Brazil's China Challenge

By Carlos Sucre
Cornell International Affairs Review
2011, Vol. 5 No. 1 | pg. 2/2 |

A South American Power Struggle

As outlined, China has become an important player in Latin America, mostly through increased trade. It makes investments and loans, participates in the region’s international institutions and bridges cultural gaps with Latin America. China funds scholarships and has opened several Confucius Institutes in Brazil, Mexico, Argentina and others throughout the region.65 While these are still in the formation stage, the investment makes China’s intention clear: gaining power in Latin America.

As China’s experience in Latin America deepens, its influence only increases. Compared to Brazilian weight in the region, we have already seen important effects of China’s importance to the Latin American economies. In 1995, Brazil’s manufactured exports to Latin America totaled US$ 5.7 billion as China exported US$1.4 billion. By 2004, China was exporting US$ 7.8 billion and Brazil around US$ 6.5 billion.66

Perhaps trying to reverse this pattern, during Lula’s government, Brazil became more involved in regional affairs.67 Long hesitant to act on the regional stage, 68 Brazil has now taken a high profile role in establishing organizations like the Union of South American Nations (UNASUR) or in organizing regional meetings such as the Latin American and Caribbean Summit for Integration and Development (CALC).69 Brazil now hosts regional meetings and in 2008, all South American nations adopted its proposed South American Defense Council.70

Along with increased political involvement, Brazil’s economy is now the most important in the region. Thanks to its recent growth, Brazil is around 60% of the regional GDP.71 Brazil is using some of this wealth to fund development projects, not only through international organizations, but also through the Agência Brasileira de Cooperação – the Brazilian Cooperation Agency. Though focused on African development, Brazil funds more than 100 projects throughout South America.72

A view of Brazil’s National Congress.

A view of Brazil’s National Congress.

However, this pales in comparison to the level of spending and investing that China carries out in Latin America. Over the first half of 2010, China invested around US$20 billion in Brazil alone.73 It committed US$8.5 billion in July 2010 to refurbish Argentina’s railway system, with the condition that Argentina buy Chinese trains.

Indeed, “China has even begun to adopt a gringo swagger that stands in contrast to its old role as the cheerleader for the Third World.” 74 For all of Brazil’s newfound wealth, it is simply unable to compete with the way China gains influence in Latin America and elsewhere. China can offer enormous loans at “tiny interest rates that can stretch beyond 20 years.”75 It is impossible for Brazil to match China in this regard.76

Further weakening Brazil’s position vis-à-vis China in the region is the probability that the country will take a different path under new president Dilma Rousseff. She is widely expected to take a more introspective approach than her larger-thanlife predecessor.77 Brazil will focus on resolving its many social ills, investing in infrastructure, including building Olympic and World Cup venues, reforming its revenue structure and reining in government spending.78

With a president uninterested in international prestige and lacking an inclination to participate on the global stage, Brazil will take a more measured approach to its heretofore seemingly unstoppable drive to global prominence. In turn, this gives China more space in South America to gain power and thus keeping Brazil from becoming a global power by 2025.

Closing Thoughts

Brazil is viewed as a rising power thanks to its stability and growth. After decades of rampant inflation and chaos, innovative policymakers managed to control the currency and usher in an era of prosperity. It is undoubtedly true that Brazil has performed admirably, economically and politically. Yet, this age of stability and growth is not yet twenty years old. It was only in 2008 that Brazil received its first investment grade rating, from Standard and Poor’s.79 In essence, Brazil’s claim to global power lies in relatively recent developments. Only twenty years ago, Brazil was experiencing hyperinflation and was considered an economic basket case.

However, China’s challenge to Brazil’s ascendancy depends upon continued Chinese performance. Yet, many have begun to question the fundamental strength of this development. Nouriel Roubini warns of China’s massive infrastructure spending possibly creating artificial growth.80 Other problems remain, including socio-political concerns threatening overall stability. J.P Morgan has voiced worries regarding China’s social tension risking China’s performance.81 It must address a creeping inflation problem, which has begun to produce considerable unrest.82 Clearly, China’s ascent to power is not without serious challenges and obstacles.83

