In Brazil, Hu Jintao aims for bigger piece of Latin America trade

A meeting between Brazil's President Luiz Inácio Lula da Silva and China's President Hu Jintao is expected to strengthen the two nations' growing economic ties. China already trumps the US as Brazil's top trading partner.

Roberto Jayme/Reuters
Brazil's President Luiz Inacio Lula da Silva (r.) and his Chinese counterpart Hu Jintao pose for photographers during a signing ceremony at the Itamaraty Palace in Brasilia Thursday.

As Chinese President Hu Jintao visits Brazil on Thursday, he is seeking to expand an already growing economic relationship that is important to both emerging giants.

Trade between Brazil and China rose from $6.7 billion in 2003 to $36.1 billion last year, according to Brazilian government figures. Last year China even dislodged the US as Brazil’s top trading partner.

While some regional analysts have criticized China’s growing presence in the region and questioned its motives, most believe the Asian giant is simply acting in its own economic interest. In the last several years, the relationship between China and Latin America has deepened, especially since Hu made a regional visit in 2004 that ignited a steady climb in China's consumption of South American commodities.

On Thursday, Mr. Hu decided to cut short his visit and depart after his meetings so he could get home and help deal with the aftermath of an earthquake in Qinghai province that killed at least 618 people.

Complex ties

Trade between China and the region is often seen as a simple exchange of Latin American commodities like copper for Chinese manufactured goods like televisions or radios. In the case of Brazil last year, 76.8 percent of exports to China were basic products and 98.1 percent of Chinese imports were manufactured goods.

But Rodrigo Maciel, the executive secretary of the Brazil-China Business Council, says many Brazilian companies are now raising capital from Chinese firms and bringing in Chinese managerial and technical expertise.

“China is becoming a big investor in Brazil. It invested more than $2 billion in the mining industry in the first three months of the year. That is a lot of money, and it is very important. Those investments will elevate the relationship and make it more serious,” says Mr. Maciel, who just returned from a 35-day trip to China where he was helping to broker business deals.

Maciel also helped organize two summits for this week where 75 Chinese companies are meeting with almost 300 Brazilian business leaders to discuss future opportunities. “Many business people understand that China is a potentially massive investor and they are going there to look for partners.”

According to O Estado de São Paulo, a leading Brazilian newspaper, Chinese companies may invest in Brazil’s vast oil industry and get involved in the construction of a multi-billion dollar high-speed train between Rio de Janeiro, São Paulo, and Campinas.

Growing economic relationship

Between 1995 and 2000, Brazil’s exports to China were stable at around $1 billion per year. They rose quickly in 2001 and shot up by about 60 percent a year until 2003. Although the rate has slowed, Brazilian exports to China continued to rise through the economic downturn.

“There is one reasonable advantage we have in dealing with China," says Paulo Ferracioli, a coordinator at the recently inaugurated BRIC Centre for Study and Research in Rio de Janeiro. "They need commodities and we need manufactured goods. They produce what we need and we given them what they need. There is no doubt that our exports to China have been very important during the crisis in which Brazil coped very well.”

The Brazilian government is clearly eager for more. “In spite of the extraordinary growth in Brazil/China commerce, it must be recognized that a lot can still be done considering that Brazil represents just 1 percent of China’s global purchases,” Brazil’s Ministry of Foreign Trade wrote in a report recently.

And many see a new phase on the horizon. The Chinese are now selling aircraft to Venezuela and Ecuador, and investing $10 billion in Brazil's state-controlled Petrobras to guarantee an oil supply. Maciel says China Bank has opened a branch in Brazil and that the Commercial Bank of China is looking to do the same.

Missed opportunity for the US?

Some have worried about China’s political intent. Evan Ellis, a national security professor at the National Defense University, says it's a mistake for the US to be overly suspicious of China's regional economic expansion but that it's likely expanding trade ties will lead to greater Chinese political influence in a region where the US long held sway.

China's rising economic clout will give it "influence over governments to pressure them in certain ways to push the global economic agenda, in ways that might not be beneficial to the US," said Mr. Ellis. There could be the "temptation to become involved politically to defend their economic interests in the region."

Most analysts, however, see pure pragmatism at play. Whatever the motivations, it underscores a missed economic benefit for the US, argues Eric Farnsworth, vice president of the Council of the Americas.

“The [Chinese] see Latin America broadly as very large potential trade partners,” Mr. Farnsworth said. “The US has become much more inward-looking economically. … People in the region understand that, and say, ‘we in Latin America have to expand our links with the rest of world.’"

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