Business and political leaders in Latin America’s biggest economy aim to strengthen ties with China—a nation increasingly crucial to Brazil’s long-term growth—as President Hu Jintao arrives in Brazil Wednesday for a state visit and a summit of so-called BRIC countries.
Among other subjects on the agenda for the BRIC nations—Brazil, Russia, India and China—leaders are expected to discuss how to protect their currencies from speculators. Russian President Dmitry Medvedev said on Tuesday that a “mutual exchange of information” among the countries would help protect local currencies. However, BRIC leaders have said they won’t discuss creating a multinational currency that could replace the dollar in international transactions—a subject that has been mentioned in forums of emerging nations.
While Brazil also is keen to strengthen relations with Russia and India, officials are going to great lengths to drum up business with Beijing. As China seeks a supply of raw materials necessary for growth in the decades ahead, Brazil is positioning itself to become an indispensable source of imports such as iron ore, oil, and soybeans.
China’s demand for such products last year led the country to supplant the U.S., after more than half a century, as Brazil’s biggest trade partner. Over the past decade, trade between China and Brazil ballooned to $36.1 billion in 2009 from just $2.3 billion in 2000.
The relationship, fortified after a series of visits between Presidents Hu and Luiz Inácio Lula da Silva since 2004, illustrates how Chinese demand is reshaping the world-wide flow of commerce among developing markets. By 2015, according to a new report by the United Nations’ Economic Commission for Latin America and the Caribbean, China will displace the European Union in terms of trade with the region.
“China is trying to diversify its portfolio, its security and economic relationships, and reach into many pockets around the world,” Steven Clemons, director of the American Strategy Program at the New America Foundation, a Washington think tank, said in a conference call.
Mr. Hu and other BRIC leaders gather in Brasília on Thursday and Friday. After the summit and bilateral talks with Brazil, Mr. Hu is scheduled to travel to Chile and Venezuela, two other growing trade partners.
Demand from China helped Brazil weather the global economic downturn while trade with other major markets dwindled. Income from those exports, coupled with a move by China to finance infrastructure and industrial projects in strategic markets abroad, is accelerating development of ventures.
Petróleo Brasileiro SA, the state oil giant known as Petrobras, last month finished building a 900-mile pipeline for natural gas with the help of Sinopec, the international unit of China Petroleum & Chemical. Last year, in exchange for future oil supply, the China Development Bank loaned Petrobras $10 billion to help develop Brazil’s massive offshore reserves. China is financing part of a project for a coal-fired power plant in southern Brazil. Chinese officials also have expressed interest in new port facilities and a proposed bullet train to link São Paulo and Rio de Janeiro.
“The interaction is mutually beneficial,” said Chen Fenying, head of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations in Beijing. “China needs the products from Brazil and Brazil needs to develop markets in China.”
Still, business between the two countries isn’t always smooth. China has rebuffed pleas by Brazil, the world’s biggest beef exporter, for access to the country’s market for meat.
Meanwhile, Brazilian bureaucracy and strict environmental laws have kept some Chinese ventures from getting off the ground in Brazil. After Mr. Hu’s first visit to Brazil in 2004, Baosteel Group, China’s largest steelmaker, announced plans to build a multibillion dollar steel plant in northeastern Brazil. After three years of failing to get the necessary permits, though, the company gave up.
“Sometimes in Brazil the hurdles are a little too big for companies that are used to moving fast,” said Charles Tang, president of the Rio de Janeiro-based Brazil-China Chamber of Commerce.
Some business people say they fear Brazil could grow too reliant on Beijing—especially if Brazil limits business with China to commodities. While Brazil imports everything from electronics, industrial products, and clothing from China, the products it sells to the Chinese are mostly mining, oil, and agricultural exports.