"To successfully invest in Brazil, China must be hyper-cognizant of the cultural mood and priorities of Brazil's government, its people and its businesses."
As China continues to pursue overseas expansion and investment deals across the globe, country and government are learning that cross-cultural matters are key to successfully define the scope and depth of financial contracts and M&A opportunities.
In fact, navigating the nuances of cultural differences and biases is critical to China's efforts to invest in Brazil — the largest economy in South America, with a GDP of roughly $1.8 trillion and a population of more than 209 million people.1
Negotiating Cultural Crossroads
Strong relationships are key to productive negotiations, especially when conducting overseas expansion initiatives. However, building and maintaining productive relationships can be a formidable challenge. Cultural differences, language barriers and misaligned perspectives can result in costly misunderstandings, miscommunications and even feelings of being insulted, distrusted and underappreciated. For China to successfully invest in Brazil, both countries must be hyper-cognizant of the cultural mood and priorities of each other's government, people and businesses.
Investing in Common Long-Term Interests
In 2018, Brazil and China traded $113 billion worth of goods with each other. About $70 billion of China's investments went into local Brazilian agriculture, energy and logistics, and — importantly — infrastructure that will help Brazil compete in a global economy increasingly defined by advanced technologies and digital transformation. Given the opportunities that may result from investments, Brazil and China must be sensitive to the concerns and traditions that dictate how each country perceives relationships, conducts business and defines success.2
China employs a patient, long-term approach to its overseas expansion efforts. Chinese investors place less emphasis on catering to the short-term objectives; instead, they focus on future-oriented benefits and results that are cultured and negotiated according to longstanding relationships. This pragmatic approach to international investments has served China well in other regions of the world, such as Europe, and it informs its strategy now in Brazil. Both countries see the benefits of working together.3
The Synergy of Digital Transformation
The promise and impact of digital transformation on the future of local economies, such as Brazil's, and global geopolitics cannot be underestimated. Sweeping and rapid advances in technology are empowering once-developing nations to leapfrog decades of economic headwinds and compete in a connected world that increasingly conducts business online and in the cloud. The melding of financial and business interests through advanced technologies, such as machine learning and artificial intelligence (AI), presents investors, such as China, with unprecedented opportunities to offer, build and profit from international collaborations and M&A opportunities.
However, the accelerated integration of modern technologies into sluggish economies can result in new, formidable challenges. According to Mercer's 2019 Global Talent Trends Report, more than 70% of companies in Brazil expect to automate some work processes. Yet, only one-third of those companies use talent analytics to measure or predict how widespread automation will impact the country's workforce and larger society.
Both China and Brazil will have to find ways to accommodate the new workforce created by digital transformation while modernizing economy and infrastructure for the future. This will require building a strong, durable relationship.
Compromise in the Digital Age
As China invests more in its overseas expansion efforts, countries like Brazil — which can benefit tremendously from an influx of money, capital and resources — must find ways to balance their assets and needs while negotiating deals that offer value to discerning Chinese investors.
In the digital age, these transactions can quickly delve into sensitive matters that involve data management, privacy rights and protections, and other realms of cybersecurity, intellectual property and modern human rights. Preparing organizations and talent for the future will be a significant priority for all countries as the world moves deeper into the digital realm.
As the digital world pushes countries further into the future, Brazil must determine what concessions it's willing to make in order to modernize its infrastructure and economy. Additionally, the two nations must account for the cultural differences and perceptions that shape mutually beneficial deals. The consequences of poorly negotiated deals are too great and disruptive for both sides.
This codependency on the results may serve as the foundation for a compromise that ensures both Brazil and China strike deals to benefit both sides long into the future.
1. "The World Bank | Data: Brazil." The World Bank Group. 2018, https://data.worldbank.org/country/brazil.
2. Adghirni, Samy. "China Says It's willing to Seek Trade, Investments Deals With Brazil." Bloomberg. 28 Mar. 2019, https://www.bloomberg.com/news/articles/2019-03-28/china-says-willing-to-seek-trade-investments-deals-with-brazil.
3. Spring, Jake. "China investment in Brazil hit seven-year high in 2017." Reuters. 18 Jan. 2018, https://www.reuters.com/article/us-brazil-china-investment/china-investment-in-brazil-hit-seven-year-high-in-2017-idUSKBN1F7387.
4. Brito, Ricardo; Paraguassu, Lisandra. "Brazil wants China to invest in its infrastructure." Reuters. 13 Jun. 2019, https://www.reuters.com/article/us-brazil-china/brazil-wants-china-to-invest-in-its-infrastructure-vice-president-idUSKCN1TE2YH.