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Brazil, China forge closer ties, sign raft of deals
July 18, 2014, 5:25 am

Chinese President Xi Jinping (L, rear) and his Brazilian counterpart Dilma Rousseff (R, rear) jointly meet journalists after their talks in Brasilia, Brazil, July 17, 2014 [Xinhua]

Chinese President Xi Jinping and his Brazilian counterpart Dilma Rousseff jointly meet journalists after their talks in Brasilia, Brazil, July 17, 2014 [Xinhua]


Chinese President Xi Jinping and Brazilian President Dilma Rousseff signed 32 agreements Thursday in commerce, education, civil aviation and energy, including a deal that will see Brazilian company Embraer sell 60 E-190 jets to China.

“The balance [of trade between Brazil and China] could not be more positive, and the future could not be brighter,” said Rousseff, at the ceremonial deal-signing. “Our relationships, which shape a truly strategic partnership, are developing with unprecedented speed in various areas of cooperation.”

Embraer will sell 40 planes – 20 E-190 jets and 20 E-190E-2 – to China’s Tianjin Airlines, a subsidiary of Hainan Airlines, and 20 E-190 jets to the Industrial and Commercial Bank of China (ICBC). According to an Embraer price list the deal could come to $2.86 billion.

Amongst the deals inked were some infrastructure investments by China, most significantly a railway spanning the continent from Brazil’s Atlantic coast to Peru’s pacific ports, which woud significantly reduce the costs and time required for Brazil to ship raw commodities to China.

China is Brazil’s biggest trade partner, with bilateral trade between the two reaching $83.3 billion, up 10% on 2012, and expected to exceed $90 billion this year.

But those figures have been disproportionately driven by growth in China’s infrastructure and consumer market, and concomitant growth in its appetite for mineral and agricultural commodities, in which Brazil is rich.

Meanwhile, China exports to Brazil are largely value-added consumer goods, which cost Brazil more while diminishing the country’s capacity and motivation to nurture its own manufacturing industries.

This relationship, according to Marcos Troyjo, co-director of the BRICLab at Columbia University, puts Brazil at an enormous disadvantage, no matter how bullishly Rousseff speaks of the relationship.

“One ton of Brazilian exports to China is worth about US$200. One ton of Chinese exports to Brazil is worth more than US$3,000,” Troyjo told The BRICS Post. “One would have a hard time calling that a “partnership”.”

Brazil, a huge country with poor roads, has historically faced delays in getting its commodities – soy from the Western state of Mato Grosso, for example, or iron ore from the north – to ports. Once at the ports, there has not always been enough capacity to get it loaded quickly onto ships bound for China.

“For China – and I think the large delegation of Chinese business leaders add to that perspective – it is all about examining the current status of Brazil’s potential as a supplier of raw materials,” said Troyjo. “China is willing to go the extra mile when it comes to investing its own money in Brazilian infrastructure of transports, warehouse, shipping, shipbuilding, etc. in order to guarantee the long-term provision of those commodities.”

Even if China has its own interests at heart, Brazil still needs infrastructure improvements to increase its productivity. A recent push to improve transport infrastructure saw Rousseff open up airports and ports to privatisation, a controversial move for the left-leaning President.

Later Thursday the two presidents met with CELAC ( Community of Latin American and Caribbean States) member nations, including Cuban president Rául Castro.

At the meet, Xi announced the official establishment of the China-CELAC Forum and the decision to hold the forum’s inaugural ministerial meeting in Beijing as soon as possible.

The founding of the forum “will have a profound impact on the future development of our relations and send out a strong signal of our commitment to strengthening unity and coordination and promoting South-South cooperation,” Xi said.

The 33-member CELAC, established in December 2011 in Caracas, Venezuela, comprises all countries in North and South Americas with the notable exception of the United States and Canada.

 

Lucy Jordan in Brasilia, Brazil for The BRICS Post

One Response to Brazil, China forge closer ties, sign raft of deals

  1. PeterWW Reply

    July 22, 2014 at 3:11 am

    The report prices all these transactions in US dollars; but will they actually be settled in US dollars, or real/yuan, please?

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