IN BRAZIL, CHOOSING SIDES IN THE U.S.-CHINA RIVALRY / GEOPOLITICAL FUTURES

In Brazil, Choosing Sides in the US-China Rivalry

5G has called into question the country’s long-standing policy of nonalignment. 

By: Allison Fedirka

Brazil, a country that tries to avoid at nearly any cost, squarely aligning with one side in a conflict, is facing one of its most difficult balancing acts yet as it lays the regulatory and physical groundwork for 5G networks. 

It’s slated to hold auctions for related frequencies in the first half of the year, and Anatel, its national telecommunications agency, could deliver the terms for the auction as early as this week. 

As with others before it, Brazil’s preparations to adopt and integrate 5G technology force its government into the security debate over the potential risks of using Chinese companies and, consequently, call into question the scope of future security cooperation with the U.S., putting its long-standing foreign policy to the test.

For Brazil, nonalignment is a product of its location in the periphery, which enables it to generally refrain from entering conflicts. 

It’s also a product of composition. 

Its size and wealth of natural resources mean it has a relatively high degree of self-sufficiency and is therefore less dependent on fixed relationships for survival. 

Most important are the competing demands of its large and diverse population, which applies pressure on the government from all angles. 

This has shaded Brazilian political history with lots of instability and regime change. 

In its nearly 200 years of existence, the country has been governed by a monarchy, a dictatorship (twice) and three republics. 

Brazil’s efforts to preserve the nation tend to focus on maintaining domestic stability and avoiding any formal alliance that allows its internal weakness to be exploited by outside powers. 

Even in the few instances where Brazil did take a side, as it did when it joined the Allies in World War II, it did so only after considerable domestic resistance.

Never did this really threaten U.S.-Brazil security cooperation. 

At the turn of the 20th century, the U.S. became the security guarantor of the Western Hemisphere. 

Though this was contested somewhat during the Cold War, Washington maintained its security supremacy by regularly leading anti-narcotics cooperation, military drills and security training. (More recently, it sent Coast Guard ships to deter Chinese fishing vessels.) 

Brazil proved especially valuable to US. security during WWII, when it granted base access to help protect the Atlantic’s southern flank; during the Cold War, when it hosted a missile observation post on Fernando de Noronha; and during the recent Venezuelan crisis, when it helped coordinate migrant relief efforts and attempts at back-channel talks with the Maduro regime. 

The U.S. currently is interested in what Brazil can offer with regard to satellite launches, space and security.

It now finds itself in the middle of the U.S.-China rivalry, which is at once familiar and unfamiliar territory. 

China’s economic boom at the start of the 21st century paved the way for Beijing to establish and then expand its financial and commercial presence in Brazil. 

China needed to secure resources and market share through massive investments in raw materials, energy and infrastructure – all of which were readily available in Brazil. 

Since then, China has made massive loans, investments and acquisitions in Brazilian energy, mining, agriculture and infrastructure. 

Trade between the two has steadily increased such that by 2009 China surpassed the U.S. as Brazil’s top trade partner, a streak the U.S. had held for 80 years.

Until now, Brazil managed to keep its trade relationship with China largely separate from its security relationship with the U.S., but the introduction of 5G brings these once separate issues together. 

The primary way the government in Brasilia has kept them from converging entirely has been to leverage the regulatory framework, allowing Brazil to appease both sides simultaneously while protecting national interests. 

Under the current proposals, Brazil separates the question of frequencies and 5G infrastructure. 

The purchase of frequencies will be restricted to telecommunications companies while the infrastructure will be the responsibility of China’s Huawei, Sweden’s Ericsson and Finland’s Nokia. 

This leaves the telecommunications companies with the responsibility of defining how to use the frequencies, with no mandate for them to implement 5G. 

5G operators must also comply with the new Brazilian General Data Protection Law, which takes effect in August. 

The law applies to any processing operation carried out by a person, business, public entity or organization with any presence in Brazil; processing operation occurring in Brazil; and related goods or services being offered to people in Brazil. 

The government has emphasized that any system or project meant to help develop 5G must stay in Brazil, the data must remain private, and the projects must be economically viable. 

There are also loose proposals circulating for how to regulate the physical components of a 5G network. 

In addition to respecting the data protection rules, suppliers will likely have to have shares traded on the Brazilian stock exchange (or on an internationally relevant stock exchange such as New York) and veto any kind of political affiliation by controlling shareholders. 

Notably, these measures are expected to be imposed only on new 5G networks; upgrades to current 3G or 4G networks will be exempt. 

The ambiguous rules reflect not only the desire to remain flexible on 5G development but also the internal constraints facing the Brazilian government. 

Nearly half the telecommunications hardware in place belongs to Huawei while the other half is shared between Ericson and Nokia. 

Excluding or replacing half the country’s existing infrastructure is simply not a viable option. 

Many in Brazil’s business community want to keep Huawei because it’s cheaper. 

Top telecom companies Telefonia, Oi, TIM and Claro have loudly opposed regulations that obstruct free-market choices. 

 Brazil thus faces increased pressure from the U.S. and China as each attempts to secure its favor. 

The U.S. spoke to the country’s financial concerns and pledged funding from the U.S. International Development Finance Corporation and Export-Import Bank to help purchase equipment from non-Huawei vendors. (Notably, it’s difficult for Washington to make any guarantees on this pledge since the public funding release is contingent on first raising private capital that does not have ties to the Communist Party of China.) 

The U.S. also tried to sweeten the deal by signing an agreement that would pave the way for further trade negotiations on contentious goods and promote greater U.S. investment. 

Claims have also been made that Brazil’s openness to allowing Chinese participation may have been a response to Chinese pressure related to vaccine shortages. 

Brazil’s COVID-19 vaccine efforts call for domestic production with all input materials coming from China. 

These materials were initially delayed. 

For now, Brazil appears capable of playing the 5G game on its own terms, which means ultimately working with both the U.S. and China in some capacity. 

China’s current monopoly on existing infrastructure and open participation seems to be enough to keep Beijing appeased. 

It’s still unclear what U.S. efforts will produce, and in any case Washington has more pressing economic and political problems to address. 

Luckily for Brazil, neither side will be forcing Brazil’s hand any time soon. 

But unless Brazil can find a way to get more leverage, it may have to choose a side eventually.