CCCC: Chinese infrastructure giant comes to standstill in Brazil

Amid uncertain times at home and in Brazil, stalled projects raise doubts about the future of Asia’s largest infrastructure builder in the South American country
<p>A ferry crosses between Salvador and Itaparica in Bahia state, Brazil. The China Communications Construction Company (CCCC) has signed to build a road bridge between the two locations, but the project appears to have stalled (Image: Panther Media / Alamy)</p>

A ferry crosses between Salvador and Itaparica in Bahia state, Brazil. The China Communications Construction Company (CCCC) has signed to build a road bridge between the two locations, but the project appears to have stalled (Image: Panther Media / Alamy)

When it arrived in Brazil in November 2016 with the purchase of Rio de Janeiro-based construction firm Concremat, the China Communications Construction Company (CCCC) brought the promise of ambitious projects for the country.

What is the CCCC?

The China Communications Construction Company is a Chinese state-owned enterprise that is one of the world’s largest infrastructure firms, having built roads, railways, airports, ports, bridges and tunnels within China and beyond, including notable projects in the Belt and Road Initiative.

The next few years saw the Chinese state-owned enterprise announce a series of suitably large-scale initiatives: a megaport in São Luís, in the state of Maranhão, with the capacity to handle the export of 10 million tonnes of grain per year; alongside domestic mining and logistics giant Vale, it would complete a railway in Pará state linking iron ore extraction sites in the Amazon to Brazil’s main ports; and in a public-private partnership with the government of Bahia state and the China Railway 20 Bureau Group (CR20), it would build the 12-kilometre Salvador-Itaparica bridge, in what would be the largest construction project on water in Latin America.

The general feeling – in the market, and among many political leaders – was that CCCC would soon help catapult Brazil’s infrastructure agenda. One of the world’s largest construction companies, and a contractor for many notable projects along China’s Belt and Road Initiative (BRI), CCCC had the resources and track record to make that goal a reality.

Half a decade later, however, none of its major projects have left the drawing board.

Last year, CCCC announced its exit from the São Luís megaport. The sale of its stake in the project was concluded in February this year, transferred to Brazilian firm Cosan for 720 million reais (US$138 million). Its two other major projects have also seen little progress, and CCCC – once held to be a major player in potential auctions – showed no interest in submitting proposals for a number of significant tenders held recently in the country.

Experts see it as a curious development, especially at a time when Brazil is once again attracting the attention of international investors. “Although we are in a difficult situation, in a post-pandemic scenario in which investments have contracted, we see a recovery process,” says Alessandra Ribeiro, partner and director for macroeconomics and sector analysis at Tendências Consultoria in São Paulo. “This step by the Chinese company, to exit a major project, seems isolated and goes against what we observe more generally.”

Changing scenery in China and Brazil

It is not yet clear whether the CCCC’s move is merely a hesitation – common in the run-up to elections, such as those currently taking place in Brazil – or whether it represents a retreat, and one that highlights not only the great challenges of investing in the Latin American country, but also current developments in China.

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When it launched its Belt and Road in 2013, with ambitions to build major logistics corridors of railways, ports and airports that would boost trade relations and the transportation of goods around the world, China had accumulated years of double-digit growth. The country had a clear purpose and resources to finance its companies worldwide. Latin America, and Brazil in particular, benefited from this.

Now, the landscape is a little different. Pressured by post-pandemic domestic concerns and a GDP outlook that is shy by its standards – forecast at around 3% for 2022 – China has been cutting back on contributions around the world; there was a 5.5% decline in Chinese foreign direct investment 2021 compared to 2020, according to UNCTAD, the UN agency for trade and development. The country has also started to prioritise certain projects and regions, turning its attention to large projects in Asia and Africa.

State-owned CCCC seems to be one such Chinese entity following this new route. In Latin America, only one project was highlighted in its most recent financial reports: the Mayan Train in Mexico.

Other factors that may be influencing CCCC’s change of tack in Brazil, such as labour legislation, a complex Brazilian tax structure and cultural challenges, as listed by the CCCC in a wide-ranging 2019 statement, originally published by China’s Ministry of Commerce and republished by state media outlet Xinhua.

In June 2021, in one of its few statements to the press in Brazil, the then executive director of CCCC in the country, Helder Dantas, told financial newspaper Valor Econômico that it was difficult to explain the often excessive Brazilian bureaucracy to Chinese colleagues, that it was difficult to obtain financing and that land issues were delaying the construction of the port in Maranhão.

