Sino-Brazilian Relations in the 21st Century

The simple fact that China has grown by at least eight percent per capita annually, and for the last few decades, irks many pro-Washington, pro-European Union financial lackeys. Notwithstanding the prevailing wisdom espoused by many pro-establishment economics experts, China’s growth has largely made it the most successful economy in the world since 1978. Even renown Harvard economist Jeffrey Sachs admits as much. Despite many fringe complaints, China’s growth has not ceased. To dismiss China’s potential to boost struggling economies the world over is terribly ignorant, and possibly detrimental to millions in the Third World who stand to gain so much from furthering trade with China. Nevertheless, China does not need Western status-quo financial warriors to vet its prowess; trade with one country in particular—Brazil—poses a near insuperable hurtle for most critics. Whatever issues many may signal to prove their incompatibility, the truth could not be more obvious. Chinese and Brazilian economies need one another, and their trade will continue to shape the future of global economics together.

Within the first few months of 2009, China bested the US as Brazil’s main trading partner. Sino-Brazilian relations educed an eight hundred million dollar credit loan between China’s Development Bank and Brazil’s National Bank for Social Development almost instantaneously. Sinopec, China’s state-owned oil firm even said it would fund Brazil’s semi-public Petrobras with ten billion dollars over the ensuing decade. In return, China could expect to receive a handsome amount of oil. The arrangement entailed Brazil supplying two hundred thousand barrels of oil a day. Even with such large agreements as the one arranged between Sinopec and Petrobras, Brazil experienced a substantial stoppage as the economic crisis in the US and Europe spilled over Asian and Latin American shores; for want of credit, consumer and industrial spending slowed in Brazil.

Some analysts aver that Brazil’s economic and financial outlook bends toward ambiguity. Clearly, economic opinion regarding Brazil differs from analyst to analyst; however, international markets bespeak the fact that Brazil has both grown economically and increased by employment and real wages. Such progress has allowed it to repay crushing debts accumulated under many years of military dictatorship and profligate political leadership, which the US openly backed.

Global recessions incurred by rich-world financial recklessness have not entirely stymied Brazil’s ability to generate profits and expand despite setbacks in development and poverty. Brazil is also a country of enormous natural resources. It can hope to secure greater economic sustainability in the near future with ecosocialist policy to protect its biosphere and its people in coming years. Brazil’s petroleum and sugar-based biofuels, for example, portend a very promising economic future. The nation has a great labor pool, and it may even become the undisputedly most important political power in South America. Its position with BRICS (Brazil, Russia, India, China, South Africa) already stems in part from its enormous and well-developed agriculture, mining, manufacturing, extractive and service sectors. Still, problems with stratified and unequal income distribution, poverty, and education in rural areas (also, high crime rates) persist. Such issues are also great sources of social unrest, which can greatly affect Brazil’s economy. Furthering socialist policy could greatly conjure development in such areas and prompt growth, assuaging such unrest and curing its roots.

Brazil’s current domestic hurdles are not without historical trajectory. From the outset of the 21st century, Brazil has faced serious problems. Inefficiency, corruption, crime, underemployment and unemployment, all seem a drain on resources that could drastically improve the quality of life for more Brazilians in future. More investment in the people would not only produce a more equitable society, but it would also allow Brazil to better capitalize on its amazing resources—human and natural. Moreover, due to Brazil’s unimaginably vast cache of natural resources, were it to provide itself with the largest trading base possible, it might even survive an economic downturn capable of crippling a giant like the United States. Recent years supply empirical evidence that this may be more likely than not.

Brazil’s growth has changed drastically within recent decades. From 1995 to 2002, Brazil grew by more than two percent annually; it then grew four percent annually for the next eight years. But because of the deleterious effects suffered by the majority of nations caught-up in the global economy, Brazil disappointed some with a minimized growth for 2011, and a decimated of less than one percent in 2012. But between 2004 and 2010, Brazil grew twice its 1999 to 2003 rate. It also grew faster than the twenty-year period from 1980 to 2000. There was reduction in poverty and progress on the inequality of incomes despite drastic amounts of unemployment. Then, policy changes took place. Increased investment in the public also helped see Brazil through the Great Recession toward the end of the last decade. Unemployment lowered, and wages rose with increased foreign direct investment trickling into the country—an unprecedented sixty-seven billion dollars in 2011 alone. That same year, Brazilian exports to China rose by almost forty percent. Brazil’s legal system, ubiquitous oil, and agriculture, continue to drive it forward today.

