Brazil Looks To Strengthen Ties With China, As Taiwan Loses Yet Another Ally in Latin America

“Brazilian and Chinese interests… align at present in some important areas, the most important being an investment in a multipolar world order.”

Today (March 28), Brazil’s President Luiz Inácio Lula da Silva (aka Lula) was supposed to be meeting the President of the People’s Republic of China Xi Jinping for the first time in over a decade. There was a lot riding on the outcome. After four years of strained relations with the government of Brazil’s former premier Jair Bolsonaro, currently still laying low in Florida, China is keen to get back on friendly terms with the fellow BRICS member. But the visit had to be “indefinitely postponed” at the last minute after Lula was admitted to hospital with a “bacterial and viral bronchopneumonia.”

Lula is apparently making a strong recovery and Brasilia has conveyed to Beijing his desire to reschedule the visit but it is unclear when that will happen. In the meantime, 240 Brazilian officials and business figures, many from the country’s burgeoning agricultural industry, are in Beijing trying to hash out new deals in Brazil’s biggest export market. From Bloomberg:

Brazil’s Agriculture Minister Carlos Favaro, who landed on Wednesday alongside the unusually large business delegation, has been laying the groundwork for several potential agreements between the two countries. In an interview on Friday, he said his mission is to re-establish warm ties between the countries, and refrained from giving explicit targets for bilateral commerce.

Trade and investment are the key drivers for any deepening of relations between the two countries. Lula wants to boost sales to China, which is already the biggest destination of Brazilian exports, and lure investment to upgrade the country’s infrastructure.

The South American nation is already the main supplier of agricultural goods to China, accounting for 60% of its soybean imports and 40% of its beef purchases. Now Brazil wants to push those numbers even higher while also working with Beijing on strategies to keep agricultural expansion from harming the environment.

A Win-Win for Both Countries

China has been Brazil’s largest trade partner for the past 14 years. Last year, the two countries’ bilateral trade was worth $172 billion — more than twice the size of Brazil’s bilateral trade with the US. The Lula government is also looking to expand Brazil’s exports of both corn and cotton to China — two sectors that have been traditionally dominated by the US. It would be a win-win for both BRICS economies: China would get to reduce its dependence on US food exports as US sanctions loom while Brazil would get to expand its already huge agricultural industry — ideally not at the expense of the Amazon rain forest.

Also no doubt on the agenda when the two presidents finally meet will be the unanimous decision last Friday to appoint Brazil’s former President (and former vice president under Lula) Dilma Rousseff as president of the New Development Bank (NDB), formerly known as the BRICS bank. Founded on the first day of the 6th BRICS summit in 2014, with $50 billion of seed funds, the bank’s purpose is to mobilise resources for infrastructure and sustainable development projects in emerging markets and developing countries (EMDCs).

Its founders harboured dreams of finally breaking the grip of the Bretton Woods institutes, the International Monetary Fund (IMF) and World Bank. But so far the NDB has failed to live up to its early promise. But that could change. There is likely to be plenty of demand for emergency financial support in the coming months and years as countries in the Global South struggle to service their debts. Russia last week wrote off $20 billion of debt owed by African nations. China has already spent $240 billion bailing out “Belt and Road” counties, according to a report by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.

Membership of the NDB is also growing. In 2021, Egypt, the United Arab Emirates, Uruguay and Bangladesh took up shares, albeit of much smaller size than the respective $10 billion investments made by the bank’s founding members. Worldwide interest in joining the BRICS group is also “huge,” according to South Africa’s Foreign Minister Naledi Pandor. In early March, she claimed to have 12 letters from interested countries on her desk. They apparently include Saudi Arabia, United Arab Emirates, Egypt, Algeria, Argentina, Nigeria and Mexico.

It is hard to imagine Mexico, long part of the North American free trade bloc NAFTA, now supplanted by the United States-Mexico-Canada Agreement (USMCA) agreement, taking such a bold step — even as tensions rise between parts of the Biden Administration, particularly the State Department, and Mexico’s AMLO government. As Silk Road Briefing notes, such a move would be seen as “a direct affront to Mexico’s US relations and a sign that global economies, even on America’s border, are having serious doubts about the US ability to trade on fair and equal terms.”

