Trade and manufacturing

Trade trumps solidarity for Brazil and China

  • This week the Institute of International Finance warned that Latin America and Brazil in particular were not prepared for a possible slowdown in Chinese growth in 2012. This is a sign of a trade relationship that has been transformed over the last decade. President Lula Da Silva of Brazil went to China in 2004 promising a new geography for world trade. Brazil’s exposure to China has risen sharply since.
  • However, the new geography has not worked out the way Lula intended and the disappointment underlies important shifts in Brazil’s foreign commercial policy. Brazil may run a trade surplus with China, but not on terms that are politically acceptable to most of its manufacturers.
  • Under Lula’s leadership this growing tension was suppressed in favour of the pursuit of a grand political vision of South-South solidarity. The administration of Lula’s successor, Dilma Rousseff, has implicitly broken with this strategy since taking office in January 2011, aligning more openly with the US in its criticism of Chinese currency policy and supporting the complaints of Brazilian industry more vocally. The shine has well and truly come off Lula’s vision of BRIC solidarity.
  • The growing strains between Brazil and China are emblematic of the economic forces and conflicting priorities that are likely to deepen tension between the large emerging economies over the next few years. China’s own desire to diversify its export markets away from the developed world will make this worse, not better.

The views expressed in this report can be attributed to the named author(s) only.