The growth Brazil experienced in 2011 was commodity-based, and largely indicative of soybean and iron ore sales to China. Combined with the reports of Chinese companies seeking to buy up several hundred thousand acres of Brazilian farmland, such powerful trade triggers international incredulity and fear. There is no reason to believe, however, that such trade will end soon. Moreover, Chinese companies are not necessarily colonizing Brazil. Companies such as Wuhan Iron and Steel have committed to help build a multi billion-dollar steel mill, rather than committing the usual crimes of neoliberalism and shipping primary resources out of Brazil for refinement back home.

Despite downslides in growth immediately following the Great Recession, Brazilians who were once doomed to poverty continued to benefit from Brazilian social safety nets. This in itself allowed Brazilians to endure plummeting wealth, exploding wealth inequality, and the perhaps nominal growth of the Brazilian middle class. The Brazilian poor’s ability to weather economic crisis is not a consolation, but an indicator that allocating funds to social welfare can keep development moving forward. The middle class yet expands, because, unlike centuries past, actual spending is allocated specifically to the middle class to undergird its expansion. Thanks to the universalization of primary education two decades ago, coupled with increased welfare payouts and a rise in minimum wage, Brazil may have a chance to actually benefit from whatever future growth might occur after the second decade of the 21st century eclipses the Great Recession of the first decade. It may use new economic leverage to help abate abject poverty.

In general, the Latin American middle class expanded by fifty percent from 2003 to 2009. It increased from over one hundred million people to one hundred fifty million people. Still, only thirty percent of the Latin American population were actually middle class. New members of the middle class, or the “formerly poor,” have barely floated above absolute levels of poverty. This all affects Brazil, a country that desperately wants to become a much more middle-class. Brazil’s ability to develop in the face of such adversity is also attractive for Chinese investors. Brazil shows that while imperfections endure, strides have been made in securing development.

According to some experts, Brazil accounts for two-fifths of Latin America’s gross domestic product (GDP). Considering that more than fifty percent of Brazilians belong to its middleclass, and that they earn anywhere from six hundred dollars to twenty-six hundred a month, there is hope that consumption can help secure Brazil’s consumerist base as an engine for growth within the later half of this new decade. But because Latin America suffers from opportunity and economic inequality to this day, more investments in the people must be made. Encouraging this type of progress is essential to surviving any sort of economic downturn that the region might face in today’s globalized, capitalist world economy. This is one of the most radical underpinnings of Brazil’s hopes for furthered partnership with China.

Just after the Great Recession, former presidents Luiz Inacio Lula da Silva of Brazil, and Hu Jintao of China, met. They wanted to promote bilateral Sino-Brazilian cooperation. The two leaders spoke optimistically about ties that have been growing since both countries formed a monumental strategic partnership in 1993. Both leaders conveyed their satisfaction with stable macroeconomic foundations, which ultimately kept their bilateral trade volume at pre-crisis numbers. They also pledged to keep momentum and trade mutually beneficial, especially regarding the promotion of cooperation in terms of aviation and related enterprises. They vowed to deepen cooperation on food safety, infrastructure, energy, space technology, military/police, etc. Jintao’s travels in Brazil then culminated in another five-year strategic plan between China and Brazil—South America’s biggest economy.

China alone has saw its trade raise from ten billion dollars a year in 2000, to over one hundred billion dollars a year in 2010, despite the global crisis. Such elevated trade came about thanks largely to such strengthened cooperation over past decades. China and Brazil also signed a memorandum of understanding, which gave both access to data from satellites, which the two countries developed, launched and operated together. The China-Brazil Earth Resources Satellite Programme (SBERS) was labeled by experts to be a jointly operated, remote system for sensing in areas of agriculture, meteorology, and the environment. Its intended use was for monitoring the environment, measure deforestation in the Amazons, and to help with future urban planning. This joint venture also helped to strengthen Sino-Brazilian cooperation on the peaceful use of space technology, yet another looming industry.

One of the world’s largest iron ore companies on the Hong Kong Stock Exchange is very important to the Brazilian economy. It continues to evince that Asia proves more essential than merely important. Some even say opportunities ultimately outweigh costs. Vale, the most successful company of South America’s biggest economy, even declared that Brazil’s presence in Asia is permanent. Vale was the first company from Brazil to be traded in Hong Kong, bringing a great deal of market capitalization worth some one hundred sixty-four billion dollars. In 2009 alone, and so close to the Great Recession, Vale shipped one hundred forty million tons of iron ore to China, or more than forty-for percent of Brazil’s total exports. Many economists note that such trade indicated the possibility of a long-term, mutually beneficial trading relationship. But there needs to be a great deal more of government oversight to prevent such large companies as Vale from continuing to violate human rights and facilitate the deaths of workers.

