Despatch from Sao Paulo | International

Brazil is caught in the U.S.-China tech war

Chinese President Xi Jinping and Brazilian President Jair Bolsonaro at the BRICS summit in Brasilia on November 14.

Chinese President Xi Jinping and Brazilian President Jair Bolsonaro at the BRICS summit in Brasilia on November 14.   | Photo Credit: ADRIANO MACHADO

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U.S. bid to get Huawei barred may not succeed as Brazil is increasingly dependent on China

On Monday, Brazilian President Jair Bolsonaro received Zou Zhilei, Huawei’s CEO for Latin America, in his office in Brasilia. The Chinese executive told the Brazilian leader that the telecom giant wanted to be a “supplier to 5G telephone services and that its equipment is safe”.

After the meeting, as Mr. Zou presented a memento to the Brazilian President and the two posed for the cameras, Mr. Bolsonaro threw a broad smile with a touch of nervousness. “I just heard them. He just told me that Huawei wants to be part of 5G in Brazil. There was no mention of the upcoming auction,” said Mr. Bolsonaro, trying to sound non-committal.

But the significance of the meeting, less than a week after Mr. Bolsonaro gave a warm welcome to Chinese President Xi Jinping at the BRICS summit and declared that “China is part of Brazil’s future” was not lost on anyone.

It is not a secret that Brazil is caught in a “tech war” between the U.S. and China. During his visit to the White House in March, Donald Trump had explicitly asked Mr. Bolsonaro “not to allow” Huawei in Brazil. In August, U.S. Secretary of Commerce Wilbur Ross said he had “warned” the Brazilians about the “vulnerabilities” — a euphemism for security threats — of Chinese technology. The world’s fifth largest mobile phone market after China, India, the U.S. and Russia, Brazil will hold the auction for its 5G frequencies in 2020. “The Americans are pushing us to ban Huawei at any cost. The Chinese do not want to be left out and are ready to make investments which we badly need. We are in a tough position,” said a Foreign Ministry official, requesting anonymity. “But the meeting was a strong signal that the government will not interfere if companies are able to close deals with Huawei.”

During his election campaign in 2018, Mr. Bolsonaro railed against China and positioned himself as a Trump ally. But in recent months, Brazil has tried to distance itself from the U.S.-China trade conflict. In June, Brazilian Vice-President Hamilton Mourão said Brazil would not ban Huawei. “There is no veto of Huawei in Brazil. Huawei has been here for 10 years,” Mr. Mourao said, adding that the country needed to adopt a position that was both “flexible and pragmatic”.

Chinese investments

Brazil, with 12% of its population facing unemployment, needs to inject more cash into its economy — and hardly any of it is coming from the U.S. On the other hand, China, which already has $100 billion trade with Brazil, is willing to invest more in the biggest South American economy. On the sidelines of the BRICS meeting, China agreed to give more than $100 billion from at least five state funds for a new round of investments in Brazilian agribusiness and infrastructure over the next five years. “With China putting in so much money here, something the U.S. will never do, it will be extremely difficult for the government to bar Huawei from operating here,” said the Foreign Ministry official.

For Brazil’s commodity-based economy, China today is a necessity it can’t do without. The Asian country is responsible for 28% of Brazilian exports and 21% of its imports, with a trade surplus of $29 billion for the South American country. In the beginning of this month, when Brazil announced a “mega-auction” of its offshore oil fields, China was the only foreign country to have its companies bid and win contracts worth billions of dollars. In such a scenario, Huawei’s entry into Brazil shouldn’t be difficult despite pressure from Mr. Trump. The Chinese firm already has a factory producing equipment for telecom infrastructure in São Paulo State, with 2,000 employees. It is planning to increase its presence after the 2020 auction. São Paulo Governor João Doria, who is likely to be one of the challengers to Mr. Bolsonaro in 2022 presidential elections, made a business trip to China in August and announced that the Chinese firm will set up a plant in the state and invest $800 million over three years following the 5G auction.

But between now and the auction, a great game for Brazil’s 5G spectrum will play out between the U.S. and China. The auction, scheduled for next March, has already been pushed to the second half of 2020.

Mr. Bolsonaro, who can block a company’s participation in infrastructure projects, is under immense pressure from Mr. Trump to bar Huawei from providing its equipment to telecom companies. But given the state of Brazil’s economy and its growing dependence on China for investments and exports, the Bolsonaro government has little option but to be pragmatic.

(Shobhan Saxena is a journalist based in São Paulo.)

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Printable version | Dec 7, 2019 5:42:46 AM | https://www.thehindu.com/news/international/brazil-is-caught-in-the-us-china-tech-war/article30062886.ece

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