Brazil Manages China Trade with Dumping Probes and Export Plans at Peruvian Port

The Lede: On Sunday, a report from the Financial Times called attention to the increasing number of investigations recently launched by Brazil into the alleged dumping of industrial goods by China, while earlier in the week, Brazilian officials expressed interest in China-controlled Chancay port on the coast of Peru according to Reuters. These developments point to the shifting trade relations between Brazil and China, which appears to be expanding rapidly.   

What We Know:

• In the past six months, Brazil’s Ministry of Development, Industry, Trade and Services has opened at least six investigations on products from China including metal sheets, pre-painted steel, chemicals, and tires at the request of domestic industry groups due to recent sharp increases in imports, according to the FT report. 
• Earlier this month, the ministry launched an investigation at the request of CSN, a large Brazilian steel producer, after it alleged that between July 2022 and June 2023 Brazil’s imports of some types of carbon steel sheets from China rose almost 85 percent. The probe is expected to last 18 months.Steel producers in Brazil have recommended 9.6 to 25 percent tariffs on imported steel products. 
• Following a visit to the construction site of the Chancay mega port project by Brazilian Planning Minister Simone Tebet earlier in the week, Peruvian Economy Minister Jose Arista said on Thursday that Brazilian officials have been in talks with Peru to take advantage of opportunities to export soy, corn, and other products to China and the rest of Asia through the port after its completion.
• Brazilian and Peruvian officials hope to arrange a visit between Brazilian president Luiz Inácio Lula da Silva and Peruvian President Dina Boluarte to establish bilateral and regional integration through the port. Arista also said that the Peruvian government wants to create a special economic zone north of Lima and establish a customs headquarters at the port to boost the development of Chancay. 

The Background: Lula has aimed to both foster relations with China while also protecting and developing his country’s national industries. China is Brazil’s largest trading partner. Brazil’s imports of steel and iron from China rose from $1.6 billion in 2014 to $2.7 billion in 2023. several countries have taken similar measures as concerns spread among industries that claim. Part of China’s overall global infrastructure vision, the Chancay port cost an initial $1.3 billion and is 70 percent completed. China’s Cosco Shipping Ports is the majority owner of the project and expects to open the port at the end of the year. 

Likely Outcomes:

• While the FT report might seem to suggest that these probes constitute Brazil’s hesitation in trading with China, the larger trend appears to be bursts of near-run-away imports of goods to Brazil from China in key sectors. The probes have not come early enough to stop the trend of Chinese goods outcompeting the domestic Brazilian industries and may be too slow to stop it from continuing. However, it may be the intention of the Brazilian government to simply signal pressure on Chinese imports. Along with state support perhaps, this could placate domestic industries while still maintaining the trend toward increased cooperation between Brazil and China. 
• The completion of Chancay port and the opportunity to boost trade with Asia through a Latin American neighbor could signal a new route of commerce with significant Chinese influence. This could attract the attention of the U.S. and could lead to increased engagement efforts from Washington to Brazil and Peru, but the arrangement with the Chinese-controlled port will likely go ahead as planned.

Quotables:

“We see temporary increases in import tariffs as an indispensable regulatory tool for combating these predatory operations and preserving the domestic market.” - André Passos Cordeiro, president of the Brazilian chemical industry association

Good Reads:

Brazil launches China anti-dumping probes after imports soar (FT)

Brazil eyes exports via China-controlled Chancay port, Peruvian minister says (Reuters)