Other big items likely to be on the agenda of a future meeting between Lula and Xi will include fleshing out recently announced plans to set up yuan clearing arrangements in Brazil, as well as Brazil’s prospective membership of China’s Belt and Road Initiative (BRI). That’s right, folks: Brazil, one of the four founding members of the original BRIC grouping (the “S” for South Africa came later), is one of 50 or so countries yet to join China’s flagship global infrastructure project. Not that it has made much of a difference: even outside the BRI, Brazil placed fourth among the countries that received the largest amount of inward Chinese investment between 2006 and 2021.

The ongoing war in Ukraine is also likely to feature in any future discussions between the two presidents. Based on their public statements, both want to see the war come to an end. Since taking office for an unprecedented third term in January, Lula has proposed creating a small group of countries totally uninvolved in the Ukrainian conflict — including, for example, China, India, Brazil, among others — to mediate a negotiated settlement. He even discussed the idea with Biden during his visit to Washington in January, but it was unceremoniously shot down.

Toward A More Strategic Relationship

Most importantly, as a piece in Global Voices notes, if the meeting had gone ahead, which it presumably will do shortly, it would have provided “an opportunity for the relationship to develop and take on a more strategic character under the incoming Lula government.” If, or rather when, this happens, it could “significantly impact” the United States and the American continent as a whole. That said, it is important to remember that Lula has generally been a conciliatory, balanced statesman on the international stage, as notes a piece in Responsible Statecraft:

He may harbor a lingering distrust of the U.S. government for what he sees as undue influence over Brazilian affairs in the recent past — NSA spying on former president Dilma (confirmed) and purported U.S. Justice Department involvement in his 2018 arrest (alleged), to list only two recent episode — but that does not mean he sees China as the good guy in the complicated game of international intrigue.

Brazilian and Chinese interests do, however, align at present in some important areas, the most important being an investment in a multipolar world order. Brazil has long craved greater influence in international affairs. It has wanted a permanent seat on the UN security council and inclusion in the OECD for years. Both goals remain out of reach.

The two countries’ economies are also increasingly intertwined. At the risk of repeating myself, China is not only Brazil’s but South America’s largest trading partner:

As a trading power, the US holds complete sway over Central America, at least for now. And pound for pound, it is still Latin America and the Caribbean’s largest trading partner. But that is predominantly due to its huge trade flows with Mexico, which account for a whopping 71% of all US-LatAm trade. As Reuters reported last June, if you take Mexico out of the equation, China has already overtaken the US as Latin America’s largest trading partner.

This has happened for a variety of reasons. As I’ve noted before, China’s rise in the region coincided almost perfectly with the Global War on Terror. As Washington shifted its attention and resources away from its immediate neighbourhood to the Middle East, where it squandered trillions of dollars spreading mayhem and death and breeding a whole new generation of terrorists, China began snapping up Latin American resources, in particular food, petroleum and strategic minerals like lithium.

Left to their own devices, governments across the region, from Brazil to Venezuela, to Ecuador and Argentina, took a leftward turn and began working together across multiple fora. The commodity supercycle was born. Since then China has become the most important trading partner for nine countries in the region (Paraguay, Brazil, Chile, Argentina, Peru, Venezuela, Cuba, Uruguay and Panama). In total, 22 of the region’s 33 countries have signed up to China’s Belt and Road Initiative, including four in Central America (Nicaragua, Costa Rica, Panama and El Salvador).

Unlike the US, China does not tend to meddle in internal politics in the region, or at least hasn’t until now. That may change if more and more countries begin to default on Chinese loans, as already happened in Ecuador in 2020. The US, apparently with zero self awareness, has made no bones about accusing China of deploying “debt trap diplomacy”. But for the moment the Chinese are happy to let the money do the talking — and so too are many Latin American governments.

Washington is now making up for lost time. In January, the Commander of US Southern Command (USSOUTHCOM), General Laura Richardson, who has a rare talent for saying the quiet parts out loud, said the US military is seeking to “box out” China and Russia from strategic resources in the region. “In a lot of our (sic) countries in this region” she said, the PRC “is the number one trade partner, with the United States number two in most cases.”

