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Good chinese business

The Asian country could take the place that Brazil had saved for itself in the globalized world

The so-called “train of history” for the 21st century has already left from China some time ago, with a stopover in India. It is moving at high speed. Brazil, it seems, is close to missing it if it doesn’t sprint to some station. With these words the ex-ambassador Amaury Porto de Oliveira, a member of the International Opportunity Analysis Group (Gacint) of the University of São Paulo (USP) and considered to be one of the highest authorities on China in the country drew attention to the situation. A conference speaker and author of dozens of articles about the theme, Oliveira believes that the extraordinary growth of the Chinese economy over the last 25 years, on average between 9% and 10% per year, is not a passing phenomenon and should be a concern both for powers such as the United States and the European Union as well as emerging countries – Brazil and Latin America.

In his view, it seems fundamental to raise the question and to attempt to understand it as soon as possible in order for Brazil not to remain distant from the process. In the ambassador’s opinion, today the world is living through a problem of civilization, one of the most relevant moments of transformation, both economically and geopolitically. If, in the last century, whilst the West – the United States and Europe – progressed and dominated the world economy, countries such as China and India remained behind, with a miserable rural mass of people, (and) they are now beginning to claim their part of the cake. Thus, what the world is going through today will direct all the economy for the next one hundred years.

Oliveira is betting that only three countries are going to come out on top in the second half of the century: the United States, China and India. And it will be a reality very different from that of the 20th century, mainly for the Western powers. “The problem is that there needs to be planetary equilibrium, it’s not possible for all to reach the consumer level of the United States, unless we very quickly colonize Mars and Jupiter” he says. Since this is just not possible, someone will have to cede and pay part of the bill. “There’s no point in orchestrating embargos against the Asian countries, since their products are going to come in as contraband” underlines Oliveira.

The confusion that the emergent Asians are causing for international analysts and economists as well as the positioning of Brazil in the context of the international economy are questions that are beginning to transform themselves into concerns for Brazilian academics. The volume of theses is as yet small, but the movement is showing itself to be expressive.

A doctoral thesis, defended at USP, for example, has just been published in book form: China – Infra-estruturas e crescimento econômico [China – Infrastructures and economic growth] (Publisher – Anita Garibaldi), written by Elias Jabbor, an assistant professor at the Asiatic Studies Center of the Geosciences Department, of the Philosophy and Human Sciences Center, Federal University of Santa Catarina (CFCH-UFSC). The study has an introduction by Armen Mamigonian and a preface by Luiz Gonzaga de Mello Belluzzo. During 2004, Luciana Acioly da Silva defended her doctoral thesis in economics at the State University of Campinas (Unicamp) entitled, Brasil, China e Índia: o investimento direto externo nos anos 90 [Brazil, China and India: the direct external investment in the 90’s], which was supervised by Belluzzo.

As well as having various articles published about China, Belluzzo, who is a retired full professor from Unicamp, informally guided the thesis written by Jabbor. Belluzzo understands that China and India are following two different growth styles. The former, with a more recent trajectory, has moved into the market economy, with experimental and original reforms, nonetheless in a very slow transition. India has a more closed policy, with an international investment flow into its industry as yet still scarce. The Indians have advantages, such as being able to count upon a scientific elite and highly sophisticated intellectuals, accumulated over decades.

While India concentrated its integration upon services, China turned itself into a global manufacturing center. The Chinese, explains Belluzzo, modernized their state companies by way of investments in infrastructure, which has given them relative improvements in the areas of energy and transport – their highways and railways are very modern. At the same time, they made use of their advantage of cheap labor, very strict balance of payments management and control of the entrance and exit of capital. Their macroeconomic management is also outstanding, as it is executed by the bureaucracy of the communist party.This unusual combination leaves economists perplexed.
One aspect pointed to by him for this success was that the Chinese showed themselves implacable in the accumulation of capital reserve – close to US$ 1 trillion -, which provides more flexibility and space for making adjustments, even in the case of a deceleration in the American economy. In this aspect, it would help the integration that China is developing with other Asiatic countries  – to where the Americans have  transferred a good part of their manufacturing production -, a region in which its economy can move.

Common sense
Elias Jabbor takes from China the lesson that there is the need, for any country, to have a strong National State – and one with a strategic vision – for the directing of its destiny. He underlined that the Chinese do not believe in the statistical efficiency of the market and in the dynamics of the market’s “invisible hand”. Much to the contrary, they confront the challenges of globalization with conceptions, methods and objectives that contradict the common sense of the end of the cycle of State-Nation and of inductive development policies. “Indeed, this is the main factor of confusion among economists and ‘specialists’ on China, since the majority had been educated to find strange and to demoralize any experience of power centered within the presence of a planning national State, and the custodian of crucial elements of the accumulation process.”

The researcher even concluded that, starting from comparative studies, it is possible to demonstrate the disaster that was the Washington Consensus for countries such as Brazil: between 1998 and 2005, when China invested US$ 800 billion in its infrastructure. The largest country in Latin America, with strangulation in this sector dating back to the beginning of the decade of the 1980’s, during the same period did not go beyond US$ 18 billion, or 2.2% of the Chinese amount. “Without saying that, for the Brazilian case, the conditions for confronting the infrastructure knot had already been set up at the end of the decade of the 1970’s with the implementation, during the Geisel government, of a heavy mechanic industry.”

