China’s top EV maker replaces Ford in Brazil

China’s top EV maker replaces Ford in Brazil

The resurrection of the former Ford plant represents the grand industrial ambitions of President Luiz Inácio Lula da Silva, widely known as Lula. Much like U.S. President Joe Biden, Lula dreams of spurring a manufacturing renaissance. Both leaders are eager to provide blue-collar jobs that can support middle-class lives, fulfilling campaign promises. But there’s an essential—and, for the U.S., vexing—difference: Biden aims to maintain an advantage over China in key technologies. Lula, a leftist who took office in January, is looking to China as the country’s benefactor.

America had long played that role in emerging markets such as Brazil and is now threatened with a humbling loss of influence around the world. China is making EV-related investments in Chile and Argentina, as well as Brazil; building smelters and battery plants in Indonesia; and mining lithium in Africa.

Relations with China reached a low under Lula’s predecessor, the right-wing nationalist Jair Bolsonaro. In March, barely two months after taking office, Lula visited Chinese President Xi Jinping, seeking a detente. While there he personally lobbied BYD CEO Wang Chuan-Fu to reopen the former Ford plant. Lula regards Beijing as able to help in ways Washington can’t or won’t.

The U.S. Congress can be hostile to direct foreign aid, so the government can only nudge companies to invest by jawboning and tax and trade policy. China keeps a tight rein on private companies, exerting control so it can more easily align their decisions with national priorities.

Xi promised China’s help, signing $10 billion in investment pledges after meeting with Lula. U.S. officials had misgivings about Lula’s uncritical attitude toward Xi. Linda Thomas-Greenfield, the U.S. ambassador to the United Nations, was dispatched to Brazil in May to repair frayed ties. The next month, Lula met with Stella Li, global vice president of BYD.

“We are super impressed with Lula,” Li said afterward. “He has a vision: He really wants BYD to bring innovation, advanced technology here, to build manufacturing.” Brazil “is the country we trust, and this is the government we trust.”

Brazil has much recovering to do. Industry now makes up about a quarter of its gross domestic product, down from almost half at its peak in 1985. Lytha Spíndola, head of industrial development and economy at Brazil’s National Confederation of Industry, blames a chaotic and unfriendly tax system and poor, expensive infrastructure.

Lula, 77, has a special affinity for the auto industry. He led a metalworkers’ union in the car plants of São Paulo in the 1970s. During a June speech at the opening of a bus factory in São Bernardo do Campo, he pledged a return to what he considers better days for the country’s manufacturing: “It is up to the state to guarantee the survival of Brazilian industry so that we can one day be competitive abroad.”

Ford led the charge when the first automakers arrived in Brazil more than 100 years ago. The company initially imported Model Ts in kit form from the U.S. and assembled them locally. General Motors and Volkswagen soon followed. Most companies set up in São Bernardo do Campo, midway between São Paulo and the Port of Santos. The city became the country’s Detroit, as well as the cradle of Brazil’s labor movement. In the ’70s the industry spread to other regions, following a path similar to that of the auto industry in the U.S., where foreign companies opened plants across the South starting in the ’80s.

Brazil is now the world’s No. 8 producer of cars. The country tends to turn out economy models aimed domestically and at other developing markets—in Ford’s case, the now discontinued Fiesta and Ka subcompacts and a mini‑SUV, called the EcoSport.

In 2001, Ford opened the soon-to-be Chinese plant in Bahia. In Northeast Brazil, with renowned colonial architecture and pristine beaches, Bahia boasts a share of tourists that ranks behind only Rio de Janeiro, about 1,000 miles south down the coast. But Bahia’s 14 percent unemployment rate is the highest of any state in Brazil. Jerônimo Rodrigues, Bahia’s governor, expects a lot from Lula’s strategy. A photo of him hugging the president dominates the wall of his Salvador office.

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