Brazil Courts China Business

Among other subjects on the agenda for the BRIC nations—a group that includes Russia and India—leaders are expected to discuss how to protect their currencies from speculators. A “mutual exchange of information” among the countries would help protect local currencies, Russian President Dmitry Medvedev said Tuesday. However, BRIC leaders have said they won’t discuss creating a multinational currency that could replace the dollar in international transactions—a subject that has been mentioned in forums of emerging nations.

While Brazil also is keen to strengthen relations with Russia and India, officials are going to great lengths to drum up business with Beijing. As China seeks a supply of raw materials necessary for growth in the decades ahead, Brazil is positioning itself to become an indispensable source of imports such as iron ore, oil, and soybeans.

China’s demand for such products last year led the country to supplant the U.S., after more than half a century, as Brazil’s biggest trade partner. Over the past decade, trade between China and Brazil ballooned to $36.1 billion in 2009 from just $2.3 billion in 2000.

The relationship, fortified after a series of visits between Presidents Hu Jintao and Luiz Inácio Lula da Silva since 2004, illustrates how Chinese demand is reshaping the world-wide flow of commerce among developing markets.

By 2015, according to a new report by the United Nations’ Economic Commission for Latin America and the Caribbean, China will displace the European Union in terms of trade with the region.

“China is trying to diversify its portfolio, its security and economic relationships, and reach into many pockets around the world,” said Steven Clemons, director of the American Strategy Program at the New America Foundation, a Washington think tank, in a recent conference call. The result is “new economic interactions and new terms of trade between developing nations.”

Those interactions will be the focus of discussion as Mr. Hu and other BRIC leaders gather in Brasília on Thursday and Friday. After the summit and bilateral talks with Brazil, Mr. Hu is scheduled to travel to Chile and Venezuela, two other growing trade partners.

Demand from China helped Brazil weather the global economic downturn while trade with other major markets dwindled. Income from those exports, coupled with a growing move by China to finance infrastructure and industrial projects in strategic markets abroad, is accelerating development of ventures that otherwise would take longer.

Petróleo Brasileiro SA, the state oil giant known as Petrobras, last month completed building a 900-mile pipeline for natural gas with the help of Sinopec, the international unit of China Petroleum & Chemical. Last year, in exchange for future oil supply, the China Development Bank loaned Petrobras $10 billion to help develop Brazil’s massive offshore reserves. China is financing part of a project for a coal-fired power plant in southern Brazil. Chinese officials also have expressed interest in ventures such as new port facilities and a proposed bullet train that would link São Paulo and Rio de Janeiro.

“The interaction is mutually beneficial,” said Chen Fenying, head of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, in Beijing. “China needs the products from Brazil and Brazil needs to develop markets in China.”

Still, business between the two countries isn’t always smooth. For instance, China has rebuffed pleas by Brazil, the world’s biggest beef exporter, for access to the country’s massive meat market.

Meanwhile, Brazilian bureaucracy and strict environmental laws have kept some Chinese ventures from getting off the ground in Brazil. Shortly after Mr. Hu’s first visit to Brazil in 2004, Baosteel Group, China’s largest steelmaker, announced plans to build a multibillion dollar steel plant in northeastern Brazil. After three years of failing to get the necessary permits, though, the company gave up.

“Sometimes in Brazil the hurdles are a little too big for companies that are used to moving fast,” said Charles Tang, president of the Rio de Janeiro-based Brazil-China Chamber of Commerce.

Despite the benefits for Brazilian exports, some businesspeople say they fear the country could grow too reliant on Beijing—especially if Brazil limits business with China to commodities. While Brazil imports everything from electronics, industrial products, and clothing from China, the products it sells to the Chinese are mostly mining, oil, and agricultural exports.

“We really need to diversify,” said Welber Barral, Brazil’s secretary of foreign trade. “We are far too concentrated in basic goods.”

For those poised to tap into China’s soaring demand, though, commodities are a good start.

Consider the business community in Acre, a remote state near Bolivia in the western Amazon. Like many other Brazilian states, Acre is sending a delegation of 77 businessmen and state officials this week to China’s major trade fair in Canton—virtually emptying out the entrepreneurial and political classes of its 350,000-population capital.

Businesspeople see a new paved road that connects the Brazilian Amazon to Pacific ports in Peru as key to invigorating their cattle and timber outpost with low-cost Chinese imports. State officials are lobbying the federal government to create a duty-free zone in the state, potentially turning Acre into a distribution center for Chinese goods entering Brazil from the west.

“China is part of our plan for sustainable economic growth,” said João Bezerra, a local rancher and real-estate investor.

—Gao Sen in Beijing contributed to this article.