China overtakes the US as Brazil's largest trading partner

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China overtakes the US as Brazil's largest trading partner

China has become Brazil's most-important trading partner, disrupting a relationship between the United States and the Latin country that stretches back to the 1930s.

By Malcolm Moore in Shanghai
Last Updated: 9:57AM BST 10 May 2009

Welber Barral, the Brazilian trade minister, said total trade between Brazil and China had amounted to $3.2bn (£2.14bn) in April, representing a near twelve-fold increase since 2001.

The sum was greater than the $2.8 billion of imports and exports to the US and represented the second consecutive month that China had topped the trade table.

"It is a historic moment," he said, adding that he expected China to remain in pole position for the rest of the year because its economy is still growing healthily. "China is now a platinum account [for Brazil]," said Douglas Smith, a Latin American economist for Standard Chartered bank.

The US has been Brazil's principal trading partner for nearly 80 years, but a sudden surge in Chinese demand for Brazilian iron ore in the first quarter of this year dislodged the Americans.

The news is the latest sign of China's increasing challenge to US hegemony in Latin America. China has been steadily increasing its sphere of influence and has become particularly close to the four "Red" South American countries: Venezuela, Bolivia, Ecuador and Peru.

China is already Chile's primary trading partner.

In February, China's vice president, Xi Jinping, and its vice prime minister, Hui Liangyu, both travelled through South America to cement ties. They visited nine countries, including Brazil and Mexico, Venezuela, Ecuador and even Colombia, a staunch US ally.

The month before, China contributed $350m to the Inter-American Development Bank.

However, despite much fanfare, China has not signed a bilateral trade agreement with Mercosur, the Latin American free trade bloc. Critics also point out that much of China's foreign investment in Latin America is funnelled directly into offshore tax havens in the Cayman Islands and Bermuda.

Brazil said it now aimed to diversify its range of products to China. Currently the bulk of Brazilian exports is made up of soya beans, for Chinese tofu, iron ore, cellulose and fuel. President Lula is expected to ink further oil and gas deals when he arrives in Beijing for talks on May 18.

"This is a very pressing issue to watch," said Mr Smith. "Brazil is seeking investment from many sources, including China, to help fund exploration from the Santos Basin, which will be very expensive to extract".