By the Blouin News Business staff

Brazil cancels Africa’s debt and shows its quiet rivalry with China

by in Africa, Americas, Asia-Pacific.

Museveni and Rousseff

Uganda President Yoweri Museveni (L) chats with Brazilian President Dilma Vana Rousseff. Photo Credit: AFP/Getty Images/Simon Maina

Brazil and China are discreetly vying for clout in Africa. The South American nation recently advanced its cause in a way pointedly intended to show it is seeking a relationship of equals. On May 25, President Dilma Rousseff said that Brazil would cancel or restructure almost $900 million worth of debt with Africa. It was a move intended not only to improve relations across the southern Atlantic but also to play off the growing perception that that China’s relationship with the continent is based on dominance and its own self-interest.

Rivalry between the BRICS nations (Brazil, Russia, India, China, and South Africa) is increasing. That challenges the unity the leading developing economies are searching for, as well as the new global world order they seek. Nevertheless interactions between Brazil and China are at an all-time high on an economic level. China is Brazil’s biggest trade partner – imports and exports between the two countries reached $75.5 billion last year. In late March, the pair agreed to a $30 billion currency swap to ensure that their trade would not suffer if a new banking crisis caused dollar finance to dry up.

Brazil’s $900 million debt cancellation covers loans to 12 African countries, mostly made in the 1970’s and  renegotiated at least once since. It was announced amidst the celebrations of the African Union’s 50th anniversary summit held in Ethiopia, and against a backdrop of the AU seeking economic independence from the foreign donors that finance a large part of its working budget.

If there were any lingering doubts about Rousseff’s revamped interest in expanding South-South relations, her air miles card should provide reassurance. Addis Ababa was the Brazilian’s president third visit to the continent so far this year: she had previously travelled to Equatorial Guinea to attend the Africa-South America Summit in February as well as the BRICS leaders’ summit in South Africa at the end of March. She wants to make up for the fact that in 2012 she did not undertake one journey to Africa – even though visited 15 countries last year (Read more: Rousseff extends Brazil’s soft power into Africa).

While speculation continues over whether Brazil will be able to get its own growth back on track, the world’s seventh largest economy won’t hold back its drive to strengthen its commercial and diplomatic ties with Africa initiated by former President Luiz Inácio Lula da Silva. “Today we are united for the future. Brazil — not just me — took a political decision to make a re-encounter with the African continent,” Lula said in 2010. An important chapter of the future Lula outlined is closed with the debt cancellation.

Over the past decade, annual trade between Africa and Brazil rose from $4.2 billion to $27.6 billion, according to Chatham House. Brazil accounts for 70% of South America’s trade with Africa. China’s bilateral trade with Africa is still six times larger, however.

Brazil can play with its cultural advantage over China. The South American country is home to the world’s second largest African population, after Nigeria. More than 50% of Brazilians are of African descent. More than 17 million Africans, particularly in western and southern Africa, speak Brazil’s official language, Portuguese, according to UNESCO, with the number growing.

Brazil has also established partnerships to share knowledge and technology in more than 20 African countries. Technical cooperation agreements cover farming, food security, biofuel production and social programs to eradicate poverty.

This doesn’t negate the fact that Brazil shares with China a desire to benefit from Africa’s natural resources (Map: The future of Africa’s natural resources), and Brazilian policy-makers, like some of their Chinese counterparts, see fast-growing Africa’s biggest potential as providing a consumer market for Brazil’s manufactured goods. But in the perception game, Brazil is the clear winner.