BEIJING, (Reuters) – Brazilian President Dilma Rousseff avoided the thorny issue of China’s currency in a summit with her Chinese counterpart Hu Jintao yesterday, but she came away with wider market access and investment pledges that may ease friction between the two emerging market giants.
Making her first visit to China since becoming president, Rousseff secured the top item on her wish list — concrete promises from her hosts that they would seek to buy more from Brazil than just raw materials such as iron ore and oil.
China soared past the United States last year to become Brazil’s biggest trading partner and investor, with more than $56 billion in trade.
But the rapid expansion in ties between the two so-called BRIC nations has also come with tensions, especially from Brazilian manufacturers who complain that China’s undervalued yuan is damaging their competitiveness.
Rousseff did not raise the currency dispute with Hu in their formal meeting, Brazilian Trade Minister Fernando Pimentel told reporters, despite earlier signals she would.
Yet Rousseff, a pragmatic leftist, did walk away with more than $1 billion worth of deals from Chinese companies for Brazilian aircraft and other goods — which could help address growing angst at home that an overvalued currency and a heavy tax load are making Brazil too expensive to compete abroad.
“It’s important to diversify for our trade to remain sustainable. The key to this relationship is reciprocity in the treatment of investments on both sides,” Rousseff told a business conference prior to her meeting with Hu.
Separately, Rousseff brandished a potential investment of $12 billion by Taiwan’s Foxconn, the maker of Apple Inc’s iPhone and other goods.
The omission of the yuan from the agenda will be a victory of sorts for China, which has resisted international pressure to raise sharply the value of its currency.
Officials in Rousseff’s government said prior to the trip they worried that publicly pressing Chinese officials about the yuan could prove futile — or even provoke a backlash. Rousseff could still raise the issue in a meeting today with Chinese Premier Wen Jiabao, who steers economic policy.
This week’s meeting of the G20 group of economic powers in Washington could provide another, more diplomatic forum for Brazil to apply pressure on the yuan.
