VP Hamilton Mourão (L) and China's Xi Jinping

Since taking office, Brazilian Vice President Hamilton Mourão has looked for ways to present himself as a moderate and pragmatic alternative to some of the more radical members of the Jair Bolsonaro administration. Now, it seems that this posture may have opened up a dialogue channel with Brazil’s most important trading partner, which could bear fruits for Brazilian business.

In an attempt to change the aggressive tone towards China that dominated Jair Bolsonaro’s campaign discourse, Mr. Mourão had a busy week in Shanghai and Beijing, trying to represent the interests of many diverse sectors. In his appointments, he found room to address scientific cooperation, financial markets, agriculture, infrastructure, telecommunications, investments, and of course, politics.

</span></p> <p><span style="font-weight: 400;">In an op-ed in weekly magazine </span><a href="https://epoca.globo.com/mourao-ganhou-protagonismo-em-viagem-china-artigo-23694767"><i><span style="font-weight: 400;">Época</span></i></a><span style="font-weight: 400;">, Maurício Santoro, an International Relations professor at the State University of Rio de Janeiro, said Mr. Mourão’s visit was “a win for the government wing that wants </span><a href="https://brazilian.report/podcast-brazil/2019/04/24/brazil-deal-china-relations/"><span style="font-weight: 400;">pragmatic relations with China</span></a><span style="font-weight: 400;">.” In his view, the VP has earned praise abroad, “in contrast to the issues Mr. Bolsonaro has been facing.&#8221; Earlier this month, New York City businessmen pulled out of a gala honoring the Brazilian president, scheduled to take place in the American Museum of Natural History.</span></p> <p><script src="https://www.buzzsprout.com/299876/1078940-57-how-should-brazil-deal-with-china.js?player=small" type="text/javascript" charset="utf-8"></script></p> <p><span style="font-weight: 400;">As a result, Mr. Mourão is coming back home with a more prominent role.</span></p> <p><span style="font-weight: 400;">A sign of this prestige was his meeting with Chinese leader Xi Jinping—who only ever sits down with the VPs of very strategic partners. However, press and pundits elected the new kickstart of the China-Brazil High-level Coordination and Cooperation Committee (Cosban) as the trip’s highlight. Established in 2004, the committee is led by the vice presidents of both countries and had lain dormant since 2015—at first, due to political turmoil in Brazil and then because Brazil had no one in the job after Dilma Rousseff was impeached and replaced by her vice president, Michel Temer. </span></p> <p><span style="font-weight: 400;">On the main issues discussed by the committee, Mr. Mourão </span><a href="http://agenciabrasil.ebc.com.br/politica/noticia/2019-05/na-china-mourao-preside-5a-reuniao-da-cosban"><span style="font-weight: 400;">mentioned</span></a><span style="font-weight: 400;"> “</span><a href="https://brazilian.report/money/2019/04/20/china-swine-fever-brazil-beef/"><span style="font-weight: 400;">verifying our meatpackers&#8217; plants</span></a><span style="font-weight: 400;">, Embraer airplanes, and genetically modified seeds.” In his view, obstacles towards these issues are “small bureaucratic issues that may be solved through dialogue.”</span></p> <p><span style="font-weight: 400;">Although the lack of big announcements may seem frustrating at first, experts praised the effort and the beginning of a new chapter as the most relevant takeaways from the meeting.</span></p> <p><span style="font-weight: 400;">“The fact that we had a meeting shows that, from now on, there are conditions to develop an agenda that has everything to move forward, considering the changes the world is going through, namely the effects of the trade war,” said political analyst Thiago de Aragão, on the </span><i><span style="font-weight: 400;">Sinológico </span></i><span style="font-weight: 400;">podcast.</span></p> <p><script src="https://www.buzzsprout.com/299876/1078967-52-when-jair-met-donald.js?player=small" type="text/javascript" charset="utf-8"></script></p> <h2>Laying ground</h2> <p><span style="font-weight: 400;">Though Mr. Mourão was successful in establishing a dialogue and giving an indication of how Brazil will position itself regarding China, there’s a limit to the vice president&#8217;s powers. Only President Jair Bolsonaro will be able to address some of the most pressing issues in Brazil–China relations, which is why it is so important to see what happens before his trip to Beijing later this year—as well as President Xi Jinping&#8217;s visit to Brasília in November.</span></p> <p><span style="font-weight: 400;">“There are a few key issues in the bilateral relations between the countries for the next few months. One of them is Huawei, the second is bilateral trade from the point of view of agriculture, and the third is the new silk road. And we may even consider a fourth issue, a little bit more distant, which is Venezuela, considering China has a large influence in the Venezuelan situation. Regarding the first three, there isn’t a unanimous vision toward them in Brazil,” said Mr. Aragão. </span></p> <p><span style="font-weight: 400;">In different measures, these issues are also connected to the U.S.–China trade war. Telecoms operator Huawei is being targeted by President Donald Trump and has been blacklisted in the U.S.; Google has also blocked its systems on Huawei’s equipment.