Weekly Report - 30 March 2023 (WR-23-13)

BRAZIL: Lula postpones China visit; reset remains on the cards

Citing illness (he was diagnosed with a mild case of bronchopneumonia) Brazil’s President Luiz Inácio Lula da Silva postponed his state visit to China, initially planned for 27-31 March. A later date is being discussed; for the moment, however, ‘the trip that didn’t happen’ remains associated with an ongoing ‘reset’ in bilateral relations with Beijing.

Although China is Brazil’s top trading partner (ahead of the US, which comes in second place), relations were somewhat strained during the far-right presidency of Jair Bolsonaro (2019-2023). Bolsonaro viewed the world from a cold war, anti-communist perspective, and a faction of his sometimes-chaotic government remained very hostile to closer relations with China. Others gave the then-president more pragmatic advice, given China’s economic importance. Brazil did not for example ban Chinese-owned Huawei from its 5G rollout, despite the urgings of the US government (telecoms companies pointed out that Huawei infrastructure was cheaper than some of its Western rivals).

Lula has in contrast wanted to re-invigorate relations with Beijing. Doing that fits with his vision of a more active and independent Brazilian diplomatic effort in a multilateral world. While welcoming US support for Brazilian democracy, Lula has avoided aligning closely with the West over the war in Ukraine, taking a more neutral stance and offering instead to broker peace talks. He also wants Brazil to become a permanent member of an enlarged United Nations Security Council. In some ways this is a re-hash of his longstanding enthusiasm for the BRICS emerging economies and for the principle of south-south economic development.   

Despite the postponement, preparations for the trip to Beijing offered a snapshot of the new direction in bilateral ties. Lula’s party would have included half a dozen cabinet ministers, state governors, members of congress, and 240 business leaders (many from the agro-industrial sector). The two leaders were expected to sign some 20 agreements. Helpfully, China lifted its month-long ban on Brazilian beef exports (caused by fears, since reduced, of an outbreak of ‘mad cow’ disease).

Some big private sector deals appear to be in the offing. Chinese electrical vehicles manufacturer BYD continues in talks to buy an old Ford automobile assembly plant in Camaçari, Bahía state, for around US$570m. Some see the deal as symbolic of a power shift in global manufacturing. Despite US security concerns, the Brazilian side is also eager to sign agreements with China to deepen a joint small satellite development programme, and to boost collaboration in micro-electronics and semiconductors.

Celso Amorim, Lula’s foreign policy adviser (and a former foreign minister [2003-2011]), explained the new government’s thinking in an interview with Reuters news agency. He said Brazil could not afford to take sides amid growing China-US tensions. “We have no preference for a Chinese semi-conductor factory,” he said, adding “But if they offer good conditions, I don’t see why we should refuse. We are not afraid of the big bad wolf.” Amorim said Brazil shared democratic values with the US but “I cannot condition where I am going to buy a chip, or something else, to these values. In fact, the chip is not impregnated with these values, it is value-free.” Not everyone shares this view, and some Brazilians say trade with China is still skewed too far in favour of low value-added raw material exports. But for the immediate future bilateral trade and investment is set to grow.

China and Amazon Fund

Talks are also underway about a Chinese contribution to a potential fund for green industry and renewable energy, which will be separate from the Western European and US-supported Amazon Fund. Off the record, some Brazilian officials say they are disappointed that the US has so far only pledged US$50m to the Amazon Fund. They are looking for, and will likely receive, a bigger contribution from China.

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