Here she is giving testimony to the Senate Armed Services Committee last week on the PRC’s “expand[ing] economic, diplomatic, technological, informational and military influence in Latin America and the Caribbean”:

Meanwhile, US Ally Taiwan Just Lost Another Key Ally in Latin America

The Government of Honduras announced on Saturday that it is severing diplomatic relations with Taiwan, days after Honduran president Xiomara Castro unveiled plans to reestablish ties with China. The Honduran Ministry of Foreign Affairs indicated that the country’s Executive “recognizes the existence of only one China in the world, and that the Government of the People’s Republic of China is the only legitimate government that represents all of China.”

In her announcement, Castro said the decision to reestablish ties with Beijing formed part of her “determination to push through with her government’s plan and expand the borders freely in concert with the nations of the world.”

Castro is the wife of Honduras’ former democratically elected President Manuel Zalaya, who in 2009 was dragged out of the presidential palace in his pyjamas by armed troops, forced onto a plane and flown out of the country. The US-backed coup was followed by a succession of deeply corrupt governments that ruled with a ruthless determination to protect the interests of the national oligarchy and foreign finance capital. One inevitable result has been a huge surge in northward migration from the country to the US.

The latest announcement by the Honduran government has caused widespread anger in Taiwan, where its president Tsai Ing-wen said her country will not engage “in a pointless competition of dollar diplomacy with China.”

“For many years we have maintained the belief that working with all our capabilities and with a pragmatic and forward-looking approach we could maintain the substantive and long-term development of our diplomatic allies,” the president said in a video released this Sunday. Since Tsai came to power in 2016, Taiwan has lost nine international allies who have chosen to establish official ties with Beijing.

This means that just 12 countries now recognise Taiwan, most of them in Latin America and the Caribbean: Belize, Guatemala, Haiti, Holy See (Vatican City), Marshall Islands, Nauru, Palau, Paraguay, Saint Kitts and Nevis, Saint Lucia, Saint Vincent, and the Grenadines and Tuvalu.

China claims Taiwan as part of its territory, and countries have to choose between maintaining official relations with Beijing or with Taipei. Since 2007, four other Latin America countries have cut ties with Taipéi in order to establish relations with China. They include, most recently, El Salvador. In November, its President Nayib Bukele announced plans to “sign a free-trade agreement with China” after meeting with Beijing’s ambassador. Before making the announcement, Bukele’s government cancelled a preexisting free trade agreement with Taiwan.

China also offered to buy up all $21 billion of El Salvador’s distressed sovereign debt, as I reported at the time. Since then there have been no further announcements regarding the offer. If the two countries were to actually consummate such a deal, it would represent another watershed moment for the region. As Bloomberg noted at the time, “anything close to that by a leading sovereign creditor hasn’t happened since the late 1980s, when the US moved to bail out Latin America,” along with, as Bloomberg failed to note, some of Wall Street’s biggest banks.

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  1. The Rev Kev

    I suppose when you think about it, Washington can really only focus on one region at a time. As Nick says here, the US got wrapped around the axle of fighting in the Sandboxes for so many years, that ‘governments across the region, from Brazil to Venezuela, to Ecuador and Argentina, took a leftward turn and began working together.’ But after – mostly – getting out of the Sandboxes, Washington went all in on a proxy war against Russia in the Ukraine to the point that it is obsessed with the place no matter the cost. YouTuber Alex Christoforou made the insightful observation that it is not really Russia that is bogged down in the Ukraine but it is the US itself which is now bogged down the Ukraine. And even when this conflict ends, it is not like that the US will once more concentrate what is going on in South America but it is already working on its next obsession – Taiwan and China. And by the sounds of this post, China at least has sailed right down this open highway direct into South America. General Laura Richardson may talk about boxing out Russia and China but she probably means coups and the like which I suspect the South American countries to be jack of by now and will not permit. That fracas recently in Brazil was just ludicrous and nobody welcomed that one.

    One final point – Honduras is so serious about recognizing China over Taiwan, that they just gave the Taiwanese 30 days to get out of the embassy in their country to make way for the Chinese.

