Brazilian President Lula’s recent status in China replaced China-Brazil relations, bringing two of the world’s largest economies and major trading partners closer together. investment in infrastructure. As we witness those vital progressions, we read further and provide relations, industry and investment between China and Brazil, and talk about the importance of those closer ties. This research aims to provide valuable insights to corporations interested in taking credit for this burgeoning partnership.
China and Brazil signed 15 bilateral agreements worth about $10 billion at the state level of Brazilian President Luiz Inacio Lula da Silva in China last week.
The visit, which lasted from April 12-15, marked a first turning point in China-Brazil and a significant replacement for the cooling experienced by former Brazilian President Jair Bolsonaro.
According to the joint communiqué between the People’s Republic of China and the Federative Republic of Brazil on deepening the comprehensive strategic partnership (the “Joint Statement”), which was issued during the visit, the two countries aim to deepen cooperation in various fields. address a wide range of issues, including poverty reduction, social development, technological innovation, environmental protection, climate change, the low-carbon economy and the virtual economy.
Bilateral agreements cover many of those spaces and many more, aimed at boosting industry and bilateral investment in a wide diversity of industries, adding strategic and emerging spaces such as technological innovation and energy.
China and Brazil officially established diplomatic relations in 1974. The two countries maintained friendly relations in the following decades and in 1993 established a strategic partnership to promote mutual interests and bilateral relations.
China-Brazil relations are basically based on bilateral industry and investment, which have soared over the past decade.
During his first presidency from 2003 to 2010, while his approval rating remained consistently above 80 percent, Lula sought to strengthen ties with China, sensing the country’s developing economic power. He visited China 4 times during his tenure and in 2009, China surpassed the United States. to become Brazil’s largest trading partner and has remained so ever since.
This event may be part of the commodity boom of the 2000s, which created an enabling environment not only for Brazil, but also for other Latin American (LatAm) countries, such as Argentina, Ecuador, Bolivia and Venezuela, to seek closer economic ties with China, a key market for their exports and a potential source of investment and generation transfer.
Brazil is one of the richest countries in the world and its political and economic influence can cause a domino effect in which other countries Brazil’s position on China. – Guilherme Campos, International Business Advisory Unit, Dezan Shira
In addition, both countries are part of the BRICS bloc of nations (Brazil, Russia, India, China and South Africa), which hold annual summits to foster cooperation in trade, investment and social development. China hosted the 14th BRICS summit in June 2022, and Brazil will be the rotating priority in 2025.
Sino-Brazilian relations cooled when Jair Bolsonaro took office in 2019, when the former president and his foreign governance advisers reached out to the United States, then under President Donald Trump.
Since President Lula took office at the beginning of 2023, bilateral relations have advanced significantly, with Lula to revive relations with China and showing enthusiasm to expand bilateral industry and investment relations.
At the end of March 2023, China and Brazil signed an agreement to liquidate the entire industry in the respective currencies of the two countries, instead of in US dollars. This agreement, as well as statements made by President Lula on his stopover in China, shows that Brazil is willing to disrupt the dominance of the US dollar as the main advertising currency, which corresponds to Beijing’s aspirations to internationalize the renminbi.
China has been Brazil’s largest trading partner for 14 consecutive years. It is also the first Latin American country to exceed US$100 billion in annual industry with China.
According to the knowledge of the General Administration of Customs of China (“China Customs”), in 2022, the bilateral industry between China and Brazil reached 1. 14 trillion RMB (about US$165. 6 billion), an accumulation of 8. 1% year-on-year.
Brazil is also one of the few countries in the world to have an industrial surplus with China (RMB 316. 6 billion in 2022), exporting more to China than it imports. , up 19. 3% year-on-year, while Brazil’s imports to China reached RMB 729. 4 billion (about USD 105. 9 billion), up 2. 6% year-on-year.
Agriculture is one of the top spaces of cooperation between China and Brazil, as China still relies heavily on imports of Brazilian agricultural products, such as meat, fruits, cereals and honey.
The most sensible import from Brazil to China in 2022 was oilseeds and oilseed culmination (culmination for oil extraction), as well as other cereal, fruit and seed products, which alone generated a value of $31. 8 billion, according to ITC Trade Map data.
