When Brazil Meets "Made In China"

On June 17, at the Itamarati Palace in Rio de Janeiro, Brazil (the former headquarters of the Brazilian Ministry of Foreign Affairs, currently the Rio Office of the Ministry of Foreign Affairs), I heard a dialogue between three Brazilian experts:

An expert from the Economic Research Institute asked Professor Luiz Pinguelli Rosa, China's urbanization will grow from 37% to 50% at present, and more than 300 million people will enter the cities in the future. What will it mean for Brazil?

Luis Bingri Rosa, a professor at the Engineering and Graduate School of the Federal University of Rio de Janeiro (COPPE, UFRJ), replied that China and India have huge populations and their development tends to be very westernized, which will be a problem for Brazil. Our exports to China are mainly minerals. The Chinese government is building low-cost housing, which will require more steel, and the demand for iron ore will be even greater. In addition, there is a great demand for our forests and soybeans.

At this time, Ambassador Celso Amorim (UFRJ) of the Federal University of Rio de Janeiro joined in and said: It should be said that a large amount of Chinese investment in Brazil is welcome, especially for energy. The problem is that it should not be limited to these products, and investment in other aspects is needed to avoid causing more problems to Brazil's development.

This dialogue contains several information: a few years ago, China bought Brazilian ores and soybeans. Due to the financial crisis, Brazilians sincerely thanked China for saving Brazil and said that "Brazil and China are interdependent", but now how can the tone change completely?

China is Brazil's largest foreign direct investment country, and also Brazil's largest export destination. Brazil's trade surplus with China has been running for several consecutive years. Why has this attracted such complaints? This dialogue reflects the current general views of Brazilians, especially the intellectual elites, on bilateral trade and investment between Brazil and China. The import of "Made in China", the export of resource products, and the quality of Chinese investment are all on this list.

What has China done in Brazil? Why are Brazilians?

When Brazil meets "Made in China"

Ricardo Zerrenner, a freelance photographer, opened a photo agency in the famous scenic spot Monte Cristo railway station in Rio de Janeiro to sell his own photos. He told me that nothing in his body was not "made in China", and even the batteries sold in the store were all from China, which were ordered online. He said: China's commodities are of good quality and low price. The price of almost everything is only 1/4 of the local commodity price.

There are many shops selling bikini, beach slippers and snacks near the beach of Rio de Janeiro. The owner of one of the stores was a young man named Ronaldo. He told me that bikinis and beach flip flops were all "made in China". In addition to food and drinks, "Made in Brazil" can be counted with one hand.

He told me, "The Chinese bought Brazilian natural rubber from us, and then Finished shoe They sold it to us again. The price is still cheaper than ours. The Chinese are very smart! " He curled his lips. It was obvious that the boss did not like China as Ricardo did.

Touring the Rio Sunday Street, countless goods, including cloth, clothing, toys, are all made in China, and they are all shipped from China. Rio has six ports and a huge throughput. Like natural rubber, a large number of Brazilian natural resources are shipped from here to China, and a large number of Chinese manufactured products are continuously transported from here to Brazil.

Brazilian girls like to buy Chinese made cigarettes when they get married Yarn products As a dowry, a drawnwork bedspread with a cost of several hundred yuan in Zhejiang can sell for 4000 yuan in Brazil, and some can even sell for 8000 yuan. About 90% of Chinese products are shipped here in containers. Although Brazil's customs impose tariffs of about 60% of the cost of goods, they still cannot prevent China's competitive advantage in manufacturing prices.

At present, there are 40000 or 50000 Chinese in Brazil, including more than 10000 Zhejiang people, mostly from Wenzhou and Qingtian. The vast majority of Zhejiang businessmen are concentrated in Sao Paulo and Rio de Janeiro in Brazil. Previously, Zhejiang merchants engaged in light industrial products, but now they are turning to auto parts, light industrial machinery, bicycles, sewing machinery and other products that make more money.

However, the feeling is different from the real situation. Although the import of consumer goods in China makes people feel "Made in China" all the time, the import of means of production products is ignored. From the data of Brazil's total imports and imports from China in 2010, China accounted for only 14.1% of the total imports, including consumer goods and means of production.

Once joined the world for Brazil trade organization Professor Renato Flores, a member of the negotiation team, told me that the issue of "Made in China" has become more and more complicated. However, whether imported from Myanmar, re exported to Brazil through Miami, the United States, or shipped goods to Dongfang City at the junction of Brazil, Paraguay and Argentina, and then re exported to Brazilian cities, although the import customs data of these products are not from China, they are all "made in China".

