Brazil to China: Come Samba with Me

Once among the most unequal countries on Earth, Brazil may become more egalitarian than China in the coming decade. Brazil reduced its proportional poverty and inequality levels five times more than China from 1993 to 2005, according to a World Bank study. And since 2005, it's fair to say Brazil's wealth gap has narrowed even more.

Domestic consumption now represents almost 70 percent of Brazilian GDP, while successful wealth transfer programs are a big reason for the 80 percent approval ratings enjoyed by President Luiz Inacio Lula da Silva, who has spent seven years in office.

Billions of dollars are distributed every month to mothers in 11 million of Brazil's poorest families. Bank cards let them withdraw money straight from government accounts so funds don't vanish at local or regional offices. Other wealth distribution programs include housing credits for about 5 million families, and coupons for purchasing cultural goods.

But these positive lessons from Brazil are not likely to be heard in Beijing's government offices anytime soon. Despite China's galaxy of think tanks, only a few brave researchers study Brazil and Latin America. Meanwhile, not a single center of Chinese studies can be found at any Brazilian university.

Moreover, despite headlines about China's growing influence in Latin America, an ongoing trade boom applies to few Brazilian products beyond soybeans and iron ore. China has the low-priced manufactures Brazilian households think about buying, and Brazil is one of the earth's richest places for the natural resources that China needs. Brazil has newly found oil, minerals and 19 percent of the world's fresh water. It also has vast amounts of the world's highest quality iron ore and almost 200 million inhabitants, half in a growing middle class.

But these incredible complementarities have failed to attract more than meager investments. China and Brazil barely talk about how the world should be and changes that could benefit both sides.

Stumbling Relations

As soon as Brazil recognized China as a market economy, it was, predictably, flooded with Chinese manufactured goods. In exchange, Brazilian diplomats expected China to support Brazil's plea for a permanent seat at the UN Security Council. The diplomats were disappointed.
 
A so-called G2 bloc that combines China and the United States started emerging just as Brazil's voice was starting to gain strength. This development supports those who argue that China is a threat, or at least not an ally.

Indeed, Brazil and China have engaged in odd dialogue since 2004, when the two countries formed a bilateral commission. The commission has met only twice; the first meeting was a mere formality.

Negotiations aimed at opening China to Brazilian meat products have dragged for five years without progress. Other competitive goods from Brazil have met the same fate. Meanwhile, Brazil has used anti-dumping mechanisms against Chinese products. Sao Paulo's influential Federation of Industries has criticized a so-called "labor, environmental and currency-dumping of Chinese goods."

In 2008, Chinese steelmaker Baosteel cancelled the only major investment China ever announced in Brazil -- a US$ 4 billion steel mill joint venture with iron ore mining giant Vale. A sale of 40 jets by Brazil's Embraer, the world's fourth biggest jet manufacturer, has been on hold since 2008, waiting for a Chinese government decision. Embraer may shutter its factory in Harbin due to technology transfer and market issues. Mutual trust is not running high.

Aside from oil deals, China's biggest investment has been a US$ 400 million stake in steelmaker MMX by Wuhan Steel. True, China became Brazil's most important trade partner in 2009. But that was only because three-fourths of exports to China benefit soy exporters and Vale.

China has an institutional framework and long-term commitment in Africa. But its alliances with Brazil and most of Latin America are at an early development stage. What's needed is a progressive agenda to advance China-Brazil cooperation in several areas.

Agenda for Progress

With 350 million inhabitants, South America offers a vast pool of natural resources and consumers. China could boost its presence by financing, sponsoring and even building the badly needed infrastructure for two-way trade, as well as storage, transportation and exploration of raw materials. China can be more of a partner than simply a supplier.

In areas of housing and urbanization, China as well as Brazil has failed. China's real estate boom is too focused on high-end properties, while hundreds of millions can't afford a first apartment. In Brazil, where there is no hukou system, the children of a rural exodus live in "favelas" – shanty towns in the ring cities.
 
Since China can't stop urbanization and Brazil needs to improve, the countries should join forces to create sustainable, architecturally efficient, pleasant and affordable housing. They can also study how to integrate new areas in their inner cities to improve traffic and transportation.

Food security is another area worthy of cooperation. Only 19 percent of Brazil's people live in rural areas, so the country didn't become an agribusiness superpower by accident. It is the No. 1 exporter of soybeans, coffee, sugarcane and orange juice, and a leading exporter of meat and chicken. Embrapa is a state-owned company focused on agriculture and livestock research. As millions leave China's countryside for metropolises, the big steps needed to modernize Chinese agriculture can be found through research and practices in Brazil.

In the area of renewable energy, Brazil could help China switch to flexible car engines running on gasoline and ethanol, a technology Brazil developed. China cut tariffs on ethanol -- the Brazilian sugarcane biofuel – to 5 percent from 30 percent. China could build a clean-fuel fleet and become less dependent on oil. Meanwhile, Brazil could learn from China's research into wind and solar power.

Finally, Brazil's ailing infrastructure – including chaotic airports and short subways -- could be a target for Chinese companies as Brazil prepares for the 2014 World Cup and 2016 Olympics.

Each country desperately needs agents to promote dialogue, from business leaders to intellectuals, political leaders and the media. They need to dismantle prejudices and misunderstandings – and build common ground. Both governments should promote scholarships and exchange programs in education, agriculture, technology, urban planning, health and language training.

Brazilian diplomats often complain how hard it is to get appointments with Chinese officials. But successful China-Africa summits in recent years have shown that diplomacy works. What's needed is a periodic China-Brazil summit. Because of Brazil has so many diverse voices, such a summit should include not only the government but also business federations, civil society and the media.

China's economic miracle has had a lot to do with carefully studying successful models in the developed world and adapting them to China. Now, as economies in the developed world slow and show limited growth potential, the search for new, pragmatic models should encourage China and Brazil to look toward each other.

There is room for optimism. Brazil's Lula has visited China three times to promote closer ties. And since it takes two to tango, or samba, China's interest in Latin America generally and Brazil in particular has been welcomed. Brazilians are ready to join the fastest economic transformation in history.