Brazilian President Luiz Inácio Lula da Silva’s visit to the People’s Republic of China (PRC) in early 2023 was greeted by the country’s top leader with friendly words. “You are our old friend and a good friend. It was with your attention and support that China-Brazil relations achieved a great leap,” Xi Jinping told Brazil’s newly inaugurated president.
Lula, who governs Brazil for the third time (he was also president between 2003 and 2010), managed to turn China into Brazil’s main trading partner in 2009, a position China still holds. Likewise, Beijing made Brazil the largest destination for its foreign investment in the region — 42 percent of PRC investment in Latin America lands in Brazil — evidencing Beijing’s interest in the South American giant.
But since then, things have changed globally: China has very different priorities today than it did 20 years ago and Brazil, according to experts and analysts, is faced with a relationship that could be described as coercive and asymmetric vis-à-vis the PRC.
“The Chinese were very good at doing what Xi Jinping used to say: ‘Hide and wait.’ In other words, hide your strength and buy time. The passage of time shows that its true nature is to force countries into economic and commercial dependence; an example of this is the relationship it has today with Brazil,” Ryan Berg, director of the Americas program at the Washington, D.C.-based Center for Strategic and International Studies (CSIS), told Diálogo.
Dependence
At the turn of the century, many developing countries believed that the PRC could be an alternative for their financing, as well as stimulate their economies through trade in raw materials. They saw what they believed was an opportunity to build a win-win relationship with an emerging power. Brazil was among the most interested in this type of relationship given its power in the export of products such as oil, iron, and soybeans.
“The world was convinced by the idea of modernization, believing that China’s economic development was leading to liberalization and giving way to new development opportunities for emerging countries,” said Berg.
Over time, China failed to fulfill its promises and the Asian country showed its other side, which experts say is more repressive and authoritarian. “Many of the countries have fallen into a relationship of dependence rather than equity with the country led by Xi Jinping,” Berg added.
In Brazil’s case, it’s about commercial grip and dependence say experts, due to Brazil’s exports to Beijing. “An example of this is the grain market, especially soybeans,” Thiago de Aragão, strategic director of Brasilia-based political risk consultancy Arko Advice, told Diálogo.
According to the Observatory of Economic Complexity, a platform focused on the dynamics of economic activities, in 2022 Brazil exported $47.2 billion worth of soybeans, of which $31.9 billion went to the PRC, followed by Spain with $1.8 million. Figures that despite reflecting the growing competitiveness and productivity of Brazilian agriculture, also expose the dependence that Beijing created in the Brazilian economy.
“One could argue that China depends on Brazilian soybeans to feed its growing population. However, the reality is that Brazil is neither the only nor the exclusive seller of the grain to the PRC, while Brazil does export practically all its soybean production to China, a volume that no country in the world can replace, even if it were divided among several,” De Aragão said.
Overall, about a third of the exports of the agribusiness sector are destined for the PRC to which is added the fact that Brazil enjoys a surplus in its trade balance with China, which has been constant for the last 20 years and vital for Brazil’s economy that has been in recession since 2014 with growth that do not exceed 2 percent. “If the export market with China were to be lost, this would be devastating for Brazil’s agribusiness sector,” De Aragão said.
A dependence that is also reflected in certain risks and threats for the security of that South American country’s agricultural sector. “The decisions made in Beijing are more important than those made in Brasilia regarding the export strategy of basic goods or commodities for the coming year, because this dependence has resulted in the success of the main items in our country’s export basket depending more on Beijing than on our own country,” De Aragão added.
Of concern to Brazil’s experts, moreover, is what they call “coercive diplomacy” arising from the PRC’s power and dependence in all trade activities, as De Aragão explained. “Since any decision-making process in China is unified between what they call private sector, government, and party, there is a constant fear and a silent threat about how the Chinese government will be able to react to decisions made by Brazilian producers and governments. This situation leads every move to be coldly calculated so as not to offend Beijing.”
A concern that is not unfounded because if the PRC does not like the decision, it retaliates and affects the economy of the countries in question. “Some of the alarming behavior we have seen on behalf of China is economic coercion: If a country does not support China’s foreign policy or takes actions against the Asian country, Beijing does not hesitate to impact the economic relationship and damage that country, even in economies as strong as Australia’s,” Leland Lazarus, associate director of National Security Policy at Florida International University’s Jack D. Gordon Institute for Public Policy, told Diálogo.
In 2020, the PRC imposed tariffs of up to more than 200 percent on wine imported by Australia in response to that government’s request to open an international investigation into the origin of COVID-19. According to the BBC, before these measures, the Australian product accounted for 35.5 percent of the imported wine market in China. Two years later it did not even appear among the top 10 exporters of wine to the Asian country.
