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Redefining Relations Between China and Brazil and Implications for the U.S.

Jul 03, 2023

In February of this year, President Lula of Brazil embarked on his first official visit to Washington, DC. He spent two brief days discussing democracy and climate change, but did not explore any commercial ties. Contrastly, Lula just concluded a four day trip to China, where he was accompanied by a delegation of over 240 government and business executives, who collectively signed a total of 15 agreements involving trade, commerce, and the internationalization of China’s currency, the Renminbi.

For the last 14 years, China has served as Brazil’s largest trading partner and their combined trade hit a record $150 billion in 2022. Moreover, the RMB became the country’s second-largest reserve currency (representing 5.37 percent of foreign-exchange holdings). With this, Lula’s trip was watched very closely by U.S. government officials, as Brazil and China seek to establish ties to help insulate them from the U.S.-led world order.

In the past few weeks, China has presented new initiatives to handle major world issues and gone head-to-head against Western-led institutions. This has primarily centered on China’s newly unveiled Global Security Initiative and Global Development Initiative. However, Brazil has also attempted to gain more global influence through relationships with Global South countries. Through this shared influence, China and Brazil have looked to strengthen ties and provide greater legitimacy for each other’s goals.

A significant step in this direction was the unanimous election of Former Brazilian President Dilma Rousseff as head of the New Development Bank (NDB). The NDB is the multilateral bank established by Brazil, Russia, India, China, and South Africa (BRICS) with the aim of providing financing for emerging economies—also known as the Global South. BRICS is often associated with a recalibration of the current Western-led world order, and NDB is a supplementary aspect used to support the Global South and garner its support. 

Furthermore, a major purpose of Lula’s trip was to increase economic ties between China and Brazil. Lula is desperate to improve Brazil’s economy, as made clear during his presidential run, where he promised to reduce poverty and offer better public services. Beyond that, Brazil’s GDP per capita has been virtually stagnant since 2012. To this end, China and Brazil recently announced a move to conduct trade using their own currencies. This will reduce dollar dependency by both countries and increase global circulation of the renminbi. Most recently, while in Beijing, Lula announced his desire for BRICS to create its own currency.

This increase in cooperation will also give Chinese companies, such as Huawei and ZTE, access to the Brazilian market. Although the U.S. has tried to pressure its allies to ban these Chinese companies, Brazil has not succumbed to Washington’s demands. According to China’s state-run news outlet, The Global Times, “Chinese companies are actively exploring and cooperating with Brazil in emerging fields ranging from the digital economy to green development and mobile communications. For example, China’s BYD entered the pure electric passenger car market in Brazil, Huawei promoted the construction of smart cities in the country, and Didi built a mobile travel platform there.” Brazil provides a market opportunity for Chinese companies in the Western Hemisphere and presents a potential launching point for them to enter other countries in the area, due to the country’s large influence in the region.

While improving economic ties was an important aspect of  this trip, there is much more at stake as well. This meeting will allow both China and Brazil to legitimize different regional and global agendas. China can support attempts to increase its role as a global player and support Latin American integration and strategic autonomy. Beijing will also attempt to convince Lula to participate in the Belt and Road Initiative and help create a multipolar world, and there are already indications that Lula is taking Brazil back to a tradition of non-alignment with his recent interactions with Venezuela, Nicaragua, and Iran—all moves that seem to indicate a distancing from the United States.

Lula is also convinced Brazil can assist Beijing in creating a peace plan for the Ukraine War. Unfortunately, part of this peace plan includes Ukraine ceding some of its previously controlled territories. As Ukrainian spokesperson Oleg Nikolenko posted on Facebook, this idea is a non-starter.

Although Brazil and China do not align ideologically, Brazil is looking to exert more international influence and take on leadership in the global south. China wants to scale back the Western-led rules and norms towards conditions that are more favorable for itself. And together, they could strengthen ties and work to accomplish these goals. However, this leaves the United States as the odd man out. The U.S. must be careful in how it addresses this conundrum. Washington must ensure this current dynamic does not continue, but it should not deride Brazil’s legitimate foreign policy activity. This would almost guarantee a forceful response from Brazil. Instead, it should work to affirm U.S.-Brazilian ties to show Lula that the U.S. is a vital partner for Sao Paulo. The Biden administration should also emphasize its goal to pursue sustainable economic prosperity, an inherent advantage the U.S. has over China, particularly as Lula seeks to re-establish Brazil as a champion of environmental protection after the setback to Brazil’s under the Bolsonaro administration.

Lastly, the U.S. must also work to address the needs of the Global South, which comprises 85 percent of the world’s population and 39 percent of its GDP, in addition to currently providing diplomatic backing to China. The U.S. cannot afford to allow its influence in these countries to diminish and for China and Brazil to gain further leadership. This region is not only valuable in its economic potential and possession of crucial rare earth minerals, but it also has begun to be more influential in global diplomacy. The Global South has started to push back on some of the inequalities created within the U.S.-led world order. It can also provide legitimacy to various Chinese initiatives, some of which were previously stated in this article. Ultimately, the U.S. must work to better engage the Global South or risk ceding influence to other countries like China or Brazil.

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