During this year’s hectic Brazilian presidential campaign, international markets’ ears pricked up at the privatisation promises by far-right candidate Jair Bolsonaro, who swept to a comfortable victory over leftist rival Fernando Haddad on Sunday October 28th.
Ahead of the election, Bolsonaro boasted of plans to sell 100 state-owned companies. But just three days after October’s first round vote, plans screeched to a halt. In an interview with news network Estadão, Bolsonaro backtracked on a pledge to privatise Eletrobras, a state-owned energy company, which was closely watched by financial markets.
Energy generation is strategic for Brazil, he said, adding that he did not want national assets to fall into the wrong hands.
“When you privatise, will you privatise to any capital in the world?” Bolsonaro asked rhetorically during the interview. “China isn’t buying in Brazil, it’s buying Brazil. Are you going to put Brazil in Chinese hands?”
The contradiction between the liberal economic policy promised by Bolsonaro and his nationalist stance has raised concern among Brazil's trade partners.
Bolsonaro has proclaimed himself anti-Communist and suggested that Chinese investments threaten Brazil’s sovereignty. Earlier this year he visited Taiwan, with whom China is locked in an ongoing diplomatic dispute about its independence. He has expressed a strong desire to draw closer to the US, which launched a trade war against China earlier this year.
Retired army captain Bolsonaro won the run-off with 55% of the total vote share. Criticism of China’s presence in the region has not been uncommon in recent elections in the region. In the 2015 campaign, current president of Argentina, Mauricio Macri, wrote a letter to Chinese authorities saying that agreements between Argentina and China might be unconstitutional and would be reviewed. In Chile in 2017, Sebastián Piñera followed suit, saying that “China’s strong political presence in Latin America [was] not good.”
Both have since backpedalled. The avalanche of Chinese investment in South America and a growing dependence on Chinese trade has taken precedence.
“I believe that once he is in office, Bolsonaro’s focus will be more pragmatic,” said Maurício Santoro, professor of international relations at the State University of Rio de Janeiro. “But this scenario is greatly concerning for the Chinese. Bolsonaro is an unknown.”
Hu Xijin, editor-in-chief of Chinese tabloid Global Times, which focuses on international affairs, expressed scepticism that anti-China sentiment would infuse Brazil’s foreign policy.
“No matter what Jair Bolsonaro said during his campaign, I think he will adopt China-friendly policy. China is top buyer of Brazilian soybean and ore. Trump-style capricious China policy will not be in line with the interests of his administration,” Hu tweeted.
No matter what Jair Bolsonaro said during his campaign, I think he will adopt China-friendly policy. China is top buyer of Brazilian soybean and ore. Trump-style capricious China policy will not be in line with the interests of his administration. https://t.co/hJSBj8GaOf
— Hu Xijin 胡锡进 (@HuXijin_GT) October 29, 2018
Chinese investments in Brazil
Since 2009, China has been the number one destination for Brazilian exports, replacing the US. Chinese state banks have provided Brazil with huge sums of capital investment. In 2017, China invested US$20.9 billion in Brazil, the largest amount in seven years. A large part of this investment has gone into energy assets. The purchase of CPFL Energia by China’s state-owned State Grid made the Chinese company the largest distributor of electricity in Brazil.
China invests in other areas of strategic importance to the Brazilian economy. These include agribusiness and infrastructure that expedites the export of agricultural products.
It makes sense to question whether Chinese investment is the best way to serve Brazil’s geopolitical interests, says Alexandre Uehara, professor at the Asian Business Studies Centre at the country’s Advanced School of Marketing and Advertising (ESPM). But these criticisms have not been constructive for formulating Brazilian economic policy.
“It is silly to say ‘I don’t like China’.” says Uehara. “China is presented as the villain behind Brazil’s problems.”
Former Brazilian president Ernesto Geisel established ties with China during his military dictatorship in 1970. The relationship has strengthened in recent years. They peaked under the successive administrations of the Workers Party (PT), when Brazil and China joined India, Russia, and South Africa in creating the BRICS group of emerging economies.
Closer relations coincided with the strengthening of Brazilian agribusiness. The country has become a major exporter of soybeans, though faces increasing competition from China.
China’s importance to Brazil grew rapidly in the 2000s causing concern among Brazilian nationalists, especially the military, a group close to Bolsonaro.
“The idea that you have strategic sectors of the Brazilian economy controlled by foreigners, and especially a regime like China, which by nominally being a Communist party is a Communist government, always causes some kind of reaction in the Armed Forces,” explains Santoro. “We still have a bit of this Cold War view.”
Bolsonaro stoked up these reactions during his campaign. In February he travelled to Taiwan. According to Onyx Lorenzoni, Bolsonaro’s chief aide, the trip was to learn more about Taiwan’s education system.
In response, the Chinese embassy in Brazil sent an outraged letter to Lorenzoni’s party, describing the visit as a “breach of the one-China policy, a broad consensus in the international community and a policy explicitly advocated by the government and the Brazilian Congress.”
Concerning US closeness
In October 2017, Bolsonaro drew the attention of Brazilian nationalists for saluting the US flag on a visit to Miami.
“Trump is an example for me,” Bolsonaro told a public audience. “I know how far I am from Trump, but I plan to approach him for the good of Brazil and the United States.”
Political experts suggest the two could create a right-wing alliance in the region. Brazil’s rapprochement with the US could benefit Trump, who has isolated himself from the international community during his presidency.
Brazil has already begun to profit from Trump’s trade hostilities with China, with exports of Brazilian soybeans went up 15% from January to September this year based on the same period last year.
Brazil and China have also been allies in international diplomacy. The two countries are part of the BASIC group with South Africa and India, a political coalition of developing countries, which is against Trump’s decision to withdraw the US from the Paris Agreement. But Bolsonaro himself has sent mixed signals about the Agreement, saying he would not withdraw but at the same time undermining Brazil’s commitments, such as the preservation of the Amazon.
Pragmatism expected to prevail
Despite Bolsano’s inflammatory rhetoric, it is likely that good relations between China and Brazil will continue. Bolsonaro is dependent on Brazil’s powerful agribusiness lobby, which relies heavily on exports to China. A quarrel with China would directly affect his support base.
An editorial in the state-run China Daily highlighted the country’s willingness to establish good relations with Brazil's new government.
“We cherish the sincere hope that when he assumes leadership of the world’s eighth-largest economy, Bolsonaro will take an objective and rational look at the state of China-Brazil relations,” it wrote.
It remains to be seen if and when Bolsonaro will meet that.
This is an edited version of an article originally published on Diálogo Chino.