The Chinese Monetary Power: The Brazilian Legal Environment as an Important Institutional Variable for the Adoption of the Renminbi in the Chinese Investments in Brazil

Abstract

The purpose of this essay is to present how the expansion of the Chinese monetary power may impact Brazil and whether the Brazilian legal environment may be of relevance to the Chinese investment and trade strategies. This study is part of research in progress that has been developed in the Global Law and Development Study Center at the School of Law of Getulio Vargas Foundation in Sao Paulo – Brazil. In order to present this issue, the author analyzes the Chinese measures related to the utilization of the Renminbi (RMB) in investments and trade from the Brazilian economic, political, and legal perspective. The main research question is: whether or not the Brazilian legal environment promotes the adoption of the RMB in the Chinese trade strategies, and direct and portfolio investments in Brazil? The author tries to answer this question by analyzing Brazilian laws and rules concerning with investments and trade. The preliminary conclusions suggest that: (i) the Brazilian legal framework may represent obstacles to or even hinder trade, and foreign investments in Brazil, and consequently may not prove to be favorable to the use of the RMB in the economic relations between Brazil and China; (ii) China has still not been able to carry out - if there is such an intention - to create in Brazil a zone of monetary dependence backed by the RMB; and (iii) the parallel legal framework structured by China together with the Brazilian bureaucracy, translated into cooperation agreements, the investment mechanism based on the China-LAC Industrial Cooperation Investment Fund Co., Ltd. - Claifund, and the BRICS CRA suggests the attempts to establish an equivalent legal reality to the use of the RMB as a means of payment in economic relations between Brazil and China, although without success until this moment.