</span></p> <p><span style="font-weight: 400;">The fight comes in a crucial moment for Brazil’s telecom landscape, as the sector&#8217;s regulating agency is mulling over a </span><a href="http://www.anatel.gov.br/institucional/noticias-destaque/2263-anatel-e-fcc-discutem-mecanismos-para-promocao-da-banda-larga"><span style="font-weight: 400;">deal</span></a><span style="font-weight: 400;"> with the U.S. </span><span style="font-weight: 400;">Federal Communications Commission to mutually validate products and equipment. A block on Huawei’s equipment may be not only a huge blow to the company—which has just</span> <a href="https://noticias.uol.com.br/tecnologia/noticias/redacao/2019/05/03/como-a-huawei-quer-usar-o-brasil-para-bater-a-apple-e-encostar-na-samsung.htm"><span style="font-weight: 400;">made a comeback to Brazilian retail mobile market</span></a><span style="font-weight: 400;">—but also to Brazil’s infrastructure as a whole, as the country prepares to auction 5G frequencies next year. Huawei is the </span><a href="https://epoca.globo.com/a-chegada-ao-brasil-da-polemica-huawei-23687104"><span style="font-weight: 400;">global leader</span></a><span style="font-weight: 400;"> in the segment.</span></p> <p><span style="font-weight: 400;">In China, Mr. Mourão said Brazil looks upon Huawei favorably, but “when things get polarized, one has to be flexible. You can’t just shoot one side all of a sudden, you have to think calmly and wait for closure,” he </span><a href="https://www1.folha.uol.com.br/mercado/2019/05/da-muralha-ao-encontro-com-xi-jimping-veja-como-foi-a-visita-de-mourao-a-china.shtml"><span style="font-weight: 400;">told</span></a><span style="font-weight: 400;"> newspaper Folha de S.Paulo.</span></p> <p><span style="font-weight: 400;">On agriculture, Vice President Mourão expressed his desire for Brazil to export more high value added goods to China, instead of </span><a href="https://brazilian.report/money/2019/05/28/tariffs-china-brazilian-sugar-boost/"><span style="font-weight: 400;">only raw materials</span></a><span style="font-weight: 400;">. However, Mr. Aragão highlights that </span><a href="https://brazilian.report/money/2019/05/14/us-china-trade-war-impact-brazil/"><span style="font-weight: 400;">China may be forced to change its commodities import policy</span></a><span style="font-weight: 400;">, depending on the terms of a trade deal with the U.S. “If China is forced to double soy imports from the U.S., for example, they will have make cuts somewhere, most likely in Brazil.”</span></p> <p><span style="font-weight: 400;">Although these issues are far from being settled, Mr. Mourão doesn’t seem keen on letting them be forgotten. “Back in Brazil, we’ll present a report to the president and implement a schedule for the ministries to give an answer on what has been negotiated here, so it will not be just words. That’s my main concern,” he </span><a href="http://agenciabrasil.ebc.com.br/politica/noticia/2019-05/na-china-mourao-preside-5a-reuniao-da-cosban"><span style="font-weight: 400;">told</span></a><span style="font-weight: 400;"> the federal public communications agency.</span></p> <h2>Investments opportunities between China and Brazil</h2> <p><a href="http://agenciabrasil.ebc.com.br/en/internacional/noticia/2019-03/brazil-host-brics-summit-november"><span style="font-weight: 400;">Brazil will host the BRICS Summit in November,</span></a><span style="font-weight: 400;"> and President Xi Jinping is set to attend. The meeting will be decisive for relations between Brazil and China, especially in terms of finances. Also in November, the New Development Bank (NDB)—the financial institution created to support infrastructure and sustainable development projects for BRICS countries—will open an office in São Paulo and, according to </span><i><span style="font-weight: 400;">Agência Brasil</span></i><span style="font-weight: 400;">, it could also have an office in Brasília. </span></p> <p><span style="font-weight: 400;">So far, </span><a href="http://agenciabrasil.ebc.com.br/en/internacional/noticia/2019-04/brics-bank-put-621-mi-towards-projects-brazilhttp://agenciabrasil.ebc.com.br/en/internacional/noticia/2019-04/brics-bank-put-621-mi-towards-projects-brazil"><span style="font-weight: 400;">Brazil has been granted USD 621 million</span></a><span style="font-weight: 400;"> dollars in loans by the bank, and will also be able to choose its chairman come 2020. But the NDB&#8217;s future role in Brazil may be at stake, as the Chinese government is keen on including South American countries in the Belt and Road initiative—Beijing’s ambitious development plan which aims to connect China to the world through investments in infrastructure and trade, also called the New Silk Road. If Brazil is to join the initiative, the Chinese would be able to invest directly in Brazil and the NDB would take a lesser role. </span></p> <p><span style="font-weight: 400;">However, judging by Mr. Mourão&#8217;s stance, Brazil is not keen on simply playing by China&#8217;s rules. </span></p> <p><span style="font-weight: 400;">“The New Silk Road is important for those countries that need to have differentiated trade relations with China. We already have that. We will enjoy what matters for us,” he told </span><i><span style="font-weight: 400;">Folha de S.Paulo</span></i><span style="font-weight: 400;"> newspaper, adding that China could invest in Brazil by way of the Investment Partnership Program.

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PowerMay 29, 2019

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BY Natália Tomé Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.