BRAZILIAN PRESIDENT TO VISIT CHINA ON A TRADE MISSION

Sao Paulo, April 11 (WSJ)- When Chinese President Hu Jintao welcomes his Brazilian counterpart Dilma Rousseff for a state visit to Beijing this week, Ms. Rousseff is expected to hail soaring commercial ties between two of the world's biggest and fastest-growing economies.

But in addition to the praise, Ms. Rousseff is also expected to vent the growing frustration that Brazil, like other developing nations, feels about the nature of its commercial relationship with China. While countries like Brazil sell loads of raw materials for China's voracious economy, China also floods countries like Brazil with cheap imports and restricts access to its own economy for other kinds of products like manufactured goods.

Ms. Rousseff arrives in China for an official state welcome Monday ahead of bilateral meetings Tuesday and Wednesday. On Thursday, the two will be joined by leaders of Russia, India, and South Africa for a meeting of the so-called BRICS group of emerging countries.

"We need a more sophisticated relationship with the Chinese," said Sergio Amaral, a former Brazilian trade minister who now heads the Brazil-China Business Council, a Rio de Janeiro-based group that fosters ties between the two countries. "The relationship can't just be about commodities”.

It is true that China's hunger for iron ore, oil, soybeans and other commodities is fueling the export growth responsible for much of Brazil's economic boom. Trade between the two ballooned to more than $56 billion in 2010, compared with just over $3 billion a decade ago. In the process, China leapfrogged the U.S. as Brazil's leading trade partner, just as it has done with other Latin American countries and other emerging markets world-wide.

But as the ties have deepened, many in Brazil see a pressing need for a more equitable relationship. In a briefing with reporters this week, a Brazilian government spokesman said Ms. Rousseff's trip to China is about "reciprocity" between the two countries in terms of trade and investments in each other's economy. For instance, 84% of Brazilian exports to China are commodities, while 98% of Chinese sales to Brazil are manufactured goods, according to the Brazilian government.

Among other agreements likely to come from their meetings, Ms. Rousseff is expected to seal deals that could save a struggling Brazilian aircraft factory in China and possibly grant Brazilian pig farmers long-sought access to China's massive meat markets. Seeking to drum up new business, nearly 250 Brazilian executives will follow Ms. Rousseff on the visit, her first beyond Latin America since she took office Jan. 1.

One item high on Brazil's agenda is China's currency policy and its effect on trade between the two countries. Echoing complaints by the U.S. and other major exporters, Ms. Rousseff has grown increasingly vocal against Beijing's intervention in currency markets. The intervention keeps Chinese exports cheap in global markets and undermines the competitiveness of Brazilian products at home against Chinese imports - especially at a time when Brazil's own currency has soared because of the boom.

In addition, Ms. Rousseff is expected to urge Mr. Hu to open Chinese markets to a broader range of Brazilian goods. Whereas cheap Chinese imports flood Brazil and other emerging markets, China maintains tough barriers for some imports. The imbalance has led to growing complaints from industry groups in other fast-growing markets including South Africa, India, and Indonesia.

Even when China gives ground, it concedes very little. Consider the aircraft factory established in 2002 by Empresa Brasileira de Aeronautica SA, or Embraer.

When high fuel prices in subsequent years made the regional jets produced at the factory less marketable, China forbade Embraer from shifting production to another type of commercial aircraft because it would compete against planes being developed by Chinese manufacturers. As a result, production has been sluggish and Embraer has threatened to close it once a final aircraft under assembly is completed later this month.

People familiar with the talks say the two governments have reached an agreement, to be unveiled this week, that will allow Embraer to begin building executive jets at the plant. Even so, the experience is often cited as an example of the difficulties Brazil has selling anything other than raw materials to China.

A third big issue between the two countries is China's role as a foreign investor. After a high-profile visit by Mr. Hu to Brazil in 2004, during which a raft of bilateral trade deals and planned investments were announced, Brazil had high hopes for Chinese ventures within its borders.

But some of what China promised hasn't materialized, including a multibillion dollar steel plant that Baosteel Group, China's largest steel maker, said it would build in northeastern Brazil. And though China has gradually become a bigger investor in Brazil, most of its transactions have focused on food, fuel, minerals and other raw materials.

"The Chinese have invested opportunistically," said Luiz Felipe Lampreia, a former Brazilian foreign minister. "They're not as interested in developing businesses in other markets as they are in getting what they need for their own growth”.

However, the Chinese have invested in the oil sector, which, given Brazil's pending development of massive new offshore oil beds, has been especially attractive for them. For instance, Sinopec Group last year paid $7.1 billion for a stake in the Brazilian operations of Spanish oil company Repsol YPF SA. Early last year, Sinopec also helped Petroleo Brasileiro SA, Brazil's state-run energy giant, build a 1,450-limometer natural-gas pipeline. And in 2009, Petrobras secured a $10 billion loan from the China Development Bank, to be repaid with oil, to finance development of the offshore beds.

<