Why China is pouring billions into Brazil's energy and oil?

China has boosted investments in Brazil to new highs, betting on key industries in South America’s biggest economy. 

Renewables, oil and gas, mining, and manufacturing took the lion’s share of Chinese investments in Brazil in 2024, a new report by the Brazil-China Business Council, CEBC, showed this week.  

As Brazilian President Luiz Inacio Lula da Silva is pursuing closer ties with China, Chinese firms more than doubled their investments in Brazil last year, and the South American nation became the top emerging market for Chinese investments, the report said.   

Companies from the world’s second-largest economy invested a total of $4.18 billion in 39 projects in Brazil last year, most of them greenfield. The value of investments surged by 113% compared to 2023, while the number of projects jumped by 34% year over year. 

The power sector, mostly solar and wind projects, attracted the biggest share, 34%, of all Chinese investment in Brazil last year. Chinese firms invested $1.43 billion in power projects. The oil industry accounted for 25% of China’s investments, with around $1 billion, showing that even as China is heavily invested in Brazil’s renewables, it also continues to bet on fossil fuel investments.

“It looks paradoxical, but one does not replace the other. In fact, both advance simultaneously because China still relies on fossil fuels to power its energy transition,” Tulio Cariello, the council’s research director and author of the report, told the South China Morning Post.

The mining sector also attracted a lot of investments, with Chinese firms focused on strategic and critical minerals to better integrate the supply chain for the projects advancing the energy transition, the CEBC report said.  

Since 2007, Chinese firms have invested a total of $77.5 billion in 303 projects in Brazil. The power sector accounted for 45% of all investments, followed by the oil industry with a 29% share, and manufacturing with 8%.  

Major Chinese oil companies have stakes in Brazil’s prolific pre-salt offshore oil basin, which has accounted for nearly all the increase in Brazilian oil production in recent years. 

Moreover, Chinese firms are looking to gain exposure to critical raw materials globally, and Brazil offered opportunities in this regard. 

For example, China Nonferrous Metal Mining Group (CNMC) finalized at the end of 2024 a deal to buy Brazilian firm Mineração Taboca, the country’s biggest refined tin producer, for $340 million. Tin is widely used in clean energy technology. Taboca also produces ferroalloys containing niobium and tantalum, which are used in electronics, aerospace, and green energy tech. 

Apart from a strategic rapprochement under Lula, Brazil and China, the biggest economies in South America and Asia, respectively, follow similar energy policy paths. Both are big in renewables: no one can beat China in scale of investment and capacity installations, while Brazil leads with a 90% share of renewable electricity, thanks to huge hydropower capacity and soaring solar and wind expansion. 

But both China and Brazil continue to bet on fossil fuels. China commissions dozens of gigawatts of new coal power capacity each year and has directed its state energy giants to boost domestic exploration and production of oil and gas to reduce its dependence on imports. 

Brazil, for its part, is boosting its oil production while it prepares to host the annual climate COP summit later this year. 

“We are thinking of a ‘net zero’ that incorporates some years continuing to use oil,” André Corrêa do Lago, president-designate for the UN Climate Change Conference (COP30) in November told the Financial Times in an interview in July.  

Meanwhile, Brazil’s state-controlled energy giant Petrobras is getting closer to obtaining an exploration permit to drill in an environmentally sensitive offshore region in the Amazon basin.    

Petrobras has been trying for years to obtain a license to drill in Foz do Amazonas and the wider region known as the Equatorial Margin, which the company believes has a significant oil resource potential, especially in light of recent huge discoveries in nearby regions such as Guyana, French Guiana, and Suriname.