Chinese Players Strategies in Accessing Latin America and Brazil Markets

In South America, Chinese mainland pesticide companies for long time had focused on cheaper and faster market access regardless the profitability or market size of chosen countries. Argentina, Bolivia, Uruguay were some of countries and still are their targets.

 

Taking into account the higher manufacturing costs in China; demand for higher profits; and lower sales margins in these countries due to competition, more Chinese players began to realize, Brazil as one of the biggest market worldwide with much higher margins, should be the main target.

 

Indeed, up to 2006, Chinese companies were solely suppliers with low sale margins of technical products to Brazilian registrants/distributors. Since then a tremendous strategy changes are transforming those companies as well as the market. Chinese players initiated sponsoring registration dossier of technical products and giving to any and all companies interested in with the propose to register the source/product, even if these dossiers would not be eligible for Brazilian registrations. There are some cases that local agents offered for sale study dossiers without the consent from the Chinese sponsors. First products were with large number of manufacturers, higher volumes and lower margins, such as glyphosate, carbendazim. As from  2009-2010 the first product registration requests from Chinese sponsors had been submitted on behalf of AllierBrasil, as consulting firm of its Chinese clients.  Meanwhile the quality of generated dossiers improved considerably, but still several non-conformities have been identified which resulted in delays of the submissions. As from 2010/2011 all type of product dossier’s have been distributed by Chinese sponsors to Brazilian registrants/distributors, including fipronil, cyproconazole, isoxaflutole, sulfentrazone, bifenthrin, Thiamethoxam, paraquate, and several others. More recently formulation registrations have been approved and the challenge to access the market is an issue.

 

Chronology
Up to 2006	Chinese companies as suppliers to local registrants/distributors.
2006	Registration dossiers sponsored by Chinese companies, not eligible for Brazilian registration.
2009 ~	Dossiers having Chinese companies as sponsor are distributed without any criteria (glyphosate, carbendazim).
2009 ~	Registration submissions from Chinese companies as sponsors.
2010 ~	Registration dossier with better quality.
2010/11 ~	Dossiers having Chinese companies as sponsor are distributed (cyproconazole, isoxaflutole, sulfentrazone, bifenthrin, thiamethoxam).
2011	1st glyphosate registration approved from a Chinese mainland company. 1st registration approved from a Chinese mainland company.
2012 ~	Registration dossier with good quality.

 Source: AllierBrasil Consulting.

 

Basically there are three types of Chinese company players attempting the Brazilian pesticide market: manufacturer; trader and manufacturers/traders. According to a survey1 elaborated by AllierBrasil in 2014 most of these companies have as their target to have Brazil as one of the most important market, either through revenue or volume. Also almost none of them have plans to import technical product and formulate in Brazil.

Access strategies

Supplier of technical product: small manufacturer, niche market product, companies “threatened” by potential distributors.

Registrant of the technical product: supply technical product with the possibility to register the formulation.

Registrant of the technical product and the formulation: ownership of both registrations or sponsor the technical product registration and share formulation registration sponsorship.

Direct distribution: acquisitions and partnerships.

All above

 
By now many Chinese players had requested registration of several active ingredients. Listed are some examples: 2,4-D, paraquat, fipronil, diquat, glyphosate, thiamethoxam, dicamba, glufosinate, metribuzin, atrazine, ametrine, acephate, azoxistrobin, imidacloprid, carbendazim, picloram, abamectin, acetamiprid, mesotrione.

 

According to Mr. Flavio Hirata, MBA, from AllierBrasil, there is a considerable demand by Chinese companies in acquisition of local companies as well as product registrations. However the offered price levels for negotiations are unrealistic based on the today’s market panorama. 

 

Manufactures that have long history in international trading are using their previous experience from other countries, ie, follow local rules, and are expected to be faster in accessing this market.

 

This article is a summary of the presentation from Mr. Flavio Hirata for AGROCARE: “Companies and Chinese government strategies, actions, registration, acquisitions in Brazil”, Brasilia, Brazil, November 12th, 2014.

¹ Survey elaborated by AllierBrasil with pesticide companies from China. Not published.