Commercial Relations: Brazil and China
Brazil and China are two countries possessing similar characteristics in their economic development especially during the last decade where they have seen rapid growth and an expanding industrial base, even though this has been decelerating in Brazil since the middle of 2011.
In this article, we will cover the history and numbers behind Brazil and China’s commercial relations.
First step to establish relations
Diplomatic relations between China and Brazil officially began in 1974, however the establishment of consulates in Shanghai and São Paulo only happened 10 years later in 1984. Brazil’s first democratically elected president since the military dictatorship, José Sarney, visited China for the first time in 1988.
The growing economic and political relationship between China and Brazil was strengthened by Brazil’s former president Luiz Inácio da Silva, ‘Lula’, visiting China in 2004, accompanied by 450 Brazilian business representatives.
Since the group was created, China and Brazil became part of the BRIC, later extended to BRICS. This encouraged strong interaction and a tight connection between the two countries. In particular, it includes trade and financial integration.
Commercial exchange: Brazil and China
Analyzing the trade balance between Brazil and China is important as since 2009, China has become Brazil’s leading trading partner. In 2013, the countries’ bilateral trade was USD 83.3 billion, an increase of 10.4% over 2012 and a growth representing almost 13 times the bilateral trade of 2003: USD 6.7 billion. China was the destination for 18% of Brazilian exports and the origin of 16% of Brazilian imports.
The balance of trade between these two countries in 2013 was favorable to Brazil, registering a surplus of around USD 548 million to Brazil, a reduction of 18.3% when compared to 2012. But, exports to China grew over imports in 2013, amounting to USD 8.7 billion, a growth of 25% when compared to 2012.
Brazilian Exports to China
The main exports to China in 2013 were basic products, namely soybean - which amounted to USD 17.1 billion - 37% of exports, iron ore - reaching almost USD 16 billion - 35% - and crude petroleum oils - USD 4 billion - 9%. Basic products amounted for almost 85% of the total value of exports to China. Brazil also exports semi-manufactured goods - goods which are already industrialized, but will be industrialized in a new process - which added up to almost 12% of the total value of exports. Manufactured products added up to 3%. The total value of exports to China in 2013 was USD 46 billion, representing 19% of exports.
Soybean was the principal catalyst for the increase in value of exportations from Brazil to China: 42.6% from 2012 to 2013. Exports of Iron ore to China grew 6.8 from 2012 to 2013. Together they represented almost 72% of the total value of exports to China.
Brazilian Imports from China
Manufactured products accounted for the majority of Chinese imports to Brazil in 2013 especially machinery, electronics and electrical appliances: which accounted for 29.1% of all imports from China reaching almost USD 11 billion. Mechanical appliances accounted for 21.8% - USD 8.1 billion - of all imports from China and organic chemicals represented 5.9% of imports from China, at a value of USD 2.1 billion. Manufactured products represented 97.5% of all imports from China, while semimanufactured products added up to 2% and basic products added up to 0.5%.The total value of Brazilian imports from China in 2013 was USD 37.25 billion, representing 16% of imports.
Machinery, electronics and electrical appliances, as well as their parts, had a relevant growth in value of importations from China to Brazil - 10.8% from 2012 to 2013. Imports of mechanical appliances grew 2.5% and imports of organic chemicals had a growth of 21.6% in value from 2012 to 2013. Together, they represented 56.8% of all imports from China.
Bilateral relations
As economic relations between Brazil and China grew stronger, so did their diplomatic relations. Today China is Brazil’s leading export destination and one of its top importers. China has also been Brazil's largest trading partner since 2009.
Mechanisms and agreements for cooperation
- Agreement for Cooperation of Science and Technology, signed in 1982
- Construction of the China-Brazil Earth Resources Satellite Program, which was announced in 1988. This program was successful, resulting in the construction of two satellites in 1999 and 2002 which provided key information on natural resources
- COSBAN, the China-Brazil High Level Commission of Agreement and Cooperation. Created during the visit of President Luiz Inácio da Silva in May 2004. COSBAN’s objective is to promote regular high-profile meetings between senior representatives of the two countries
- Joint Action Plan 2010-2014, facilitating cooperation on areas such as: politics, trade, economy, energy and mining, agriculture, industry and information technology, space cooperation, culture and education. According to the Joint Action Plan, Brazil and China will cooperate in World Trade Organization negotiations, especially in agriculture and also oppose protectionism
- As China is one of the largest importers of basic Brazilian products such as iron ore, soybean and petroleum, China is investing in Brazil for the construction of Porto do Açu near Rio de Janeiro. Porto do Açu will handle Chinamax containerships to import and export raw materials and manufactured goods.
- Other major infrastructure investments are the construction of a continental pipeline, roads and high speed trains.
- In July 2014 Brazil and China signed 54 new agreements during an official visit from Chinese President Xi Jinping to Brazil. The agreements and memorandums of understanding were signed to cover areas such as technology, telecommunications, remote sensing, defense, energy and education.
We would like to thank Daxue Consulting for the background information to this article.