Despite China’s declining investment volumes in Brazil, strengthening cooperation remains of interest to both countries, which will likely see Brazil join China’s Belt and Road Initiative, potentially before the end of the year. Recent diplomatic discussions between Brazil and China have revolved around the former’s admission to the latter’s Belt and Road Initiative (BRI). Chinese officials have publicly stated their interest in having Brazil join the global infrastructure program — which would mark a significant political victory for Beijing — while Brazilian President Luiz Inacio Lula da Silva told reporters in July that his team was putting together a proposal on the issue. Chinese President Xi Jinping is scheduled to pay a state visit to Rio de Janeiro in November, during which a formal announcement on Brazil’s BRI membership could materialize. 

• Brazil and China marked 50 years of bilateral relations in August. The two countries’ strong commercial ties are backed by the complementarity of their economies, with Brazil exporting grains and metals that feed China’s growing middle class and construction sector. 
• China is the largest purchaser of Brazilian agricultural products, accounting for 73.1% of the country’s soybean exports, 60.4% of its global beef sales and 29% of its transgenic corn in 2023. Albeit concentrated in agricultural and mineral commodities, Brazil’s trade surplus with China reached $51.1 billion in 2023, comprising more than half of Brazil’s overall surplus of $98.8 billion.

The discussions on Brazil’s potential admission to the BRI come against the backdrop of declining Chinese investments in the South American country. Chinese investments in Brazil stood at $1.73 billion in 2023 — the second lowest level since 2009 and 64.7% below the average of the previous decade, according to a Brazil-China Business Center report released in September. After being the main recipient of Chinese investments in Latin America between 2008 and 2017, Brazil has since lost ground to Chile, Peru and Mexico, as China and its companies prioritized investments in these countries’ critical minerals, ports and manufacturing. But despite this, the size of Brazil’s economy helped it remain among the top 10 destinations of Chinese investments globally in 2023, and the number of Chinese projects has remained near historic highs. Although Brazil’s electricity sector continues to draw the most Chinese investment, over the past five years, China has also shown increasing interest in the country’s automotive industry (particularly hybrid and electric vehicles) and electronic manufacturing sector, which reflects Beijing’s shifting industrial priorities amid the energy transition. China’s move to reduce its investment volumes in Brazil while still maintaining a high number of projects in the country also aligns with Beijing’s strategy, especially in BRI financing, of focusing on ”small [and] beautiful” projects — a phrase Chinese policymakers, including President Xi, have repeatedly used to describe projects that are lower value and higher quality. Additionally, the combination of low investment volumes split across many projects also coincides with a broader shift in China’s foreign investment strategy and the growing diversification of its economic and commercial interests around the world, including in Brazil.

• China has been Brazil’s top trading partner since 2009, but ranked eighth in terms of foreign direct investment (FDI) stock and 30th in terms of FDI flows in 2022, the latest data available. The United States led both rankings for Brazil, accounting for nearly 24% of FDI stock and flows in the country, followed by the Netherlands with 13.2% and 20%, respectively. 
• Chinese investments in Brazil have been concentrated in the energy sector over the past 15 years, but have recently started to diversify into manufacturing and electric mobility, with China becoming Brazil’s second biggest supplier of imported cars in 2023.

For Brazil, admission to China’s BRI would result in quicker access to bigger financing volumes, large infrastructure projects and the diversification of Chinese investments across its economy. Joining the BRI would mean streamlining Brazil’s access to increased Chinese funding and boosting the diversification of Chinese participation into sectors such as EV manufacturing, while maintaining Chinese investments in traditional sectors such as renewable energy, oil and gas, mining and large infrastructure projects (including railways and roadways to facilitate grains exports by connecting Brazil’s center-west producing region to the Pacific Coast). Brasilia would welcome such initiatives, as large investments via Chinese private companies or state-owned enterprises would partially offset its own limited capacity to invest in domestic projects. For Brazilian President Lula, additional Chinese infrastructure investments would also boost one of his geopolitical ambitions of increasing regional integration by building transnational roads and railways across South America, especially ones connecting Brazil to Andean countries. Additionally, BRI membership would strengthen Brasilia’s ties with Beijing amid the expansion of the BRICS bloc and the consequent dilution of Brazil’s influence in the group. 

• In an attempt to woo Brazil to join the BRI, Chinese officials have publicly declared their willingness to align the objectives of the infrastructure initiative with those of Brazil’s flagship New Acceleration Growth Program, which was announced in 2023 and encompasses $300.5 billion of investments mostly in infrastructure, urban development, sanitation, transport and energy transition initiatives through 2030. 

Although Brazil will continue to seek a neutral position in the U.S.-China competition, the country will still likely join the BRI due to these benefits, even if an official announcement does not emerge before the end of the year. Despite the varied benefits of BRI membership, Lula has so far been cautious on the decision given its broader implications, including regarding Brazil’s relations with other important diplomatic, commercial and strategic allies, such as the United States. Indeed, the United States is a key partner for Brazil’s local defense sector and supported the country’s democratic institutions during the political turmoil that followed former Brazilian President Jair Bolsonaro’s defeat in the 2022 presidential election. The Biden administration’s policy priorities also align with those of the Lula administration, including environmental protection and workers’ rights. If, however, Donald Trump wins the U.S. presidential election on Nov. 5, the left-wing Brazilian president may be more incentivized to join the BRI when Xi visits Rio later that month, as the deepening of U.S.-Brazil bilateral relations under Biden in recent years would almost certainly cool down due to Lula and Trump’s divergent political views — making the decision of boosting cooperation with China less of a trade-off. Conversely, if U.S. Vice President Kamala Harris wins the election, the Lula administration may be incentivized to delay joining the BRI to ensure its relationship with the new White House starts off on the right foot, as Harris would likely broadly maintain Biden’s focus on bolstering U.S.-Brazil ties. But even if Harris is elected, Brazil remains more likely than not to eventually join the BRI due to the aforementioned, net-positive strategic and economic benefits. 

• The United States would certainly oppose Brazil becoming significantly closer to China, and Brazil’s admission to the BRI would likely result in U.S. diplomats or high-ranking officials warning against alleged threats to intellectual property, debt sustainability and overreliance on Beijing. But Washington remains unlikely to impose retaliatory measures against Brasilia over the issue, as this would risk harming relations with a key regional partner and eroding U.S. influence over investment and partnerships in sensitive Brazilian sectors, such as in telecommunications and defense.