The Financial Times, 05/24/2011
Probably no country has gained as much from the rise of China as Brazil. Each country has what the other lacks. China needs commodities to house and feed its population; Brazil has them in abundance. Brazil needs foreign savings to fund domestic investment; China has a surplus. Extra bonus: their shared history has no colonial baggage. As a result, a long distance relationship has flowered. Over the past decade, bilateral trade has increased 18-fold to more than $50bn annually. Yet, as an FT special report earlier this week made clear, the honeymoon for this “perfect match” is now over.
Every day, Brasília faces increasing protests from manufacturers complaining that cheap Chinese-made goods are “de-industrialising” the country. This pushes Brazilian buttons, given the region’s long history of commodity dependence. But trade numbers bear out the concerns: over the past 10 years, the share of commodities in total Brazilian exports has more than doubled to 46 per cent, while manufactured goods have slumped. Massive Chinese foreign exchange intervention, which has deflected international capital flows to other markets in the so-called “currency wars”, has not helped. The real value of Brazil’s trade-weighted currency has surged 24 per cent since 2007, punishing local industry even more. Indeed, most of the country’s carnival costumes are now made in China; so too much of its processed steel. As a result, Brazil has begun to re-evaluate its Chinese ties.
Trade retaliation is a tactical possibility. Indeed, of the 144 anti-dumping investigations that Brazil launched at the end of last year, 50 were against China. But this is also a dangerous path. An alternative is to foster complementary industries, as other successful commodity producers have done. Norway, rich in oil, has an exportable excellence in deep water engineering. Israel, once famous for oranges, is now better known for the irrigation technology it developed to grow them. Brazil’s comparative advantage lies in agricultural sciences.
Brazil Portal 
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