It is no secret that China is now a major economic presence in Latin America. For countries such as Brazil, Argentina, Chile, Ecuador, and Venezuela this has meant money to help keep their economies going, to build power plants, to provide loans to business, to increase the consumption and trade of agricultural goods, and to create new opportunities for both foreign and domestic investment. China also has overtaken the U.S. to become Brazil’s largest trading partner.
But China is not the only Eastern nation playing in Latin America’s sandbox. Japan has also amassed a great deal of assets, investment gains and trade opportunities—most notably in Brazil. Japanese foreign direct investment in Brazil totals just over $4 billion—well behind that of China ($17 billion) and the U.S. ($8.2 billion) but not insignificant. Brazil has just what Japan needs: commodities, natural resources and high-yielding interest rates on investment.
Further, despite the Brazilian government’s imposition in late 2009 of a 2 percent tax on the inflow of capital destined for financial assets, Japanese retail investment in Brazil has grown from nearly zero in 2007 to $95 billion as of June 2011. This is because it makes plain financial sense. In 2010, Brazilian bonds—which make up two-thirds of investment trusts—had interest rates of 8.65 percent, compared to Japan’s interest rate of 0.1 percent. With the ability to receive noticeably higher returns on investment abroad than at home, Japan has taken advantage of the lucrative and expanding Brazilian market.
Japan’s economic success in Brazil is no surprise. Japan has a rich (no pun intended) history in the country, dating back to the first wave of immigration at the turn of the twentieth century. Its recent fiscal achievements echo the social and economic success that immigrants achieved in spite of marked social, cultural and racial differences. Moving forward, Japan and Brazil might reflect on a century of successful cultural, historic and economic relations and use them as a blueprint for doing business together.
In a society with widespread European and African heritage, the Japanese presence stands out. Whereas some ethnic groups in Brazil are spread out throughout the country—a heavy African presence in the Northeast (Salvador), Lebanese and Jews in São Paulo, and Europeans notably of Spanish, Portuguese, German, Italian, and French descent all over the country—Brazilians of Japanese descent, or nipo-brasileiros, have built large, well-preserved and distinctly Japanese communities. At 600,000 people, A Liberdade, the “Freedom” district of São Paolo, has the largest Japanese community outside of Japan.
Japanese immigration to Brazil was spurred by the 1907 “Gentleman’s Agreement” between the U.S. and Japan, which effectively halted Japanese immigration to the U.S. and redirected it toward Brazil and other countries. At the turn of the twentieth century, thousands of Japanese were settling in places like Tomé-Açu and Santos, Brazil’s largest port and located in São Paulo. From 1908 to 1940, they quickly assimilated into the Brazilian workforce, initially engaging in rural farming and agricultural production, but advancing upwardly through academic excellence into the corporate workforce and upper class.
Most nipo-brasileiros also assimilated linguistically within two to three generations. The first generation would typically speak Japanese, the second learned both Portuguese and English in addition to Japanese, and the third would speak mainly Portuguese and very little Japanese. By 1918 there were three Japanese newspapers in Brazil, and in 1929 the first English-language Japanese newspaper in Brazil appeared. A 1950 poll showed that 73 percent of a raça amarela (“the yellow race”) was literate, and 38 percent of Japanese in Brazil had completed at least elementary education, compared to a mere 17 percent for Brazilians.
Brazilian politicians and media praised Japanese values and encouraged integration within Brazilian society. The Country, a Rio newspaper, commented on the economic success of Japanese peasants and farmers who helped build a railroad in the Northeast. The Geographical Society of Rio de Janeiro condemned racial prejudice and enthusiastically endorsed "yellow immigration" for Japanese immigrants’ industriousness, discipline, cleanliness, respect for the law, and intelligence. Such rapid assimilation into Brazilian society via hard work and commitment to education enabled the nipo-brasileiros to climb up the social and economic ladders in Brazil.
After 1940, however, Japanese immigration stalled due to the Second World War, which increased domestic fears and racism among powerful economic and political leaders in addition to the general public in Brazil. A national protest in 1935 resulted in the limiting of Japanese immigration to Brazil, and in 1942 Brazil temporarily ended diplomatic relations with Japan.
In spite of these soured relations, shortly after World War II Brazilians again embraced Japanese culture, adopting their spices, foods and the martial art form jiu jitsu. A contemporary nipo-brasileiro artist from São Paulo, Curumin, released a major album titled Japan Pop Show in 2008, in which some lyrics are in Japanese and others in Portuguese. And a second-generation (Nisei) Japanese-Brazilian architect, Ruy Ohtake, has contributed to the list of São Paulo’s iconic buildings. The half-moon-shaped Hotel Unique and the Tomie Ohtake Instituto, a building dedicated to the work of his mother, are just two of his most recognizable landmarks.
In the last few years, Japanese involvement in Brazil has taken a business turn. Beermaker Kirin’s recent takeover of Brazilian brewing company Schincariol exemplifies Japan’s commercial capability and influence in Brazil. Kirin spent $2.6 billion to become the majority shareholder of Schincariol, which brought in $1.8 billion in revenue in 2010. It is Brazil’s second-largest beer producer, behind AmBev, which became the world’s largest brewer when it merged with Anheuser-Busch in 2008. With a strong yen for funding acquisitions and a shrinking Japanese beer market, Kirin is doing exactly the same as many other foreign companies: partnering, doing business, and investing in emerging markets, including Brazil’s.
The nipo-brasileiros of the early 1900s paved the way for today’s growing Brazil-Japan economic relationship. Would Japanese investment and corporate partnership in Brazil be happening today without this history? Most likely, yes. But the nipo-brasileiros’ legacy of economic success and social integration no doubt helped.
And today, Japan’s presence in Brazil is continuing to help that nation develop. Despite the negative effects of the global financial crisis, Brazil’s economy has continued to grow, expanding 7.5 percent last year—thanks in large part to soaring commodities prices and robust demand for raw materials by Asian countries, including Japan. The real has also become stronger, due to high interest rates, which have lured a heavy influx of foreign currency from overseas investors, notably China and Japan. Along with China, Russia, India and the U.S., Japan is taking advantage of a hot, expanding market and bringing the heft of other major world economies to Brazil.
*Billy Butler works in the public policy programs department at Americas Society and Council of the Americas. He is a graduate of the University of Virginia, where he earned his Bachelor’s Degree in Spanish and Latin American Studies.