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Reinaldo Azambuja

Governor of Mato Grosso do Sul

In 2015, Reinaldo Azambuja became Governor of the Brazilian state of Mato Grosso do Sul. One of Brazil’s most naturally blessed regions, the state is home to a vast agricultural industry, booming tourism and a growing renewable energy sector that is already attracting Chinese investments. Now, Azambuja is also focussing collective attentions on the infrastructure demands, which can help sharpen the region’s competitive edge and bring even greater productivity and profits

There is huge expectation and anticipation regarding Brazil’s future economic relations with China, what is your perspective on that developing landscape?

Trade between China and Brazil has been getting stronger over the years. Brazil has increased exports to the country, especially agricultural products such as grain, cellulose, processed meats, etc, but we have also been importing a great deal. The Minister of Agriculture, Tereza Cristina, went to China to kick-start an important dialogue surrounding analysis and certification of several meat production plants here in Brazil. That’s in large part thanks to the work of our diplomatic service, so President Bolsonaro’s forthcoming trip there is going to be crucial to sealing the partnership. China has a very large population, their eating habits have expanded greatly, and Brazil can help supply that huge demand. China can also help us. It is a highly industrialised country, and Brazil is still lacking in infrastructure, especially the areas of railways, ports and sanitation. Diplomacy is fundamental to further improve the existing partnerships, so our President’s trip will open the processes up even further. Brazil is very solid in terms of the quality of its products and we have a great level of sanitary control for both animal and plant products. We have a lot to offer.

We have a few Chinese companies here already, especially in the transportation sector

Brazil has always been criticised for not having a long-term plan for its future with China, a country that has very strategic, long-term visions. What are you expecting from Chinese investors here in Mato Grosso do Sul?

We have a few Chinese companies here already, especially in the transportation sector. BBCA has an ongoing project here at Mato Grosso do Sul, we received the ambassador of China and then we were with him in Paraná with Governor Ratinho discussing the viability of the Bi-Oceanic Railway. We presented the route that connects Mato Grosso do Sul, Paraguay, Argentina and China and would integrate the Pacific and the Atlantic, reducing costs by 12%. The cost of transportation can be 32% higher or lower depending on where you are loading on. We also discussed the Trans-American Railway, from the Port of Santos, through São Paulo, Mato Grosso do Sul, Corumbá, then Bolivia, Santa Cruz de la Sierra, Cochabamba, then down to the ports of Chile, where there are already railways in operation.

That railway integration increases the competitiveness of Brazilian exports, especially those from Mato Grosso do Sul, and improves conditions for importing those products we get from China and other Asian countries. When you can load and offload ships in the Pacific, you cut 17 days out of the trip. There are two ways of shortening that distance. Campo Grande to Antofagasta is 1,800km and an agreement to develop that corridor is under discussion between the four countries to simplify customs clearance, so that products can move around more fluidly. There’s still the whole issue of safety to consider, because trains will have to cross four different countries. There’s a technical working group that has been focusing on the two bi-oceanic corridors, the railway and the highway. I’m sure that, in the mid-term, this will be the preferred route for products. All the infrastructure work is being carried out to connect the border between Mato Grosso do Sul and Paraguay and Salta, on the frontier with Argentina. The Minister of Infrastructure, Tarcísio Gomes de Freitas, told us that this is the most feasible rail corridor. There’s already a fully developed stretch between Santos and Cochabamba. President Evo Morales will inaugurate the final stretch soon, so the section between Santos and Santa Cruz de la Sierra is ready, but part of it needs to be renovated, especially here in the west of Brazil at Mato Grosso do Sul.

From Cochabamba, there are already rail tracks to access the ports in Chile. Some of them are precarious, but it is clearly easier to invest in something that already exists than having to cross the Amazon or create something entirely new. If they connect La Paz to Cochabamba to Ilo, they’ll go through the lowest point in the Andes. It’s viable, the bridge over the Parana River – at the border between Paraguay and Mato Grosso do Sul – already exists because Itaipu took that on. So we have the resources, the agreement and the planning almost done. What we still need is to go through the bidding process and do the work.

Mato Grosso do Sul is a young, culturally diverse state

What will be the impact of this specific infrastructure project for the economy as a whole?

Brazilian production is vast and competitive. The agricultural and agro-industrial sectors are very well organised. Brazil loses its competitive edge through poor access to the ports to reach consumers in Asia, Europe, the US, etc. The corridor makes production more profitable. If producers can reduce shipping costs, they’ll be able to retain that difference. This is what turns the economic wheel. It’s about being competitive. Brazilian exports will become more competitive when its ports, airports and especially railways improve. For many years, Brazil has invested in its highways, but that proved very expensive. If we change to modal transportation, modernise the ports, increase loading speeds and reduce tariffs, we’ll increase the competitiveness of our exports.

For a rural producer in the city of Maracaju that normally exports via the Port of Santos or the Port of Paranagua, both in the Atlantic, a new option would be to go via Porto Murtinho on the Paraguai river to Nueva Palmira, in Uruguay. Soy and corn are more competitive when shipped from there because we are suddenly just 300km from the port, not 1,000km. This is why we want to attract Chinese companies to develop these railways, and China has a lot of technology in that area. Brazil has a lot to gain from these agreements.

