This Tuesday, representatives of the Brazilian and Chinese governments signed a Memorandum of Understanding (MoU), which establishes the basic guidelines for setting up and operating the Brazil-China Cooperation Fund for Increasing Productive Capacity. The fund will be allocated to projects considered a priority in the infrastructure sectors and able to facilitate industrial capacity cooperation between the two countries. The agreement is the result of bilateral talks concluded after President Michel Temer’s visit to China in the beginning of September.

The fund will be capitalised in up to US$ 20 billion, US$ 15 billion of which with Chinese capital and up to US$ 5 billion from Brazil. Resources will be paid out on a project-by-project basis, as the investment is approved by the steering committee.

“The projects will be rolled out in Brazil, and the US$ 20 billion will come from various sources, as the projects get approved. There may be resources from FI-FGTS, BNDES and from the private sector. We are talking about a resource coordination mechanism to make the projects viable", explained the interim Minister of Planning, Development and Management Dyogo Oliveira.

In Beijing, the memorandum was signed by the ministry’s Secretary of International Affairs Jorge Arbache. “Implementing the fund is something unheard of in Latin America and probably in other continents. The fund should be reason for celebration and shows real foreign interest in the country”, he added.

The fund will be established as an investment screening and approval mechanism, and not as an established entity (like an enterprise, business partnership or others) in any jurisdiction. Investments may take place in the form of equity investment, debt investment, funds, as well as other formats to be agreed between the parties.

The sectors that qualify for resources from the fund include logistics, energy and mineral resources, advanced technology, agriculture, agro-industry and agricultural storage, manufacture and digital services, among others, operating in Brazil. The activities must be mutually beneficial for both parties.