What Happened
Brazilian President Jair Bolsonaro arrived March 17 in Washington for a three-day visit. Discussions between the White House and Brazil's new government over ways to address Brazil's dependence on China as an agricultural export market and its role as a destination for Chinese foreign direct investment add significance to the visit. About 27 percent of all Brazilian exports — mostly agricultural products and mineral resources — are sent to China. Some U.S. foreign policy advisers, such as Steve Bannon, former chief strategist for U.S. President Donald Trump, apparently perceive a strategic vulnerability for Brazil in its dependence on China as an agricultural export market. Brazilian Foreign Minister Ernesto Araujo has echoed similar views, in the past criticizing Brazil's dependence on iron ore exports to China. Bolsonaro, for his part, previously criticized Chinese investments in Brazil's mineral resources and its electricity sector as giving Beijing too much influence over the South American country.
What This Visit Means
Brazil's new government clearly is exploring a more ideologically motivated trade policy to reduce opportunities for Chinese economic expansion in the Americas. This policy is likely motivated as much by Bolsonaro's ideological proximity to the Trump administration — which shares similar views on slowing China's economic rise — as it is by economics. No concrete measures have been announced in support of this aim, but the governments of Brazil and the United States will likely explore possible limits on Chinese investment in Brazil. And both Brasilia and Washington are exploring the feasibility of a U.S.-Brazilian free trade agreement that could provide an alternative market for Brazilian goods.
But the limits on enacting a bilateral trade deal between Brazil and the United States will rein in the Bolsonaro administration's ability to address what it perceives as overdependence on China. For one, the U.S. market cannot absorb enough Brazilian agricultural exports to substitute for the Chinese market. Bolsonaro would also have to contend with internal pressure to push a U.S. trade deal through. Pressure from the potent Brazilian agricultural lobby is likely why the Brazilian government is currently exploring ways to increase beef exports to China. Those agricultural interests — which hold 27 percent of the seats in Brazil's lower house — could eventually make or break any anti-China legislative measures Bolsonaro might offer.
In recent months, discussions in both countries have grown around the possibility of an eventual Brazilian-U.S. free trade agreement. The Bolsonaro administration appears to be seriously analyzing the prospects for such a deal. But Brazil can't actually begin such negotiations unless it can modify the charter of the Common Market of the South. The customs union, also known as Mercosur, forbids its members from individually negotiating free trade agreements. The other obstacles to a successful bilateral trade negotiation will be Brazil's agricultural and industrial sectors, which are vulnerable to foreign competition.
Bolsonaro is a relatively weak president in terms of his relationship with the National Congress. Moving toward a free trade policy that would threaten to undermine agricultural and industrial conglomerates would set off alarm bells among Brazil's private sector. Business interests could then use their influence with lawmakers to pressure the president to relent on his push to upend the country's trade relationships.
Background
Bolsonaro came to power promising to safeguard Brazilian economic interests by drawing Brazil closer to the United States politically and economically. To do so, he intends to amend customs union legislation to allow Brazil to sign a trade deal with the United States. He also will move to more closely partner with the United States in resisting Chinese economic advances.