    1. AG

      it´s not the major topic here, but I wonder in how far is the US bogged down.
      I have not listened to the podcast. However there is no reason if state wisdom suggests so the US could not retreat from the Ukraine scenario at will. And above all what have they invested so far?
      Their arms industry is having a heck of a time and EU is in their pocket in ways unimagineable may be even to the Russians before (though I am not sure about their true naivité as suggested by many commentators in the West.) So far for the US its win-win. Question is rather how to not alienate the rest of the world in prospect of the coming decades. But when did the US ever act with 30-year-foresight?

      1. KD

        First, we have pledged to assist Ukraine to the “end”–blank check with no apparent Congressional attempts to restrict. Either the US helps Ukraine limp along or they get squashed, which is egg on the US’s face, it questions “American credibility” as a Neocon would say. If through Western assistance, Ukraine manages to limp along to some kind of military stalemate and there is some kind of ceasefire or peace deal, America is going to have to pay to rebuild it, and we will also start re-militarizing which we will have to fund because Ukraine will have no foreign currency.

        Second, we have already used most of the spare ammunition capacity and it will take probably a decade before the US and NATO has anything like a decent stockpile of ammunition. Further note, we are sinking money into the Army when SE Asia requires a navy.

        Third, you are assuming that the conflict does not go nuclear, or expand conventionally. NATO is not really in a position to defend the Baltic States or even Germany at this time, especially if China provides direct military support. Poland wants to have 300,000 soldiers, but how many months would that take Russia to chew through? Would the US really nuke Russia to defend Germany? What do the Neocons always say when the stupidity of provoking a nuclear power is brought to their attention: “I’m not going to discuss nuclear blackmail?”–you don’t think they can translate that into Russian as well?

        The last problem is that China is the most dangerous peer competitor America has faced since the British in 1812. Pushing a dangerous rival into the arms of rival that beats you 2 to 1 in manufacturing and over 3 to 1 in population, resembles, well, an Operation Barbarossa-level of geopolitical miscalculation in the long-term. In 100 years, this will probably be remembered as the point at which the American Empire set itself irrevocably on the path of doom, following the example of the Third Reich.

        1. digi_owl

          From a foreign point of view it again and again appears as if US foreign policy gets used for domestic political gains.

          But Ukraine seems to be as personal to Biden as Iraq was to Bush.

          But it is also a great way for the MIC to land new long term contracts for replacing all the hardware being shipped over there.

          And China seem to be just as much about the Democrats voting block around SF, in particular Pelosi’s district.

    2. Piotr Berman

      “I suppose when you think about it, Washington can really only focus on one region at a time.”

      The real problem is what does “Washington” do when they focus (or without the focus). The agenda like immunity of Americans from local or word courts, support for Israel, favorable treatment for US corporations, refraining from trading with American adversaries (however advantageous), participation in economic sanctions, orchestrating NGOs and other means to tilt elections, is not particularly attractive, is it?

      What does USA offer to a country like Brazil except “charm” and “you know, we do not sanction you yet”?

      1. KD

        What does USA offer to a country like Brazil . . .

        How about not using the CIA to re-instate the military dictatorship?

  2. Piotr Berman

    This leaves Taipei with just 13 official allies <– according to the link, 12 diplomatic partners, and I am not sure if Tuvalu, Palau or St. Kitts and Nevis are allies. Thinking about it, counting diplomatic partners is a bit hard because two of them have "and" in the name, however "and Nevis" and "and Grenadines" do not enjoy any type of foreign policy.

  3. lyman alpha blob

    If the US really wants to “box out” China as a trading partner as Richardson states, they better have something to trade other than dodgy financial instruments they want to unload on suckers and GMO grain designed to put those countries’ own producers out of business.

    Perhaps the US should have thought about this before they sent all their manufacturing capacity to China; then they might have something to trade that other countries actually want.

    You really didn’t have to be a rocket surgeon to foresee these problems coming down the pike 30 years ago.

    1. digi_owl

      Not like anyone that had studied industrial history would not see it coming, as USA basically pulled the same move on England after the revolution.

      But then USA these days is run by lawyers and ahistorical economists.

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