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Foreign Relations - China

Brazil, another of the BRICS emerging industrial nations (which also include Russia, India, China and South Africa), has recently turned away from its partnerships with those nations with the election of President Jair Bolsonaro late in 2018. Bolsonaro, who was sworn into office on 01 January 2019, ran on an anti-Chinese position, saying that "China owns the whole country". Brazil is one of the nations whose top trading partner is China. The far-right Bolsonaro also positioned himself as an anti-socialist warrior, saving Brazil from "cultural Marxism" and vowing opposition to the Bolivarian project in Venezuela being led by the United Socialist Party of Venezuela as well as other leftist governments in the region such as Bolivia and Nicaragua, collectively known as the "Pink Tide."

?Ironically, though, the US trade war with China increased economic ties between Brazil and China, with the huge soybean tariffs turning Brazil into China's largest supplier of the crop, as well as boosting its sales of iron and steel.

Established in 1974, diplomatic relations between Brazil and China have intensely evolved, assuming increasing complexity. The recent chronology of relations demonstrates the importance of the bilateral dialogue. In 1993, Brazil and China established Strategic Partnership, and in 2004, the China-Brazil High-Level Coordination and Cooperation Committee (COSBAN) was created. On the perennial topic of Taiwan, the GOB continued to support a one China policy and reaffirmed this position with the Chinese.

In 2012, on the occasion of the visit of the Prime Minister at the time, Wen Jiabao, to Brazil, relations were raised to the level of ‘Global Strategic Partnership’, a Global Strategic Dialogue was established between the Ministers of Foreign Affairs, and the 10-Year Cooperation Plan (2012-2021) was signed.

Brazil recognizes that ‘the People’s Republic of China is the sole legal Government of China,’ and the Chinese Government confirms that ‘Taiwan is an inalienable part of the territory of the People’s Republic of China.’ Thereby, Brazil ceased to recognize Taiwan as a sovereign and autonomous government entity, breaking diplomatic relations with the island. Brazil supports the ‘One-China’ policy and peaceful efforts to the reunification of the Chinese territory.

In 1988, the CBERS Program (China-Brazil Earth Resources Satellite) was established to build and launch satellites, a pioneer project among developing countries in the high-tech field. Five satellites have been released since then (1999, 2003, 2007, 2013 and 2014). Signed in 2013, the 10-Year Space Cooperation Plan provides for the continuity the CBERS Program and expands space cooperation to other sectors, such as weather satellites, launch services, and staff training.

Over 200 government officials and business people accompanied President Hu Jintao to Brazil 11-15 November 2004 in a follow-up to President Lula's own five-day state visit to Beijing less than six months earlier. While the development of a bilateral strategic partnership served as the principal theme for Lula's trip to Beijing, Hu's visit took a narrower, largely trade and commercial focus. The Chinese came to Brazil "with a one-note samba." The simple song paid off. President Lula agreed to the Chinese President's sole demand -- Brazilian recognition of China as a market economy. With the concession on market economy status, Brazil became the first Latin American country to accede to China's demand, as well as the largest anywhere to date.

Trade relations between Brazil and China began to intensify in 2001 when China began seeking Brazil's natural resources to support its expanding economy and expanded rapidly in 2004 when Brazil identified China as a market economy for the first time. The PRC then quickly became an important player for both Brazilian exports and imports; providing Brazil's second highest source of imports and third largest export destination in 2007.

Although bilateral trade between China and Brazil continues to grow, there are increasing frustrations on both sides regarding access to each others' markets. For Brazilian business, China represents the largest opportunities for growth, but also the greatest economic risks, and many point to the first ever trade deficit with China, (USD 1.9 billion in 2007), as proof of these risks. Clearly, China plays a much more important economic role for Brazil than Brazil does for China.

Chinese businessmen in Brazil complain that corruption and bureaucracy are preventing greater investment in Brazil. Opening a company in Brazil requires pay-offs to Brazilian customs and trade officials, as well as paying buyers under the table for initial contracts and follow-on purchases. Analysts have historically considered Brazil's economy "closed" to imports in an attempt to support domestic industry. These import duties are one of the most onerous barriers to entry in Brazil for many industrial goods.

Although China had become Brazil's second and fastest growing export market, 75 percent of these exports were concentrated in just five commodities: soy beans, iron ore, steel, soy oil, and wood. Similarly, 97 percent of Chinese imports in Brazil were manufactured products, mainly capital goods, machinery and equipment, and other manufactured household goods.

China's lower production costs and higher utilization of technology in the production cycle make Chinese products less expensive than their Brazilian counterparts in the textile, footwear, furniture, and auto parts industries. Brazilian industries have countered Chinese imports by reducing their production costs (either by implementing new technology, moving production facilities to the Northeast where labor costs are lower, or making the production chain more efficient) to become more competitive against the influx of cheaper Chinese products.

China is, since 2009, Brazil's largest trading partner and has been stablishing itself as a major source of investments in the country. Trade flow between Brazil and China strongly increased between 2001 and 2015, rising from USD 3.2 billion to USD 66,3 billion. In 2009, China became not only the largest buyer of Brazilian exports, but also the main trade partner of Brazil, according to the criterion of trade flow. In 2012, China also became the leading supplier of products imported by Brazil.

In 2010, the 2010-2014 Joint Action Plan (PAC) defining objectives, goals, and guidelines for bilateral relations was signed. Updated version of the plan, effective from 2015 to 2021, was signed by President Dilma Rousseff and Prime Minister Li Keqiang in May, 2015.

The comprehensive strategic partnership between the People's Republic of China and the Federative Republic of Brazil continued to grow in 2013. The two countries had close exchanges at high levels and in various fields. In March and September, President Xi Jinping and Brazilian President Dilma Rousseff held bilateral meetings during the Fifth BRICS Leaders Meeting and the St. Petersburg G20 Summit. In a telephone conversation in June, they had an in-depth exchange of views on bilateral relations and issues of common interest and reached important agreement. In November, Brazilian Deputy President Michel Temer paid an official visit to China. He had a meeting with President Xi Jinping, and held talks with Vice President Li Yuanchao.

The two countries maintained good communication and coordination in international organizations and multilateral mechanisms including the United Nations (UN), the World Trade Organization (WTO), the G20, BRICS and the BASIC countries. China-Brazil practical cooperation was enhanced. Two-way trade kept growing. China remained Brazil's largest trading partner, largest export market and largest source of import. Progress was made in financial and energy cooperation.

In 2015, Brazil exported USD 35,6 billion to China and imported USD 30,7 billion from China (versus USD 40,6 billion and USD 37,3 billion in 2014, respectively), having as result a surplus in bilateral trade of USD 4,9 billion. Since 2009, Brazil has accumulated a USD 46 billion surplus with China.

China is one of the main sources of foreign direct investment in Brazil, particularly in the areas of energy and mining, iron and steel metallurgy, and agribusiness. A diversification of Chinese investments in Brazil, in areas such as telecommunications, automobiles, machinery, and banking services and infrastructure can also be observed. There are important Brazilian investments in China, in areas such as aeronautics, mining, food, engines, car parts, iron and steel metallurgy, pulp and paper, and banking.

Financial cooperation has grown in bilateral and multilateral levels. Several Chinese banks operate in Brazil and Banco do Brasil has an agency in Shanghai since May 2014, the first agency of a Latin American bank in China. In 2013, a currency swap agreement was signed, aiming at safeguarding bilateral trade in case of financial crisis.