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Social Sciences

Routes in transformation

São Paulo has become the main distribution center for popular Chinese products in Brazil, replacing Ciudad del Este in Paraguay

Popular products at the night fair in São Paulo: China has created a transnational market that supplies cities in Brazil, the Middle East, Africa, and India

Léo Ramos Chaves

Popular Chinese goods that used to circulate in Brazil via Ciudad del Este in Paraguay are now distributed across the country from São Paulo, mainly through commercial activities in the bazaar-type stores in the city center. Most of the products come from the cities of Guangzhou and Yiwu in southern China. These goods involve constant circulation of people, and usually arrive at the port of Santos. Some enter the country legally, while others escape the Federal Revenue Service’s control system.

This was one of the conclusions of the thematic project “Managing conflict in producing the contemporary city,” coordinated by the sociologist Vera Silva Telles, a professor at the School of Philosophy, Languages and Literature, and Human Sciences of the University of São Paulo (FFLCH-USP) who studies recent reconfigurations of the informal markets in São Paulo and Rio de Janeiro among her lines of research. “China has created a transnational market for popular products, supplying cities not only in Brazil but also in Africa, India, and the Middle East,” states Telles.

People still travel to Ciudad del Este, mainly to purchase cigarettes and electronics, according to researcher Carlos Freire, who participated in the project and studied this socioeconomic dynamic that connects wholesale centers. However, the flow of buses toward Paraguay is much smaller than it was in the early 2000s, says Freire, who is in a postdoctoral internship at the FFLCH-USP Department of Sociology.

According to Rosana Pinheiro-Machado, a professor in the Department of Social Sciences at the Federal University of Santa Maria (UFSM) in Rio Grande do Sul who has also conducted studies related to the thematic project, one of the reasons explaining the route change is related to the intense efforts that the United States has taken against piracy, including investments in strengthening control of the border with Paraguay. Brazil also created a new customs bureau in the region in 2006 to make it harder for these products to enter. “In the early 2000s, there were 20,000 Chinese on the border with Ciudad del Este. Today, this number is only 4,000. They scattered throughout South America, and many moved to São Paulo,” notes Pinheiro-Machado. USP’s Freire adds that in 2012, the Association of Chinese People in Brazil reported that 250,000 Chinese and their descendants live throughout the country, with 180,000 residing in the state of São Paulo.

In São Paulo, the commercial activities in the shopping bazaars (known as galleries) in the center of the city and expanding trade in Chinese products supply popular markets around Brazil through sacoleiros, individuals who buy goods and sell them in their home cities. “The gallery sales model has increased between 2000 and 2014, transforming traditional trade spaces in the center of the city,” says Freire. He says that a square meter in Pagé Gallery, one of the most traditional spaces, costs more than the same amount of space in some shopping malls. A 2013 article published in the O Estado de S. Paulo newspaper showed that the standard purchase price for a square meter of space on Rua 25 de Março (the street where the gallery is located) jumped from R$5,200 in 2009 to R$12,000 in 2013. Another article from the same newspaper in 2010 indicated that rent for a square meter on the same street was R$1,000, and R$800 in the Brás district, compared to the roughly R$744 charged by the high-end Iguatemi Mall.

In addition to the galleries, another space that drove the movement of Chinese goods was the night fair in Brás, in the center of São Paulo. This fair began in 2004 in a former train maintenance area, and involves wholesalers supplying sacoleiros who come to the city from all over Brazil. Freire explains that in the early years, street vendors and small-scale producers of clothing from Brazil, Paraguay, and Bolivia occupied the space. As the fair gained value, Chinese traders began to buy stores, which they transformed into an extension of the activities in the galleries. Today, despite the strong Chinese presence, most of the products found at the night fair are not from China, but rather from the local textile industry and sewing workshops that are scattered throughout the outskirts of the city.

