A Macau company planting the seeds in Portugal
The acquisition of one of Portugal’s biggest agricultural companies by Macau firm CESL Asia last year may yet be seen as a defining moment in the economic relationship between China, Portugal and the Macau SAR.
China’s population is around 1.4 billion people. And that is a lot of mouths to feed. So when a Macau investment and services firm acquired one of Portugal’s biggest agricultural companies a few months ago, the opportunities for the Middle Kingdom didn’t go unnoticed.
In October, CESL Asia, a Macau firm which aims to ‘foster a greener society’ and works with clients and partners to introduce ‘innovative and environmentally friendly solutions that help to minimize the environmental impacts arising from business activities’, acquired Portuguese farming group Monte do Pasto, Portugal’s largest beef producer, investing 40 million euros (MOP357 million) into 3,700 hectares of agricultural land in the south of the European country.
Monte do Pasto’s land, which lies in the municipalities of Cuba and Alvito in the Alentejo region, is mainly used as pasture for cattle. It lies close to Alqueva Dam, which constitutes one of the largest dams and artificial lakes in Western Europe, giving the fields excellent access to water. The company, which was established in 1981, has traditionally exported most of its beef as its cattle are ‘known for having very good genetics’. But now it’s in CESL Asia’s hands following the acquisition from Portuguese bank Novo Banco.
The investment, which was financially supported by Bank of China’s Macau branch, made headlines in both Portugal and Macau – not only because of the size and importance of the land but also because this was a Macau company investing in Portugal’s heartland for the benefit of Macau, Portugal and China. Apart from Quinta da Marmeleira – a winery near Carregado in the heart of Portugal which was bought by Macau businessman Wu Zhiwei in 2016 – there have not been many investments from Macau companies in this sector in Portugal up to now.
A growing interest
The Portuguese ambassador to Beijing, José Augusto Duarte, also sees the great potential of the investment. He says he expects Macau and Hong Kong companies to maintain their ‘agility to invest abroad’ in the near future and identifies a ‘growing interest’ in China’s decision-making bodies ‘in the agricultural or agrifood sector abroad’. The CESL Asia farm at Monte do Pasto is a perfect example of this ambition.
Duarte, a former diplomatic advisor to the President of Portugal, says that the Chinese government has recognized the importance of the food sector and recalls that the Middle Kingdom does not have the productive capacity to feed its growing population without relying on imports. The country is home to more than 18% of the world’s population but, claims Duarte, it’s home to only 9% of the globe’s arable land and four per cent of its drinking water.
“It is imperative,” he says, “to strongly increase [China’s] investment in innovation in the agricultural sector in order to expand its productive capacity – and part of this focus is on co-operation between Chinese companies and their counterparts in other countries.”
Portugal is keen on co-operating with China in the agricultural sector. Over the past few months, the European country has concluded negotiations to export Portuguese pork to China. “For 2020,” says Duarte, “we will continue to negotiate with our Chinese counterparts to open doors to more Portuguese products, such as fruit, poultry and beef, which will surely create new opportunities in Portugal’s agricultural and agrifood sector.”
The Monte do Pasto investment, says Duarte, deviates from the previously observed pattern of Chinese investments in the financial, insurance and energy sectors.
“Portugal has also sought to promote investments in the real economy,” he says. “With the growing importance of the agricultural sector, the Portuguese countryside can see here a window of opportunity to combat desertification, which is a worldwide trend.”
Sowing the seeds
“Our goal is to build things that have never been built,” says the head of CESL Asia, António Trindade, sitting in his office in Macau’s AIA Tower. “Things that are highly productive, both economically and socially.” He adds that CESL Asia, in the agricultural sphere, is looking to develop innovative methods of sustainable production – anything from wheat to beef – that can be replicated across the world.
“Our focus is not on herding cows,” says Trindade. “It’s always on the people involved and what they’re doing. Know-how comes with people. We are a people’s company. Our platform is intellectual. What makes sense to us is producing value, technology, knowledge and science.” According to Trindade, all of CESL Asia’s expertise in working abroad can be shared with other Macau companies, thus strengthening the entire business ‘platform’ in the SAR.
An earlier project that saw CESL Asia join hands with Portugal took place in 2012, when the firm partnered up with Lisbon-based Magpower, which manufactures concentrator photovoltaic systems (CPV) solar modules and trackers. The two companies jointly invested around MOP200 million (about $29 million) into three power plants in the south of Portugal and they have since collaborated on technical and scientific projects.
That partnership and this investment in Monte do Pasto show a strengthening of relations between CESL Asia and Portuguese businesses.
A statement from the Macau firm following the acquisition last year said that the deal aimed to continue the development of social and economic co-operation between Portugal, China, Macau and African Portuguese-speaking countries. According to Trindade, the key to economic diversification could be “a combination of both” the development of the platform with Portuguese-speaking countries and Macau’s role in the Greater Bay Area.
Cultivating a platform
In acquiring Monte do Pasto, CESL Asia is establishing a platform in Portugal. The firm wants to increase exports from the European country to the Macau and China markets, taking advantage of Macau itself as a ‘platform’ for social and economic co-operation between China, Portugal and Portuguese-speaking countries. The company also sees Macau developing as an operational base for food and renewable energy businesses from Portugal, Macau, China and Portuguese-speaking countries.
According to Trindade, ‘the potential of the Macau platform is bigger than that of its gaming industry’.
Trindade adds that it is important for the SAR to consider economic opportunities beyond gaming and he questions whether Macau’s gaming money ‘adds value’ to the city in terms of knowledge. He admits that the gaming industry has been ‘exceptional’ when it comes to boosting the local economy in past years but he argues that Macau is now confronted with ‘Dutch disease’ – the economic term that describes the causal relationship between the increase in development of a specific sector and a decline in others. In Macau’s case, this refers to the rapid economic increase in the gaming sector compared to all others.
But Trindade, who says that his company wants to ‘replicate CESL Asia in Portugal’, also notes that ‘the China-Lusophone platform cannot go through Macau only because Macau by itself does not have the resources and capabilities to serve the whole Chinese economy’. He admits that there is an opportunity for Monte do Pasto to supply meat to China but he is also keen to look beyond the short term. “The platform is a commitment, not a business opportunity,” he says, “to create a unique value chain. With this in mind, we are creating an economic infrastructure that has never been created before.” Paulo Figueiredo, MDT/Macauhub
