MercoPress. South Atlantic News Agency

Brazil discussing a trade deal with Beijing; Chinese company planning US$ 1bn investment in port

“We are talking to China about the possibility of creating the free trade area with China as well, while talking about joining the OECD,” minister Guedes was quoted

President Jair Bolsonaro and Economy Minister Paulo Guedes want to strengthen trade relations with China. Guedes said the creation of a free trade area between the two countries is under negotiation.

The minister talked about the issue during the seminar of the New Brics Development Bank (Brazil, Russia, India, China, and South Africa) in Brasilia. The Brics summit is taking place in Brasilia, hosted by president Bolsonaro.

“We are talking to China about the possibility of creating the free trade area with China as well, while talking about joining the OECD,” Guedes was quoted.

Guedes said he heard from the Chinese government that there would be no problem if Brazil sold even more to the Asian country, “there would be no problem with unbalanced trade with China”.

”I don't care if, in a surplus situation [of Brazil today] with China, we balance ourselves there, increasing exports by 50% and imports doubling or even tripling. What we want is even more integration,” Guedes underlined.

Skeptical about Mercosur, from the very first day he was named minister, Guedes has pushed hard for open markets, lesser government, privatizing government enterprises, a balanced budget, and with the prospects of a protectionist government in Argentina, Brazil's insistence on a trade deal with China, should not come as a surprise.

China is Brazil's main trading partner and a significant source of investments, and is also limited by Mercosur clauses which demand that negotiations with third countries must be extensive to the whole group and have the overall consensus from its members, in this case Argentina, Paraguay and Uruguay.

Furthermore during the BRICS summit in Brasilia, Chinese leader Xi Jinping was expected to make an announcement regarding a major investment in one of Brazil's ports. Allegedly China Communications Construction Company (CCCC) is prepared to invest almost a billion US dollars in the northern Brazilian port of Sao Luis.

In 2018, CCCC began work on a new greenfield port at Sao Luis, the capital of the state of Maranhão on Brazil's northeastern coast. The four-year-long construction project has a projected cost of about US$250 million; two Brazilian partner companies, WPR and Lyon Capital, own a combined 49% minority stake in the venture.

The new port's primary objective is to increase the region's capacity for shipping Brazilian soybeans to overseas markets. China is the largest customer for Brazilian soy exports, and it is also Brazil's largest trading partner overall.

Chinese investment has become increasingly important to Brazil’s oil and gas, power and transportation sectors, while China’s demand for iron ore and agricultural goods make it the top Brazilian trading partner.

China’s growing presence made it a target for Bolsonaro’s nationalist rhetoric in last year’s presidential campaign, including a repeated complaint: “The Chinese are not buying in Brazil. They are buying Brazil.”

But since taking office, diplomats and business leaders in both countries have influenced the former army captain to tone down his anti-China rhetoric.

“We want to more than expand, we want to diversify our trade relationship,” Bolsonaro said at an event with Xi on Wednesday.

China and Brazil announced a list of agreements including an accord to allow the transfer of convicted prisoners between the two countries, protocols to allow an expansion of the fruit trade and broad memorandums of understanding to cooperate on transportation, investment and the services sector.