China: Brazil should use cycle for reindustrialization – 04/11/2023 – Market

The government of President Luiz Inácio Lula da Silva (PT) needs to improve Brazil’s partnership with China in the coming years, if the country wants to take advantage of the current moment of the Chinese economy, of growth based on cutting-edge sectors, according to the view of specialists heard by Sheet.

In early March, China set a target of around 5% for economic growth in 2023. It is the lowest in more than three decades, and the Chinese economy has already performed weaker, growing 3% last year. after being pressured by three years of a tough Covid-19 control policy.

The Chinese government reinforced the need for economic stability and expansion of consumption, setting a target of creating around 12 million jobs in urban centers this year, above last year’s target (of 11 million) and warned of the risks that remain present. in the real estate sector.

For Elias Jabbour, professor at Uerj (University of the State of Rio de Janeiro) and specialist in China, the more modest goal is not a negative sign, and a country with Chinese dimensions aiming at a growth of around 5% brings certainties in an uncertain time for the world economy.

“Growth will be lower, but this will not be reflected in a drop in investment or labor productivity. It is lower from a quantitative point of view, not a qualitative one”, he says. Greater results will be replaced by more sustainable growth, supported by an energy transition, investment in high technology sectors and focused on income distribution, she says.

Jabbour, who is the author of the book “China: Socialism in the 21st Century”, argues that the Chinese have built a financial and commercial framework that allows the country to choose how much and when to grow and that Brazil can learn to mobilize its intelligence using China’s capacity.

“China tends to export public goods, while Brazil has a serious infrastructure problem. A partnership for the delivery of high-speed trains, with technology that can be a gateway to the reindustrialization of Brazil, can be way. It is necessary to go beyond commodities and move to a stage of cooperation”, he says.

Last month, President Lula would travel to China, visiting the Chinese leader, Xi Jinping. Lula, however, canceled the trip after being diagnosed with pneumonia. The Planalto Palace rescheduled the visit of the president to the country for this Tuesday (11).

The entourage should leave Brasília for Shanghai and arrive in Beijing two days later. Lula’s visit comes right after former president Dilma Rousseff (PT) went to the NDB, the BRICS bank (a bloc formed by Brazil, Russia, India, China and South Africa).

The presence of the former president at the institution is considered by the government as a sign of the country’s strengthening in the Brics and of investment opportunities. A Sheetthe Minister of Agriculture and Livestock, Carlos Fávaro (PSD), said that the government intends to establish a partnership with the institution, expanding the offer of credit at low interest rates for rural producers.

“Brazil has a good moment to capture money. It takes money from the Brics, and the BNDES and Banco do Brasil lend to investors, buying tractors, harvesting machines, building warehouses. Investments of five, six, seven years with lower rates. reduced. It’s a safe operation for everyone.”

In the analysis of the analysts, China can leave the role of one of the beneficiaries of the deindustrialization of Brazil to become an ally in the reindustrialization, now with a focus on the green economy.

Lula should take advantage of the visit to sign a cooperation agreement with China in semiconductors, 5G, 6G and the next generations of mobile networks, artificial intelligence and photovoltaic cells.

BYD, a manufacturer of 100% electric buses in Campinas (SP), will soon have its first national passenger car factory.

After Lula’s visit, the government also promises to mobilize efforts to resume infrastructure works, with the new PAC (Growth Acceleration Program) – the investment plan should combine concessions, direct government contributions and partnerships with states and municipalities.

In March, Xi Jinping secured an unprecedented third term during a parliamentary session in which he tightened his grip on the world’s second-largest economy.

According to an analyst at a US think tank, the Chinese leader will need to focus on economic recovery in his third term.

For Lívio Ribeiro, associate researcher at FGV Ibre (Brazilian Institute of Economics, of the Getulio Vargas Foundation) and also a specialist in the Asian country, analysts already said that a Chinese growth of around 6% would require a lot of stimulus and would cause imbalances, such as inadequate allocation of capital.

“People look too much at the short term, but forget to see the whole. The goal may be more reasonable, but it will still require efforts on the border of what is possible”, he assesses.

Ribeiro also reinforces that the plans of the Minister of Finance, Fernando Haddad, should also take into account the loss of momentum of commodities and that countries that export grains and animal proteins, such as Brazil, should see a stabilization of prices.

“I am only moderately optimistic about the behavior of iron ore prices, which could be positive for Brazil. China is showing signs of progress in infrastructure investments. To show growth, it will need a slight fiscal boost.”

The coordinator of the Research Group on Competitiveness and International Economy at Unisinos (University of Vale do Rio dos Sinos), Marcos Lélis, recalls that 2023 will be a difficult year for the world economy —and China should not escape this, since it reopened the country, with the end of Covid Zero policy restrictions, at a time of global slowdown.

“That robust cycle of commodities ended in the last decade and should not return. But Lula is trying to seek investors to adjust the formatting of Brazil’s infrastructure. Whether there are solid Chinese companies, with an appetite to invest in Brazil, is another matter.”

Lélis agrees that the country is going through a change in the production level, in which the large exports of footwear, textiles and ceramic tiles will increasingly give way to cutting-edge sectors, with more added technology.

“For Brazil, the best way to take advantage of this Chinese moment is to get even closer to them and try to make more exchanges with a high technological standard, to capture something of this leap. But it is not so easy. The Chinese have already invested more in Brazil in the past and we need to regain that.”

Despite being far from the levels of previous decades, a report by the Brazil-China Business Council pointed out that the Asian country’s contributions to Brazil totaled US$ 5.9 billion in 2021, an increase of 208% compared to 2020 in nominal terms (recovering the drop caused by the pandemic).

With Reuters