To close, we note the warning that Alvaro Vargas-Llosa, a Peruvian politics and economics writer, issued regarding the hype surrounding Brazil’s takeoff: “Brazil, a bewitching country, needs to take a deep breath,”84 and focus on reforming its political system and addressing other ills. Indeed, sustained growth and prosperity cannot be built upon “high revenue from commodities and some manufactured goods,” along with social welfare programs.85 Brazilian authorities should be mindful of Argentinean experience of the early 20th century. Its neighbor reached developed status through commodity exports, only to regress in less than 20 years.86


Endnotes

  1. Jim O’Neill, “Building Better Economic BRICs,” Goldman Sachs: Global Economics Paper No. 66, November 30, 2001. Accessible at: http://www2.goldmansachs.com/ideas/brics/building-better-doc.pdf (accessed April 1, 2011).
  2. Dominic Wilson and Roopa Purushothaman, “Dreaming with BRICs: The Path to 2050.” Goldman Sachs: Global Economics Paper No. 99, October 1, 2003. Accessible at: http://www2.goldmansachs.com/ideas/brics/book/99-dreaming.pdf (accessed April 1, 2011).
  3. Jim O’Neill, interview by Charlie Rose, Charlie Rose, April 12, 2011, http://www.charlierose.com/view/interview/11612
  4. Juan de Onis, “Brazil’s Big Moment: A South American Giant Wakes Up,” Foreign Affairs, November/December 2008. Accessible at: http://www.foreignaffairs.com/articles/64610/juan-de-onis/brazils-big-moment.
  5. Riordan Roett, The New Brazil (Washington, DC: Brookings University Press, 2010), 127.
  6. David Murrin, Breaking the Code of History (London, UK: Apollo Analysis Limited, 2011). Argument regarding the stages of global power Accessible at: https://www.breakingthecodeofhistory.com/about.htm.
  7. Oliver Stuenkel and Jabin T. Jacob, “Rising powers and the future of democracy promotion: the case of Brazil and India,” Portuguese Journal of International Affairs, No. 4, (Autumn/Winter 2010): 23-30.
  8. Mac Margolis, “The Crafty Superpower,” Newsweek, April 18, 2009, http://www.newsweek.com/2009/04/17/the-crafty-superpower. html (accessed April 1, 2011).
  9. Edmar Lisboa Bacha and Regis Bonelli, “Accounting for Brazil’s Long Term Growth,” Revista de Economia Política, Volume 25, Number 3, 2005. Accessible at: http://www.ecostrat.net/files/Bacha_e_Bonelli_ECOSTRAT.pdf
  10. Roett, The New Brazil, 91.
  11. Roett, The New Brazil, 87.
  12. David Landes, The Wealth and Poverty of Nations (New York, NY: W.W. Norton, 1999), 511.
  13. Roett, The New Brazil, 92.
  14. Roett, The New Brazil, 92.
  15. Bacha and Bonelli, “Accounting for Brazil’s Long Term Growth.”
  16. Regis Bonelli, “Strengthening Long-Term Growth in Brazil,” (paper presented at the OECD Seminar: Beyond the Crisis – Returning to Sustainable Growth in Latin America, Paris, France, November 24, 2010). Accessible at: http://www.oecd.org/dataoecd/30/41/46454661. pdf.
  17. Rodrigo Maia, José Carlos Aleluia, and Paulo Gouvêa da Costa, eds,., Brazilian Foreign Policy: Present and Future (Washington, DC: Democratas – National Board of Directors, 2010), 59.
  18. Maia, Aleluia and Gouvêa da Costa, Brazilian Foreign Policy: Present and Future, 9-10.
  19. Patrice Franko, The Puzzle of Latin American Economic Development, 3rd Edition (Lanham, MD: Rowman & Littlefield, 2007), 254
  20. Central Intelligence Agency, World Factbook, https://www.cia.gov/library/publications/the-world-factbook/ (accessed April 2, 2011)
  21. Jorge Dominguez and Rafael Fernandez de Castro, Contemporary U.S.-Latin American Relations: Cooperation or Conflict in the 21st Century, (New York, NY: Routledge, 2010), 6.
  22. Dominguez & Fernandez de Castro, Contemporary U.S.-Latin American Relations, 3
  23. Dominguez & Fernandez de Castro, Contemporary U.S.-Latin American Relations, 3
