Brazil not real middle power if it just takes China's side Opinion by Nikkei Asia

Alicia Garcia-Herrero, a chief economist for Asia-Pacific at investment bank Natixis in Hong Kong and a senior research fellow at policy research think tank Bruegel in Brussels, has written an opinion piece for Nikkei Asia arguing that Lula cannot show strategic autonomy by parroting Xi Jinping. Caliber.Az reprints the article.

Brazilian President Luiz Inacio Lula da Silva made quite a splash in Beijing last week, not so much because of the huge delegation that accompanied him and the dozen or so cooperation agreements he signed, but rather because of his daring side remarks.

While the comments may have been surprising coming from Lula, often he came out sounding so much like Chinese President Xi Jinping that the idea that he was representing an important middle power in a world of intense US-China systemic rivalry simply vanished.

In other words, if his goal was to position Brazil as a neutral power, as Indian Prime Minister Narendra Modi has done with his country, it would be hard to consider Lula's visit to Beijing a success -- at least for him. Things look very different for Xi, who once again has managed to enthrall the leader of a significant economic power.

Lula was clearly out to capture economic opportunities, given uncertainties about Brazilian post-pandemic growth. China holds the key there as its imports of Brazilian commodities have soared since 2008, establishing Beijing as Brasilia's largest trading partner by far.

Although Brazil's exports into China remain heavily concentrated on commodities, there has been diversification, with lithium and other materials critical to the energy transition growing in importance. In fact, Brazil is one of the few countries that is running a trade surplus with China.

China has also become one of Brazil's largest investors, especially in the energy sector. State Grid Corporation of China has invested about $3 billion in power transmission in Brazil while state-owned COFCO has put $1.1 billion into agribusiness activities in the country.

Meanwhile, rising interest rates are putting pressure on Brazil due to its large public debt. Hence Brasilia's keen interest in luring Chinese companies to buy Brazilian assets, even in strategic sectors.

But growth and development were not the only motivations for Lula's trip.

After having been humiliated with imprisonment in 2017 following a corruption conviction, Lula is seeking to show international leadership, something which was rather absent during his first presidency, which ran from 2003 to 2010.

There is no doubt that Brazil is big enough, in terms of the size of its economy and population, to play a role as a regional power in Latin America and even as a global middle power. Others, including the European Union and India, are also playing this game, but unlike them, Lula seems to want to stand on China's side and move away from the US-led camp.

The reason for Lula's shift toward China might be explained by his discontent with Brazil's role in traditional organizations, such as the Group of 20, which has become increasingly dysfunctional since Russia's invasion of Ukraine. Of note, Brazil lacks a comprehensive trade agreement with the US while its South American Mercosur bloc has been unable to complete a trade pact with the EU for 24 years.

Lula thus seems convinced that only China can deliver quick results in Brazil's favor. This impression may have been reinforced by the appointment of Dilma Rousseff, his hand-picked successor as president back in 2010, to lead the BRICS-affiliated New Development Bank.

The Belo Monte hydroelectric dam, one of the world's largest: State Grid Corporation of China is building a transmission network to send power from the plant in Brazil's north to cities in the south. 

The problem with Lula's approach is that China is simply not ready to share global leadership even with countries the size of Brazil. This has pushed Lula into a corner in which he sounds like little more than an echo of Xi.

If Lula's intent is to show the world, and especially the US, that he has established Brazil's strategic autonomy, he certainly has not. Lula's most attention-getting comments in Beijing, about ditching the dollar in trade and the need to end the war in Ukraine, may well have been Xi's words, not his own.

This reality is not a sign of Brazil's strength as a regional power but rather of its enormous economic dependence on China to the point of affecting its foreign policy and, even more seriously, affecting the makeup of its foreign reserves, a matter of significance given Brazil's heavy debts.

As for Ukraine, Lula has been on a campaign since February to end the war via what he has described as a "peace club." From this rather original initiative, Lula moved in Beijing to a much more aggressive position in which he accused the US of promoting the war while putting Ukraine on an equal footing with Russia in terms of responsibility for the conflict. On Monday, Brazil welcomed Russian Foreign Minister Sergey Lavrov for talks, even as it has kept a distance from Kyiv.

In other words, after starting off offering big ideas as a potential broker of a concerted solution, Lula now almost gives the impression of being a Chinese puppet.

As far as the international use of the dollar is concerned, in advocating the use of local currencies for international trade, it seems obvious that Lula is not so much referring to the real but specifically to the yuan. This was evident in the announcement a couple of weeks ago of the creation of yuan payment infrastructure in Brazil to settle import and export contracts.

All in all, what seems clear is that Xi has achieved his goals with Lula's visit, namely corralling the Global South behind China's global leadership. Lula, by contrast, has not demonstrated any strategic autonomy or global leadership but rather just support for Xi's position on important issues like Ukraine and the reserve currency role of the dollar.

Hopefully, Lula has at least brought home enough deals to create new growth opportunities for Brazil's faltering economy.