Brazil Can’t Compete on Cost or Gumption with China

So as to reach Arab consumers, most of the Brazilian companies face a challenge: competition with China. The Chinese discovered the Arab buying power and started shipping their products there a long time ago.

With the United Arab Emirates alone, China had foreign trade of US$ 8 billion last year, a value similar to the bilateral trade between Brazil and the 22 countries in the League of Arab States.

The countries of the Gulf Cooperation Council (GCC), Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the Emirates, absorb 2% of Chinese exports, according to news agency Ameinfo.

The textile, shoe, electronic product, construction material, furniture and auto parts sectors are some of those in which Chinese products are present in the Arab world, according to the secretary general of the Arab Brazilian Chamber of Commerce, Michel Alaby.

"In sectors in which there is no need for high technology, in which production is large scale and needs great volumes of labour, they lead," stated Gerson Schmitt, brand and sale channel director at Dilly, which makes the Try On sports shoes and tennis shoes for famous brands like Nike, Puma and Fila in Brazil.

Dilly produces around 7.5 million shoes a year and exports Try On products to the Middle East.

The shoe sector is one of those that face Chinese competition in the Arab market. According to Schmitt, Chinese shoes reach the Arab market costing between 10% and 30% less than similar Brazilian products.

China has extremely low cost and labour and an aggressive export policy.

"They are pro-active in foreign trade," stated Fahd Koja, the general manager at Giro Group, an export company that works only with the Arab market.

The Chinese are also closer to the Middle East. "They have lower freight costs due to geography," recalled Koja.

Factories from China, however, usually work only with large-scale production. "They are not so good in smaller loads," stated the director at Dilly.

According to the executive, this is one area in which the company usually has an advantage in selling to the Arab market. Smaller orders represent lower risk to importers as, if the product is not well accepted for some reason or has a problem, replacement is easier and more agile. There are also high stock costs.

China is also renowned for its low quality. Among Brazilian businessmen the opinion is unanimous: the largest advantage Brazil has over China is the quality and creativity.

"Brazil may escape competition with Chinese products due to quality, different design and brands," stated Michel Alaby.

The general manager of Giro Group agrees. "It is necessary to make the product different. What may be different, for example, is the package, which may have different presentation," stated Koja.

The brand and channel director at Dilly believes that creativity is a characteristic that has opened space for the company on the Arab market.

"We compete due to our innovation capacity," stated Gerson Schmitt. Brand Try On is specialized in adventure. The shoes are inspired on the characteristics of Brazilian nature.

Furniture in China

One of the sectors in which China grows most on the Arab market is furniture. "There has been great evolution in the furniture sector in China. We noticed that during foreign fairs. The Chinese were not so present five years ago," stated the president of the Brazilian Furniture Industry Association (Abimóvel), Domingos Sávio Rigoni.

The main competition, in the sector, is in the area of solid wooden furniture, where there is greater need for labour.

"But they are in all sectors," stated the president of the Abimóvel. According to Rigoni, in the areas that that require more automated production there is also competition, but at a lower level.

The president of the Abimóvel stated that, also in the furniture sector, design is the factor that has given Brazil an edge over the Chinese on the foreign market.

The Chinese expansion on the Arab world may be noticed in the local press. Every day the Arab press publishes articles about joint ventures with companies in the Asian country and the increase of Chinese exports.

In the month of October, for example, Chinese construction company Cino Hydro signed a memorandum of intentions to build a cement factory in Damascus, Syria.

China has business in various sectors in the Arab world, but one of its main interests is oil.

"China is worried about guaranteeing energy sources," stated the secretary general of Arab Brazilian Chamber. Various Arab countries have partnerships with China in the oil sector.

Chinese companies like China Petrochemical Corporation (Sinopec) and China National Petroleum Corporation, for example, are installed in Egypt. Last year, incidentally, Sinopec won a tender for gas exploration in Saudi Arabia.

The largest Chinese trade partner in the Arab world is Saudi Arabia, followed by the Emirates. In the United Arab Emirates there are 500 Chinese companies installed, according to Ameinfo.

In the month of September this year, the Arab countries signed, through the League of Arab States, an agreement to further increase cooperation and the trade dialogue with China.

This article appeared originally in Anba – www.anba.com.br.

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