"China uses the raw materials we provide to manufacture various products and sell them to us, so Brazil is trapped in the" manufacturing dependence "on the Chinese. Obviously, quite a lot of people in Brazil will have such a concern," said Professor Renato Flores.

Is Brazil's industrial system destroyed by "Made in China"?

Ronaldo Mota, Director of the International Cooperation Department of the Ministry of Science and Technology of Brazil, said to me on the corridor of the Itamarati Palace: "Brazil is a country with a relatively complete industrial production system". Anibal Quijano, a Peruvian sociologist, also believes that Brazil is the country with the most complete original industrial base in Latin America.

He wrote: "Brazil is the only country that has retained an important industrial production structure, while other Latin American countries have been dragged into the" de industrialization "situation. Brazil is also the only country with heavy industry, so that it can produce and absorb advanced technology. Although transnational corporations also exist widely in Brazil and are more dominant in the automotive industry and other sectors, the property rights of most industrial enterprises are still Brazilian. "

According to the World Bank data, in 2010, Brazil had 198 motor vehicles per 1000 people, while China had 37. Since May 2010, Brazil has surpassed Germany to become the fourth largest automobile market in the world. The only difference from Beijing is that more than 85% of Brazilian cars are driven by "Flex Fuel" hybrid power. Not only for cars, Brazil is also the world's largest regional aircraft manufacturer and exporter, and the only state-owned enterprise in Brazil at present.

But if you look at Brazil's steel industry, it is not so optimistic. Although Brazil is rich in iron ore resources, the cost of iron ore in Brazil is only US $40 (US $75 in China) and the labor cost is US $57 (US $26 in China), far lower than other major producers. but

　 For more than 10 years, Brazil's annual steel output has been hovering around 25 million tons.

The reason is that Brazil implemented the largest privatization in the world in the 1990s. At the end of the 1990s, Brazil successively privatized metallurgical, mineral development, petrochemical, power, financial services, telecommunications and other industrial sectors. Statistics show that from 1990 to 1999, there were 113 privatized enterprises in Brazil, with a total transaction value of 61.5 billion dollars; There were 1055 M&A transactions in total. The total transaction value is US $67.8 billion; The two projects totaled US $129.3 billion. The participation of foreign capital in privatization was 76.9%, and in mergers and acquisitions was 71.4%.

I asked the Brazilian ambassador to China, Huguenet, whether Brazil's privatization is related to the "Washington Consensus"? He denied it outright. He said: "Brazil's privatization is mainly due to the need to solve the high inflation rate in the country and repay public debts. At the same time, state-owned companies have very poor business performance and no funds for reinvestment. The government has been unable to run state-owned companies, including state-owned steel companies, state-owned communication companies, state-owned mineral companies and state-owned power companies."

As a result of the great changes in the property rights of Brazilian industrial enterprises since the 1990s, industrial growth began to slow down, and some industries also experienced negative growth; In the face of the rapid opening up of the market, it is difficult to predict the new competitive situation caused by the entry of domestic enterprises, especially small and medium-sized enterprises, into a large number of imported goods and foreign investors. Usually, they take defensive measures rather than expanding their investment rashly.

As some critics pointed out, in the process of property rights reform, Brazil has not added many new industries to the original industrial matrix, and few of the original industries have been eliminated. In addition, the interest rate of Brazilian banks has been high for a long time, and few new factories have been invested. The industrial manufacturing industry has been maintained at a general level.

Jo? O Carlos Ferraz, Vice President of the Brazilian Development Bank, told me that as a capital inflow country, our exchange rate and interest rate have caused long-term stagnation in the growth of the manufacturing industry, which has been at a relatively low level in the international production chain. The private sector in Brazil is still very cautious, especially their willingness to invest in innovation is very weak, so solving the exchange rate and interest rate problem is the biggest challenge we are facing. Brazil has always had great financial problems. The interest rate is around 12%. The reason why Brazil maintains a high interest rate is that Brazil always has a memory of inflation.

According to the Central Intelligence Agency (CIA), the situation is far more serious than the Vice President described. In 2009, the basic interest rate of the Central Bank of Brazil was 15.17%, ranking ninth in the world. Its commercial loan interest rate is 44.65%, ranking second in the world; It can be said that Brazil is the country with the most expensive capital in the world. Moreover, the investment rate of Brazil is only 18.5%, ranking 107th in the world, and China has remained above 30% for decades. In China, about 25% of the investment is in the manufacturing sector, while in Brazil, only 11% to 15%, and the proportion of capital products in the investment is as high as 75% to 80%.