Such a confrontation was made impossible, in his opinion, by successive policies of financial “stabilization” by the last few governments, of “combating inflation” via the compression of demand, by commercial opening and by the aborting of Brazilian financial capitalism. “China did exactly the opposite, and the numbers are at one’s disposal to prove it, and to confound even more the economists and ‘specialists'” he says.

The researcher is optimistic as to the new world economic order headed by China, which is going to direct not only economic momentum, but also political forces. The speed with which China is industrializing could benefit all of the world’s economy, mainly the peripheral countries. On the one hand, the Chinese growth creates an effective demand for them. On the other hand, it serves as a dampener, in the context of each nation, of policies and of ideas of the neo-liberal type. “In the end, the Chinese format is a concrete counterbalance to this imported model of the center to the periphery. This movement is already occurring in Sub-Sahara Africa, in Latin America (look at the examples of Cuba, Bolivia and Venezuela) and in Asia.”

For this reason Jabbor argues that China is planning its external commerce in such a manner as to maintain commercial deficits with all of the system’s periphery and surpluses with the center. So much so that, last year, the tariffs of imports of the 35 poorest countries in the world fell to zero. “This is a purely political movement that’s going to substantially alter the correlation of forces in the world environment in the future.”
By intertwining policy, economy, philosophy, history and geography, “the Chinese ascension is something natural, since, for centuries, China was the most developed country in the world, possesses a thousand plus year civilization, has a territory of more than 9 million km2, a consolidated state power system and a society mediated by philosophies (Taoism and Confucianism), of civilizing features and tolerant with other peoples.”

Within this scenario, it is up to Brazil to work hard so as not to fall behind. For now, says Amaury Oliveira, as with Australia and Africa, Latin America has been important for feeding the raw material hunger of the Chinese industry, principally minerals (iron ore) and vegetables (soyabean). “The idea that Brazil could improve its presence in the external market with products of added value unfortunately is not being brought to fruition” he lamentes. “We’re outside of the world, stopped, whilst all of the world is changing with frightening speed.”

For Belluzzo, the country has, since the decade of the 1980’s, promoted an inadequate adjustment of its economy to international changes. As a result, it had a “disastrous” performance from the point of view of manufacturing. The picture, he says, is one of stagnation and almost regression, since Brazil has not grown in technology and the investments in industry were despicable. “There has been no project for this segment, both in the decade of the 1990’s and until now we don’t understand that the sustaining of the competitive level of the dollar is fundamental. The truth is that we had two disastrous devaluations, the valorization of the exchange rate de-stimulated exporting and also those that compete internally with whatever comes  rom abroad.” Thus, even in a situation of recovery, the country should still feel these consequences for a long time.

Elias Jabbor observes that it is common to place the blame for the Brazilian  failure on the Chinese, with such phrases as “slave labor” and others. Nothing could be more superficial, in his opinion. The first question to be brought up is history. For more than 3,000 years China set up on its territory the so called basics for a social division of labor. This made commerce something normal for the Chinese thousands of years ago. “We have to be clear that we’re not dealing with ‘apprentice sorcerers’, as one might say, but with qualified people, of the highest level, and who learned from Sun Tzu that a war can be won without the need for a single shot. Either we understand the thousand plus year Chinese history or we’ll not manage to get off the surface and into the air.”

At the same time, one needs to reflect on whether it is possible to carry out commerce with a thousand year old nation starting from internal Brazilian options, such as liberty, capital flow, floating exchange rate and other aberrations. Jabbor questions if it would be possible to have a strategic partnership with an aggressively commercial country such as China, without  having the minimum capacity of planning its external commerce and of financing exports or exporting capital goods. “It’s good to be aware that a real disharmony exists between Brazilian external policy and the adopted economic policy, and the Chinese commercial surplus with Brazil, verified in the first  trimester of this year – US$ 90 million of deficit with China – is the expression of this.”

In his view, it is idealistic to believe that the country can have a sovereign and independent external policy unless the State has conditions of transforming this policy into real/true concrete actions. Within these measures he highlights the planning of external commerce; the financing of exports; the planning of commercial deficits with neighboring countries; exporting of capital; an exchange rate that inhibits predatory imports and optimizes exports etc. “Off hand, the central error is in the option of economic political material that was imposed on us in the decade of the 1990’s, which led to a nation such as ours, which built the most modern subway in the world [that of Sao Paulo] with equipment manufactured in Brazil, (and had) to import the rails, wagons and locomotives from China, South Korea and Spain.”

The researcher suggests that a strategic partnership with China should be a true marriage of national projects and that, as well as commerce, there could be major contributions in the balancing of world forces. “Unfortunately, Brazil – with all the advances verified in the current government – hasn’t shown itself to be up to the level of the challenge that the world imposes upon it.” For an idea to transform itself into material force, to grow, it is necessary that such an idea be totally absorbed by a united Brazilian population. Meanwhile, time is pressing.