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  25. Kerry Dumbaugh and Mark P. Sullivan, “China’s Growing Interest in Latin America,” CRS Report for Congress, April 20, 2005, Accessible at: http://fpc.state.gov/documents/organization/45464.pdf (accessed April 1, 2011).
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  27. Franko, The Puzzle of Latin American Economic Development, 254.
  28. Franko, The Puzzle of Latin American Economic Development, 254.
  29. Daniel H. Rosen, “How China is Eating Mexico’s Lunch,” The International Economy (Spring 2003), 25. Accessible at: http:// yaleglobal.yale.edu/sites/default/files/pdf/china_mexico_lunch_0.pdf (accessed April 1, 2011).
  30. J.F. Hornbeck, “U.S.-Latin America Trade: Recent Trends and Policy Issues,” Congressional Research Service, February 8, 2011. Accessible at: http://www.fas.org/sgp/crs/row/98-840.pdf (accessed April 1, 2011).
  31. Dominguez & Fernandez de Castro, Contemporary U.S.-Latin American Relations, 213.
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  35. Roett & Paz, China’s Expansion into the Western Hemisphere, 16.
  36. R.E. Ellis, “Chinese Soft Power in Latin America: A Case Study.”
  37. Ellis, “Chinese Soft Power in Latin America: A Case Study.”
  38. Dumbaugh and Sullivan, “China’s Growing Interest in Latin America.”
  39. Organization of American States, “DIA Activities with Permanent Observers 2010.” Accessible at: http://www.oas.org/en/ser/dia/ perm_observers/docs/SG%20Annual%20Report%20Permanent%20Observers%202010%20-%20Final.pdf (accessed April 3, 2011).
  40. Staff, “China, OAS, Extend Cooperation,” China Internet Information Center, December 17, 2009, http://www.china.org.cn/ world/2009-12/17/content_19084994.htm (accessed April 3, 2011).
  41. Staff, “China, OAS, Extend Cooperation.”
  42. Inter-American Development Bank, “IDB, China Eximbank join forces to set up infrastructure facility and a publicprivate investment fund for Latin America and the Caribbean,” news release, March 28, 2011, http://www.iadb.org/en/news/newsreleases/ 2011-03-28/china-eximbank-latin-america-investment-fund,9323.html
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  44. Inter-American Development Bank, Annual Report 2009.
  45. Maia, Aleluia and Gouvêa da Costa, Brazilian Foreign Policy: Present and Future, 76.
  46. For an interesting look at Chinese and Brazilian economic growth, since the 1960s: http://www.google.com/publicdata?ds=wbwdi& met=ny_gdp_mktp_cd&idim=country:BRA&dl=en&hl=en&q=brazil+gdp#ctype=l&strail=false&nselm=h&met_y=ny_gdp_ mktp_cd&scale_y=lin&ind_y=false&rdim=country&idim=country:BRA:CHN&hl=en&dl=en
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  48. Maia, Aleluia and Gouvêa da Costa, Brazilian Foreign Policy: Present and Future, 76.
  49. Silverio Zebral, personal interview, March 8, 2011.
  50. Zebral, personal interview, March 8, 2011.
  51. Zebral, personal interview, March 8, 2011.
  52. Paulo Sotero, “Brazil and China: Growing Asymmetries, Unmet Expectations and the Limits of Convergence in the Global South” (paper presented at the Conference on Leadership and the Global Governance Agenda, Center for International Governance Innovation, Stanley Foundation and Chinese Institutes of Contemporary International Relations, Beijing, China, November 10-11, 2009).
  53. Paulo Sotero, lecture Brazilian national security (course on Brazil in the Global Arena, George Washington University, Washington, DC, April 11, 2011).
  54. Wang Xinyuan, “Brazil to Diversify Exports to China,” The Global Times, May 20, 2009, http://www.globaltimes.cn/www/english/ business/Investment-in-China/2009-05/431338.html (accessed April 12, 2011).
  55. Xinyuan, “Brazil to Diversify Exports to China.”
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  57. Sotero, “Brazil and China: Growing Asymmetries, Unmet Expectations and the Limits of Convergence in the Global South.”
