Brazil accepts China as 'market economy; inks cooperation pacts

Nov. 16, 2004
Brazil has recognized China as a "market economy," removing an obstacle to trade between countries already studying cooperation in energy projects.

Peter Howard Wertheim
OGJ correspondent

RIO DE JANEIRO, Nov. 16 -- Brazil has recognized China as a "market economy," removing an obstacle to trade between countries already studying cooperation in energy projects.

Earlier this year, Brazil's Petroleo Brasileiro SA (Petrobras) and China Petroleum & Chemical Corp. (Sinopec) signed strategic cooperation agreements for oil exploration, production, refining, products sales, petrochemicals, pipelines, and technical cooperation partnerships (OGJ Online, May 27, 2004). And officials from Brazil and Sinopec have signed a memorandum of understanding under which Sinopec will evaluate whether to participate in the proposed, 1,225-mile, $1.3 billion natural gas pipeline in Brazil called Gasene (OGJ Online, Sept. 16, 2004). Sinopec would perform engineering and construction of the pipeline, and China's Export-Import bank would handle financing.

China has pledged to invest $10 billion in Brazil over the next 2 years.

Chinese President Hu Jintao is known to want to secure energy supplies to meet his nation's burgeoning demand—projected to reach 12.8 million b/d of oil by 2025. China's crude oil imports rose 34% in the first 9 months of this year to 90 million tonnes, according to customs data. Brazil exported 5 million bbl of crude to China last year, and will export 14 million bbl this year.

Petrobras has agreed to cooperate with Sinopec in oil exploration in China and Brazil and will build a logistics center in China to help manage the company's Asian activities, said Petrobras Chief Financial Officer Sergio Gabrielli.

China entered the World Trade Organization in 2001 as a nonmarket economy but has eagerly sought recognition as a market economy, which would make it more difficult for its trading partners to impose penalties for selling Chinese exports below cost. Many Brazilian analysts have criticized Brazil's decision.

Accompanied by 200 Chinese businessmen, Hu has been visiting South American nations hoping to boost bilateral trade and cooperation. The tour included Cuba and Argentina—also keen to sell oil to China—and will conclude with the 2-day, Asia-Pacific Economic Cooperation summit in Santiago, Chile, this week.