China bolsters Brazil trade ties

Published on May 20, 2009 by brooks | This story has been viewed 227 views

China yesterday agreed to lift restrictions on imports of Brazilian chicken and to allow in more beef, further boosting the two countries’ fast-growing trade partnership.

Beijing also said it would lend up to $10bn (€7.4bn, £6.5bn) to Petrobras, Brazil’s government-controlled oil company, in exchange for guaranteed oil supplies over the next decade. Brazil will provide 200,000 barrels of oil a day to Sinopec, China’s state oil company, for the next 10 years.

The agreements were signed during a two-day trip to Beijing by Luiz Inácio Lula da Silva, Brazil’s president, who held two meetings with Hu Jintao, China’s president, during his visit.

China overtook the US as Brazil’s biggest trading partner during the first four months of this year, underlining increasingly close relations between two of the world’s biggest emerging markets.

Brazilian officials told the Financial Times on Monday that the governors of the two countries’ central banks would meet soon to discuss replacing the US dollar with the renminbi and the real in trade transactions. The move follows recent Chinese challenges to the status of the dollar as the world’s leading currency.

Sergio Gabrielli, Petrobras chief executive, said the loan from the China Development Bank, along with another $20bn in loans the company had obtained from other banks this year, would be used for its five-year, $174.4bn investment plan to extract reserves off Brazil’s south coast.

Petrobras and Sinopec also signed a memorandum of understanding on exploration and the supply of equipment and services. However, Mr Gabrielli said it included no commitment to buy from China. He added that the companies were in discussions about a potential upstream equity investment by Sinopec in Petrobras.

Apart from the oil deals, the two sides signed agreements covering Brazilian port construction, biofuel exports to China and the joint launch of two satellites.

Brazil is the world’s biggest exporter of chicken, selling 3.2m tonnes abroad in 2007, according to the country’s chicken exporters’ association. This compares with 2.5m tonnes from the US and 685,000 tonnes from the European Union.

Yesterday’s accord allows 24 Brazilian exporters, the majority of its chicken industry, to sell to China with immediate effect.

The deal will be a boost to Brasil Foods, whose creation was announced yesterday in a merger between Perdigão and Sadia, two of Brazil’s biggest exporters of chicken and processed meats.

Beijing also agreed to allow more imports of Brazilian beef. China recognises just four of Brazil’s 27 states as being free of foot-and-mouth disease. However, the World Organisation for Animal Health, of which both countries are members, recognises 17 Brazilian states as being free of the disease. China also agreed to move quickly to allow exports from the additional 13 states.

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