In China, Lula Seeks Help to Build Back Brazilian Industry

By MAURICIO SAVARESE and EMILY WANG FUJIYAMA Associated Press

12:07 JST, April 15, 2023

BEIJING (AP) — The trip by Brazil’s President Luiz Inácio Lula da Silva to Beijing has made clear he is counting on China to help reinvigorate the South American nation’s ailing industrial sector — particularly by picking up the slack of exiting U.S. companies.

After Lula met Friday with China’s President Xi Jinping, Brazilian finance minister Fernando Haddad told reporters the nations are planning a “leap forward” in their relationship.

“President Lula wants a policy of reindustrialization. This visit starts a new challenge for Brazil: bringing direct investments from China,” Haddad said. He added that Brazil wants strong bonds with the U.S. as well, but noted with regret that recently “some American companies made the decision to leave Brazil.”

Industrial policy is near and dear to Lula, a former steelworker who became a union leader. Decades later, he launched his bid for a third presidential term on the gritty outskirts of Sao Paulo outside a car factory. That area — and the country — is churning out ever-fewer manufactured goods.

Brazil’s national statistics institute said in July 2022 that Brazil had lost 1 million industrial jobs over the prior decade, a decline of 11.6%. The institute said in 2021 that the country’s industrial sector represented 18.9% of Brazil’s GDP, down from 38% three decades earlier.

Speaking to journalists before leaving China, Lula said Saturday morning that Brazil’s relationship with the Asian giant “is going beyond that phase of commodity” exports. He added he visited the headquarters of Chinese telecommunications company Huawei because he needs to promote “a digital revolution” in his South American nation.

Over the years, Brazil became a big exporter of raw materials, and China has consumed them voraciously. China overtook the U.S. as Brazil’s biggest export market in 2009, and each year buys tens of billions of dollars of soybeans, beef, iron ore, poultry, pulp, sugar cane, cotton and crude oil.

The Asian giant and the Latin American powerhouse had a somewhat frosty relationship over the last four years when far-right leader Jair Bolsonaro held the presidency in Brasilia. Even some of Bolsonaro’s supporters in the agribusiness sector were critical of outbursts that antagonized China.

On Thursday, Lula meet with the CEO of Chinese manufacturer BYD, which produces electric busses and is in talks to start operations at a factory the Brazilian state of Bahia, Lula’s office said. The previous owner, Ford Motor Co., announced in 2021 that it was shuttering the plant, along with two others in Brazil.

Brazil is already the biggest recipient of Chinese investment in Latin America, according to Chinese state media. And Lula doesn’t just want more investment; he is also seeking partnerships that challenge the hegemony of Western-dominated economic institutions and geopolitics, including diplomacy over the war in Ukraine.

Lula’s visit included the swearing in Thursday of former Brazilian President Dilma Rousseff as head of the Chinese-backed New Development Bank, which is funding infrastructure projects in Brazil and elsewhere in the developing world.

The bank portrays itself as an alternative to the International Monetary Fund and World Bank, which often impose loan conditions that developing nations criticize as punitive.

At the swearing-in ceremony, Lula took swipes at both the IMF and the dominance of the U.S. dollar in international trade, hailing an agreement between Brazil and China to use the Chinese yuan in their bilateral commerce

Lula and Xi oversaw the signing of agreements in 15 areas, ranging from agriculture to aeronautics, which underscored the improvement in relations since Lula took over in January.

“As comprehensive strategic partners, China and Brazil share extensive common interests,” Xi said, according to the Chinese Foreign Ministry.

“China … sees the relationship as a high priority on its diplomatic agenda,” he said.

Charles Tang, who chairs the Brazil-China Chamber of Commerce, told The Associated Press that he expects several new deals for Chinese infrastructure investments after the trip.

“China tends to put money into that, as it did in Africa. China is filled with reserves for investment and it can take the current risks in Brazil,” Tang said by phone.

The trip was Lula’s third visit to China, but the first with Xi sitting as president. On Friday, the two leaders met for three hours — far longer than had been scheduled.

“The duration of the meeting speaks for itself,” Brazil’s Ambassador Marcos Galvão said afterward at a late-night press conference.

Xi had greeted Lula with full military honors, including a 21-gun salute, at the Great Hall of the People adjacent to Tiananmen Square in the heart of the Chinese capital. The two leaders walked to the sound of Brazilian song “Novo Tempo” — or “New Time” in English.

The Brazilian leader is seeking to rebuild ties with China following a turbulent relationship under Bolsonaro, who showed little interest in foreign travel.

On Friday, a son of the former president, Sen. Flávio Bolsonaro, criticized Lula for cozying up to China.

“The only thing missing is to wage a direct war on the United States … Lula is walking a dangerous path alongside dictatorships and enemies of democracy, like Venezuela, Cuba and Nicaragua, ” the younger Bolsonaro said on social media.

In February, Lula traveled to Washington, where he and U.S. President Joe Biden stressed the importance of defending democracy and preserving the Amazon rainforest. The trip didn’t, however, produce the hoped-for financial pledge for Brazil’s Amazon Fund.

The Lula-Xi talks touched on the conflict in Ukraine, with the leaders agreeing on the need for a negotiated settlement, according to Chinese state broadcaster CCTV.

A key piece of Lula’s outreach abroad is his proposal that Brazil and other developing countries, including China, mediate peace. However, his suggestion that Ukraine cede Crimea has irked Kyiv and its closest backers, namely the U.S. and Europe.

Lula said Saturday morning that China and the U.S. have an important role in the discussion on Ukraine, but added, “It is necessary that the U.S. stops stimulating the war and talk about peace.”

One of roughly 50 leaked classified documents on the platform Discord that have been viewed by the AP said that, as of late February, Russia’s foreign affairs ministry supported Lula’s plan to establish a club of supposedly impartial mediators, as it “would reject the West’s ‘aggressor-victim’ paradigm.” The item cited electronic surveillance as the source.

China has also sought to play a role in ending the conflict, though in a manner highly supportive of Moscow. It has refused to condemn the invasion, criticized economic sanctions on Russia and accused the U.S. and NATO of provoking the conflict.

Lula’s trip to China marks a significant contrast with the “low-key visit to Washington” and provides leverage against Europe, said Oliver Stuenkel, a political scientist from the Getulio Vargas Foundation university and think tank.

“This approach with China might actually make Europeans keener to make an agreement with Brazil, so they don’t lose even more market share to China in South America,” Stuenkel said.