Should Brazil Enter China’s “New Silk Road”? Maybe already – China, Middle-earth

The figures touted by the official propaganda are impressive: 70 participating countries, $ 690 billion in investments and a long belt connecting East Asia to Europe, Africa and, more recently, the Latin America.

From different angles, the “New Chinese Silk Road” – officially the “Belt and Road Initiative” – had everything to become the project of the century, the turning point that would make Beijing a major hub of international trade.

The cancellation of the agreements signed by Australia with the initiative and the doubts about the ability of small economies to honor debts contracted with Chinese banks, however, triggered the yellow alert: is it logical that Brazil is joining the package billion dollar infrastructure?

Announced in a speech by Chinese leader Xi Jinping in Kazakhstan, the project was born with less cohesion than the government suggests. Addressing students at Nazarbayev University, Xi preached “strengthening economic ties, deepening cooperation and expanding development space in the Eurasia region. We need to take an innovative approach and jointly build an economic belt along the Silk Road, ”he said, referring to the legendary road that linked Asia to Europe around 200 BC.

Senior Fellow of the John L. Thornton China Center at the Brookings Institution, David Dollar was a US Treasury envoy to the US Embassy in Beijing at the time of the speech. In an interview with Folha, he said that the creation of the “new silk road” brand was less a new project and more a way to give cohesion to a series of initiatives that China has been developing since the beginning of the decade. the internationalization of national and international companies. strengthening of strategic diplomatic relations.

“They were already developing several projects abroad since 2008, and Xi Jinping created a brand for something that already existed. Surprisingly, the reaction of the Western press to this speech and the notoriety which the newspapers accorded to the term [nova rota da seda] were the likely factors to consolidate the Chinese initiative. At that time, it was undoubtedly an important package of economic incentives aimed at development, but the political slogan helped to give credibility ”, explains the economist.

Visit of the Chinese exhibition on the Belt and Road initiative during a conference organized by the Ministry of Human Resources. ILO / Disclosure

The impression that the Belt and Road initiative emerged more as an advertising campaign than a well-designed project may help explain the evidence Dollar collected in the years following Xi’s announcement.

Following the development of the project, the economist claims that, despite the grandiose announcements, the countries which decided to join the project did not receive significant Chinese investments – in comparison with the economies which decided not to join the project. road.

“If you take Xi’s official speeches and Chinese documents, it is still possible to find references to the Belt and Road as the core of a grand strategy linking Central Asia with Europe and the Africa, whether by land or sea. However, most Chinese infrastructure investments are not concentrated in this corridor. Brazil and several African countries, for example, have received significantly more money, although not all of them are officially linked to the Chinese project.

Flexible diplomacy

Researchers on foreign investment in Brazil, Professors Fábio Morosini of UFRGS and Michelle Ratton Sanchez of FGV-SP have been following the legal language of contracts signed by Chinese companies for years. While conducting a survey on China’s participation in the Brazilian electricity sector, they believe that the indifference as to whether or not to join the Belt and Road initiative is due to the dynamism of the agreements sealed by the Chinese.

“There is a big discussion about what the US model of cooperation is, or how the EU regulatory frameworks work. We realized that there doesn’t seem to be a Chinese model. There is flexibility to adapt companies, which allows to penetrate different markets, to assess regulatory tools and to raise awareness of strategies according to the local legal environment, ”explains Sanchez.

In addition, according to Morosini, preliminary comparisons between the Initiative’s agreements signed with Asian or European countries and the memoranda in force in Brazil do not seem to bring much difference.

The professor says Brazil has already consolidated its position as the main destination for Chinese investment in Latin America and Beijing’s largest trading partner in the region, a dynamic that a denial of the Belt and Road initiative would hardly change.

“We studied the bilateral agreements signed between 2005 and 2018, which allowed us to conclude that the type of language and the strategic areas foreseen in the Sino-Brazilian relations are almost the same. [aos da Iniciativa do Cinturão e Rota]», Declares Morosini. “The provocation we ask for is this: does it still make sense to debate whether to join the Initiative when China has already managed to enter Brazil, so to speak, using similar legal instruments?”

Initiative progresses across Latin America

If for Brazil the debate no longer seems to have meaning, other Latin American countries see the Chinese project as a beacon of possible investments in the region.

In memorandums of understanding, promises to build grandiose infrastructure projects help attract less robust economies, with fewer offers of foreign direct investment available. The reality shows, however, that Chinese diplomacy has struggled to make these projects viable and has not yet succeeded in “attracting the attention” of the most representative countries in the region.

Research associate at the International Institute of Asian Studies at Leiden University, Rafael Abrão explains that Latin America was not originally included in the Chinese project, but became part of a demand from local countries hungry for Chinese money.

Without much planning in advance, the Chinese announced the arrival of the project in the region, bringing little new investment and renaming old initiatives – and some already concluded – under the Belt and Road.

“The Chinese have been developing their relevance to the region for a long time, and Latin America is essential to their development, as it consolidates itself as a main source of commodities. There is some publicity [na Iniciativa], but there also seems to be a real desire to boost the infrastructure that facilitates the flow and export of these goods to China, ”says Abrão.

The researcher points out that all Latin countries have infrastructure deficits and can benefit from possible partnerships with the Chinese, even if it is necessary to assess the risks. Recently, the poorly planned construction of hydropower plants in Ecuador with Chinese money left Quito in debt to the country, which now wants to be paid off with oil, as foreseen in the original contract.

Investment failure has damaged China’s image with Ecuadorians and raised fears of the “debt trap” used by European countries and the United States to accuse Beijing of forcing fragile economies to take out loans important, demanding concessions when they fail to recover. .

to money.

“This risk is not new and is not limited to China. Argentina itself is in a very delicate situation with the money it took from the IMF. Even so, it is important that countries are responsible when making long-term commitments to Chinese banks, ”advises Abrão.

Dollar follows the same understanding. “I don’t like this concept of ‘debt trap’ because I don’t even believe for a second that the Chinese are already lending money in the hope of defaulting. If these examples tell us anything, it is that Chinese banks have poorly analyzed the risks and that countries must choose to set up sustainable projects ”.

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