment, and may also be used to support oil-field development in Africa.
"The impulse Lula gave his government to reach out to Africa continues," Pimentel said at the event, organized by Brazil's state-controlled development bank BNDES. BNDES President Luciano Coutinho said the bank will "accelerate" financing availability for Brazilian projects in Africa. The African economies are seen growing an average of 5% to 5.5% a year over the next few years, offering opportunities, according to Coutinho.
Lula, who spoke at the event, noted that since the Arab Spring, no fewer than 25 state elections have occurred in African countries, a sign of growing democracy in the region. Bilateral trade between African countries and Brazil jumped to $27.6 billion in 2011 from $4.3 billion in 2002, and Brazil is now in a position to increase its investments in African nations because Brazil is growing and is richer because it has redistributed its wealth.
However, Brazil is also indebted to Africa, which provided Brazil's colonialists with slaves in the past, Lula continued.
"It's time for Brazil to pay off its enormous debt with Africa, African blood was spilled in the plantations and the 'quilombos'" Lula said, referring to runaway slave communities. "Brazil is the country with the biggest number of Afro-descendents."
Africa wishes to consolidate its democracy and achieve food and energy self-sufficiency, and Brazil can help in these areas through investments in logistics projects and training, the former president said.
Vale Chief Executive Murilo Ferreira said Vale has so far invested $7.7 billion in nine African countries and wishes to invest more in the production of copper, nickel and iron ore on that mineral-rich continent, where it's "really enthusiastic" about opportunities. Locals must be employed in projects in Africa, he said, noting that in Vale's railroad venture there, the company is "working with local businesspeople so as to be able to speak the local language."
Ferreira acknowledged, however, on the sidelines of the event, that Vale's major Simandou iron ore project in Guinea--designed to produce 50 million metric tons a year of high-grade ore--is at a standstill following the west African nation's introduction last year of a new law that steeply raises taxes on mineral production. Vale may make a decision on the project following the upcoming elections in Guinea, he said.
However, Vale has a head start on mining investments in Africa, even on potential Chinese investors, according to Ferreira. "We don't see anyone in front of our company in Africa," he said.
Another Brazilian company eyeing large investments in Africa is Centrais Eletricas Brasileiras SA (ELET6.BR), or Eletrobras, which is studying building a $6 billion hydroelectric power plant in Mozambique, possibly with BNDES financing.
For Maria das Gracas Foster, chief executive of Brazilian state-controlled oil and gas producer Petroleo Brasileiro SA (PBR. PETR4.BR), or Petrobras, Brazil's interest in Africa "isn't only because of the friendly links. Africa's become an exceptional market," she said. Africa's geological similarities to Brazil make oil exploration of interest, according to Foster.
Petrobras currently produces 2,000 barrels a day of oil in Angola and 58,000 barrels a day in Nigeria. It has a biofuels project in Mozambique and oil exploration projects in Benin and Gabon.
Brazil's BTG Pactual bank on Thursday launched a $1 billion Africa-focused private equity fund, the largest of its type worldwide, aimed at attracting Brazilians to invest in Africa, and harnessing some of the "enormous affinity that Brazil has with Africa," the bank's chief executive Andre Esteves said at the event.
Africa's economic growth, relatively low inflation--averaging 8% a year over the past 10 years--and increasing urbanization and industrialization are all attractions to the investor, according to Esteves. Africa may offer "some good macroeconomic surprises," he said.
-By Diana Kinch, Dow Jones Newswires; 55 21 7564 4495; [email protected]
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