“The cost of a sales spot has already reached R$400,000, which reflects the value of the wealth circulating there, even though the products are inexpensive,” stresses Freire. He says that the night fair drove the development of a new commercial dynamic in the region, creating galleries that target the sacoleiros who come to Brás at night. “The Chinese predominate in these new ventures,” he explains. Clothing, costume jewelry, purses, bags, cell phone accessories, electronic components and equipment, rackets to kill mosquitoes, flashlights, and toys are some of the Chinese products that circulate in the popular trade.

The activities of Chinese migrants to São Paulo revolve around sales, but there are also entrepreneurs who operate in the real estate market, buying spaces in galleries in order to rent them out, says Freire. Some are employed by these entrepreneurs, while others join together to create credit unions and import goods on a large scale. “There is wide diversity among the Chinese of São Paulo, not only in terms of their professional activities but also in relation to their origins. In some galleries, you can hear four different Chinese dialects,” Freire states. The Chinese presence in the center of the city also extends to other spaces: today, Chinese children make up more than half of the students at Colégio São Bento, one of the city’s most traditional private educational institutions, connected to the São Bento Monastery.

The informal economy
The informal economy is believed to have moved R$1 trillion in Brazil in 2017, a number including goods from other countries as well as China. This number comes from a study by the Brazilian Institute of Competitive Ethics and the Getulio Vargas Foundation’s Brazilian Institute of Economics, and appeared in an article published in Valor Econômico on December 6. The newspaper also published data from the Brazilian National Forum Against Piracy and Illegality estimating that the city of São Paulo lost R$4.5 billion in taxes in 2016 because of the trade in illegal products.

According to Pinheiro-Machado, most products arrive at the port of Santos but only a portion are declared. “The Federal Revenue Service utilizes sampling, which makes it possible to circumvent the control system. However, it is impossible to accurately measure the amount of goods entering the country illegally,” she explains. Freire emphasizes that popular trade does not always have a well-defined distinction between formal and informal, legal and illegal. In Brazil, as trade has developed and the scale has changed, import and export companies were established in the center of São Paulo to purchase goods directly from China. “Moving from the narrow lanes of the Friendship Bridge in Paraguay to containers in the port of Santos involves changes in the mediation of how goods circulate, and this passes through a more formal dimension of relationships,” says the sociologist.

Despite the difficulty of measuring the quantity of Chinese goods that illegally enter Brazil, it is estimated that 15% to 20% of electronic and computer products sold in Brazil are smuggled, says Paulo Roberto Feldmann, a professor at the USP School of Economics, Administration, and Accounting (FEA). “Since a good part of the products coming from China are of this type, I would use this same proportion as the basis for estimating the percentage of illegal items in other types of goods,” states Feldman.

But Pinheiros-Machado argues that it is necessary to avoid the image of the Chinese importer as a mafia figure. “Many migrants who sell illegal goods are people that the Brazilian labor market was unable to absorb, and need to do this work in order to survive,” she claims. In addition to the Chinese, commercial activities in the galleries in the center of São Paulo and the bazaars selling these goods across Brazil provide livelihoods for people from various nations.

Daniel Veloso Hirata, a professor at the Department of Sociology and Methodology in Social Sciences of the Fluminense Federal University (UFF) who is part of the thematic team, says that the sale of popular merchandise is associated with itinerant work. He says that in the 1990s, the city of São Paulo began to provide licenses for certain persons working in this modality, including ex-convicts and the disabled, who may have had more difficulty entering the formal job market. During that same period, vendor associations were formed, bringing together people who sought to broaden the right to work in the streets. Hirata believes that a tipping point was the creation of legal status for individual entrepreneurs (MEI) in 2000, which formalized different activities. “In the case of itinerant vendors, they still need to obtain a license from the city, but with this formalization they came to have some social rights and welfare,” explains Hirata.

