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In China, Lula Seeks Help Building Back Brazilian Industry

Brazil’s President Luiz Inacio Lula da Silva, left, and China’s President Xi Jinping attend a welcoming ceremony at the Great Hall of the People in Beijing, April 14, 2023. (Ricardo Stuckert/Handout via Reuters)
Brazil’s President Luiz Inacio Lula da Silva, left, and China’s President Xi Jinping attend a welcoming ceremony at the Great Hall of the People in Beijing, April 14, 2023. (Ricardo Stuckert/Handout via Reuters)

The trip by Brazil's President Luiz Inácio Lula da Silva to Beijing has made clear he is counting on China to help reinvigorate the South American nation's ailing industrial sector — particularly by picking up the slack of exiting U.S. companies.

After Lula met Friday with China's President Xi Jinping, Brazilian finance minister Fernando Haddad told reporters the nations are planning a "leap forward" in their relationship.

"President Lula wants a policy of reindustrialization. This visit starts a new challenge for Brazil: bringing direct investments from China," Haddad said. He added that Brazil wants strong bonds with the U.S. but noted with regret that recently "some American companies made the decision to leave Brazil."

Industrial policy is near and dear to Lula, a former steelworker who became a union leader. Decades later, he launched his bid for a third presidential term on the gritty outskirts of Sao Paulo outside a car factory. That area — and the country — is churning out ever-fewer manufactured goods.

Brazil's national statistics institute said in July 2022 that Brazil had lost 1 million industrial jobs over the prior decade, a decline of 11.6%. The institute said in 2021 that the country's industrial sector represented 18.9% of Brazil's GDP, down from 38% three decades earlier.

Over the years, Brazil became a massive exporter of raw materials. China overtook the U.S. as Brazil's biggest export market in 2009, and each year buys tens of billions of dollars of soybeans, beef, iron ore, poultry, pulp, sugar cane, cotton and crude oil.

The Asian giant and the Latin American powerhouse had a somewhat frosty relationship over the last four years when far-right leader Jair Bolsonaro held the presidency in Brasilia. Even some of Bolsonaro's supporters in the agribusiness sector were critical of outbursts that antagonized China.

On Thursday, Lula met with the CEO of Chinese manufacturer BYD, which produces electric busses and is in talks to start operations at a factory in the Brazilian state of Bahia, Lula's office said. The previous owner, Ford Motor Co., announced in 2021 that it was shuttering the plant, along with two others in Brazil.

Brazil is already the biggest recipient of Chinese investment in Latin America, according to Chinese state media. And Lula doesn't just want more investment; he is also seeking partnerships that challenge the hegemony of Western-dominated economic institutions and geopolitics, including diplomacy over the war in Ukraine.

Lula's visit included the swearing in Thursday of former Brazilian President Dilma Rousseff as head of the Chinese-backed New Development Bank, which is funding infrastructure projects in Brazil and elsewhere in the developing world.

The bank portrays itself as an alternative to the International Monetary Fund and World Bank, which often impose loan conditions that developing nations criticize as punitive.

At the swearing-in ceremony, Lula took swipes at both the IMF and the dominance of the U.S. dollar in international trade, hailing an agreement between Brazil and China to use the Chinese yuan in their bilateral commerce

Lula and Xi oversaw the signing of agreements in 15 areas, ranging from agriculture to aeronautics, which underscored the improvement in relations since Lula took over in January.

"As comprehensive strategic partners, China and Brazil share extensive common interests," Xi said, according to the Chinese Foreign Ministry.

The trip was Lula's third visit to China, but the first with Xi sitting as president. On Friday, the two leaders met for three hours — far longer than had been scheduled.

In February, Lula traveled to Washington, where he and U.S. President Joe Biden stressed the importance of defending democracy and preserving the Amazon rainforest. The trip didn't, however, produce the hoped-for financial pledge for Brazil's Amazon Fund.

The Lula-Xi talks touched on the conflict in Ukraine, with the leaders agreeing on the need for a negotiated settlement, according to Chinese state broadcaster CCTV.

A key piece of Lula's outreach abroad is his proposal that Brazil and other developing countries, including China, mediate peace. However, his suggestion that Ukraine cede Crimea has irked Kyiv and its closest backers, namely the U.S. and Europe.