“Something similar already happened in Brazil during the government of Jair Bolsonaro, who initially showed himself unfriendly to a pro-China policy. This was how, during his first years in office, direct investment in Brazil decreased from $11 billion in 2017 to $300 million in 2018. While we cannot say it was a direct incident, it was a challenging correlation,” Lazarus said.
And this very unequal, asymmetric, and coercive economic relationship that experts denounce puts at risk strategic sectors, such as new technologies and renewable energies, crucial for the country’s development and security. These sectors are highly sought after by the PRC and are part of what Beijing has called “new infrastructures.”
BRI: Brazil, the perfect prey
In 2013, as a crucial part of Beijing’s global projection strategy, Xi Jinping launched the initiative known as the Belt and Road Initiative or BRI. Through exorbitant investments and loans for infrastructure, the PRC now has high-impact projects in 147 countries worldwide. However, the countries’ difficulties in paying their debts and the criticism of BRI projects for lack of transparency, engineering flaws in the works, labor rights violations, as well as environmental impact, have made it so that the PRC seeks to recalibrate its presence in the region. “It’s not that China is letting go of its ambition, but it is looking to channel through new avenues the drive to maintain its global hegemony,” Berg said.
According to a recent study by U.S. think tank Inter-American Dialogue, the PRC’s new priority areas include, information and communication technologies, renewable energy, and electric vehicles, among other strategic businesses.
Interests that the member of the Political Bureau of the Central Committee of the Communist Party of China (CPC) and Minister of Foreign Affairs Wang Yi made clear during his visit to Brazil in mid-January 2024 where he spoke of the importance of strengthening alliances in these sectors, Argentine news site Infobae reported.
While Beijing strategically plans how to increase its presence in these sectors, Brazil’s trade relationship with the PRC keeps growing. According to official data from the Brazilian government, 30.7 percent of Brazilian exports were destined for Beijing in 2022. A figure that worries experts and decision-makers because they consider that Brazil could be ceding strategic sectors to the PRC in exchange for maintaining its good trade relations.
“The dependence that China has created in Brazil has generated a certain ‘goodwill force,’ in other words: please your best customer. And this has allowed China to advance in very diverse strategic sectors, while Brazil strives to develop products that meet China’s needs and tastes,” De Aragão said.
The Huawei case
In March 2021, The New York Times (NYT) published a revealing article on how China took advantage of the pandemic to influence Brazil’s decision-making, when the South American giant resisted including Huawei in the list of bids to develop the 5G network.
According to the NYT, Brazil was ready to build an ambitious 5G wireless network worth billions of dollars that would guarantee cybersecurity and free from espionage. A decision that excluded the Asian company Huawei, considered an extension of the Chinese surveillance system, and which had already been banned by several countries including Australia, Japan, New Zealand, the United Kingdom, and the United States, among others.
But the decision coincided with the COVID-19 pandemic that caused many deaths. Amid the crisis, Brazil’s Minister of Communications Fábio Fara traveled to Beijing to meet with Huawei executives, the newspaper reported. Two weeks later, the Brazilian government announced the rules for the 5G auction, and Huawei, a company that the country had vetoed, surprisingly appeared among the possible suppliers. Days later, tens of millions of shipments of vaccines landed in Brazil, as well as the ingredients to produce them in that South American country, the NYT reported. “This change of position, experts decry, illustrates how China is capable of making repressive use of its advantages to achieve its objectives,” De Aragão said.
But it was not only the pandemic that triggered the change of position, but a major pro-China lobby was also registered. “Despite not being a democracy, the Chinese know and understand very well how the Brazilian Congress operates. So, instead of directly lobbying the Brazilian government, they used as intermediaries the heads of agricultural groups, who, fearing new phytosanitary regulations and inspections on agricultural exports, advocated in favor of Huawei,” said Berg.
Influence that also reached into the upper echelons of large private companies in both the agriculture and mining sectors, De Aragão added. “Huawei offered 5G kits to influential private companies, which made it more difficult for the Brazilian government to exclude this vendor, given that several key players in important production sectors in Brazil were already using its technology.”
As a result, Huawei is today one of the leading technology providers in the deployment of the 5G network in Brazil.
In the second part of this special report, we will look at how the PRC has advanced in this and other strategic sectors such as energy. “If it wanted to, China could leave Brazil without electricity at any time,” Berg said. We will also look at Beijing’s alarming exploitation and production of a mineral much more precious than gold: niobium, critical for the development of hypersonic missiles and the aerospace sector, and which abounds in Brazilian soil. Is Brazil inadvertently promoting the modernization of the PRC’s People’s Liberation Army?
Read the next installment of Brazil and China: Asymmetric and Troubling Relationship – PART II