Brazil and China bolstered their growing ties with trade and investment agreements on Thursday in Brasília before a summit of the world’s top four emerging markets that was cut short after China’s leader decided to return home to deal with the aftermath of a major earthquake.
President Hu Jintao canceled visits to Venezuela and Chile because of the quake that killed more than 600 people, and his early return forced the so-called BRIC summit with Brazil, Russia and India to move forward by a day to Thursday evening.
The increasingly influential countries, which account for about 40% of the world’s population, are expected to use their second leaders’ summit to push demands that developing countries be given more say in global financial institutions.
Hu oversaw the signing of deals with Lula aimed at boosting trade and energy cooperation between the two emerging giants, which have grown closer in recent years amid a surge in trade flows.
Lula said a Chinese pledge to build a steel plant at a Brazilian port was also likely and that it would be China’s biggest investment ever in Latin America’s largest economy.
The leaders gave no details, but Brazilian media reported that China’s Wuhan Iron and Steel will build a plant in a port in Rio de Janeiro state with Brazilian logistics firm LLX Logistica, controlled by billionaire Eike Batista.
Lula also said China had expressed interest in bidding to construct a high-speed train line that is planned to connect Rio de Janeiro and São Paulo.
“The possibility for Chinese companies to participate in the modernization of Brazil’s infrastructure is exceptional,” Lula said, citing Brazil’s preparations for the 2014 soccer World Cup and the 2016 Olympics.
Brazil’s recent discovery of vast offshore oil reserves has opened a new area of potential cooperation with resource-hungry China, which last year agreed to lend US$ 10 billion to Petrobras in return for guaranteed oil supply over the next decade.
“The two sides will deepen the bilateral partnership in the oil sector, with the participation of Brazilian companies in development and production in China and the participation of Chinese companies in development and production in Brazil,” said the official bilateral statement.
Brazil and China also agreed to boost Brazilian beef and tobacco exports to the Asian country, and to move forward with cooperation on satellite launches.
Hu said after meeting Lula that both countries were willing to increase cooperation on international affairs and to push for reform of the global financial system.
The countries also pledged to study the use of the real and the yuan, instead of the U.S. dollar, in bilateral trade. The statement didn’t mention the value of China’s currency.
The two leaders also discussed Iran. Brazil has opposed fresh sanctions over Iran’s nuclear program, arguing that negotiations have not been exhausted. President Lula is scheduled to visit Teheran next month.
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Luciano Coutinho, the president of the Brazilian Development Bank (BNDES), informed that the institution should finance 21 billion Brazilian reais (US$ 11 billion) of the 34.6 billion reais (US$ 18.5 billion) necessary for construction of the High Speed Train (TAV) connecting São Paulo to Rio de Janeiro, on 518 kilometers (322 miles) of tracks and tunnels.
Coutinho participated in the meeting between representatives of the Federal Government, the private initiative, investment and fostering agencies and the Federation of Industries of the State of São Paulo (Fiesp) to discuss the concession, security and profitability for implementation of the TAV.
According to Coutinho, the government should invest 2.2 billion reais (US$ 1.2 billion) in claiming land and 1 billion reais (US$ 535 million) for the creation of the High Speed Train Company (ETAV), to be used for learning and incorporating the TAV technology.
"ETAV should be a public organization, with good technical qualification, prepared for the learning process for technology transfer to be efficient. This shows the government confidence in the project as, due to its participation, the government's is clearly showing private companies that it is prepared to assume risk."
Apart from that, the government should also repeal 6 billion reais (US$ 3,2 billion) in taxes , which still depends on negotiation, according to the BNDES.
According to the director general at the National Agency for Overland Transport (ANTT), Bernardo Figueiredo, the deadline for completion of the TAV (from Campinas to Rio de Janeiro), with all its elements, is six years, but investors will be free to make proposals to anticipate the completion of stretches. "We believe that the project may be completed in three years and the maximum acceptable will be six," he said.
Figueiredo emphasized that the objective of the project is to reduce the negative impact of road and aerial transportation, creating modern transportation in Brazil to integrate the aerial system, optimizing the use of airports.
The company that wins the tender, in October, should have the TAV concession for 40 years, with the right to tariffs throughout operation. The tendering process should be completed in early 2010 and the signing of the contract is forecasted for May 2010, with works scheduled to begin in the second half of 2010.
The tariff should be half the price of airfares between both capitals, in the economic class. The price of the executive class, however, is not fixed.
According to Figueiredo, initially the TAV should connect Rio de Janeiro to São Paulo and Campinas, later on being extended to Curitiba and Belo Horizonte, but there is interest in expanding the project, creating a medium and high capacity railway transport grid in the country.
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