China eases Brazil’s concerns with investments

BRASILIA, (Reuters) – China has put its relations  with Latin America’s largest economy back on track by sending  Brazilian President Dilma Rousseff home with billions of  dollars in pledged investments, showing its economic clout and  easing, for now, Brazil’s concerns over trade imbalances.

The Asian giant’s showering of business deals on Rousseff  contrasts sharply with last month’s trip to Brazil by U.S.  President Barack Obama, who offered much praise for Brazil’s  rising economy but few concrete agreements.

Rousseff had gone to China with complaints from Brazilian  manufacturers ringing in her ears about a wave of cheap imports  that have decimated some Brazilian export sectors even as China  became Brazil’s largest direct investor last year.

Dilma Rousseff

Those complaints have received a more favourable hearing  since Rousseff was sworn in on Jan. 1 as her government has  sought a more balanced relationship with the country that is  now its biggest trade partner and has long been the main buyer  of Brazil’s huge farm and mining output.

Thorny currency and trade issues were largely left  untouched in Beijing. They will continue to dog ties, but  Brazilian officials say Rousseff advanced her main objective —  to diversify trade and investment ties beyond raw materials to  include more value-added goods.

She avoided bringing up the touchy issue of China’s  currency in public, but secured a host of business deals that  signaled Chinese sensitivity to Brazilian concerns over their  lopsided relationship.

“The agenda with China looks much more promising than that  with the United States,” said Andre Nassar, head of Icone, a  Sao Paulo-based trade think tank.

Obama’s visit to Brazil last month was partly aimed at  taking advantage of Rousseff’s more critical stance toward  China, whose growing influence in Brazil and Latin America has  eroded traditional U.S. economic dominance in the region.

Obama’s concrete pledges were slim though, especially  compared with China, which last year invested about $17 billion  in Brazil in areas from oil to manufacturing.

Rousseff, a career bureaucrat who has adopted a more  pragmatic foreign policy than her predecessor, returned from  China with billions of dollars of investment pledges in areas  ranging from research and development to food processing.

MATCHING WORDS
WITH MONEY

Taiwan-based Foxconn Technology Group, which has a heavy  presence on the mainland, is eyeing a massive investment in an  assembly line for electronic displays in Brazil, precisely the  type of labor-intensive industry that Rousseff’s administration  aims to promote.

Brazilian aircraft manufacturer Embraer secured an order of  up to $1.4 billion for its mid-sized E-190 commercial jet and  authorization to assemble its Legacy corporate jet in China.
After years of neglect, high-level communications channels  between the two governments have been revived, allowing  differences to be addressed more swiftly, Brazilian Foreign  Minister Antonio Patriota told Reuters.

“It exceeded expectations, I think they genuinely  understood and addressed Brazil’s concerns,” he said.

China’s Communist government is free of the congressional  restraints that Obama faces in granting trade concessions and  also sees more at stake in Brazil, a crucial supplier of food  and metals for China’s economy, said Nassar.

“Brazil provides them with food security. They need and  want this relationship to work.”

In a sign that Brazil will remain on Beijing’s radar screen  in coming months, China’s Trade Minister Chen Deming is to lead  a business delegation here during the second quarter to  consolidate potential business deals.

These include Chinese interest in a planned $21 billion,  high-speed railway linking Rio de Janeiro and Sao Paulo as well  as a line of credit that Brazil’s oil giant Petrobras is  negotiating with Chinese banks.

In exchange for the business deals, Brazil agreed to speed  up its recognition of China as a free-market economy, which  could make it harder to apply anti-dumping tariffs on imports.
Despite pledges by both sides to promote trade in  value-added products, Brazilians say several tariff barriers  remain on products such as steel, poultry, and processed soy.

“I don’t think they were simply trying to be nice but we’ll  have to see in coming months whether they carry through on  their pledges,” said Energy and Mines Minister Edison Lobao,  who participated in Rousseff’s meetings in China. Rousseff largely skirted the issue of China’s cheap yuan by  saying it was best discussed by the G20 group of major  economies.

The currency imbalance, heightened by a rallying real, has  fueled a wave of Chinese imports from white goods to car parts  and helped erode Brazil’s trade balance.

The issue of contraband Chinese imports, one of the biggest  problems facing Brazilian manufacturers, was also not addressed  during Rousseff’s visit. Customs officials say boatloads of  Chinese goods enter the country with doctored documents,  understating price and quantity.

“Much was left undone. They’ll need several more of these  summits to build on trust and really unleash the huge potential  of this relationship,” said Welber Barral, a former Brazilian  trade secretary.