Brazilian President Jair Bolsonaro seemed to be walking on a tightrope, apparently favoring cooperation with China at the recent BRICS summit but doing his best to ban Huawei and Chinese-made vaccines from Brazil. These contradictory postures risk sinking the Brazilian economy and worsening the country’s Covid-19 epidemic.
At the 12th BRICS Summit last month, Bolsonaro pledged to work with the other four leaders (of Russia, India, China and South Africa) to address Covid-19 and economic recovery in the post-pandemic period. God only knows that Bolsonaro needs the support of his fellow BRICS leaders because it is the third-worst-hit country, after the US and India, in the world, in terms of infections and deaths from the disease.
The Brazilian economy was also one of the hardest hit by the pandemic, sinking nearly 10% in the second quarter of this year. But thanks in part to trade, particularly with China, the economy was expected to register positive growth in the last half of 2020, reducing economic contraction by only 4.7% for the full year.
But that economic “improvement” may evaporate if Bolsonaro succeeds in blocking Huawei and other Chinese-made equipment from the country’s 5G (fifth-generation telecommunications) rollout. In the first place, it will be costly and delay the country’s establishment of the 5G network because Huawei equipment accounts for more than half of Brazil’s four major telecom companies’ hardware, which explains why those firms were contemplating legal action against the Bolsonaro government.
Dismantling and replacing Huawei equipment could take years and cost telecom companies billions of dollars for no reason other than Bolsonaro “idolizing” his American counterpart Donald Trump. Brazilian telecom companies have been using Huawei products for more than two decades, yet there have never been any “national security” issues.
As well, installing Ericsson, Nokia or Samsung equipment is no guarantee that the country’s security will not be breached, because some parts of their equipment are produced in China or integrated into the same ecosystem.
As for Bolsonaro banning Chinese-made Covid-19 vaccines, it has nothing to do with safety or caution, but is just another decision influenced by his hero, Donald Trump. His excuse was that since the pandemic “originated” from China, Chinese vaccines are “untrustworthy.”
Such ideological biases against China and inept management of the Covid-19 pandemic could exacerbate Brazil’s health-care problems and increase the number of deaths from the disease.
Indeed, The Guardian reported on December 13 that one of Brazil’s news portals, Folha de Sao Paulo, had said Bolsonaro’s decision not to use Chinese vaccines amounted to “homicidal negligence.” The Brazilian news outlet complained that the government had abandoned the people, leaving them to die necessarily for ideological or political reasons.
Should Bolsonaro succeed in banning Huawei and Chinese vaccines, Brazil’s economy could “burn” for a number of reasons. First, the additional cost and delay in replacing Huawei equipment could distort the economy. Because 5G technology speeds up business decisions, thus making production and distribution of goods and services more efficient, its delay would put Brazilian industries at a disadvantage relative to other economies.
For example, Brazilian soybean farmers using Huawei 5G products increased production, one reason for the third-quarter economic expansion. The Chinese company’s 5G equipment offered fast broadband communication and real-time data processing, enabling farmers to retrieve the necessary information in one hour as compared with three days using older technology.
Furthermore, the rise in the cost of telecommunication services could reduce real household income, thus reducing consumption. Accounting for more than 85% of GDP in 2019, according to World Bank figures, an erosion in private consumption would undermine economic recovery.
Allowing policies to be dictated by Trump and personal or ideological biases, Bolsonaro could lead Brazil down the garden path, prolonging the recession and costing more human lives.
China is Brazil’s largest trade partner, with two-way trade exceeding 100 billion in 2019. A June 2020 Forbes report revealed that China bought 40% of Brazilian exports, mostly agricultural products and commodities such as iron ore.
As export markets dried up in the West and other major economies, China became even more important to Brazil. Surging numbers of Covid-19 infections in the West, Japan and India forced the imposition of harsher lockdown measures, prompting further economic downward movements.
China, on the other hand, is the only major economy expected to record positive growth of 2% and 8% in 2020 and 2021 respectively, allowing it to buy large quantities of natural resources from Brazil.
Chinese economic growth is maintained by domestic demand, and increasing consumption through urbanization and infrastructure investments. Building new cities and high-speed railways to connect them will require considerable iron and other commodities from abroad.
Taking the analysis to its logical conclusion, caving in to Trump’s demand that Bolsonaro “get tough” on or decouple from China would not only set the country burning, but could end the Brazilian president’s political career. Bolsonaro has only 37% of the people’s support, after all.
Indeed, Bolsonaro should consult with Australian Prime Minister Scott Morrison before he pursues his anti-China agenda. Australia’s economy is struggling to remain above water even though Morrison has strong public support for his anti-China policies, whereas many of Brazil’s political and business establishments are opposing Bolsonaro’s anti-China stances.
Biting the hand that feeds you can only lead to disaster, particularly if the reason for doing so is largely if not solely based on perceived threats. China has done nothing to Brazil, except help its economic development.
Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.