Roughly the size of Germany but with a population of just 2.7 million, the Brazilian state of Mato Grosso do Sul has long attracted visitors because of its unspoiled natural beauty. After going through a rough patch, its agriculture-based economy is making a comeback thanks to the adoption of high-yield, low-impact technology and growing demand from countries like China, which is also a major investor in the region. State official Eduardo Riedel discusses the attractive opportunities opening up for investment in high-tech agriculture, infrastructure, solar energy and tourism

What is the connection between the economies of Brazil and China?

I think it’s a perfect marriage from an economic standpoint. The population of China is almost 1.5 billion, 750 million of whom do not live in cities but will, at least in part, migrate to increase their income. These people will demand a lot of food. And it’s not just China; this same process is only just starting in India. The two economies are very complementary: our agricultural sector is highly efficient, as is the production of inputs and the industrialization of our production chains. This is the kind of thing that China demands, and we have grown a lot because of that demand. We have competently incorporated the proper technology, and developed a winning economic model with a low environmental impact. It’s important to underscore this point because many people link the agricultural sector to environmental degradation, which simply isn’t true. As for infrastructure, China is a major player if not the most important one. I have seen an interest by Chinese entrepreneurs, government officials and other leaders, but there is the practical matter of being able to transpose our natural barriers.

China has been doing that quite successfully in Africa, where they take their know-how and workers. Why can this not happen in Brazil?

Here we have strong environmental, labor and tax laws. The first problem that the BBCA Group, a high-tech Chinese company, encountered was when it tried to bring 50 workers from China, but couldn’t. I don’t mean that as criticism, it’s just an analysis of the facts. Based on the little I know about the Chinese people, I know they are very patient and tolerant, and I think they are learning to deal with Brazil. At the same time we ourselves are understanding their own culture and customs. I think this is all part of the process of bringing two very different cultures together. The problem is that our business environment is not that competitive for investments. This is part of what we have to do to make the business climate more friendly.

Where can Chinese investments be most successful?

I think there’s great potential in companies that process agricultural inputs. We could speak of processing ethanol from corn, and there is also the BBCA’s investment in a processing line of corn-to-lactic acid-to-polylactic acid, a bioplastic made from corn. Eventually, I believe that there could also be Chinese capital in the meat industry, namely beef and pork. I get phone calls every week from a friend who tells me: “Look, I am in China, and I just talked to a business owner here who said they want a few thousand tons of chicken.” This sort of thing happens all the time, and it proves that there is a latent demand. The channels are there and they’re open. It doesn’t necessarily need to go through large exporters.

Diplomats have been promoting Brazilian agribusiness in China, and their feedback is that people still know very little about Brazil. What do you think has been failing in the communication with China?

I think we should have a more aggressive stance, both in public and in private. I think some companies have managed to sell their products, but they didn’t go out there to sell them. It’s been a very passive process: someone just knocked on their door. We haven’t yet established a more structured sales strategy. I think our relationship with China is relatively new, but it’s been advancing. For example, now we have Brazilian law firms in China, and Chinese offices here. This sparks the emergence of a world that we were completely unaware of just 15 years ago.  

The weight that China has on the economy of Mato Grosso do Sul is such that some people are worried. It is often said that if one partner sneezes, the smaller one gets the cold. Do you have any concerns about extending this partnership with China even further?

No. I used to have that concern, but Mato Grosso do Sul has diversified its economy, and it did so partly because of Chinese demand. For instance, the paper and cellulose production chain has developed tremendously in Três Lagoas, home to two of the largest pulp mills in the world and now the capital of pulp in Brazil. And a third mill is on the way. Where does all that cellulose go to? A large percentage goes to China. So there is a level of dependency, but without their demand we wouldn’t have had the investments in the first place. Chinese demand allowed our development and growth, and we were competitive and capable enough to structure that. If something ever happens with China, our management capacity will have to handle it, but I don’t think of that as a determining factor. If China sneezes, the whole world will get a cold.

A new generation of young farmers is using new technologies especially created for agriculture. How do you think innovation can help the development of Mato Grosso do Sul?

