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Business first, politics second

Sofia Diogo MateusJuly 14, 2014

As China's President Xi Jinping lands in Fortaleza to attend a BRICS summit, he will also embark on a state visit to Brazil as part of a Latin American tour to deepen ties in the region. DW examines Sino-Brazilian ties.

Chinese President Xi Jinping meets with Brazilian President Dilma Rousseff in Durban, South Africa, in 2013.
Image: imago/Xinhua

It didn't go unnoticed that President Xi Jinping was not at the World Cup final on Sunday evening, despite Brazilian President Dilma Rousseff's invitation to all participants of the sixth BRICS summit being held in the city of Fortaleza.

Although officially the meeting only began on Monday, July 14, the game provided a bit of fun ahead of four days of intense negotiations between the leaders of five of the world's major emerging economies: Brazil, Russia, India, China and South Africa (BRICS).

For Chinese President Xi, who is also embarking on a series of state visits to Latin American countries including Brazil, Argentina, Venezuela and Cuba, the trip offers a unique opportunity to strengthen economic ties with the resource-rich region and it is easy to see why. Last year, trade between Brazil and China alone amounted to around 83.3 billion USD.

China is Brazil's main trade partner both in terms of imports as well as exports. Last year, 41.2 percent of all Brazilian exports went to China. At the same time, 34.2 percent of all imports into Brazil were from China.

At first, one might think that Brazil is clearly benefiting from China's growth more than the other way round. But percentages can be deceiving as in this uneven relationship, the balance tilts in China's favor.

João Castro Neves, Latin America director at the Eurasia Group, explains that part of that imbalance is due to the fact that Brazil sells commodities to China such as iron ore, oil, soya, in exchange for manufactured "made in China" goods, which, in turn, lead to the creation of jobs in the People's Republic.

"Brazil exports primary goods and China exports manufactured goods. So that is a traditional north-south relationship, which is very asymmetric," says Neves.

The imbalance is something that bothers industrialists in Brazil - with many claims in the Brazilian press that China "has killed Brazilian competitiveness."


Over the past ten years, Sino-Brazilian ties have flourished as the Brazilian economy has taken off and Beijing became Brasília's biggest trade partner. A few years ago, economic magazines began hailing the Chinese economic model as the path to take for Latin America's largest country.

A private Embraer 195 Jet.
Embraer is expected to close a deal to sell some 25 planes to China during Xi's visitImage: picture-alliance/dpa

But as Neves points out, this excessive optimism eventually gave way to realism as China's growth engine began to cool down as a result of the global economic slowdown, which began with the 2008 financial crisis. In turn, Brazil's growth has slowed down substantially over the past two to three years.

"Brazilians are starting to have a look at China with a more realistic and pragmatic lens. It is an important partner, of course, but Brazil cannot put all its eggs in the China basket," Neves says, adding that Brasilia cannot engage with Beijing to the detriment of ties with Europe and the United States.

President Xi is keen to further deepen the bilateral relationship during his trip to Brazil by signing a series of business deals. Last Thursday, Brazil's industry minister Fernando da Mata Pimentel announced that China would be purchasing airplanes from Embraer, a Brazilian multinational and the world's third largest aircraft manufacturer.

The deal, however, is not without controversy: Embraer has been doing business in China for many years, but has yet to see a return on investment. "When Embraer went to China, several years ago, they thought that they would make money immediately. But then for years, they didn't make much - in fact, there are rumors that some of the planes that they are manufacturing in China got copied by another Chinese company."

And even now expectations seem to be overblown: Government sources have said that only about 25 aircraft will be exported, down from an initial 60.

But Neves indicates there are also other Brazilian companies in China, medium-sized companies that do not generate many headlines. "I think this (intergovernmental dialogue) is part of a coherent Brazilian government strategy to support these companies there - to see China not only as an important market in itself, but also to get a foothold on other Asian markets as well."

At the same time, Brazil is also eager to draw Chinese investment, particularly in its underdeveloped rail network. Brazil, the world's fifth biggest country, has about 27,882 km (16,777 miles) of rail lines. The number pales in comparison to the US' 224,792 km or China's 103,144 km.

View of a CRH (China Railway High-speed) train and a CRH3 train leaving for Tianjin during a test run at the Beijing South Railway Station in Beijing, 31 July 2008.
Deals for the expansion of Brazilian rail network with the Chinese CNR rail corporation are also expectedImage: picture-alliance/dpa

It's a market rife with possibilities. Which is something the Chinese seem to be quite aware of, says Xie Wenze, economist and Latin America expert at the Chinese Academy of Social Sciences. "Latin America needs investment for its development and China always needs a lot of resources, hence the visits to Brazil, Argentina and Venezuela."

Xie also believes that "China now wants a structural change in the relationship, since its demand for primary commodities such as iron ore from Brazil could be reduced." He adds that "trade alone can not make the relationship progress, which is why the Chinese will now also increase investment and financial cooperation and this will be one of the emphases of this trip."

Although this trip is clearly a great opportunity for Chinese businessmen, there are warnings on the Brazilian side. Adriano Pires, economics professor at the Federal University of Rio de Janeiro calls on the Brazilian government to create a transparent regime for foreign investment.

Collective interests

Despite the fact that political issues are expected to play a secondary role in this visit, they are not irrelevant - and it is here that China seems to need Brazil a bit more. "The BRICS are a way to help China legitimize its foreign policy, since it (the meeting) helps mitigate concerns with Chinese overreach in the world," says Neves.

"China doesn't have any conflicts of interest with most Latin American states, which is also an advantage," says Xie Wenze.

Against this backdrop, Brazil might be the most important partner, since it is the most democratic country of the group. But Neves says that it is a difficult relationship, since the BRICS only seem to agree on what they don't want: financial institutions in which Western countries have more influence than they do, such as the IMF or the World Bank. However, when it comes to reforming the UN Security Council, Russia and China, he says, are happy to go at it alone.

Russia's President Vladimir Putin (L) is greeted by his Chinese counterpart Xi Jinping (R) earlier this year in Shangai.
China and Russia's unwillingness to propose change in the UN Security Council is an example of why the BRICS group doesn't progress more politicallyImage: Reuters

Which is why the focus is almost always on the commercial ties, says Xie. "There are three pillars to base the strengthening of the relationship on: trade, investment and finance." And the basis for cooperation between China and Latin America are "sustainable development, integrating the interests of all nations and enhancing China's international importance," according to Xie.

This is why, as Neves explains, "Brazilian officials still see their relationship with China today as a possibility of adding another potential pull of economic power to the existing two partners: the US and Europe."