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Brazzil - Foreign Relations - May 2004

Lula: "Brazil-China, a Model for the 21st Century"

Brazilian President Lula speaking in Beijing, said that relations between
Brazil and China were "emblematic." The Brazilian leader cited
significant figures, such as the US$ 8 billion in bilateral trade
in 2003. Lula concluded that both countries have the historical
responsibility to make the China-Brazil relationship a paradigm.

Edla Lula


Picture The importance of regional integration for the strengthening of developing countries was one of the main themes of President Luiz Inácio Lula da Silva's speech at the University of Beijing. As an example, Lula cited the G-20's achievements in the agricultural sphere.

"At the WTO (World Trade Organization) Ministerial Meeting in Cancún in September, 2003, the coordination among a significant group of developing countries, including Brazil and China, proved decisive in transforming the dynamics of the negotiations," he recalled.

Lula also drew attention to two recent conquests in the process of South American integration: the incorporation of Peru into the Mercosur and the establishment of an agreement considered "historical" with the Andean countries.

"With the convergence of the two major blocs in South America, an economic and strategic alliance is created that embraces a population of approximately 350 million inhabitants and a GDP (Gross Domestic Product) of over a trillion dollars," he affirmed.

According to the President, the partnership with Argentina is the mainstay of Brazil's South American policy. Revitalization of the Mercosur is another fundamental question. The Mercosur is currently engaged in negotiations with the European Union, India, and the Southern African Customs Union over trade liberalization.

Relations between Brazil and China were defined by the President as "emblematic." After citing significant figures, such as the US$ 8 billion in bilateral trade in 2003, Lula concluded: "We have the historical responsibility to make the China-Brazil relationship a paradigm of the cooperation the world expects from the XXI century."

Nothing but the Future

President Lula told entrepreneurs who attended the Brazil-China Business Seminar on Trade and Investment—Prospects for the 21st Century that the two countries are taking a qualitative leap in their relations, which complete thirty years of existence this year.

"The relationship between China and Brazil is a relationship that has a clear tendency to grow in the political as well as the cultural and commercial spheres. Brazil and China harbor no disputes from the past. They have no historical quarrels, and two giants like China and Brazil, without historical disagreements, will be free to think only about the future," he declared.

Lula emphasized the intensification of commercial and political relations since 2003. "Between January and March of this year, exchanges between the two countries increased 60 percent, compared with the same period in 2003," he said, highlighting the performance of trade flows, which rose from US$ 1.5 billion in 2000 to US$ 6.7 billion in 2003. The balance favors Brazil, which exported US$ 4.5 billion to China last year.

Fourteen business agreements were signed during the seminar, which gathered approximately 800 Brazilian and Chinese entrepreneurs at the Beijing International Hotel. During the seminar the Brazil-China Business Council, which will act as an intermediate in business transactions between the two countries, was officially inaugurated.

Four agreements involve the Vale do Rio Doce Company and Chinese steel industries. The most important of these agreements constitutes a joint venture with the Shanghai Baosteel Group to construct the São Luiz (Maranhão) Steel Center, designed to produce 3.8 million tons of steel.

The agreement also provides for the establishment of an ocean shipping line between the two countries and the development in China of a project to produce coal for export to Brazil.

In its second agreement the Vale Company and the Yukuang Group plan to develop a project to produce coking coal for the Chinese market, as well as for export to Brazil and third-party markets. The Brazilian mining giant's third agreement involves the production, processing, and sale of coal in partnership with the Yongcheng Coal & Electricity Group and the Shanghai Baosteel Group.

In a fourth agreement the Vale Company formed a partnership with the China Aluminium Company (Chalco) to mine bauxite and produce alumina (aluminum oxide). "We are very excited, because Chalco is a strong firm, with an extremely important market, and it wants to develop this partnership with Brazil," said Vale president Roger Agneli.

Another substantial agreement was drawn up between Petrobras and Sinopec, to extract petroleum in other countries. The first countries where they are considering making investments are Ecuador and Iran.

The Southern Thermoelectric Company (RS) and the China National Machinery and Equipment Import and Export Corporation will build a coal-powered thermoelectric plant in Cachoeira do Sul, Rio Grande do Sul. The Pará Steel Company signed an agreement with Minmetals Trading to purchase Chinese equipment and export ore to China. Brazil's Foreign Trade Company (Comexport) and the China Brazil Investment, Development, & Trade Corporation will exchange smelting coke, pig iron, cotton, and sugar.

Agreements were also signed between the Brazilian Bicycle Company and the Jinan Qingqi Motorcycle Corporation to manufacture motorcycles.

The Telemar North East "Oi" Company and China Mobile entered into an international roaming agreement that will allow customers to use a single number from a single device to make and receive calls.

There were two letters of intention that will permit future agreements. One of them is between Varig and Air China to schedule regular flights between Brazil and China. The other involves the Three Marias export company and the Chinapack Hua Yuan International Economic Cooperation company, which will sell Brazilian instant coffee.

More Brazil-China Flights

The establishment of regular flights between Brazil and China will help eliminate a bottleneck that impedes tourism from growing in Brazil. This evaluation was made by the Rio de Janeiro state secretary of Tourism, Sérgio Ricardo de Almeida. Varig—a Brazilian airline—will inaugurate the Brazil-China route in August with four weekly flights, following the itinerary Rio-São Paulo-Munich-Beijing.

Seats on Varig's Brazil-China flight are expected to cost US$ 2.8 thousand in economy, US$ 6 thousand in executive, and US$ 10 thousand in first class. Incentives or promotions, however, should be offered, reducing the fares. Two of the company's airplanes should be assigned to this route.

Varig's director for Europe, the Middle East, and Africa, Carlos Muzzio, declared that, besides the beginning of regular flights between Brazil and China, the authorization conceded to Brazil by the Chinese government opens large possibilities for a greater flow of Chinese tourists to Brazil and, therefore, to South America.

"The warranty the Chinese government is giving Brazil is very significant. It is an incentive for Chinese tourists to come to our country," said Muzzio, who added that this will help increase business as well as leisure tourism.

Brazil's Minister of Tourism, Walfrido Mares Guia, expects that, with the establishment of regular flights to China, Brazil will receive one hundred thousand Chinese tourists annually. Muzzio believes that this figure will be surpassed in the medium run. The route should also attract tourists from Eastern Europe, Russia, and Slovenia to Brazil via Beijing, the Varig director believes.

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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