Simone Preissler Iglesias and Leonardo Lara, Bloomberg News

BRASILIA/SAO PAULO
EnergiesNet.com 08 09 2023

On Brazil’s east coast, the vast parking lot off Avenida Henry Ford sits empty. Shift workers once packed these spaces, next to a Ford Motor Co. plant that covers 1.8 square miles—an area larger than New York’s Central Park. On a recent weekday, a lone security car patrols its perimeter, the only sign of life.

Allison Barreto Sousa, a Ford maintenance technician for almost two decades, remembers when the company decided two years ago to shut down the plant, along with its entire operations in Brazil. Ford had a final ask: Could Sousa join a crew of 10 to perform the industrial equivalent of the last rites? They’d dismantle, piece by piece, the same equipment they’d once installed and maintained, so it could be packed up and shipped away. Sousa started the work, but memories of colleagues flooded his mind. He just couldn’t do it. “When I got married, I was at Ford. When my children were born, I was at Ford—all my good memories are somehow connected to Ford,” says Sousa, now 39. But then, “out of nowhere, came the silence. I asked not to come back.”

Today, Sousa hopes he can, no thanks to Ford. The new economic power in town is China—and its largest ­electric-vehicle maker, BYD Co. Those initials stand for “Build Your Dreams,” a phrase that very much reflects the hopes of Sousa and hundreds of his idled former co-workers. BYD is wrapping up negotiations with Ford to buy the shut-down factory in Camaçari, about 30 miles north of Salvador, the state capital of Bahia. (Ford says talks are continuing.) When the plant opens as expected later this year, it will be BYD’s most extensive electric-vehicle operation outside Asia.

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 US 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 US, 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 Chief Executive Officer 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 US 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. US officials had misgivings about Lula’s uncritical attitude toward Xi. Linda Thomas-Greenfield, the US 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. Uallace Moreira Lima, Brazil’s secretary of industrial development and innovation, says the country failed to prepare for its future: “Europe and the United States have deindustrialized, but they dominate these complex industry chains, which is not the case in Brazil.”

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 US and assembled them locally. General Motors Co. and Volkswagen AG 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 US, 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 coastline along the Atlantic, Bahia played a central role in the country’s painful colonial history. Portuguese explorers first reached landfall there in the year 1500, making it one of the earliest European settlements in the Americas. The conquerors established Salvador on the Bay of All Saints to serve early sugar cane plantations—and the slave trade. Pelourinho, the oldest part of town, is named after the wooden post to which enslaved people were tied and whipped.

Today, Salvador, the center of a bustling metro area of 4 million, remains mostly Black and the heart of Afro‑Brazilian culture. During carnival and religious holidays, music groups throng the streets playing afoxé, a typical rhythm of Bahia whose roots lie in a fusion of African religions. With its 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% unemployment rate is the highest of any state in Brazil. More than half its population lives at or below the government poverty line, a monthly income of 665 Brazilian reais ($136). Last year, Lula won 72% of the state’s vote, making it key to his defeat of Bolsonaro.

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. Hanging nearby are two feathered headdresses whose palette of white, green, blue and yellow stands out in a bland government building. They remind him of his origins. The son of a cowboy and a seamstress, he won election for the first time last year. At age 58 he’s one of the few Indigenous Brazilians to be a state governor, a matter of pride for another historically disadvantaged group whose culture and families have long intermingled with those of Black people.

A rising star in Lula’s Workers’ Party, Rodrigues has helped lead negotiations with the Chinese for the BYD plant. He figures the company’s EV and other investments could create 10,000 jobs in his state. Lula’s election “has helped us a lot to expand possibilities with the Chinese government and companies,” he says. Expectations are high, since “we’ve developed trust—financial trust, legal trust, political trust—that by investing in Brazil, especially in Bahia, our deals and agreements will be fulfilled.”

Chinese investments in Salvador and its environs stand out as a modern counterpoint to the city’s pastel-hued houses, baroque churches and narrow streets. A group of state-­controlled Chinese companies is planning a $1.3 billion bridge connecting Salvador to the island of Itaparica, where wealthy tourists rent rustic lodges and enjoy meals of lobster washed down with caipirinhas. It will be the longest bridge over water in Latin America, extending 7.7 miles, more than four times the length of San Francisco’s Golden Gate Bridge. Getting to Itaparica now takes two hours by boat or five hours driving around the city’s bay. A car will be able to make it over the bridge in 10 minutes. More than a bridge, the project “has a much greater purpose,” says Claudio Villas Boas, CEO of the Bridge Salvador-Itaparica Island Consortium, the group of Chinese companies. “It’s a regional development project, a way to improve economic and social conditions” across Bahia.

BYD is poised to make just as big a splash in town. Visit the Victorian-era train station in the outskirts of Salvador, and you’ll find the headquarters of BYD’s SkyRail. It’s just starting to build 15 miles of track for an electric monorail. BYD spent more than $700 million just on research and development. SkyRail will provide an alternative to Salvador’s aging bus fleet, which BYD also plans to replace with electric vehicles. The monorail can transport 10,000 people an hour—including, one day soon, workers to and from the former Ford plant. BYD expects to spend $613 million to reopen the Camaçari plant and has plans to mine lithium in Bahia to supply it.

Diogo Damasceno views the Chinese company’s arrival as a fresh chance in life. His world changed overnight when the Ford plant shut down. A metalworker, Damasceno reckons he assembled tens of thousands of car bodies during his decade working for Ford. Yet the first he heard of the company’s plans to close the plant was from family members who called him after he’d just come off the night shift on a holiday, when streets pulsed to afoxé. (Ford declined to comment on the job losses but said in 2021 that it had worked with unions to mitigate their impact.)

Two and a half years later, at 40, Damasceno is living in a one-room apartment and, like many of his former colleagues, eking out a living as a delivery driver. Damasceno has 90,000 miles on his 2014 Ford EcoSport, which he uses to make his rounds. “I know that BYD could take some time to come to Bahia, but I hope it looks for us—people with experience,” Damasceno says. “I’m waiting very anxiously for it to arrive.” —With Mariana Durão

Iglesias covers the economy from Bloomberg’s Brasília bureau. Lara is an editor based in São Paulo.

bloombereg.com 08 09 2023