Huawei footprint in Brazil continues to grow

. Jul 24, 2020
Huawei footprint in Brazil continues to grow Photo: BIOTIC

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We are covering the latest move by China’s Huawei in Brazil. The government’s infrastructure project. And what will happen to the Brazilian currency.

Huawei makes (another) move in Brazil

Brazil’s first permanent testing lab for 5G technology will be inaugurated today in Brasília.

It is a partnership between BIOTIC S/A (Brasília Technology Park), Vivo and … Chinese telecom equipment firm Huawei. Governor Ibaneis Rocha praised the initiative and said that &#8220;Huawei&#8217;s choice of Brasília shows the Brazilian capital&#8217;s potential to develop into a tech hub.&#8221;</p> <ul><li>The lab will serve to test how 5G technology can be used in industry and logistics. BIOTIC says it hopes companies&#8217; efficiency will improve by up to 50 percent once the new-generation networks are fully operational in Brazil.</li></ul> <p><strong>Why it matters.</strong> The inauguration happens as U.S.-China relations sour at a worryingly fast pace, with Huawei being a central part of the feud. Just this week, U.S. and UK officials talked about building a &#8220;coalition&#8221; that understands China as a &#8220;<a href="https://www.bloomberg.com/news/articles/2020-07-21/u-s-and-u-k-discuss-plans-for-coalition-to-resist-china?cmpid=BBD072420_CN&amp;utm_medium=email&amp;utm_source=newsletter&amp;utm_term=200724&amp;utm_campaign=china">threat</a>.&#8221;</p> <ul><li>Just last month, U.S. Secretary of State Mike Pompeo gave a <a href="https://www.state.gov/the-tide-is-turning-toward-trusted-5g-vendors/?utm_source=miragenews&amp;utm_medium=miragenews&amp;utm_campaign=news">statement</a> saying Vivo would be &#8220;in the near future, without equipment from any untrusted vendors,&#8221; in reference to Huawei. &#8220;The more countries, companies, and citizens ask whom they should trust with their most sensitive data, the more obvious the answer becomes: not the Chinese Communist Party’s surveillance state,&#8221; said Mr. Pompeo.</li></ul> <p><strong>We want Huawei. </strong>Back in June, Vivo CEO Christian Gebara defended the use of Huawei technology to develop 5G networks. &#8220;They are one of the world&#8217;s most advanced companies and one of our suppliers. We respect all security protocols. No Huawei equipment used by us has put consumers or our systems at risk,&#8221; he said.</p> <p><strong>Where Brazil stands. </strong>Brazil&#8217;s telecoms regulator Anatel — which is preparing to auction 5G frequencies next year — says the president&#8217;s security cabinet will decide on a potential Huawei ban. But the government has been coy about where it stands. <a href="https://brazilian.report/tech/2020/03/28/brazil-quietly-passes-new-5g-regulations-coronavirus/">Recent regulations</a> suggest Brazil will keep itself equidistant from the U.S. and China. The rules don’t give Chinese behemoth Huawei a completely open market — freeing up space for U.S.-supported companies such as Cisco or Nordic firms Ericsson and Nokia.</p> <p><strong>Brazil-China.</strong> Earlier this week, Brazil moved to back an <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/22/brazil-joins-us-taking-wto-stand-against-china/">anti-China proposal by the U.S.</a> at the World Trade Organization. Instead of treading carefully between the two superpowers to get the most out of each one, Brazil has adopted an erratic one-sided position in the brewing U.S.-China Cold War.</p> <iframe src="https://open.spotify.com/embed-podcast/episode/3YsBHpzE0oGHDZnfiIBEYG" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Infrastructure: the government&#8217;s priority list</h2> <p>The Pro-Brazil Plan — a government initiative to recover the post-pandemic economy through infrastructure projects — continues to move along. The Infrastructure Ministry forwarded to General Walter Braga Netto, the President&#8217;s Chief of Staff, a demand for BRL 40.4 billion (USD 7.7 billion) to be invested in 153 projects, including roadways, railways, waterways, and airports.</p> <p><strong>Why it matters.</strong> The plan was launched in April, as the government (correctly) assessed that the uncertain scenario, coupled with the global economic slowdown, would dry up investments in riskier markets such as Brazil. But committing billions of the public budget to new projects could make public debt spiral out of control, hampering recovery prospects.