Brazil is one of the largest soybean manufacturers in the world and China is one of the main customers. According to Chinese customs data, China imported 54. 4 million tons of soybeans from Brazil in 2022, accounting for 59. 7% of total soybean imports. the volume was a low of 6. 45% compared to last year, likely due to COVID-related disruptions and a buildup in domestic production.
China also imports a quantity of beef from Brazil, and Brazilian beef accounts for 41% of China’s total beef imports, reaching 1. 1 million tonnes. This industry has suffered further disruption in recent years due to the discovery of mad cow disease in Brazil, leading to the suspension of beef exports to China in 2021 and in February 2023, with the suspension still in effect at the time of writing.
China remains a vital expansion market for Brazil’s agricultural sector. New types of Brazilian agricultural products are becoming popular in China, such as Brazilian acai berries, mate tea, and specialty fruit juices. Several types of Brazilian agricultural products and beverages were highlighted at China’s annual fair. International Import Exhibition (CIIE).
The Brazilian Trade and Investment Promotion Agency has participated in the Shanghai International Import Expo for five consecutive years. Last year, they took several Brazilian food and beverage corporations to display in the food and agricultural products box and actively sought cooperation opportunities with Chinese spouses. The agency’s president, Vianna, said: “China is Brazil’s largest trading partner and the main source of investment, and deepening cooperation with China is for Brazil’s economic and social development. “
Meanwhile, China’s main export to Brazil, machinery and electrical equipment, reached a value of US$18 billion.
Trade between China and Brazil is expected to remain strong in the coming years, with Brazil keen to take advantage of China’s developing economy and a developing middle class to increase the volume and price of its exports.
According to a report published through the China-Brazil Business Council (CEBC) published in February this year, Brazil’s exports to China are expected to increase to $103. 4 billion by 2030, with the most sensitive exports being iron ore, copper, pharmaceuticals, electricity power equipment, non-organic chemicals and wood products.
China is Brazil’s main source of foreign investment, with cumulative investment reaching $66. 1 billion between 2007 and 2020, according to CEBC data. It also accounted for 47% of all Chinese investment in Latin American countries. Meanwhile, China’s Ministry of Commerce (MOFCOM) states in its Investment Guide for Brazil 2021 that Chinese direct investment flows to Brazil in 2020 reached $312 million, while direct investment inventory reached $3. 2 billion.
According to the ECBC report, 76% of Chinese investment in Brazil between 2007 and 2020 went to the energy and electricity sectors. However, Chinese investment in Brazil is diversifying, with more cash flowing into sectors such as agriculture, finance and data generation. (HIM).
Recent years have seen an increase in Chinese investment in spaces such as oil, electric power, new and green energy, infrastructure, agriculture, manufacturing, communications and e-commerce.
As in many other parts of the world, China has invested heavily in Brazilian infrastructure projects, Brazil has yet to participate in China’s Belt Initiative.
Some of the major Chinese investment projects in Brazil include:
Several Chinese currency establishments have also developed a presence in Brazil to supply money and facilitate industry and investment between the two countries. These include Bank of China, Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of Communications (BOC), Agricultural Bank of China (ABC), China Development Bank (CDB) and Sinosure.
In addition, Chinese tech corporations also entered the Brazilian market, with electronics company Lenovo telling news firm Xinhua that it hired more than 1,600 local workers in Brazil and invested BRL 500 million (about $72. 6 million) to identify a joint think tank. and branch of progression in the country.
China and Brazil have not signed any bilateral investment treaties to date, but signed a double taxation avoidance (DTA) treaty in 1991, which was amended in early 2022. In addition, China and Brazil are WTO member countries and are bound by multilateral treaties. and foreign industry regulations related to WTO accession.
During President Lula’s state visit, the two sides signed 15 bilateral agreements and MoU memoranda on a wide diversity of topics, from industry facilitation to cultural exchanges and poverty reduction.
In addition, more than 20 industrial agreements were signed during the visit between various Chinese and Brazilian companies.
China and Brazil have signed a series of memoranda ranging from industry facilitation to cooperation in poverty alleviation efforts.
Memoranda of understanding include:
China and Brazil signed two to renew aerospace cooperation and revive the China-Brazil Earth Resources Satellite Program: the Supplementary Protocol on the Cooperative Development of Satellite 06 for Earth Resources and the Space Cooperation Plan 2023-2032 between the China National Space Administration and Brazil. Space Agency.
