China, Brazil sign S$36b trade agreements

China, Brazil sign S$36b trade agreements
China's Prime Minister Li Keqiang (R) and Brazilian President Dilma Rousseff shaking hands during Li Keqiang welcome ceremony at Planalto Palace in Brasilia on May 19, 2015. Li is on a three-day official visit to Brazil, where he began a Latin America tour including Colombia, Peru and Chile.

China signed deals worth USD$27 billion (S$36 billion) with Brazil on Tuesday, putting its economic influence in Latin America on a firmer footing.

Experts said the agreements will help Latin America's largest economy battle a fifth straight year of poor growth and spiraling inflation.

Premier Li Keqiang and Brazilian President Dilma Rousseff watched the signing ceremony after hours of talks in Brasilia that touched on a wide range of topics, including trade, industrial co-operation and climate change.

In addition, Beijing shared its experience of holding the Olympics with the next host country.

"China and Brazil are the largest developing economy in the East and the West Hemisphere. A deepened co-operation between China and Brazil will contribute to not only both countries, but also the recovery of the world's economy," Li said at the meeting with Rousseff.

Under the agreements, the two countries will set up an action plan to encourage co-operation in industrial production, helping Brazil improve its sagging infrastructure ahead of the 2016 Summer Olympic Games in Rio de Janeiro. The plan will also enhance bilateral trade away from the current focus on resources to a more comprehensive, balanced pattern.

"The focus of bilateral industrial co-operation can be put in railroad, mining industry, power supplies and equipment manufacturing," Li said.

Rousseff thanked Li for choosing Brazil as the first stop of his maiden Latin American visit since he took office in 2013. She said Li's visit marks a historic moment in Brazil-China ties.

Wang Zhen, a former ambassador to Uruguay and Venezuela, said the action plan for industrial production marks the start of a new era of economic co-operation between China and Brazil.

"China is seeking to diversify its trade pattern by exporting more industrial production capacity, while Latin American countries rely too much on exports of raw materials," she said.

The deals also include the start of a feasibility study of a proposed transcontinental railway linking Brazil and Peru.

The Chinese-built, cross-Andes line is expected to connect cities on the Pacific coast in Peru with Brazil's Atlantic coast, experts said. The route would greatly reduce transportation costs in Brazil, especially for ore and soy.

China said in a joint statement that it will speed the approval of buying 22 jetliners from Brazilian aerospace conglomerate Embraer, as the first part that went through the whole purchasing procedure of a 60-aircraft deal announced during President Xi Jinping's visit to the region last year. China also will lift its ban on imports of Brazilian beef.

China has been Brazil's largest trade partner since 2009, accounting for 18 per cent of the country's foreign trade. Bilateral trade last year stood around USD$78 billion, according to the Brazilian authorities. China had invested more than USD$18.9 billion in Brazil up to last year.

Xu Shicheng, a research fellow in Latin American studies at the Chinese Academy of Social Sciences, said resource-rich countries, including the Latin American nations, have benefited greatly from selling raw materials such as ore and crude oil. China's rapid economic development generated growing demand and higher prices.

"However, the good old days ended when the global economy entered a period of recession, and the growth of the Chinese economy is slowing, too," he said.

"Life has become tough for these Latin American countries, which are eager to find new driving forces for their economies, and the co-operation over industrial capacity is one new engine."

The purchase of Brazilian planes, he said, is an example of such co-operation.

Xu said Chinese companies should be fully aware of the slowdown in Brazil, where the economy is expected to slump this year.

"Chinese companies in Brazil have to adapt to local rules and customs and will be affected by local levels of prosperity."

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