China and the US in Brazil: No need to compete

While at loggerheads in the global economy, the US and China are carving out spaces for themselves in Brazil's national economy. And that benefits the Latin American country.

Even though US-China investments dropped dramatically last year, according to the economy ministry, the US remains the largest player to provide foreign direct investment while China is the biggest trade partner. 

Between 2003 and first half of 2019, the US pumped US$81.6bn of FDI into Brazil, compared to China's nearly US$79.7bn, according to Brazil’s economy ministry.

China-Brazil trade from January to September totaled US$72.8bn, but trade with the US reached only US$44.3bn, according to Brazil's trade and industry ministry.

Brazil is running a US$19.6bn trade surplus with China and a trade deficit of US$739mn with the US.

CHINA AND US INTERESTS 

Importantly, China and the US don't yet compete in Brazil's economy, but invest in different sectors, reflecting their respective national economies. China, for example, buys mostly commodities from Brazil but the US focuses on semi-industrialized goods and finance.

Consequently, Chinese FDI flows to Brazilian natural resources and energy assets and US capital into the financial and services sectors.

FOREIGN AFFAIRS

Until the Wokers Party came to power, Brazil's foreign policy was anchored in the Anglosphere and trade with industrialized countries.

But the Lula administrations changed direction to take advantage of global power relations increasingly driven by emerging markets. Establishing Brazil as a leading actor among the BRICS economies, Lula also triggered rapprochement with China.

President Jair Bolsonaro (pictured), who took office in January, questioned this approach at first. Being ideologically close to Donald Trump, Bolsonaro sought to strengthen relations with the US at the expense of China and non-industrialized countries generally.

But Bolsonaro realized China's importance within the first five months of his government and changed course quickly.

Lisa Schineller, Standard & Poor's Managing Director Latin American Sovereign Ratings, told BNamericas that "the US side is a key trading partner as well. China is the single largest trade partner but the US holds the larger FDI share in Brazil." Hence, Brazil does not need to suffer under US-China rivalry.

The Bolsonaro administration acts accordingly. Announcing his first Asia tour, which will also lead him to China, the president recently told an investment forum that “my trip to Asia is to show that we are open for all and we want to reinforce our ties will all our important partners. We want to be a more open economy.”