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China and Brazil’s Fractured Infrastructure

Just last week, Brazil hosted the Chinese President, Hu Jintao on an official state visit. Brazil’s President, Luiz Inácio Lula da Silva, has signed an accord with the Chinese on tourism, technology and industry.

The most important part of the signed treaty is that Brazil will recognize China’s economy as a “market economy”.


China in return will support Brazil’s bid to enter the UN security council, open its market to Brazilian exports and provide Brazil with nearly 2 billion dollars in infrastructure investments.


In order for China to invest in rebuilding roads, trains and seaports Brazil’s congress will need to pass a new PPP (private-public partnership) law.


This new law is designed to stimulate, throughout Brazil, public and private sector cooperation in investments that the country desperately needs.


According to many experts, Brazil’s infrastructure needs roughly 20 billion dollars each year. It is doubtful that Brazil will receive even half this amount in 2004.


Also the passage of the PPP is going to be a difficult task for the ruling coalition. But Lula’s resolve has proven that he is a master at making concessions to opposition lawmakers to gain the votes necessary to pass reforms.


Some Chinese companies have said they will wait for the passage of the PPP law before they invest in Brazil. There are speculations that China’s investments in Brazil might reach 5 billion dollars a year.


If the PPP law does not pass by December, it may then become very difficult to get its approval through the Senate and then the House as the PMDB (The Brazilian Democratic Movement) and the PPS (Popular Socialist Party) parties decide if they will continue to ally themselves with the government.


Lula will need to maintain both parties among its coalition, especially the PMDB who has the second largest number in the House of Deputies with 73 votes and is the largest force in the Senate with 23 senators.


It seems likely that the government will be able to stop the party from breaking away from the government. This sudden call to break with the government came after the PMDB performed poorly in the recent local elections.


This disappointment in election turnout is also evident in the fact that party leaders during their convention in December will also discuss a plan to change the party’s name back to its original MDB (Movimento Democrático Brasileiro – Brazilian Democratic Movement) moniker.


Visit www.thebraziliandaily.blogspot.com for your daily dose of Brazilian economic and political commentary.

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