Brazil-China trade expected to hit new record in 2021

RIO DE JANEIRO, BRAZIL – Trade between Brazil and China is set to reach a new record high this year, coinciding with a more stable period in bilateral relations after Bolsonarist criticism of Beijing eased, according to sources tracking the situation.

After the outbreak of Covid-19 and the departure of Ernesto Araújo from the command of Brazilian diplomacy, the change in tone, more careful, in the government of Jair Bolsonaro towards China, if not generating a change in quality at least put the relationship on a course of normality.

President Jair Bolsonaro’s praise of the partnership with China yesterday at the BRICS Summit, when he mentioned the use of inputs from the Asian giant in the production of vaccines, illustrates the new situation.

On other occasions, Bolsonaro accused the Coronavac vaccine, developed in China and produced in São Paulo Brazil by the Butantan Institute, of being ineffective and unsafe, besides insinuating that the coronavirus may have been created in a laboratory, on purpose, by China.

This has led to bilateral tensions. The Chinese laboratory Sinovac even pointed out to the Brazilian authorities that doing business with Brazil would have negative political repercussions in China.

At least, that was the official version. Behind closed doors, it is clear to many of those involved that the balance of power is rapidly changing.

Whereas in the past it was the powers with access to virtually unlimited money printing capacity that called the shots, it is now increasingly the powers with surplus food production that are in the driving seat in international deals.

It is only under the Bolsonarto administration that Brazil is slowly becoming aware of its real weight. Apart from being a huge and desirable market itself, the country’s ability to produce food for the world is almost limitless.

Not to mention that it is also a leader in the production of raw materials.

That is why in the economic sphere, it is said, relations between China and Brazil have, in the end, not been seriously shaken. The Chinese view focuses on practical interests.

First, Beijing wants to be sure that it receives the soybeans, iron ore, and meat it buys to secure its production chains. And second, that its investments already made or to be made in the country will not be discriminated against.

The halting of comments considered provocative by Beijing, which even came from the president’s sons, and caused tension in governments and markets, has allowed, in any case, greater fluidity in the relationship, sources say.

For the first time last year, the total bilateral trade (sum of exports and imports) reached US$101 billion. This year, by August, the exchanges had already reached US$93.8 billion, or 34.7% more than in the same period last year. An estimate of bilateral trade of US$120 billion this year tends to be exceeded.

Brazilian exports of beef are suspended, because of two atypical cases of mad cow disease, following the special sanitary protocol with Beijing. But the expectation in Beijing and Brasilia is that this stoppage will not last long. Brazilian exports continue to be driven by soybeans, even though the U.S. has returned to sell the product in the Chinese market.

What could affect bilateral trade would be a possible shortage of containers, even because of its concentration in China. The Chinese are importing more than they sell, and the containers are going to the Chinese market and not coming back. According to sources, some countries can not send products for lack of means to ship them.

After the decrease of Chinese investments in Brazil, in the wake of Covid-19, there are recent signs of resumption of Chinese interest. Chinese institutions have again organized seminars with Chinese and Brazilian entrepreneurs to participate in infrastructure programs in the country.

Concerning 5G and Huawei’s role in Brazil’s telecommunications infrastructure, the company apparently awaits a separation between the government network, which would not be open to it, and the commercial one, in which it would have a stake.

The question is whether Huawei would be able to supply equipment that Brazil will need because of barriers imposed by the U.S. to the supply of microprocessors to the company, for example. This is a difficulty that is on the radar.

There is also movement in the diplomatic area to hold the Sino-Brazilian High-Level Commission for Consultation and Cooperation (Cosban), the main mechanism for coordinating the bilateral relationship between Brazil and China. It could take place at the end of this year or early next year, organized by Brazil.

The doubts today in Beijing and Brasilia are different. Concerning China, it has to do with regulatory restrictions that question the continuity of reforms and its economic development ahead. The noises today about Brazil are also fed by uncertainties about the country’s growth in the face of the instability caused by the President of the Republic.