Brazil courts China as its Musk feud erupts again
The re-election of Donald Trump on November 5th rather overshadowed Luiz Inácio Lula da Silva’s big bash. Lula, as Brazil’s president is known, hosted the G20 leaders’ summit in Rio de Janeiro on November 18th and 19th. Heads of state from 19 of the world’s largest economies, as well as the European and African Unions, convened to talk shop.
Lula had three goals for the summit: the creation of a global alliance to reduce hunger and poverty; an agreement to reform global institutions like the IMF and the UN; and an increase in countries’ financial commitments to combat climate change. He also wanted to whip up support for a global tax on billionaires. Lula got a declaration signed by all g20 participants to broadly support these ambitions. Mr Trump, soon to be the most powerful person in the world, will not share the zeal.
Mr Trump’s return to the world stage may scupper Lula’s plans, but he has a consolation prize: his relationship with Xi Jinping. After the g20 China’s president travelled to Brasília, the capital, to meet his Brazilian counterpart. To celebrate 50 years since their countries established diplomatic ties they signed 37 agreements, covering everything from Brazilian grape exports to co-operation on satellites. Sino-Brazilian relations “are at their best moment in history,” said Mr Xi, with Lula by his side. In recent months, “anyone who is anyone in Brazil has been to China,” says a former Brazilian ambassador to Beijing.
Several factors have been pushing Brazil and China together. In Brazil’s case they are mostly political. Shortly before the election in the United States, Lula threw veiled support behind Kamala Harris, Mr Trump’s rival. Meanwhile, Mr Trump is close to Jair Bolsonaro, Lula’s far-right populist predecessor and nemesis. Elon Musk has become Mr Trump’s right-hand billionaire. The tech entrepreneur had a months-long feud with Brazil’s highest court this year, which culminated in his social-media platform, X, being banned in Brazil for over a month. On November 16th Lula’s wife, Rosangela da Silva, said “Fuck you, Elon Musk,” at a public event. Mr Musk replied on X, “They are going to lose the next election”. This means Lula will not expect a warm reception in Washington after Mr Trump is inaugurated in January.
China’s problems with the United States run deeper. Mr Trump has said he will slap 60% tariffs on all Chinese goods as soon as he takes office. And so China is keen to do everything it can to expand the markets for its goods beyond the United States. Brazil, the world’s ninth-largest economy, is an important part of that puzzle. Brazil also shares China’s multipolar view of the world, and is keen to rely less on the dollar for international transactions.
But perhaps the most important component of Sino-Brazilian friendliness is that China wants to buy what Brazil is selling. China guzzled Brazilian oil, iron ore and soyabeans though the 2000s as the Chinese middle class grew rapidly. It overtook the United States as Brazil’s biggest trade partner in 2009, during Lula’s second term (see chart). Commerce continues to expand despite slowing Chinese growth. Brazilian exports to China are running at record highs. Brazil is one of a handful of countries that boast a trade surplus with China; last year it exported $51bn more to the Asian giant than it imported from it.
And that surplus could yet grow. During Mr Trump’s last term, between 2017 and 2021, Brazilian exports to China nearly doubled as China bought soyabeans, corn and chicken from Brazil instead of the United States. On this visit, Mr Xi and Lula signed deals that could soon allow Brazil to export grapes, sesame, sorghum and fish products to China, which could be worth a combined $450m per year. TS Lombard, an investment firm in London, reckons that a 10% increase in Chinese demand for Brazilian products could boost GDP growth from a projected 2% in 2025 to 2.6%.
But it is Chinese investment in technology, industry and green energy which most excites Lula, a former carworker who has pledged to slash Brazil’s carbon emissions. The United States remains the biggest source of foreign investment into Brazil by far. Chinese investment in the region—and in Brazil—has fallen in recent years. But the composition of that investment still suits Lula. Last year fully 72% of it went to clean-energy projects. Exports of electric vehicles, solar panels and lithium-ion batteries from China to Latin America rose from $3.2bn in 2019 to $9bn in 2023. Brazil absorbed 63% of the total by value.
“Five years ago China was investing in expensive fixed assets like electricity infrastructure, oil and gas,” says Hsia Hua Sheng, a professor at the Getulio Vargas Foundation in São Paulo who also works for Bank of China. “Today it invests in manufacturing, renewables, services and logistics.” He claims that these are “higher-quality” investments because they often involve partnerships with local firms, job creation and technology transfer. BYD and Great Wall Motors, two Chinese rivals to Tesla, are opening electric-vehicle factories in Brazil next year. BYD’s is in a former Ford factory. It will be the firm’s biggest factory outside Asia.
A high-tech Chinese factory built on the site of a fading American industrial champion is hard enough for officials in Washington to stomach. But no subject is likely to ruffle as many feathers in a Trump-Musk White House as a deal on satellites. During Mr Xi’s visit a memorandum of understanding was signed between Brazil’s state telecommunications company, Telebras, and SpaceSail, a Chinese maker of low-Earth orbit satellites that competes with Mr Musk’s Starlink. Brazil’s communications minister, Juscelino Filho, said he hoped SpaceSail will offer its services in Brazil “as soon as possible”. In October, Mr Filho had visited SpaceSail’s headquarters in Shanghai and those of another satellite-maker in Beijing. The visit followed a spat about free speech and disinformation between Mr Musk and Alexandre de Moraes, a powerful judge on Brazil’s Supreme Court. In August Mr Moraes froze Starlink’s bank accounts in Brazil to force Mr Musk to take down social-media accounts on X, the platform he owns. Starlink controls almost half of the market for satellite-internet services in Brazil. SpaceSail plans to have 600 satellites in orbit by the end of 2025—around a tenth of the number that Starlink does.
Beyond this, Lula and Mr Xi could further their countries’ financial co-operation. In 2023 they agreed to settle all trade in their countries’ own currencies rather than in dollars. In October that same year they carried out the first transaction in yuan and reais. The scale of these transactions is currently puny, but they carry symbolic weight and may provoke Mr Trump’s ire. He has warned that he would slap tariffs of 100% on goods imported from countries that try to “leave the dollar”.
Such radical actions by Mr Trump would probably have unintended consequences. “The relationship between Brazilian and Chinese businessmen is way more consolidated today compared with five or ten years ago,” says Mr Hsia. That is thanks in part to the trade war Mr Trump waged in his first term. In his second, he may end up making Chinese and Brazilian businessmen friendlier than ever. ■
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