Lula’s China Tilt Reflects New Geopolitics
Lula is pushing hard to bring his country back to the world stage. In the few months since taking office, he kicked off a whirlwind of foreign trade visits through the Americas, China, the Middle East and Europe, determined to reverse years of isolationism under populist predecessor Jair Bolsonaro. But while Washington and Brussels welcomed Lula’s promise of “normalization” in Brazil, embrace of democratic norms and climate leadership push, some of Lula’s other actions clashed hard with key Western priorities.
Leading the blowback was Lula’s offer to help mediate the Ukraine war bracketed by his statement that both sides bore responsibility. A warm visit to Washington was followed by an extensive China trip including a visit to an “innovation center” of Chinese tech giant Huawei — a longtime US security bogey but popular Latin American provider. Top Lula appointees also met with Western pariahs including Venezuelan President Nicolas Maduro and Russian Foreign Minister Sergei Lavrov.
But calling this an anti-West pivot would be oversimplifying. Brazil has a long history in the nonaligned movement, with Lula known for advocacy for and diplomacy within the Global South. The Brics bloc, for instance, crystallized during his earlier tenure. Lula has now walked back his Ukraine comments, saying on Twitter he knows “what invasion is and what territorial integrity is.” But he underscored his focus on Brazilian priorities, recalling that when then-US President George W. Bush asked Brazil to enter the war in Iraq, “I replied that my war was against hunger in Brazil,” he wrote. “Today, again, we have 33 million starving in our country. This is my war.”
Academics, including former Chilean Ambassador to China Jorge Heine, describe this as intentional “nonalignment” that rebuffs pressure to take sides and allows countries to pursue their own commercial and diplomatic interests. India and Saudi Arabia are behaving similarly, rejecting the West’s “with us or against us” approach to Russia and China. “This is very traditional in Brazilian foreign policy … to have diversification of its relations and not be dependent on China or the US and … try to balance any kind of pressure,” the University of Brasilia’s Danielly Ramos told a Brazil Center for International Relations webinar.
Or as top Lula envoy Celso Almorim put it in an interview with China’s state-run Global Times, the country targets trade and investment free from “ideology.” Case in point, Brazil has become one of biggest buyers of Russian diesel. Lula — whose most recent trips were to Canada, Portugal and Spain — also continues to work on an EU trade deal on behalf of the regional Mercosur bloc.
Brazil-China Ties in Transition
China has long occupied an outsize role for Brazil, its top trading partner, with transactions between the countries rising to $150.4 billion in 2022, per Brazilian government figures. But China’s Latin America strategy has shifted from oil loans, which proved vulnerable to price volatility, to tech and energy transition investments. It’s part of China’s low-carbon industrial push that is positioning it as a serious partner to oil producers — including Saudi Arabia — keen to advance their energy transition.
China and Brazil signed 15 agreements earlier this month worth 50 billion reals ($10 billion) from monitoring Amazon deforestation, to, according to Chinese state broadcaster CCTV, backing clean energy and green hydrogen production in Brazil. For Lula, such investment is a win-win — addressing his priorities to strengthen industrial policy and create jobs while bolstering Brazil’s already-robust transition stance.
The deal also paves the way for China to grow its overseas influence and exports as a clean-energy provider as some segments like solar panels or electric vehicles (EVs) reach saturation at home. But years before its 2020 public clean-energy pivot, China had already been quietly investing in Latin American renewables, explains Rebecca Ray at Boston University’s Global Development Policy Center. “China can bring to the table its ultra-high tension power distribution,” she told Energy Intelligence, vital for connecting renewables to population centers over long distances, an expertise honed over China’s massive geography. Chinese companies agreed some $3.5 billion in greenfield investment in Latin America in 2022, primarily in emerging supply chains for lithium, renewable energy and EV projects, the center’s latest report notes.
As with Saudi Arabia’s shifting ties with the US and China, it’s difficult to avoid comparisons between Lula’s US and China visits — with the February Washington trip lasting half the time and yielding just one joint statement. It’s not that US companies are not involved, or that the US isn’t a climate (or political) ally: Washington last week pledged $500 million to the Global Amazon Fund. But Washington cannot steer state and private investment in the same way as Beijing. The US is also now pushing low-carbon investment inward via reshoring initiatives.
Fossil Fuels Still Feature
Oil remained in the background of trade discussions, but China is still a vital market for Brazilian crude. While 2022 saw a surge in Brazilian barrels to Europe, flows to China are rebounding this year as the Chinese economy roars back post-Covid-19. China imported 806,000 barrels per day of Brazilian crude between January and March, up 55% from the same period a year ago and the second-highest rate since the late 2000s. China’s three state majors — CNOOC, CNPC and Sinopec — are also substantial partners in Brazil’s pre-salt developments.
China and Brazil recently processed their first cross-border yuan settlement at a Brazilian bank, while Argentina just announced it will pay for Chinese imports in yuan, to relieve pressure on dollar reserves. Proponents argue this facilitates trade proceedings and allows counterparties to mitigate exchange risk from an intermediate currency. But critics say it brings its own kind of risk via Chinese currency exposure.
Breaking dollar dominance is a favorite topic for Lula. Ramos, of the University of Brasilia, sees it as a way for Brazil to flex its muscles as a more active economic power — not taking sides like Bolsonaro — as well as a bargaining chip in trade dialogue. “It’s sending a message, to China as well as to the US — it’s saying the competition is on.”
Despite some incremental deals, the currency switch is unlikely to soon match the share of the ruble and yuan in Russia-China trade, for example. But such moves could be the sign of things to come as the Brics aim to strengthen cooperation, a major Lula priority. Another notable step: Former Brazilian President Dilma Rousseff was recently named head of the China-backed New Development Bank.