Summary: Brazil-China Economic and Political Relations

Speakers:

• Mauricio Mesquita Moreira, Principal Economist, Trade and Integration Sector, Inter-American Development Bank (IDB)
• Claudia Trevisan, Correspondent, O Estado de S. Paulo

Summary

On March 20, AS/COA hosted two experts on political-economy issues affecting the Brazil-China relationship. Having overtaken the United States as Brazil’s largest trading partner in 2009, China has deepened its ties with the Latin American country in some areas, while creating discomfort in others. The panelists spoke about how the relationship has evolved and the challenges remaining for the future.

"Mixed Blessings" of Bilateral Ties

As ties have deepened over the past decade, the relationship between Brazil and China has been “a mixed blessing,” said the IDB’s Mauricio Mesquita. On one hand, China has boosted Brazil’s commodity sector to become the country’s top export destination. On the other hand, the competition from China’s manufacturing sector has led Brazil to establish barriers to protect its own manufacturing industry. O Estado de São Paulo’s Claudia Trevisan noted that in 2004, Brazil’s exports consisted of 30 percent primary goods and 55 percent industrial goods. In 2013, primary goods accounted for 47 percent of exports, while industrial goods made up only 38 percent. The opening of the market to China has had an important effect on the structure of the Brazilian economy and industrial policy, the speakers noted. This shift to specialize in primary goods could lead to challenges in the country’s long-term development, they added.

Trade vs. Investment

The Brazil-China relationship is largely concentrated on trade and with few shared cultural aspects between the two countries, the partnership suffers from a lack of depth and long-term potential, the speakers said. Plus, the relationship has been driven by “diplomatic considerations with no clear strategy in mind,” explained Mesquita. Despite the growing bilateral commercial ties, investment is lacking. In the past 5 to 6 years, China invested $28 billion in Brazil, while in 2012 alone, the United States invested approximately $12 billion in the South American country. In addition, some Brazilian business leaders want a free-trade agreement with the United States in order to counter China’s influence.

The Future of the Relationship

Both panelists agreed that the so-called BRICS countries (Brazil, Russia, India, China, and South Africa) will continue to have a strong presence worldwide in trade and foreign policy. With the expansion of globalization and the need for healthy relationships across the hemispheres, Brazil and China must deal pragmatically with one another instead of maintaining unrealistic expectations, said the speakers. They agreed that Brazil should diversify its trade partners in order to reduce its risk and exposure, as well as to diversify the economy in order to promote long-term growth.