The construction site of the Port of Chancay, Peru. Photographer: Paul Gambin/Bloomberg
In Acre, Brazil’s westernmost state, a gleaming new stretch of highway is being built to bring President Luiz Inácio Lula da Silva’s hopes of economic transformation to the region.
The new section also risks receiving the full weight of Donald Trump’s protectionist policies.
Building a bridge and access roads along a 10-kilometer corridor leading to the border with Peru may seem like a modest project for such a large burden. Its importance lies in the fact that it is part of an entire network of new or modernized arteries designed to connect the vast territory of Brazil to its South American neighbors, from there to the Pacific Ocean – and to China.
Brazil’s geography and colonial history mean that the country has traditionally looked to the Atlantic for trade. Now, under Lula’s command, the country is deepening its ties with the Asia-Pacific. Acre’s new road and rail system will reduce the travel time of goods to Chinese ports by 10 to 12 days and has the potential to add one percentage point – or about US$22 billion – to Brazil’s GDP per year, according to with conversations with authorities and documents from the Ministry of Planning seen by Bloomberg News.
The construction of infrastructure is part of Lula’s grand plan to move Brazil up the value chain and develop economically, with crucial help from Beijing. It’s a strategy that will be in evidence when Chinese President Xi Jinping passes through Latin America, first for the Asia-Pacific Economic Cooperation forum in Peru this week, then for the G-20 summit hosted by Lula in Rio de Janeiro, and culminating in a state visit to Brasília.
However, this is a path that caused unrest in the United States even before Trump’s electoral victory, with the Biden administration warning Brazil against deeper engagement with China and warning it not to join the New Route infrastructure program. of Silk, signed by Xi. Considering Trump’s calls to impose tariffs of up to 60% on Chinese imports, his government threatens to be even more aggressive in confronting allies willing to break with Beijing.
READ MORE: How Brazil and Mexico became strategic for Dubai Ports, a partner of Rumo and Suzano
Lula doesn’t let himself be discouraged. Brazil already shares geopolitical objectives with China, through the BRICS, of which both are founding members, and their joint proposal to end Russia’s war in Ukraine. Dilma Rousseff, Lula’s chosen successor as president of Brazil until she was impeached and removed from office in 2016, now heads the Novo Banco de Desenvolvimento — the group’s financial institution — in Shanghai.
At a time when China is facing increasing obstacles to trade with the US and European countries, Lula sees an opportunity for Latin America’s largest economy.
Encouraged, Lula wants to take advantage of the New Silk Road without formally joining the initiative. His government is seeking Chinese participation in four projects: a domestic infrastructure program; regional integration routes; Brazil’s transition to clean energy; and industrial modernization. Brazil is in talks with China over financing and wants to take the relationship beyond exporting commodities like iron ore and agricultural products, the people said.
Lula was typically combative in an August interview with a local news website, in which he said the Chinese want to bring up the New Silk Road in their meeting with Xi. “We will not turn a blind eye,” he said. “Let’s ask, ‘What’s in it for us?’”
China’s Foreign Ministry sent a delegation to Brazil in late October to prepare for Xi’s visit, with bilateral ties considered generally good and without fundamental disagreements, according to a source close to the ministry. China is willing to expand its investments in the country, which already range from agriculture to electric vehicles, and sees Brazil as an ideal base for manufacturing, as well as a gateway to other Latin American countries with which it has trade agreements. free trade, the person said, asking not to be identified as they are not authorized to speak to the media.
The decision was taken “to take the strategic partnership to a new and broader phase and, if the Chinese include the New Silk Road, we will not have any problems with that,” said Celso Amorim, Lula’s main foreign policy advisor. “It’s neither inside nor outside, they can call it whatever they want.”
Washington is less blasé. Speaking at Bloomberg New Economy at B20 in São Paulo in October, US trade representative Katherine Tai said she would “encourage our friends in Brazil to analyze the risks” of closer ties with China and to “really think about what is the best path forward for greater resilience in the Brazilian economy”.