Some economists speculate that China may have made investments in Brazil to fix the price of raw materials within recent years. The flow of raw materials in one direction and manufactured goods in the other, from China to Brazil, may also have hurt Brazil’s manufacturing base by impacting both employment and broader economic growth negatively. Nonetheless, stabilizing the prices of raw materials in Brazil was likely mutually beneficial in the long run. Furthermore, Brazil has dismissed the suggestion that a neo-colonial relationship underlies the booming trade partnership in terms of the long haul. Two continental, trading-partner countries ranked among the ten largest world economies cannot seriously be linked to neo-colonialist practices. It is categorically unacceptable to espouse this notion.

Almost half a century ago, much of the international community did not seriously ponder whether or not China would one day vie for global hegemony. When Mao promised certain outcomes from China’s “Great Leap Forward”—so that China could catch-up in steel production and other things—few even thought twice. The failure of China’s Great Leap ultimately led to even less speculation about China’s trajectory. Yet the international belittling of the Chinese goes much further back in time. The Germans originated rhetoric of “Yellow Peril,” which they aimed at the Boxers during the reign of Kaiser Wilhelm. At the same time, intellectuals such as Mark Twain considered them serious patriots. Regardless of any sympathy they might have garnered from anti-imperialists in the industrializing world, rhetoric about the People’s Republic of China (PRC) led to the acceptance of a “Yellow Peril” attitude toward the Chinese on other fronts. Anti-Chinese sentiments cropped up yet again as Beijing produced its own atomic bomb. Then, “Yellow Peril” morphed into “Red Menace” during the 1960s. Both the United States and the Soviet Union openly worried over Mao’s staunch criticisms of capitalism and also his “revisionist” neglect of Marxism, respectively. The American government even produced a film in the 60s entitled Red Chinese Battle Plan. It depicted the Chinese as hungry for global domination. It also depicted the PRC as anxious to take over in Africa and Latin America. On some serious levels, not much has changed on this bigoted front.

Notwithstanding years Chinese defamation, there has yet to emerge some dastardly plan for global domination—economic or otherwise. Even during the Cold War the Chinese sought to ally themselves with prospective friends among the non-aligned states as an alternative to the US and USSR. While it is true that Chinese military has seriously weaponized itself over the years, experts argue that this has more to do with domestic control and self-defense from possible foreign multilateral military aggressors. Moreover, China is now one of the most economically powerful countries in the world; it is not likely that it will be equal to that of the US, even as China matches the US in some areas and passes it in others. China will have a great deal of economic prowess and stability for years to come, but the per capita income will lag far behind that of more economically developed nations. Bilateral trade between Brazil and China, for one, has skyrocketed from a matter of millions to tens of billions. Ultimately, fostering such mutual connections will lay the groundwork for economic development in both countries that can do far more than simply enrich the superrich. And among emerging economies, Brazil is second only to China apropos its numbers of superrich citizens.

Despite few and often serious hiccups, China’s industries have in many ways been a boon to Brazil’s economy. Annual growth in exports have been substantial, and thanks to extra income, thirty million-plus Brazilians have upgraded to middle-class strata. China has invested in Brazilian steel and mineral-ore companies and land for farming. China has become a strong exporter to the Brazilian market, selling shoes, clothes, watches and telecommunications equipment and electronics. By 2020, China will have soundly overtaken the European Union as Brazil’s second largest importer and exporter of goods. Chinese companies have invested tens of billions of dollars. Compared to just eighty-two million dollars in 2009, that is quite the jump in little more than a decade.

Brazilian government officials have called the Sino-Brazilian relationship dynamic. Many have been quick to note that an astonishing increase in bilateral trade, in economic ventures, scientific exchanges, and in technical and cultural collaboration. Even more financial ties will blossom with the growing increase in trade. Many Brazilian companies expect to follow onto the Hong Kong exchange. Both countries are enormous, with tremendous populations and extreme amounts of feasible trade with one another. The global economy will have to get accustomed to the fact that China will remain Brazil’s biggest trading partner, and Asia as a trading region will continue deepening more profound trade with Brazil and South America.

Going after Latin America’s agricultural centers, China also yearns not to rely to heavily on US crops. They especially take interest in soybeans. They provide credit to farmers so as to potentially triple the soybeans grown simply in order to feed chickens and hogs in China. Frankly, they need soy more than anyone, and this yet presents quite an opportunity for Brazilian farmers. The two countries even signed a seven billion dollar agreement to produce six million tons of soybeans a year—one of several such agreements. At some point, then, it is important to ask if the Chinese have become so dependent on Brazil that they would not do well without them. China is Brazil’s biggest trade partner, voraciously consuming soybeans, iron ore and flooding billions in Brazil’s energy sector. Such investment and economic boost has been a boon to Brazil’s economy, generating some general stability and lifting millions out of poverty. Almost eighty-four percent of Brazilian exports to China were raw materials, a staggering increase from just sixty-eight percent in 2000.

