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How Brazil is responding to growing Chinese influence in Latin America

Image credit: Palácio do Planalto (Wikimedia Commons: Creative Commons)

The distance between China and Latin America is extreme. In fact, the three global capitals that are furthest from Beijing are Santiago (19048 km), Montevideo (19143 km) and Buenos Aires (19254 km). Yet despite the distance, China’s economic and diplomatic ties in Latin America have grown significantly since 2001. Regional trade with China hit record levels in 2018, jumping from $17 billion at the beginning of the century to approximately $346 billion in 2018. China is now Latin America’s second-biggest trading partner, behind only the US. For many countries, it has been number one for years.

Chinese demand for Latin America’s commodities has had significant consequences in the region. It has helped drive the economic boom that doubled the size of Latin America’s middle class and dramatically reduced poverty. Chinese investment has propped up the socialist regimes of Hugo Chávez and Nicolás Maduro in Venezuela, Rafael Correa in Ecuador, Evo Morales in Bolivia, and the Kirchners in Argentina – providing them with 75% of the $168 billion loaned to the region by Beijing. With the end of the commodity super cycle in 2014, China has emphasised its interest in expanding business ties with Latin America beyond just commodities, as well as in growing infrastructure and industrial cooperation. Currently 14 of the region’s 20 countries are signed up to the Belt and Road Initiative.

With the end of the ‘pink tide’ – a period of left-wing governments in the region – and the election of new neoliberal governments, the future of China in Latin America has come under more strain. As the biggest economy in Latin America and with a radical new president, Brazil’s relationship with China is of particular interest. How is Brazilian President Jair Bolsonaro responding to Chinese influence in the region and what does this tell us about the future of Sino-Latin America relations?

During his presidential campaign, Bolsonaro made headlines with his strong anti-China rhetoric, advocating that Brazil distance itself from China and realign with the US. In response to Chinese trade, he stated that that Beijing is not just ‘buying in Brazil - it is buying Brazil’. In February 2018, Bolsonaro became the first presidential candidate to make a trip to Taiwan since Brazil recognised the People’s Republic in the 1970s. In response, the Chinese embassy in Brazil labelled the trip an ‘affront to Chinese sovereignty’. Bolsonaro’s anti-China rhetoric had a clear political agenda, aligning perfectly with his broader anti-leftist critiques.

Once Bolsonaro entered office, his rhetoric was put to the test. Given how strong the economic ties between the two nations are, would Bolsonaro really be able to disentangle Brazil from China? Bolsonaro is not the first Latin American leader who has tried to redefine their country’s relationship with China. The efforts of Argentina’s President Mauricio Macri and Ecuador’s Lenín Moreno highlight how difficult this task is in practice.

China has been Brazil’s main trading partner since 2009, with bilateral trade reaching $106 billion in 2017. Brazil’s sales to China amounted to $66 billion, more than double what Brazil exports to the US. Its imports from China include everything from technology to chocolate. In turn, Brazil exports soybeans, iron ore, crude petroleum and sugar.

Brazil is also a prospective member of the Chinese-led Asian Infrastructure Investment Bank, and in recent years, several Chinese banks have begun operations in the country. In short, China and Brazil’s economic ties are extremely close. Chinese firms have been particularly involved in Brazilian energy, mining, infrastructure and agribusiness. This creates a political problem for Bolsonaro as he requires support from the rural caucus in Congress whose constituents are the cattle breeders and soy farmers that depend heavily on trade with China.

The Sino-Brazil relationship has already suffered – direct Chinese investment in Brazil fell from $16 billion in 2017 to just $3.9 billion in 2018. Some analysts attribute this to the uncertainty caused by Bolsonaro’s anti-China comments during the campaign. Despite Brazil’s economic size, it still remains immensely fragile in the wake of its 2015–16 recession, with unemployment above 11 percent. Worried by this trend, several powerful lobbies – including agribusiness and the military – have pushed Bolsonaro to moderate his rhetoric now that he is in office.

With the severity of these economic and political pressures, it seemed clear that Bolsonaro would be unable to sustain his critiques of China. By late March 2018, there were signs that Bolsonaro had moderated his view. Brazil is set to restart high-level trade talks with China that have not been held since 2015 and Brazil is hosting the Brazil, Russia, India, China and South Africa (BRICS) Summit in November, which President Xi will attend.

Furthermore, Bolsonaro shocked Brazilians by standing next to the Chinese ambassador to Brazil and announcing that he will visit Beijing during the second half of 2019. While some sources close to the administration claim that there are still plans to drive the two nations apart, these actions indicate that Bolsonaro will not be taking the hard-line position that he advocated during the campaign.

Brazil’s inability to redefine its relationship with China shows how difficult this task is to accomplish. Given its sheer economic size and subsequent bargaining power, Brazil was the best placed Latin American country to negotiate any changes in its relationship with China. If Brazil cannot change the bilateral dynamic then perhaps nobody in Latin America can.

Rose Iles Fealy is the Latin American Fellow for Young Australians in International Affairs

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