</p> <p><strong>Hurdles. </strong>Getting the right suppliers would be complicated. The administration resists turning to Brazil&#8217;s main construction groups, which have expertise in dealing with major public projects. These firms&nbsp;have been associated with massive corruption scandals, and many are in dire financial straits following Operation Car Wash.</p> <ul><li>Moreover, Brazil will need foreign investment. And the government&#8217;s laissez-faire approach to deforestation has made many <a href="https://brazilian.report/podcast/2020/07/16/explaining-brazil-podcast-deforestation-is-bad-for-business/">foreign investors wary of Brazil</a>.&nbsp;</li></ul> <p><strong>Guedes opposes.</strong> Economy Minister Paulo Guedes is adamantly against the plan, even comparing it to “pickpocketing the government.” But the cabinet member, once hailed as a &#8220;super minister,&#8221; has <a href="https://brazilian.report/power/2020/07/23/brazil-economy-minister-paulo-guedes-bolsonaro-prestige/">lost power among political power brokers</a> —&nbsp;and has suffered several behind-the-scenes losses recently.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazilian currency has room to rise</h2> <p>The Institute of International Finance has published an update of its &#8220;FX Fair Value Estimates&#8221; model. The index determines where widening current account deficits suggest that falling currencies could still be playing catch-up with deteriorating fundamentals. The IIF says the Brazilian Real is undervalued by 8.8 percent —&nbsp;showing there is room for the currency to appreciate in value in the near future.</p> <ul><li>The previous estimate had the Brazilian Real undervalued by 15 percent. Since then, it gained 7 percent against the U.S. Dollar.</li></ul> <p><strong>Why it matters.</strong> Since the beginning of the year, the Brazilian currency has lost 30 percent of its value — which may create inflation.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3275934" data-url="https://flo.uri.sh/visualisation/3275934/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Coronavirus.</strong> The federal government published a new regulation yesterday making it easier for doctors to prescribe medication containing antimalarial drug chloroquine&nbsp;—&nbsp;which <a href="https://brazilian.report/podcast/2020/05/27/chloroquine-bolsonaros-miracle-cure-for-covid-19-podcast/">President Jair Bolsonaro touts as a &#8220;possible cure&#8221; for Covid-19</a>. On the same day, the largest Brazilian study to date on the efficacy of hydroxychloroquine in the treatment of Covid-19 concluded that the medicine is not effective in combating the disease in mild and moderate patients.</li><li><strong>Investments.</strong> The <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/16/brazil-new-branch-brics-bank-5g-coronavirus/">New Development Bank</a>, also known as the BRICS Bank, has elected sustainable development as its top priority for the post-pandemic world. The bank currently has an investment portfolio in Brazil appraised at USD 820 million —&nbsp;mainly in infrastructure and logistics projects.</li><li><strong>New strike.</strong> App delivery workers will stage a second protest on Saturday, July 25,&nbsp; demanding <a href="https://brazilian.report/tech/2020/06/19/brazilian-delivery-app-workers-rise-up-telecom-regulations-5g/">higher pay and better working conditions</a>. Their first demo happened on July 1 and drew attention from politicians —&nbsp;and they hope a new act will be more effective in pushing for effective change. Couriers ask for a higher fee paid per delivery, plus higher rates per kilometer — which in São Paulo averages BRL 1 (USD 0.19).</li><li><strong>Inequality. </strong>The rate of cured Covid-19 patients in private hospitals is 50 percent higher than in public facilities. Experts say there is no single reason for the discrepancy but claim that pre-existing conditions are the key factor. Lower-income populations — those who rely more on public services — also face lower quality nutrition conditions and less access to healthcare.</li><li><strong>Tech. </strong>OLX Brasil, an online marketplace company, launches two services today: its own payment platform and a delivery service in partnership with Correios, Brazil&#8217;s state-owned postal company. Until now, OLX users had to figure out payments and deliveries for themselves. Working exclusively on peer-to-peer transactions, OLX operates around 2 million deals per month and intermediated the sale of BRL 140 billion in products last year.

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