READ MORE: Looking for new pockets for infrastructure, managers move towards individuals
President Joe Biden is expected to meet with Xi on the sidelines of APEC in Peru on Saturday, then travel to the G-20 in Rio, with a stop in the Amazon capital of Manaus to meet with local leaders working to preserve the tropical forest. It turns out that Chinese companies, including automaker BYD, have a strong presence in Manaus.
Chinese participation in South America
Chinese investments have been advancing throughout Latin America in areas such as electric mobility, renewable energy, urban infrastructure and high-quality manufacturing. In the decade and a half to 2022, China has invested around US$96 billion in the countries of the Mercosur trading bloc — Brazil, Argentina, Uruguay, Paraguay and, most recently, Bolivia — and has said it plans to increase that amount to US$250 billion until 2025.
An important conduit for investment will be the Chinese-owned port of Chancay in Peru, which, when operational, will be the first on the continent’s Pacific coast capable of handling the largest container ships traveling directly between Asia and Asia. and South America. Much of Brazil’s new transport infrastructure will eventually reach Chancay. And Xi is expected to inaugurate the port during his trip.
Billed as a $1.3 billion “megaport,” it is majority-owned and operated by Cosco Shipping of China. That prompted U.S. criticism of China’s expanding presence in Latin America and concerns that the facility could pose a threat to national security if it were used by the Chinese navy on the doorstep of the United States.
On October 20, an opinion piece published in the Chinese state-run Global Times newspaper dismissed these concerns as “a zero-sum game mentality.” Mario de las Casas, Chancay’s corporate affairs manager, denied there was a risk, saying Peruvian laws require congressional approval for the presence of foreign military personnel, and focused on their potential.
“This port will be a hub that will receive cargo from Chile, Ecuador, Colombia and, we hope, Brazil as well,” said De las Casas. “With a railway from Brazil to Peru, South America will become a global power.”
Brazil could help coordinate these New Silk Road projects for BRICS members, but “it really needs to sign a memorandum of understanding with China,” said Wang Yiwei, a professor of international relations at Renmin University and a former Chinese diplomat who is seen as close to the Beijing government. Brazil’s left-wing government under Lula “shares similar values to the Chinese, not just narrow interests,” he said. “So this is an opportunity.”
If so, it is unlikely to escape the attention of the new Trump administration, especially under the watch of Elon Musk, an outspoken supporter of Lula’s predecessor Jair Bolsonaro and who has clashed with Brazilian authorities over disinformation on his network. social
Chinese investments in Brazil are increasingly moving from announcement to realization and invading what could previously have been considered US territory. They include BYD’s most extensive electric vehicle operation outside Asia – based at a former Ford Motor plant in the state of Bahia – and a local partnership with Chinese smartphone maker Oppo. Brazil is also courting SpaceSail, a Shanghai-based satellite maker, to compete with Musk’s Starlink internet service.
READ MORE: Pirates in the Red Sea keep Maersk away from the Suez Canal until “well after 2025”
Until 2017, the first year of Trump’s first administration, the US was the largest supplier of soybeans to China. With Trump’s imposition of tariffs, a trade war and subsequent impasse, Brazil stepped in to take its place. Brazil is now China’s largest supplier of food imports overall.
“The fact that China is investing more in developing countries than in developed countries reflects rising tensions with the US and EU and the increasing barriers imposed by these countries on Beijing,” said Claudia Trevisan, executive director of the Business Council Brazil-China.
Trump spoke of tariffs of up to 20% on all imports, a measure that would hit shipments from Brazil as well as those from other allies. However, his threat to impose even higher tariffs on China could decimate bilateral trade, shifting business to Brazil. According to Trevisan, Brasília has the chance to take the lead in negotiations with Beijing on behalf of other Latin American countries, maximizing leverage by acting as a strategic bloc, but it lacks the necessary regional coordination.
“Beijing has investments in Chile, Argentina, Brazil, Bolivia, Peru and there is no partnership in the region on how to deal with this nor how to discuss investments in infrastructure that create connectivity in the area,” she said. “It’s every man for himself.”
The Lula government is working to reinforce this connectivity through its “South American Integration Routes” project, with 190 infrastructure projects in the 11 states that border its neighbors. There are high expectations that Beijing-based China Communications Construction Co. (CCCC) will participate in auctions for the construction of highways and, later, railways.