Technology will have a phenomenal impact on the agricultural sector, like it will in every other sector. In fact it already does. All these ideas – like the internet of things, artificial intelligence, automation, and so on – are being applied to the agricultural sector to a greater or lesser extent. Farming systems in Brazil are highly heterogeneous in size, input, modernization and income. Although many producers don’t appear to have enough income to absorb disruptive technologies, nevertheless the change is happening. We see examples of that all the time in the different chains of production: cattle, milk, chicken, pork, agriculture. Until 10 years ago, there was no electricity at the farms, but today, modern farms have the most modern, up-to-date technologies that are bringing farmers out of a world of doubt: by analysing data gathered from sensors, satellites, drones, apps and localized weather forecasts, farmers can track crop health, make planting decisions or target fertilizer use to improve efficiency and lower their impact on the environment. Farmers are connected today, and this will make their lives much easier. If you visit a modern farm here in Mato Grosso do Sul, you will see that they are connected.

In the next few years, Brazil will have a growing demand for energy. How will you deal with that in Mato Grosso do Sul?

I think that solar energy is one of the possible solutions for energy development. It is already a reality in our state, where the conditions for solar energy are great. It is also very interesting from a return-on-investment standpoint. I’m sure that there will be many small solar plants in farms in Mato Grosso do Sul to feed their energy consumption. It’s mostly small units that produce sufficient energy for that specific business.

How would you differentiate your state from the others?

Our state has abundant natural resources and very modern and sustainable production systems. From a technological standpoint, we’re able to produce and maintain these natural resources. We have three different biomes: Pantanal, Cerrado and the Atlantic Forest, and another industry that could represent a great opportunity for China is tourism. Campo Grande is the gateway to the Pantanal region and Bonito. There’s potential in agritourism: traveling around the state visiting the farms and learning about our culture and lifestyle. Many people want to know about this, and a few farms already specialize in it.

Is it a bit like the different cultures one can find in the Bi-Oceanic Corridor?

Yes. “67” is the area code for Mato Grosso do Sul, and we will launch the Route 67, which is the bi-oceanic highway, starting in Campo Grande. From there you drive to Porto Murtinho, cross the bridge into Paraguay, cross northern Paraguay, cross Argentina, and go up the Andes. This is a wonderful route that takes you through different cultures, music and food in something like two days.

What do you think the future holds for your state ?

I’m very optimistic. We went through the most important economic crisis in Brazilian history during Governor Reinaldo’s first mandate, and we managed to pull through. Agribusiness is the great driver of the Brazilian economy today, and we excel at that. When you look at the numbers, São Paulo and Rio de Janeiro lost proportionately much more than we did. But we did lose and our economy suffered. Interest rates were low, we lacked investments, consumption was down. Perhaps one of our greatest problems we have here is that the population of the state is small, so our internal consumption is low. That means we need to attract more people here, as we continue to export products, raw materials, tourism and services.

If people want to come here to work, they will be welcome?

Yes. They will be very welcome here. We’re 2.7 million people living in the state, a little more than 1% of the Brazilian population. The state of São Paulo by comparison has 40 million people. Our population is too low, so our level of consumption is low as well. However, our Human Development Index is good, and we enjoy very good quality of life, clean air, good working conditions and services, and more. We have done our homework, and the economy is coming back to life now.

What kinds of projects are you seeking investment for?

We have many projects in the pipeline with private investors that will help the state develop even further. We also have an important package of infrastructure development, and this is where our strategy of attracting private capital comes in. Our sanitation company will get started next year through a Public-Private-Partnership (PPP) agreement representing R$1 billion in investments. None of our highways are toll roads yet, but this will soon change; our first highway concession, B3, will be announced in December at the São Paulo Stock Exchange. This is an opportunity for investors: it is a 30-year concession for a 220km stretch of a highway that could be of interest to the Chinese, or Americans, or Europeans, or a combination of them, either with the right partner here in Brazil or by themselves. And there are many other opportunities as well. For example, ports are in the hands of the private sector because we believe that the State doesn’t have to create and operate them. The goal of our administration is to create the conditions for the private sector to  flourish.

Do you have any specific message you would like to send out to China?

Get to know Mato Grosso do Sul better. Come and visit us. They are and will always be welcome here, and we can develop many opportunities together.