What does Brazil take if it adheres to China’s trillionaire plan? – 04/12/2023 – Market

Brazil’s possible approach to China’s controversial and ambitious infrastructure investment plan known as the “New Silk Road” is at the center of negotiations between Brazilian and Chinese diplomats on the eve of President Luiz Inácio Lula da Silva’s (PT) arrival in the country. Asian.

Sources interviewed by BBC News Brasil claim that Chinese authorities want the country to give a nod to the initiative.

Diplomats heard privately by the report said that “One Belt, One Road” is one of the main points still under discussion in the communiqué.

According to Brazilian negotiators, although the Chinese always raise the issue in diplomatic exchanges, this time they exerted a little more pressure on the Brazilian side for membership.

Brazil, however, has not yet decided whether to make any mention of the project in the joint communiqué that should be released at the end of the visit, on Friday (14th).

Lula should arrive in China this Wednesday night (12). On Thursday (13), she should participate in the inauguration of former president Dilma Rousseff (PT) as the new president of the NDB (New Development Bank), also known as “Banco dos Brics”.

On Friday, a meeting between Lula and the Chinese president, Xi Jinping, is scheduled.

The New Silk Road completes ten years in 2023, and Brazil’s adherence to the instrument would be a considerable political gain for Beijing.

A decision, according to these sources, is still awaiting the arrival in Shanghai of the Brazilian delegation. A formal adherence to the project at this point, however, would be ruled out.

Discussions surrounding the Chinese initiative, however, show a public division between a wing led by diplomats from the MRE (Ministry of Foreign Affairs), including its head, Ambassador Mauro Vieira, and a group closer to President Lula, which includes his special advisor for international affairs, former chancellor Celso Amorim.

Itamaraty has been stating that Brazil would not need to join the project because it is already the target of a significant part of Chinese international investment.

In turn, Celso Amorim and ministers such as Agriculture, Carlos Fávaro, argue that the country can join the Chinese project as a way to leverage infrastructure projects in the country.

What is the New Silk Road?

One Belt, One Road is a trillionaire project launched in 2013 by the Chinese government that initially envisaged a series of infrastructure projects such as highways, railways and ports, in addition to works in the energy sector, such as oil and gas pipelines connecting Asia to Europe.

There are different estimates of how much money has been invested since its launch. Values ​​range from US$ 890 billion (R$ 4.46 billion) to US$ 1 trillion (R$ 5 trillion).

The project became known as the New Silk Road in allusion to the ancient silk road, the name given to the trade flow that operated in the first millennium and connected Asia with Central Europe.

Since it was launched, the Chinese project has been expanded to other regions of the world, such as Africa, Oceania and Latin America.

According to the American study center CFR (Council on Foreign Relations), specialized in international relations, 147 countries have already joined or expressed interest in joining the plan since its launch. They represent two-thirds of the world’s population and 40% of the global GDP (Gross Domestic Product).

In Latin America, at least 20 countries are already part of the initiative, including Argentina, which, in April 2022, signed a memorandum of understanding with the Chinese government providing for membership.

International analysts believe that the project is one of the arms of the project to expand China’s economic and political power.

Currently, China is the second largest economy in the world and, until the Covid-19 pandemic, there were estimates that indicated that it could surpass the United States by 2028.

In an apparent reaction to the Chinese project, leaders of the G7 (a group formed by the United States, Canada, France, United Kingdom, Japan, Italy and Germany) released, in 2022, a financing plan for infrastructure projects valued at US$ 600 billion (BRL 3 trillion).

The project, however, is the subject of other controversies. Experts warn, for example, of the risk of over-indebtedness of countries that contract such financing.

In 2018, the Sri Lankan government transferred control of a port to China after failing to honor its debts to the country.

China, on the other hand, refutes the criticism, stating that they would be an attempt to tarnish its image on the international stage.

Another frequent criticism is that the loans made possible by the program depend on the intermediation of Chinese companies to be released and that, frequently, China sends qualified labor to countries for infrastructure works and hires locally only employees with lower wages.

What does Brazil have to gain?

Specialists in Sino-Brazilian relations claim that adherence to the program would have little practical effect and would not result in a “flood” of direct investment in Brazil in the short term.

They say that a Brazilian nod to the initiative would therefore have a more political than economic result.

Karin Vazquez, a specialist in international cooperation and professor at Fudan University, in China, estimates that a formal adhesion by Brazil could give access to a fund of US$ 40 billion (R$ 200 billion) in Chinese investments.

