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Brazzil - Foreign Relations - May 2004

Brazil: Lula's Great China Trip

Chinese Ambassador to Brazil Jiang Yuande believes business
transactions between China and Brazil are still modest in
comparison with both countries' potential. According to him,
Brazilians are not aggressive enough. Brazilian beef and
coffee, for example, have yet to become popular in China.

Edla Lula


Picture On Saturday (22), the President of Brazil, Luiz Inácio Lula da Silva, departs for the Peoples' Republic of China, where he will visit Beijing and Shanghai. His return is scheduled for May 27.

According to the Chinese Consul-General in Brazil, Li Baojun, 509 Brazilian entrepreneurs have already formally requested visas to accompany the presidential entourage to China, whose annual growth rate of around 8.5 percent makes it one of the world's most promising economies.

The business elite thus demonstrates the visit's highly commercial purpose, which is also encouraged by the hosts. "China intends to increase its cooperation with Brazil and the Mercosur in various areas, including the trade sphere," Chinese Ambassador Jiang Yuande guaranteed, on Monday, at a breakfast offered to the press (Brazilian and Chinese) in Brasília. He admits that his country is already evaluating the hypothesis of establishing a free trade agreement with Brazil.

For Yuande, business transactions between the two countries are still modest in comparison with both countries' potential. "Brazilian entrepreneurs could be more aggressive," the diplomat remarked, citing sales of beef and coffee as examples of Brazilian products that have yet to become popular in China.

The Ambassador affirmed that, in his country, Brazilian beef is not nearly as well-known as Australian beef. Brazilian coffee was also mentioned by the diplomat as "timid" in the Chinese market.

Yuande believes that Colombian coffee gets more propaganda and consequently is more successful especially in winning the following of youth, who are more accustomed to drinking this beverage. "In restaurants, one pays US$ 10 for a cup of coffee," the Ambassador informed.

Even without taking full advantage of the potential of the Chinese market—the largest in terms of the quantity of consumers, since the population approaches 1.3 billion—Brazil enjoys a surplus in the bilateral trade balance.

Last year's surplus was approximately US$ 3.7 billion, mostly from sales of soybeans, vegetable oil, leather, and iron ore. Brazilian transgenic soybeans are another product that recently began to enter Chinese ports.

Yuande foresees a growth in Chinese exports to Brazil in the coming years. "We are going to invest in the São Luís Steel Plant, in the Brazilian Northeast, and we encourage private investors to buy land in the country to plant soybeans," he commented.

UN Permanent Seat

With Lula's trip to the Peoples' Republic of China, Brazil may be closer to obtaining that country's support in its attempt to become a permanent member of the UN Security Council. This support is important, because China is one of the five countries that have permanent seats on the Council.

Brazil currently occupies a temporary seat on the Council, which is the most important source of decisions on issues of world peace. "China views the question with sympathy, supports Brazil's desire to play a bigger role in the United Nations, and we can discuss this matter further," said the Chinese Ambassador to Brazil.

The Security Council includes as permanent members the United States, China, Russia, France, and Great Britain, nations which have voting rights and veto powers in international decisions of great significance for world peace.

Brazil-China Trade

Trade between Brazil and China may surpass US$ 8 billion this year. The source of this information is Ambassador Luiz Augusto de Castro Neves, who should take over as Brazil's representative in Beijing in the coming months. According to him, there is a "great potential" for investments on both sides.

"To the extent that emerging markets begin to do business with one another, they become less dependent upon variations in US interest rates. More precisely, the expansion of bilateral transactions will make both less vulnerable," Neves contends.

According to him, China is building the biggest hydroelectric plant in the world measured in terms of installed capacity. The Three Gorges Dam will produce around 18 thousand megawatts. Brazil's Itaipu Power Plant, for example, currently produces 12.6 thousand megawatts.

Nevertheless, Itaipu will continue to be the world's largest hydroelectric plant in terms of energy production, since the Paraná River allows the use of 90 percent of installed capacity, whereas the Three Gorges project will only be able to harness 50 percent of the hydrographic potential.

Brazil's future ambassador to China believes that trade between the two countries can improve even more with the construction of the power plant. "Much of the equipment for the Three Gorges is being manufactured in Brazil, because Itaipu, due to its size and the characteristics of its turbines and generators, is the only model that can serve for the Three Gorges," explained the Ambassador, who is currently in charge of the embassy in Paraguay, Brazil's partner in the Itaipu project.

In the diplomat's opinion, the growth in energy demand will certainly add to the demand for exports of heavy equipment for hydroelectric plants.

The Most Important

President Luiz Inácio Lula da Silva described his next international trip as the most important one this year. When he lands in China on May 21, Lula will be looking at the world's largest consumer market, with 1.3 billion people. The country has been growing at an annual rate of around 9 percent, at the same time as it is in need of investments in areas critical to development, such as housing, food, transportation, and electricity.

Brazil is a big exporter of commodities such as soybeans, mineral ores, steel, and all the products linked to agribusiness. High-technology Brazilian companies—Embraco, Gradiente, Embraer—are active in China, producing for the Chinese and foreign markets. The Chinese, for their part, invest abroad, and Brazil can attract US$ 5-10 billion of these investments, in the view of the future Brazilian ambassador to Beijing. "We are an important market, because we have 180 million inhabitants, and there is still much to be done. Brazil possesses an important growth potential in capital goods and macroeconomics," Neves insists.

Edla Lula works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br.
Translated from the Portuguese by David Silberstein.

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