The collapse of global oil prices has seriously hurt Brazil. Now in recession, South America’s biggest economy has seen export earnings dip as oil trades at half the price it did this time last year. Meanwhile, demand for commodities has slowed in China, Brazil’s largest trading partner – which itself experienced a shock as its stock market, the Shanghai Composite Index, recently shed a third of its value in just three weeks.
Yet despite their economic troubles, China and Brazil along with other BRICS member countries remain defiant. Last week in Shanghai, they formally launched the New Development Bank (NDB, commonly referred to as the BRICS bank), which was created at the sixth summit in Fortaleza, Brazil, last year.
The bank, which will have an initial cash injection of US$ 50 billion, could invest in projects as soon as April 2016, said leaders, who also declared their desire to invest in renewable energy technology. Brazil is planning to contribute US$ 18 billion to the NDB and China has pledged US$ 41 billion, giving the latter the largest share of the vote on where to allocate funds.
But the NDB’s sustainability aims will depend on member countries being able to commit resources to the new knowledge-transfer and cooperation pact, signed by BRICS science & technology ministers in Brasilia in March. And existing bilateral platforms, such as that shared by China and Brazil, can provide some useful lessons, and warnings, about commitment and parity.
Bilateral cooperation
Following the BRICS science and technology meeting in Brasilia, in March, and the recent visit of Chinese Premier, Li Keqiang, to Brazil, Chinese Minister of Science and Technology Wan Gang led a delegation to the Brazilian capital for a second high-level exchange. Wan’s counterpart and host of the meeting, Aldo Rebelo, announced a deepening of bilateral scientific cooperation in the areas of agricultural sciences, biotechnology, nanotechnology and new energy, and experts presented some interesting advances.
For instance, Brazilian agricultural research institute EMBRAPA and CAAS (Chinese Academy of Agricultural Sciences), have cooperated on germplasm exchange which involves sharing genetic material from the seeds of crops such as corn, soybeans and rice, storing numerous varieties in “genetic banks”. The aim of storing seeds is to experiment with and identify the most efficient – in terms of yields and water use – and those most resilient to climate change and pests. The EMBRAPA CAAS partnership already benefits from a virtual laboratory and a permanent EMBRAPA representative in Beijing.
In the area of nanotechnology, Brazilian director of the China-Brazil Center for Nanotechnology, Fernando Galembeck, pointed to Brazil’s huge biomass potential. He says converting plant matter into fuel by using nanoparticles – effective catalysts because their large surface area relative to their volume means they react quicker – can lead to higher bioenergy efficiency.
Dehua Liu and Luiz Pinguelli Rosa, directors of the China Brazil Center for Climate Change and Energy Technology Innovation, also presented on their work, including on the production of biodiesel from waste cooking oil using natural enzymes. And Li Xuguang, vice-president of Tsinghua Solar, a company created and owned by Tsinghua University, which has installed several solar thermal panels, declared the company’s interest in supplying Brazil with both solar-thermal and photovoltaic energy.
Short-term challenges
Despite promising results in the lab, the absence of Brazilian companies at the meeting spoke volumes about the lack of funding coordination between the private and public sector within the national structures that govern technology and innovation. Investment is likely to remain external as Brazil’s recession leaves the future of bilateral projects in doubt.
Some of China’s largest companies such as IT, auto and renewable energy equipment manufacturer BYD, and telecommunications equipment makers ZTE and Huawei, declared their intention to inject finance into research and development in Brazil.
While Brazil’s need for investment can be China’s opportunity, both need to benefit without compromising their equal roles in the partnership. Chinese solar energy companies, for example, are keen to expand in Brazil given the latter’s market potential. Markus Vlasitis, executive director of Yingli Brazil, which has 20MW installed in the country, called for better regulation, financing schemes and training programs at the meeting. But Vlasitis also identified the lack of a skilled labour force in Brazil to design, install and maintain solar projects as a bottleneck for further investment.
Aside from official declarations of friendship and optimism, the deceleration of Brazil’s industrial sector and the consequent decrease in investments in technology and innovation risks making the country rely even more on commodities as its main export and energy source. This puts Brazil at risk of overreliance on exports of raw materials to and imported manufactured goods from China.
The disparity between Brazilian companies’ absence at the meeting and ambitious plans laid out by Chinese companies for the Brazilian market looks worryingly like a diktat for the latest phase of bilateral relations.
And with Brazilian president Dilma Rousseff’s influence over congress waning, getting legislators to commit to supporting government-led renewable energy projects is difficult. In fact, congress recently passed a law allowing troubled state-run oil company Petrobras to receive outside assistance to extract the massive pre-salt reserves off the south-east coast of the country. Aside from legitimate questions about Petrobras’ limited financial and technical abilities to actually extract the deeply buried oil, it shows a weakening resolve to commit to developing renewable energy sources in times of economic hardship.