However, according to Vazquez, the slowdown of the Chinese economy has made the conditions for these loans less attractive than in the past.

“Nor do I see how joining would favor Brazil’s participation in regional integration projects financed by China. Brazil is already considered in some of these initiatives, such as the bioceânica railroad, whose implementation obstacles tend to be more related to internal issues of the countries and less to the financing of these projects”, says the professor to BBC News Brasil.

Pablo Ibanez, professor of Geopolitics at the Federal Rural University of Rio de Janeiro and visiting researcher at Fudan University, points out that Brazil’s entry into the project would have a more symbolic character. Even so, he defends membership.

“I don’t see major disadvantages. China doesn’t demand large counterparts when it finances projects. I think Brazil should enter, because it is a great partner of China”, says Ibanez.

Marcos Caramuru, former Brazilian ambassador to China, considers that, despite being symbolic, membership could benefit investments claimed by Brazilian states.

“Adherence does not make much difference in practice, but it sends a message to Chinese economic agents that can help when they evaluate investments in subnational entities such as state governments,” he explained.

What can Brazil lose?

Analysts interviewed by BBC News Brasil also believe that the disadvantages of a possible accession by Brazil would be small and not necessarily related to the partnership itself.

“The problems I see are related to the difficulties of implementing infrastructure projects, such as the environmental impact and how this affects indigenous or traditional populations”, says Ibanez.

The experts heard also minimize the risk of possible American retaliation against Brazil if the country associates itself in some way with the Chinese project.

Vazquez points out, however, that Brazil’s signaling in relation to the subject needs to be well calibrated.

“Some actors believe that joining the project would give Brazil greater space to bargain with the United States and China and not be encapsulated as a member of either ‘band'”, says the professor.

But she says that the argument is questionable insofar as it gives a “signal” that Brazil is aligned with China without signaling in the same direction and intensity for the Alliance for Economic Prosperity in the Americas, a project launched by the government of Joe Biden in 2022, it can be understood as favoring one of the two sides.

“At the very least, there would have to be clarity about what Brazil wants and can gain from each of these initiatives, which, in my view, does not exist”, says the professor.

The United States is experiencing one of the most tense periods in its relations with China and has signaled concern about the deepening of relations between China and Brazil.

Washington sees as an asset the fact that Brasilia has not, so far, committed itself to being part of the One Belt, One Road.

“For the United States, it is worrying to see Brazil increasingly indebted to China, getting involved in a growing number of businesses, especially in sensitive areas, such as technologies, public services, energy, mineral area, which bring risks to US-US cooperation. Brazil,” says Ryan Berg, director of the Americas program at the Center for Strategic and International Studies in Washington.

“If Lula, as the rumors say, gives in to the project on his trip to China, that will also be a big thing for the United States and seen with reservations, because it would provide a new avenue for Chinese influence and loans in the country.”

Issue exposes rift in government

In the midst of this scenario, two wings of the Lula government have been publicly diverging over whether or not Brazil should join the Chinese initiative.

In an interview with correspondents from international agencies in Brazil last week, Mauro Vieira signaled that Brazil would not need to adhere to the Chinese plan at this time.

“We have a strategic partnership that goes far beyond the One Belt, One Road. It’s not something that we’re in a hurry on either side or the other. It’s something that is part of contacts and conversations, but it’s not a pressing decision” , said Vieira when asked about the subject by BBC News Brasil.

On the other hand, Celso Amorim said in an interview with Valor Econômico newspaper that Brazil would have no reason to stay out of the initiative.

“There is no reason for Brazil not to enter. I have no prejudice and I do not see any political harm,” stated Lula’s special advisor.

Another who also defends Brazil’s entry into the mechanism is the Minister of Agriculture, Carlos Fávaro.

Questioned by BBC News Brasil, he argued that the country’s adherence to the Chinese project could bring investments considered important for the logistics of Brazilian agribusiness and for national integration.

“I defend (the entry of Brazil) because one of the main obstacles to the competitiveness of Brazilian agriculture is the logistics infrastructure. Expensive freight is synonymous with loss of competitiveness for export products”, stated the minister.

For Pablo Ibanez, the difference in views between the Itamaraty command and members around the president is the result of the view of PT members such as Lula and the wing led by Celso Amorim for a preference to foster relations with countries outside the United States-United States axis. Europe.

“On the one hand, you have the PT, Lula and Celso Amorim, who are known for valuing the growth of relations in the so-called global south. The Itamaraty, on the other hand, has a more pragmatic wing that believes that this (adherence) can bring reprisals from the United States. “

This text was published here.