China turns to Brazilian states for diplomatic ties

. Aug 18, 2020
China turns to Brazilian states for diplomatic ties Photo: Pawel Oleszczuk/Shutterstock

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We’re covering efforts between governors to establish healthy relations with China. The new (old) controversy involving the Economy Minister. And the blazes devastating Brazil’s wetlands.

China extends an olive branch … to Brazilian governors

During an online event with governors from the Northeast region of Brazil,

Chinese Ambassador Yang Wanming praised &#8220;friendship&#8221; as the &#8220;main asset&#8221; of Brazil-China relations, adding that &#8220;mutual political confidence&#8221; has allowed for a fruitful relationship and increasing exchange between the two nations over the years.</p> <p><strong>Investments. </strong>&#8220;The Chinese part is on hand for all sectors in the Northeast to plan regional exchange and diplomatic cooperation after the sanitary crisis, in order to recover the economy and improve people&#8217;s quality of life,&#8221; said Mr. Yang.</p> <ul><li>The acquiescence between China and Brazilian states is a counterpoint to the <a href="https://brazilian.report/podcast/2019/04/24/brazil-deal-china-relations/">tepid relations</a> the Asian giant has with the federal government. Back in March, tensions peaked after Congressman Eduardo Bolsonaro said the Chinese Communist Party is fully to blame for the Covid-19 pandemic. At the time, the ambassador demanded a formal apology for what he called &#8220;flagrant provocation.&#8221;</li></ul> <p><strong>Why it matters.</strong> China has many interests in Brazil —&nbsp;while states, with depleted finances, desperately need foreign investment. Without the federal government coordinating diplomatic and trading efforts, states are negotiating directly with China.&nbsp;</p> <ul><li>Political scientist Mauricio Santoro, an international relations professor at the State University of Rio de Janeiro, said that dynamic could be catastrophic, as &#8220;states have <a href="https://brazilian.report/power/2020/06/07/brazil-wasting-golden-opportunity-in-us-china-feud/">little to no structure to stand tall</a> at the negotiation table, creating an immense risk of draconian deals.&#8221;</li></ul> <p><strong>Relations.</strong> There is no evidence that the Bolsonaro government&#8217;s verbal attacks on China have resulted in any significant retaliation as of yet. However, observers point out that some donations from Chinese companies have never made it to Brazil.&nbsp;</p> <ul><li>The Amazon Consortium — a body representing Brazil&#8217;s nine Amazonian states — requested support from potential Chinese partners to receive medical supplies to combat the Covid-19 spread. Eduardo Tavares, Planning Secretary of the state of Amapá, said &#8220;nothing concrete&#8221; has come from the request.</li></ul> <p><strong>Trade.</strong> According to the latest data available, China gobbled up 34 percent of Brazil&#8217;s <a href="https://brazilian.report/business/2018/11/14/brazil-trade-china-commodities/">exports</a> (in USD) and was responsible for 22 percent of imports.</p> <div class="flourish-embed flourish-hierarchy" data-src="visualisation/3502023"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Will Guedes stay or will he go?</h2> <p>Markets were in for a bumpy day on Monday, after rumors that Economy Minister Paulo Guedes was &#8220;no longer seen as indispensable&#8221; by President Jair Bolsonaro. Brazil&#8217;s benchmark stock exchange index Ibovespa fell below the 100,000-point mark, while the Brazilian Real lost ground to the U.S. Dollar, which topped the BRL 5.50 threshold for the first time since late in May.&nbsp;</p> <p><strong>What to make of it.</strong> Mr. Guedes supports austerity measures as being the only way out of the crisis, opposing himself to the government&#8217;s military wing — which wants the president to ramp up public spending on infrastructure projects to recover economic activity. Analysts fear that his recent surge in approval rates might push the president into listening to the latter group.</p> <ul><li>Fears of Mr. Guedes jumping ship are nothing new, and arise every few months. This is because markets know that President Bolsonaro has never championed austerity throughout his time in politics, and see the Economy Minister as the sole guarantor of a pro-market agenda.</li><li>Mr. Bolsonaro has given mixed signals — publicly backing Mr. Guedes, but also floating the idea of a BRL 5-billion infrastructure project for 2021.