Roughly ninety-eight percent of Chinese exports to Brazil are manufactured products. Competitively priced cars for Brazil’s emerging middle class pose an interesting obstacle for Brazil’s industrial sector. For Brazil, manufacturing is a big concern. A sharp rise in exports accounts for the appreciation of the Brazilian currency in the last few years, but it had also had an averse affects on Brazil’s manufacturing exports. One solution may be an increase in the Chinese investment in Brazil to help relieve the country’s external vulnerabilities, while also enhancing local business effectiveness and viability.

Brazilian president Dilma Roussef has stated that it is no accident there has been an “effort to revalue the relationship with the United States.” The truth is that China itself exposes Brazil’s economic weakness perhaps more so than any of its other trading partners. China’s attempt to lease a few million acres from the Philippines soundly alarmed Brazilian officials. Nevertheless, Brazil endeavored to push for emerging-market peers like China to join it in denouncing unfair monetary policy practices of the US and the EU. It also implored China to join along in raising hell over global economic imbalances. Brazilian trade and industry minister Fernando Pimentel said that China had been reticent about supporting language regarding global monetary inequities, thinking that Brazil might indirectly implicate them. “Today’s problem doesn’t have to do with China,” says Pimentel, “it has to do with the dollar and the euro.” In just the last decade, China assumed roughly fifteen percent of Brazil’s total exports. There is reason to believe that this percentage will continue, and that more growth will continue to enliven Brazilian firms.

Brazil has already benefited from its trade with China thanks to its strong demand for both soft and hard commodities. Brazil’s trade relationship with China is a contrast to its many interests in Central America, the Caribbean and even Mexico which all have weaker ties to China than Brazil does. For one, the growth in trade flows might not benefit all Brazil’s business community equally. Brazil can also continue to help China in energy, minerals and nutrients. China can reciprocate, helping with contributions in aerospace and clean energy. Agriculture is yet another specific sector in Brazil where labor is demanding, which can keep employment growing. China’s demand for Brazilian crops has thus already helped reduce the unemployment rates. Yet, how might other American economies foster stable trade relationships with Brazil when, next to trade with China, they can seem little more than an afterthought?

China claims that bolstering partnerships with Brazil is strategic to its own interest. Chinese president Xi Jinping notes that Sino-Brazilian ties have surpassed many bilateral relations on unexpected levels, even in terms of global influence. Both countries view their mutual development as opportunities for their own respective development on national levels. Xi said China has committed itself to Brazil in order to further build on state-to-state relationships. He noted the special importance for this measure in a world of increasing economic globalization. China is the largest trading partner and export market for Brazil today, and both will doubtlessly work on a business forum to promote cooperation between each country’s enterprises. Brazil has every right, however, to ensure that centuries of pillage from other domineering economies does not metamorphose into some veiled form of Chinese plunder in this new century. Again, its growth ought to benefit its people—especially its poorest.

Executive editor of the Black Agenda Report, Glen Ford, has said that BRICS nations are historically positioned to overtake the waning US economic superpower. According to Ford, the “United States has positioned itself as the great and implacable impediment to global development.” Both China and Brazil have shown since the Great Recession that they have no choice but to work together in the face of such adversity. Ford notes that since the BRICS summit in Durban not so long ago, “the options available to the ‘West’ began to shrink, leading inexorably to the current historical juncture, in which U.S.-led imperialism relies almost entirely on its overwhelming military superiority to maintain itself.” Unlike the US, Brazil and China have other options, especially if they continue to work together.

According to the United Nations Development Program, Brazil, China, and India’s “combined economic output” will exceed the “aggregate production of Canada, France, Germany, Italy, the U.K., and the United States” by 2020. These are three developing nations responsible for this new economic world order, not the standing, historic economic superpowers of the last century. The Organization of Economic Cooperation and Development, comprised of rich-world countries, has predicted that China will surpass the United States as the world’s biggest economy by the end of 2016 alone. Given that China had already overtaken the US in some areas by 2010 alone, there is no reason to believe that China does not hold the keys to the global economic future. For that matter, its ability to even sustain its growth and economic prowess will require a continued partnership with Brazil. In turn, Brazil will continue to grow, and it will continue to be a leader in Latin America in matters cultural, political and economic. Brazil’s people can hope to benefit from their government if, and only if, democracy is at the heart of its trade relationships. For that matter, sustainable relations with China are not a given; great strides in political understanding must also be made.

Mateo Pimentel lives on the Mexican-US border, writing for many alternative political newsletters and Web sites. He can be reached at: mateo.pimentel@gmail.com. Read other articles by Mateo.