 What are the big gains that Brazil’s agricultural sector could make from innovation and technology?

The productivity of our agriculture and cattle ranching has already increased greatly. Today, we produce more soybeans and more corn per hectare, more cellulose per cubic metre of wood. We produce more meat in less time. We used to slaughter cattle when they reached 36 months. Today, it’s between 12 to 16 months. This is all down to genetic improvements and technology. For agribusiness, technology can really help increase productivity.

These days we often don’t have to expand the area we plant on, we produce more using the same amount of space. Asian countries could still help us with water use. We have a lot, but we need to make it go further and deploy more efficient systems of irrigation. Today, there is the Asian market and the possibility of an agreement between Mercosul and the European Union. These treaties open markets for our primary or secondary products, but also for us to import technology.

Today, Brazil is safe for investors. Every investor needs legal security for their money and Mato Grosso do Sul has a legal framework for regulating incentives

In terms of energy, China is already the second-largest electricity producer in Brazil via various acquisitions, but what are your thoughts on promoting green-field sites, solar and wind?

We have seen a shift towards that market recently and we already have two hydropower plants on our border with São Paulo that were bought by Chinese companies: Jupiá and Ilha Solteira. In the long-term, I think Brazil will change its energy profile. Wind energy will certainly see an expansion because of climate variables, but it isn’t the reality of the Central-West region, where solar dominates. Mato Grosso do Sul has great solar radiation and we have tax exemptions on the importation of solar panels to make it even more competitive and attractive to the Chinese. Since the recession, the demand for electricity has dropped, but if Brazil starts growing again at 2% or 3% rates like in the past, we’ll need to generate more, and I believe renewables will be more competitive. Some states require environmental compensation for the generation of wind and solar energy. We don’t. This and a predicted ICMS tax exemption will increase our competitiveness.

What would be your advice to potential Chinese investors?

Today, Brazil is safe for investors. Every investor needs legal security for their money and Mato Grosso do Sul has a legal framework for regulating incentives, based on federal laws approved by Congress. Our state is very big at 37 million hectares, a vast majority is agricultural. So our production of raw materials can still increase a lot, be it wood, animal protein or grain. Investors need to see that they can produce industrial goods from our raw materials – and we can increase production with increased demand. There’s also ethanol from sugar cane, corn and texturized soy protein as inputs for other production and our animal protein is also very high-quality. Mato Grosso do Sul has a wide range of raw materials, legal safety and a broad incentivising policy.

Environmental licenses are issued more efficiently here as well. In the scope of the Bi-Oceanic railway, we have a strategic location, and we have credit for investments with very attractive interest rates generating a very favourable business environment. The population of Asia continues to grow and incomes there are increasing. When people start earning more, the first thing they do is start eating better. For investors who have an eye at these opportunities, Brazil, the Central-West region and specifically Mato Grosso do Sul are safe.

That railway integration increases the competitiveness of Brazilian exports, especially those from Mato Grosso do Sul, and improves conditions for importing those products we get from China and other Asian countries

The Chinese like to know who they are doing business with and trust is very important for them. How would you describe the culture and identity of Mato Grosso do Sul?

Mato Grosso do Sul is a young, culturally diverse state. Our population is a mix of peoples from different places. We have a lot of people who migrated here, especially from the Northeast, but also from Minas Gerais and the South. Europeans have also come here quite extensively; we have a colony from the Netherlands, from Germany, Italy, Arabic countries. It’s a very diverse state. It’s also a deep part of our culture to be welcoming. We have a traditional cuisine: Brazilian barbecue, tereré which we inherited from the Paraguayans and chimarrão from the south. Campo Grande is a planned, organized city in full swing. Bonito is one of the most beautiful natural wonders in the world, one of our most important eco-tourism destinations. In the Pantanal, you’ll find some of the world’s greatest biodiversity. Mato Grosso do Sul is both an excellent place to invest and an amazing place to live.

Are you ready to grow? And do you believe that it is agribusiness that will drive that growth?

Our challenge is to industrialize our agribusiness. Brazil needs to be more competitive, change our raw materials into industrialized products, and I think we can do that. There’s no harm in starting to produce industrial goods. It’s an advantage to contribute with a type of food that helps to feed the entire planet. The world has a production problem; the population grows and food production doesn’t always follow. I think that Brazil is a good source of opportunities for China. We are ready to receive a delegation from that giant of Asia, sit down with them and show the opportunities we have here in Mato Grosso do Sul. 

And do you believe that the Chinese and Brazilian profiles are compatible?

The Chinese want to exchange a lot of information and they become more trusting once they have partnered with companies that have been here longer. I think this is a good model, and all these commercial and diplomatic exchanges are fundamental to giving a sense of legal safety and a strong future landscape for their investments. We are competitive compared with other countries. Our workforce is still relatively cheap. Given the growing demand for food around the world, I think that Brazilian agribusiness has a great future. We are in a great position.