  58. Paulo Cabral, “China to Welcome Brazil’s Newly Elected President,” BBC News – Business, April 7, 2011, http://www.bbc.co.uk/ news/business-13009093 (accessed April 14, 2011).
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  60. Xinyuan, “Brazil to Diversify Exports to China.”
  61. Andre Soliani and Matthew Bristow, “Rousseff Wants China Buying More Than Soybeans, Vale’s Iron Ore,” Bloomberg, April 10, 2011, http://www.bloomberg.com/news/2011-04-10/rousseff-wants-china-buying-more-than-soybeans-vale-s-iron-ore.html (accessed April 14, 2011).
  62. Andre Soliani and Matthew Bristow, “Rousseff Wants China Buying More Than Soybeans, Vale’s Iron Ore.”
  63. Raymond Colitt and Ana Nicolaci da Costa, “Geithner Pledges to Work With Brazil on China,” Reuters, February 7, 2011, http:// www.reuters.com/assets/print?aid=USTRE7160ST20110207 (accessed April 14, 2011).
  64. Paulo Cabral, “China to Welcome Brazil’s Newly Elected President.”
  65. Wang Ying, “Costa Rica gets Confucius Institute,” China Daily, November 19, 2008, http://www.chinadaily.com.cn/cndy/2008- 11/19/content_7217557.htm (accessed April 15, 2011).
  66. Amaury de Souza, “Brazil and China: An Uneasy Partnership” (paper presented at the China – Latin America Task Force, Center for Hemispheric Policy, University of Miami, Miami, FL, February 14, 2008). Accessible at: http://www.cebri.com.br/midia/documentos/204. pdf (accessed April 14, 2011)
  67. Roett, The New Brazil, 127.
  68. Woodrow Wilson International Center for Scholars – Brazil Institute, “Brazil and ‘Latin America’ in Historical Perspective,” press release, March 2, 2010, Accessible at: http://www.wilsoncenter.org/index.cfm?topic_id=1419&fuseaction=topics.event_ summary&event_id=591059 (accessed April 13, 2011).
  69. Roett, The New Brazil, 130-131.
  70. Roett, The New Brazil, 130.
  71. Sotero, “Brazil and China: Growing Asymmetries, Unmet Expectations and the Limits of Convergence in the Global South.”
  72. Paulo Sotero, “Brazil as an Emerging Donor: Huge Potential and Growing Pains,” Development Outreach, Volume 11, Number 1 (February 2009), 20.
  73. John Pomfret, “China Invests Heavily in Brazil, Elsewhere in Pursuit of Political Heft,” The Washington Post, July 26, 2010, http:// www.washingtonpost.com/wp-dyn/content/article/2010/07/25/AR2010072502979_pf.html (accessed April 14, 2011).
  74. John Pomfret, “China Invests Heavily in Brazil, Elsewhere in Pursuit of Political Heft.”
  75. John Pomfret, “China Invests Heavily in Brazil, Elsewhere in Pursuit of Political Heft.”
  76. John Pomfret, “China Invests Heavily in Brazil, Elsewhere in Pursuit of Political Heft.”
  77. Vincent Bevins, “Dilma Rousseff Moves Brazil To Centre,” The Guardian, March 3, 2011, http://www.guardian.co.uk/commentisfree/ cifamerica/2011/mar/03/brazil-dilma-rousseff (accessed April 14, 2011).
  78. Alexei Barrionuevo, “Leading Brazil, Facing Unfinished Tasks,” The New York Times, October 30, 2010, http://www.nytimes. com/2010/10/31/world/americas/31brazil.html (accessed April 14, 2011).
  79. Fabio Alves and Carlos Caminada, “Brazilian Debt Raised to Investment Grade by S&P (Update 4),” Bloomberg, April 30, 2008. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a86v4f6_W2Jg (accessed April 14, 2011).
  80. Nouriel Roubini, “Beijing’s Empty Bullet Trains,” Slate Magazine, April 14, 2011. Accessible at: http://www.slate.com/id/2291271/ (accessed April 15, 2011).
  81. Alejandro Barbajosa, “JP Morgan Bullish on China Commodity Demand, Warns on Social Tension,” Reuters, April 5, 2011, http:// uk.reuters.com/article/2011/04/05/jpmorgan-commodities-idUKL3E7F50FJ20110405 (accessed April 26, 2011).
  82. Jim Jubak, “China Creeps Toward a Crisis,” MoneyShow,

Photos courtesy of:

  • http://commons.wikimedia.org/wiki/File:Brazilian_National_Congress.jpg
  • http://commons.wikimedia.org/wiki/File:Dilma_Rousseff_-_foto_oficial_2011-01-09.jpg

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