The situation in the city of Recife, Pernambuco, is different, according to anthropologist Marcos de Araújo Silva, a collaborator in the Anthropology Investigation Network Center in Portugal and the Institute of Latin American Studies at the Federal University of Pernambuco (UFPE). In Recife, he estimates that approximately 30% of Chinese products come from São Paulo, and the remainder leaves the Chinese province of Guangdong and comes directly to the port of Suape in the Greater Recife region. In the capital of Pernambuco, popular trade is most intense in the neighborhood of São José. “Between 2001 and 2010, the Chinese worked in most of the shops. Today, they act as managers in approximately 40% of these establishments, controlling the movement of capital,” Silva explains. The numbers are the result of research on the Chinese in Pernambuco that the anthropologist has conducted for approximately 10 years.

In 2016 US$30 billion in Chinese products entered Brazil legally

Despite the current predominance of popular Chinese products in the center of São Paulo, Douglas de Toledo Piza, a doctoral student in sociology at the New School for Social Research in New York, recalls that the center of the city has been an important distribution center for goods since the early twentieth century, when immigrants from different ethnic groups set up shops and worked in itinerant sales. “The street hawker was a type of itinerant vendor who used the train lines from the city center to distribute products across the country,” he says.

Carlos Freire at USP emphasizes that the circuit of Chinese goods distributed in popular trade works alongside large firms that also seek lower production costs in China. “The spread of copies from China is linked to the work of foreign companies that outsource their production to Chinese factories. These sometimes end up reproducing and selling products without authorization from the brand holders,” he explains. With regard to labor, the researcher reports that in China, social and labor rights are linked to a birth record, which must be transferred when a person moves to another city. If this is not done, this person may be exploited by companies and not have access to other rights.

Commercial power
The first Chinese immigration to Brazil occurred in 1812 and was related to investments in tea cultivation in Rio de Janeiro. This flow increased significantly after the second half of the twentieth century, when Chinese and Taiwanese immigrants came to Brazil to escape political conflicts in Asia. After the death of the communist leader Mao Zedong in 1976, the nation underwent changes that allowed Chinese to move between the country’s provinces and also travel abroad. Many people moved to the southern provinces, where many factories that produce superfluous goods are located. The country also began to offer export incentives, authorizing the shipment of containers with different types of goods to any part of the world.

“China was a closed country until the end of the 1970s. The government was concerned about the financial collapse of the Soviet Union and decided to gradually introduce capitalism in the country in the late 1990s, creating a successful business model,” says Feldmann, a professor at FEA-USP. He explains that on the Brazilian side, commercial opening during the 1990s resulted in the expansion of trade with China. But after the arrival of Chinese products, many Brazilian companies went bankrupt. He says that the flow of trade between Brazil and China gained momentum during the Lula administration (2003–2011), when that president signed a trade agreement with the country. Feldmann estimates that in 2016, approximately US$30 billion worth of Chinese products legally entered Brazil, 90% of these goods industrial; São Paulo received approximately US$9 billion in total, including mainly electronics, computers, cell phones, and printers.

He also explains that part of China’s commercial strength comes from the fact that the country deliberately devaluates its currency to encourage exports. “Between 2011 and 2012, the acquisition of Chinese products by Brazilians was so intense that it was reflected in the creation of 1 million industrial jobs in China. It is a high number, if we consider that Brazilian industry currently employs around 8 million people,” concludes Feldmann.

Projects
1. Conflict management in producing the contemporary city: The experience in São Paulo (No. 13/26116-5); Grant Mechanism Thematic Project; Principal Investigator Vera da Silva Telles (USP); Investment R$2,298,704.81.
2. Cities and markets: Migration and trade routes from São Paulo to Guangzhou and Yiwu (No. 15/15056-7); Grant Mechanism Postdoctoral Grant; Principal Investigator Alvaro Augusto Comin (USP); Scholarship Beneficiary Carlos Freire da Silva; Investment R$181,185.72.

Book:
PERALVA, A.; TELLES, V. (eds.) Ilegalismos na globalização: Trabalho, migrações, mercados. Rio de Janeiro: Editora da UFRJ, 2015, 572 p.