On Lula’s Approach to Asia: Q&A with Karin Costa Vazquez

Photo of Lula, Hu Jintao, Manmohan Singh, and Dmitri Medvedev José Cruz/ABr | CC-BY-3.0 BR

The following is part of Asia-LAC Dialogues, a series of interviews produced by the Inter-American Dialogue’s Asia and Latin America Program, featuring global perspectives on recent developments in the Asia-Latin America and the Caribbean dynamic.

The recent re-election of Luiz Inácio Lula da Silva to the Brazilian presidency has led many to anticipate closer Sino-Brazilian relations and a more prominent role for Brazil on the international stage. During Lula's first two terms in office, he fostered strong commercial and diplomatic ties with China, capitalizing on China's surging demand for Brazilian and other commodities. Lula also helped found the BRICS forum, which assumed its current form when South Africa was added to the group in 2011. Over time, China has become Brazil's number one trading partner, with bilateral trade last year totaling US$135 billion, as well as a significant investor in the country's wide-ranging industries. According to the Inter-American Dialogue's China-LAC Finance Database and the China-Latin America Commercial Loans Tracker, Brazil additionally received thirteen loans from China's policy banks totaling US$30.5 billion, and at least nine from its commercial banks. 

Of course, Lula is returning to the presidency at markedly different moment in time. Commodity prices have dropped, and China is facing its own host of domestic economic problems that could affect future Sino-Brazilian commercial and financial engagement. For key insight on prospects for future Brazilian relations with China and other key Asian partners, we spoke with Karin Costa Vazquez, who is a is a non-resident senior fellow and researcher at the Center for China and Globalization at Fudan University, as well as an associate professor, assistant dean for global engagement, and executive director of the Center for African, Latin American, and Caribbean Studies at O.P. Jindal Global University. Costa Vazquez authored the recently published policy paper, "A strategic and futures agenda for Brazil's sustainable development."

[caption id="attachment_131850" align="alignleft" width="260"]Photo of Karin Costa Vazquez Karin Costa Vazquez is an associate professor and assistant dean for global engagement at O.P. Jindal Global University.[/caption]

Inter-American Dialogue: Lula’s first two presidential terms were characterized by deepening economic and diplomatic ties between Brazil and China. How would you suggest that Lula engage with China in what is now a dramatically different international context? In which sectors, if any, might we expect China-Brazil economic engagement to grow?

Costa Vazquez: In response to this questions, allow my to highlight some findings from my policy paper, “A strategic and futures agenda for Brazil’s sustainable development,” which was published by the Brazilian Center for International Relations. In it, I note that Brazil’s relationship with China must be part of a "strategic and futures agenda" that leverages public policies through international partnerships and finance—in line with Brazil’s international commitments—and positions the country ahead of major global transformations.

I see three major global transformations shaping the future of Brazil-China relations. The first is the shift of the economic center of gravity from the West to Asia, and China's growing relevance to Brazil. But if the boom in Brazil-China bilateral flows has led to a favorable trade balance for Brazil, it has also generated an asymmetric trade structure. This asymmetry now invites us to think about strategies to diversify and add value to Brazilian exports to China.

The second transformation is the digital-technological revolution and the inauguration of a more competitive, sustainable, and innovative productive paradigm, which I believe has China at its epicenter. This paradigm is born amid structural changes in global value chains that will determine countries’ competitiveness and access to markets, as well as the future of work. China can be a partner in Brazil’s transition to the industry 4.0 and digital agriculture, ensuring both processes happen in a timely, competitive, and sustainable way.

The third transformation is the global energy transition and the impact of China's decarbonization on global energy markets. China is among the world's largest importers of crude oil. Brazil is among the top suppliers of crude oil to China and heavily relies on the country for its exports. That said, we must be aware of the possible impacts of a contraction in Chinese demand over the medium-long run and identify elements that could contribute to Brazil’s repositioning in low-carbon industries.

We must also qualify Brazil-China economic and trade relations. More than thinking about strategies to diversify and add value to Brazilian exports to China, we must do so within a process of reindustrialization of the Brazilian economy that benefits from partnerships with countries like China for the transfer of technologies and investments in sectors with positive spillovers to the economy, the environment, and the society—in line with the 2030 Agenda. One way to articulate FDI with technological development and value aggregation in agricultural and industrial production chains is to create Brazil-China RD&I hubs, include technology transfer/joint development clauses in bilateral investment agreements, and incentivize investments in industries with the greatest contributions to the Sustainable Development Goals.

As I have noted in previous studies, this does not come at the expense of Brazil's economic and trade relations with the United States. On the contrary, I see potential for trilateral collaboration in areas such as green standards and taxonomies with an aim to increase the interoperability among carbon markets in different countries and the fungibility of the carbon credits generated in Brazil. It is this type of synergy or “race to the top” that we must explore.

Inter-American Dialogue: To what extent do you see Brazil's relations with other Asian partners (e.g., India, South Korea, and Singapore) evolving under a Lula administration?

Costa Vazquez: Brazil must be aware of the many opportunities in Asia. Five of the world's largest economies are on the Asian continent. Together, China, South Korea, India, Indonesia, and Japan account for 32 percent of the total trade flows of the G20 countries, 39 percent of GDP (PPP), 63 percent of the population and 18 percent of the bloc's geographical coverage. India is expected to become the world's second largest economy by 2050.

Today, Brazil-India trade amounts to US$14 billion and has room to grow and diversify. Indian investments in Brazil total US$8 billion and generate between 25,000 and 30,000 jobs in sectors, such as information technology, pharmaceuticals, and electronics. As in the case of China, there is potential to qualify Brazil-India economic and trade relations within a process of sustainable and inclusive reindustrialization in Brazil.

Beyond India, estimates indicate that negotiations on a Mercosur free trade agreement with Indonesia, Vietnam, South Korea, and Singapore would bring an increase in Brazilian GDP of US$1 billion, as well as positive impacts on investments, trade flows, and wage. New trade chains based on sustainable agriculture can be created with mega-diverse countries, such as Indonesia and Vietnam, seen by Brazilian agribusiness as the "next China."

Inter-American Dialogue: What role will the BRICS play in an ever-evolving international political environment?

Costa Vazquez: Lula and Xi coincide in their vision of a global order based on a new form of human progress, where poverty cannot exist, prosperity is common, and harmony with nature is crucial. Modi and Ramaphosa also advocate for the democratization of international relations, respect for sovereignty, horizontality, and mutual benefits, within the South-South cooperation framework. For Putin, BRICS is an important window to the rest of the world.

This said, I believe there is still appetite within the five countries to move forward the original motivation for the BRICS. That is, to offer alternatives to global governance. The challenge lies in the form and priority that will be given to issues such as the expansion of the bloc, dialogue with other political-economic and regional blocs, as well as the formulation of joint responses to some of the most pressing development issues of our time, including a just energy transition, health, poverty eradication, and food security.

Lula's leadership profile allows Brazil to position itself as consensus builder within and outside the bloc and spearhead a positive Global South agenda for international development. The revitalization of IBSA, a forum which brings together India, Brazil and South Africa for dialogue, as a space for political coordination between the Indian, South African, and Brazilian G20 presidencies and the South African and Brazilian BRICS presidencies could be the engine of this effort over the coming three years.

As I note in aforementioned the policy paper, Brazil could, for instance, explore the creation of a Global Alliance for the Eradication of Hunger and Poverty, building on its own and other BRICS countries' experience fighting hunger and extreme poverty, fostering Brazil and Latin American centrality for the promotion of food security in China and the world, and highlighting the need to redesign food systems to ensure sustainability and resilience in food access worldwide.

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