The China-Brazil Earth Resources Satellite (CBERS) program is a bilateral progression program established in 1988 to expand terrestrial satellites, which to date has introduced several satellites, adding one in 2019 to practice the Amazon rainforest.
From the new agreements, either of the two agrees:
According to the joint statement, the two sides will “strengthen and expand cooperation between the two countries in the non-violent use of outer space” and under pressure for “cooperation to jointly announce the studies and progression of new technologies and present projects that emerge with generation. “moving items. “
The joint declaration pledged to actively expand and facilitate the agricultural products industry and, above all, to “improve the resilience of chains and trades. “
In order to facilitate the industry in agricultural products, China and Brazil seek to digitize customs procedures and signed a “cooperation plan of tables for the electronic certificate of animal products”, a document that has not been given an express title. It also states that both parties have committed to “continue consultation on the paint plan for the electronic phytosanitary certificate. “
The two sides also signed the Protocol on Quarantine and Hygiene Requirements for Brazilian Terrestrial Protein Feed Exported to China, saying they are “actively consulting on the Protocol on the Export of Brazil Nuts, Sesame, Sorghum and Rice from Brazil to China. “
The two countries also agreed to deepen cooperation in the control of agricultural diseases that can have an effect on bilateral industry and the stability of supply chains. This includes technical cooperation in the prevention and control of avian influenza. In addition, China has declared its willingness to speed up threat assessment processes for Brazil’s FMD-free spaces, while Brazil promises to invite Chinese experts to Brazil for on-site testing as soon as possible, and the two sides will jointly announce the applicable assessment and accreditation work.
The group also addressed the factor of the resumption of Brazilian beef exports to China, which have been suspended due to the discovery of an atypical case of mad cow disease in Brazil. However, he did not specify when the suspension could be lifted.
In addition to bilateral agreements, 20 industrial agreements were also signed between Chinese and Brazilian corporations during President Lula’s visit.
The agreements cover a wide diversity of sectors, adding renewable energy, finance, wood and pulp, agriculture, logistics, vehicles, metals and mining, telecommunications, pharmaceuticals, housing and infrastructure development, and environmental protection.
Among the agreements, two facilitate the use of RMB for advertising transactions: the ICBC branch (Brazil) began operating as an RMB clearing bank in Brazil, while BOCOM BBM Bank announced that it will join the RMB Cross-Border Payment System (CIPS).
In the field of renewable energy, applications company Electrobas Furnas partnered with China’s State Grid to expand a DC transmission renewal allocation for Brazil’s largest hydroelectric plant, the Itaipu hydroelectric plant.
Brazilian iron ore and nickel manufacturer Vale signed a total of seven agreements with Chinese entities, adding a know-how exchange agreement with Tsinghua University; a cooperation agreement with Baoshan Iron and Steel to produce biochar and its derivatives, with the aim of providing decarbonisation responses for the metallurgical industry; and a green cooperation monetary agreement with ICBC.
Chinese telecom giant ZTE also signed a deal with Brazilian telecommunications company Unifique to bring 5G network policy to life in southern Brazil, while engineering corporation ETERC Engenharia and China CITIC Construction Co. signed a cooperation agreement on infrastructure projects and social housing systems in Brazil.
The revival of China-Brazil relations will have a profound effect on bilateral industry and investment. Although the bilateral industry has remained strong even during years of cooling relations, collaboration in other living spaces has declined under former President Bolsonaro.
Today, deepening cooperation on a variety of vital issues, such as addressing climate change, securing supply chains, and making an investment in key infrastructure, will not only open up a host of new trade and investment opportunities, but can also gain advantages. community.
Brazil is home to one of the world’s largest carbon sinks in the form of the Amazon rainforest, which has come under intense deforestation pressure in recent years, posing an existential risk to the entire world. Cooperation between China and Brazil in preserving the rainforest and preventing illegal deforestation is crucial, especially since the agricultural products on which China depends for imports are among the main reasons for deforestation.
Closer relations between China and Brazil may also improve China’s standing in Latin America, where it has abundant interests in a variety of industries. As the director of Dezan Shira said
About us
China Briefing is written and produced by Dezan Shira
Dezan Shira
Our loose webinars are packed with data for doing business in China.
The subscription allows you to do this, as well as get lost with our articles and magazines.
Sign up here for your free subscription to our weekly newsletter.
No subscription fees!
Type in the keyword to start the search. . .