Obstacles for CCCC

Of all CCCC’s projects in the country, the port in Maranhão proved to be particularly challenging. Located near the state capital São Luís, in an area of forests and mangroves, the project was designed to occupy an area where the indigenous community of Cajueiro is located – a village with families engaged in fishing and extractive activities, and whose roots in the area date back to the 19th century.

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Tensions in the area are long-standing and predate the arrival of CCCC, but as the consortium led by the company appeared reticent to engage with local demands, the situation was aggravated. “There was no respect for the community on the part of the companies that were involved,” says Haroldo Paiva de Brito, a prosecutor on agrarian conflicts in the Maranhão State Public Ministry.

As for its Pará railway, CCCC encountered problems with the local population, with concerns raised over the risks of such a large-scale undertaking in a region of sensitive biodiversity, and passing through quilombola communities and indigenous villages. So far there has been no clarification on the execution of the project.

As for the Salvador-Itaparica bridge in Bahia, in August this year, the State Public Prosecutor’s Office recommended that technical studies be carried out for its construction, given its potential impact on nearby protected areas in Salvador, Itaparica and Vera Cruz. The new forecast is that the work will begin in 2023.

International action and reaction

The political landscape in Brazil may also have had a bearing on the CCCC’s current stance, considering the often belligerent stance on Chinese investments of the current Jair Bolsonaro government.

On taking office in January 2019, Bolsonaro sought to cosy up the US – and the Trump administration – at a time when the trade war between the US and China was at its most heated. Though more rhetorical than effective, it served to dent the image of good Brazilian diplomacy and impacted the relations Brazil has always maintained with the Asian country.

There have also been barbs traded: one of the cases with the greatest repercussions happened in March 2020, when federal deputy Eduardo Bolsonaro, son of the president, blamed China for the coronavirus in a tweet. The message was retweeted by the then Chinese ambassador, Yang Wanming, with its embassy in Brazil issuing an official response.

For agribusiness, the government’s stance has a minor impact. But for large infrastructure works that require huge investment and approvals, it is not possible to separate these things

The president of the Brazil-China Chamber of Commerce (CCIBC), Charles Tang, was one of those who went public to warn about the risks of this friction. He said that comments against China can generate more bureaucracy and put the brakes on projects. “Without accusations, there would be more closed deals,” he told UOL in May 2021.

China remains Brazil’s largest trading partner. Chinese businesses are also among the main foreign investors in the country’s infrastructure and technology sectors. But it is undeniable that relations have been affected by such episodes.

“For agribusiness or even foreign trade, the government’s stance has a minor impact. But when it comes to large infrastructure works that require huge volumes of investment, licences and approvals, it is not possible to separate these things,” said Pedro Brites, professor at the School of International Relations at the Getúlio Vargas Foundation in Rio de Janeiro.

For him, the posture taken by the current government is not only inconsistent with the pacifist history of Brazilian diplomacy, but also places Brazil in a subordinate position on the international stage. “It’s no wonder that there is a lot of expectation about the October elections. There is a great demand from the G7 countries themselves for Brazil to return to being the important interlocutor it has been throughout the South American region,” Brites commented.

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The track record of the incumbent Jair Bolsonaro and former president Luiz Inácio Lula da Silva, the two candidates for the 30 October second round of presidential elections, does not leave much room for surprises in the field of international politics.

Bolsonaro’s hostility to China is evident, while a prospective Lula government may be more open to dialogue and Chinese investments. Celso Amorim, a former foreign minister during the previous Lula government and today his main advisor on international affairs, recently told Diálogo Chino that if the former president is elected, China will have an important place in his international policy. “We will pick relations up where we left them in the Lula and Dilma governments, with very good partnerships, with very good coordination,” he said.

In a milder way, and without naming the current government or Lula’s Workers’ Party, the CCIBC’s Tang told Diálogo Chino that “the political lack of definition in the pre-election period ends up putting many projects on hold”.

“I have no doubt, however, that by 2023 things will be accelerated, especially if the government has the same ‘affection’ for China that China has always shown for Brazil,” Tang added.

China Communications Construction Company did not respond to interview requests for this story.

Yedan Li contributed additional reporting for this article.