</li><li>Per newspaper <a href="https://www1.folha.uol.com.br/mercado/2020/08/bancos-temem-que-bolsonaro-vire-uma-dilma-e-gaste-mais-do-que-pode.shtml?utm_source=meio&amp;utm_medium=email">Folha de S.Paulo</a>, markets fear Mr. Bolsonaro will turn into a right-wing version of ex-President Dilma Rousseff, &#8220;spending a lot and spending poorly.&#8221; The newspaper talked to three bankers, two economists from top investment banks, and managers of two major private equity firms — all of whom remained anonymous.&nbsp;</li></ul> <p><strong>Rocky relationship.</strong> Jair Bolsonaro and Paulo Guedes have always been odd bedfellows. But the truth is that the Economy Minister doesn&#8217;t seem to be planning to leave his position as Brazil&#8217;s economic tsar — even if only in name.</p> <hr class="wp-block-separator"/> <h2>Pantanal: Brazil&#8217;s burning wetlands</h2> <p>Since late in July, Brazil&#8217;s Pantanal — the world’s largest floodplain and a Unesco World Heritage site — has lost over 200,000 hectares of vegetation to <a href="https://brazilian.report/environment/2020/07/28/brazil-pantanal-wetland-in-flames-during-harsh-drought/">massive wildfires</a>. This is Pantanal&#8217;s worst fire outbreak since 2006, but its origins remain unknown and there is no sign that the blazes can be tamed in the short term.</p> <p><strong>Why it matters.</strong> The fires are ravaging the São Francisco do Perigara farm — a sanctuary that is home to 15 percent of the world&#8217;s population of blue macaws, an endangered bird species. Over 70 percent of the reserve has been destroyed, which could erase decades of <a href="https://brazilian.report/business/2018/05/15/pantanal-threat-wwf/">environmental efforts</a>.</p> <p><strong>Why the fire has been so potent.</strong> Pantanal is suffering after months of severe droughts. The dry season arrived in May after a rainy season that saw 50 percent less precipitation than expected. To make matters worse, the region has seen strong winds — which help to spread flames.</p> <ul><li>The Environment Secretary of Mato Grosso do Sul state, Jaime Verruck, told Brasília correspondent Renato Alves that the <a href="https://brazilian.report/environment/2020/07/28/brazil-pantanal-wetland-in-flames-during-harsh-drought/">majority of these fires were caused by humans</a>. “We are in the middle of the worst situation in terms of drought, so the fires are likely to continue and the big problem we have is that most of the fires are caused by human action,” said Mr. Verruck.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Coronavirus. </strong>According to pollster Datafolha, 79 percent of Brazilians believe that school reopenings will aggravate the coronavirus crisis. The same percentage believe schools should remain closed until the pandemic is tamed. To help low-income students with limited access to the internet during this period, the government launched a procurement process worth BRL 24 million (USD 4.3 billion) to bring internet cell-phone SIM cards to 400,000 students in public universities and professional certificate courses. </li><li><strong>Strike.</strong> Employees of Correios, Brazil&#8217;s federally-owned postal service company, went on strike Monday night. They are protesting the government&#8217;s plan to privatize the company — which has posted losses in the billions over recent years — and accuse management of &#8220;neglecting workers&#8217; health&#8221; during the pandemic. According to union leaders, servants lost several benefits, such as premiums for risky activities or extra hours, and aid for those with children with disabilities.</li><li><strong>Politics.</strong> Antonio Rueda, deputy chairman of the Social Liberal Party, met with leaders of the so-called &#8220;Big Center,&#8221; a group of traditional conservative forces in Congress — and <a href="https://brazilian.report/power/2020/06/02/jair-bolsonaro-bedfellows-congress-deliver-results-how-long/">Jair Bolsonaro&#8217;s new allies</a>. Mr. Rueda is heading negotiations for <a href="https://brazilian.report/power/2020/08/15/acrimonious-split-bolsonaro-back-in-bed-with-old-political-party/">the president&#8217;s return to the party</a>, after a bitter break up last year. </li><li><strong>Cybersecurity. </strong>Insurance premiums against cyberattacks have more than doubled since last year. In H1 2019, direct premiums amounted to BRL 8.3 million — figures have jumped to BRL 17.8 million in the first half of 2020. Insurance claims, which cover damages to third parties caused by leaks, were also up from BRL 145,000 between January and June 2019 to BRL 12.9 million in the same period this year. Per cybersecurity company Fortinet, Brazil registered over 1.6 billion cyberattacks over Q1 2020 alone. That number is directly related to remote work — as home networks are much less secure than corporate ones.

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