Opinion

There is no Chinese “debt trap” in Brazil

As China increases its economic presence in Brazil, some fear it may have negative consequences for Brazil’s sovereignty

china debt trap brazil
Presidents Xi Jinping of China and Jair Bolsonaro of Brazil during a bilateral meeting in 2019, during the BRICS Summit in Brasília. Photo: Alan Santos/PR

China has become an important economic partner for Brazil over the past 10 to 15 years, particularly in funding infrastructure development. Brazil is China’s second-largest borrower in Latin America, behind only Venezuela. 

Since 2005, Brazil has received around USD 30 billion in loans from Beijing, mainly directed towards energy and infrastructure, while at the same time being the destination of over USD 60 billion in investment, primarily in electricity, oil, and gas projects. This Chinese financial presence can be seen in almost every state of the union. 

But is this increasing partnership detrimental to Brazil’s development and sovereignty?

The situation has led to concerns that Brazil is becoming too dependent on China and could even be falling into a sort of “debt trap.” 

Brazilian President Jair Bolsonaro has stated that Chinese advances in the country are dangerous and should be contained, while U.S. officials have also suggested on multiple occasions that China is entrapping the region in debt. Are these fears warranted?

It should be stated that China does not have major geopolitical designs for South America in general or Brazil in particular, other than securing access to raw materials – something in which Brazil is a willing partner. More importantly, there is no evidence of a “debt trap” being laid by China. It seems unlikely that Chinese leaders have devised a plan to grant excessive loans to Brazil so as to gain control of strategic assets when a debt crisis hits.

For instance, when Brazil was plunged into an economic crisis in 2015, private external debt was more prejudicial to the economy than public foreign debt, which had been kept under control since at least 2002. Most of this debt wasn’t held by China, but by Western financial institutions. In fact, China came to the rescue with a USD 10 billion loan to Petrobras, Brazil’s largest state-controlled company, and a USD 53 billion investment plan. 

Instead of taking control of Brazilian assets, Beijing effectively assisted Brasília in trying to solve the crisis.

The most strategic asset for China in the 2015 investment plan was a railroad connecting the Atlantic and...

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