From this point of view, does "Made in China" "destroy Brazil's industrial system"? The conclusion is clear: the entry of Chinese manufactured goods is only an external cause. Although Brazil has a complete industrial system, its privatization and foreign mergers and acquisitions only emphasize the control of foreign capital on automobile, electronics, telecommunications, information and other industries, thus rapidly improving the technical level and product quality of these industries, However, it relatively ignores the serious lack of production capacity and innovation capacity of Brazil's domestic manufacturing industry. {page_break}?

Nelson, Deputy Minister of Finance of Brazil Barbosa) said when talking about imports and Brazilian industry: "Brazil's industrial production capacity recovered relatively quickly after the economic crisis of 2008-2009, but it still remained at the level of capacity before the crisis. At present, the competitiveness of Brazil's industrial exports has been weakened due to the sharp increase in imports, especially from East Asia." He thought it was just a "negative impact". Because the import situation of Brazil as a whole has not yet reached the level of "destruction".

　　 "Trade is a tool for growth, not a source of difficulties"

Brazilians agree that China has occupied its own place in the division of labor in the international manufacturing industry, and that this is because China benefits from the correct foreign trade policy. However, a large number of textiles or finished shoes imported from China have indeed impacted Brazil's huge light industry sector. These departments complain that the price of products imported from China is too low, which has brought great pressure to the Brazilian government. They require restrictions on some products imported from China.

Luis Augusto de Castro Nevis（ Luis Augusto de Castro Neves, a professor at the Institute of Economic Research of the Federal University of Rio de Janeiro, said: In Brazil, some industrial sectors complain about the "China threat" they understand because of the low labor and tax costs. Some Brazilian industrial sectors have always been directly affected by Chinese competition, whether in Brazil or in the third-party market. For example, China has overtaken Brazil as Paraguay's main source of imports.

Professor Antonio Barros Castro, President of the Board of Directors of IBRACH, Federal University of Rio de Janeiro, said seriously: In fact, Brazil is indeed facing the impact of "China shock", and the lack of correct understanding will be an obstacle to mutual strategic cooperation. He believes that Brazil has been missing opportunities for many years, and now Brazil can no longer bear the cost of missing opportunities. He hoped that "China shock" would be a positive shock, enabling Brazil to awaken.

"Brazil is at a dangerous crossroads," Director Ronaldo Motaba said to me. "The so-called danger is that in the current international division of labor system, Brazil can choose to be consumer goods, such as food and mineral products, as a comparative advantage product participating in the international division of labor, or become the center of the world's industrial finished products, like China or other countries. This means that Brazil can be a strong competitor in the consumer goods market, but this is not a choice for a big country like Brazil. We hope to be competitive in all fields of the international market, but this is not a simple process. Brazil is far from this goal. " Obviously, Brazil has a longer-term pursuit.

The Brazilian ambassador to China said to me: China is not responsible for all the problems in Brazil's industrial sector, and the Brazilian government is also making active efforts to improve the development level of its industrial sector. "Our president just launched the Bigger Brazil Plan two days ago (August 2), aiming at the problems existing in the industrial field and hoping to promote the development of Brazil's industrial sector, China is one of the important factors."

He clearly stated: "The Chinese government and enterprises need to understand this and understand Brazil's concerns. When another country's domestic market is facing difficulties, it is impossible to continue to develop relations between countries according to the original model. When trade leads to unemployment and production disruption, trade cannot play a positive role. Trade is a tool for growth and development, not a source of difficulties. "

The core content of the "Greater Brazil Plan" launched by Brazilian President Dilma Rousseff is that in the next two years, Brazilian enterprises will receive 16 billion dollars of tax relief, protect Brazil's national industry through export tax rebates and other subsidies, thus promoting the export of industrial products and coping with the competition of imported products.

Professor Renato Flores believes that China has upgraded its position in the industrial chain, and we should remain rational. For example, the parts produced in some countries are of good quality and low price, so we should buy them directly instead of producing them ourselves. In fact, before the Great Brazil Plan, the Brazilian industry had seen the manufacturers who wanted to produce the whole equipment. The Brazilian government was also using its foreign exchange reserves to stimulate its industrial upgrading. For example, Brazil's oil industry was going through such a process.

Ambassador Hu Genei said to me that most of his career has been dealing with trade problems. As long as people are aware of the existence of the problems, trade problems can eventually be solved. "We hope that when Vice Premier Wang Qishan visits Brazil next month, we can discuss relevant issues and seek solutions. If we can solve these problems, I think the prospect of our relations is very bright."