US pressure unlikely to turn Brazilians off TikTok, Huawei and other Chinese tech

HONG KONG, Aug 14, 2020, SCMP. As US President Donald Trump launches an unprecedented assault on China’s most powerful tech conglomerates, Brazil finds itself locked in a political struggle – between those who want the country to follow Washington’s lead, and those who advocate for a more pragmatic approach, South China Morning Post reported.

The US and Brazil, the two largest countries in the Americas by population and GDP, have had markedly different policies towards Chinese technology.

On August 6, Trump issued two executive orders banning TikTok and WeChat, two apps owned by Chinese companies ByteDance and Tencent, respectively.

Only a week earlier, US ambassador to Brazil Todd Chapman warned in an interview with local news outlet O Globo that his host country would face “consequences” if it allowed one of Trump’s other targets, Huawei, to build Brazil’s 5G network.

Chapman’s warning was promptly refuted. On August 3, Brazilian Vice-President Hamilton Mourao said Huawei would not be banned from taking part in the bid for Brazil’s 5G network scheduled for 2021.

“Huawei has capacity above its competitors and we do not yet see US companies capable of defeating international competition,” Mourao said during a videoconference with foreign correspondents in Sao Paulo.

This is the latest of Mourao’s many statements defending the Chinese telecommunications giant’s presence in Brazil, where it has built more than a third of the country’s 4G networks.

A retired general, Mourao’s relationship with Brazilian President Jaír Bolsonaro goes back to the 1970s when both were in the army.

But other members of Bolsonaro’s cabinet have tried to steer Brazil’s policy towards Huawei in the opposite direction. In June, the Folha de São Paulo reported that Brazilian foreign minister Ernesto Araujo had told Bolsonaro Huawei should be banned from the 5G network bid.

Analysts say that there is a schism in the Brazilian government’s position on Chinese tech companies like Huawei. “There is an ideological wing, like Araujo, that is completely hostile to China and a more pragmatic, military wing, like Mourao, but I think the president’s own wish is to not let Huawei participate,” said Felipe Zmoginski, CEO of Inoavasia Consulting in Sao Paulo.

Zmoginski, who used to work for Chinese technology company Baidu, said it was “hypocritical” for the US to warn Brazil about Huawei as a threat to national security, pointing to documents leaked by American whistle-blower Edward Snowden in 2013 that showed the American National Security Agency was spying on former Brazilian president Dilma Roussef.

The US started to restrict purchases of Huawei technology in 2018, but other countries have only recently followed suit, either issuing or submitting proposals for a ban on Chinese technology deemed to threaten national security.

In July, Britain announced it would ban Huawei from its 5G networks, while India banned 59 Chinese apps in retaliation for a border dispute in June that led to the death of at least 20 Indian soldiers. In Japan, lawmakers from the ruling party are reportedly pushing to get TikTok banned.

If Bolsonaro joined this group, the country would suffer “unilateral damage”, according to Otavio Costa Miranda, chief operating officer of Gabriel, a Rio de Janeiro-based start-up that sells and installs hi-tech surveillance cameras.

Brazil’s homicide rate is one of the highest in the world, having almost doubled over the past three decades. Drug trafficking, carjacking, and kidnappings are rife in Brazil’s largest cities, an issue that led Miranda to look towards China for solutions.

“There is a tendency for developing countries like Brazil to trade some privacy for more real freedom in the form of security, just like in China,” Miranda said. “The idea of privacy and liberty above all else is a very American ideal.”

With the aim of covering every nook and cranny of Rio de Janeiro in two years, Miranda’s start-up has already amassed millions of dollars in seed funding, including investment from Chinese venture capital firms.

Although the young entrepreneur said the company was inspired by Hong Kong-based SenseTime – the world’s most valuable AI start-up specialising in facial and image-recognition technology – Miranda said there were important differences.

For one, the Chinese government is the main client of SenseTime and many of its competitors while Gabriel’s target market is made up of middle-class Brazilians concerned about living in a crime-ridden city.

“We would not let the Brazilian government or police access our data bank without the express consent of our users,” Miranda said.

Privacy concerns also led Miranda and his team to forgo an initial plan to get SenseTime to build the start-up’s first batch of security cameras. Instead, Brazilian engineers were contracted for the job.

“Any Chinese camera used around the world has a back door, a source code that allows the camera to be rebooted and reprogrammed remotely,” Miranda said, adding that Gabriel holds the source code to all 200 cameras it has currently installed across Rio de Janeiro.

Marcos Caramuru de Paiva, Brazil’s ambassador to China between 2016 and 2018, said US fears of a back door in Huawei technology were not applicable to Brazil because the country “does not hold industrial secrets”.

“I don’t see any vulnerabilities, but if something does happen, these areas are highly regulated, there has to be a permanent dialogue, and the Chinese enter following our rules,” he added.

Zmoginski said that, while Huawei had operated with transparency in Brazil, the Snowden leaks revealed it was the US, not China, that was found to have conducted industrial espionage, pointing to the wiretapping of executives of Brazilian oil conglomerate Petrobras.

Miranda said that, even if Bolsonaro’s camp whipped up anti-China sentiment ahead of the 2022 presidential election, the Brazilian public would not throw away Chinese products because of their quality and cheap price.

“The average Brazilian might not trust the Chinese but will buy a Xiaomi phone without a second thought,” he said, referring to another of China’s technology companies.

Data suggests Brazilian consumers are also enjoying apps made by Chinese companies. According to app analytics platform Sensor Tower, Brazil is TikTok’s fastest-growing market. Between January and July of this year, the app was downloaded 62.4 million times, a 957 per cent increase from the same period last year.

TikTok is now far more popular than US apps such as WhatsApp and Facebook, respectively the second and third most downloaded apps in Brazil between January and July, at 38 million and 33.7 million downloads.

Growth in Brazil also far outstrips other countries in Latin America. Sensor Tower data shows TikTok’s 122.4 million downloads in Brazil are almost double that of the app’s second largest Latin American market Mexico, with 62.9 million downloads.

Zmoginski said the growing demand applied to other areas too, noting the push from Brazil’s regional governments for Chinese firms to solve some of their most pressing challenges.

The tech consultant pointed to the state of Sao Paulo, which is taking part in trials for a Covid-19 vaccine made by Chinese biopharma company Sinovac, in spite of the federal government’s preference for the vaccine being developed by Oxford University and Swedish-British company AstraZeneca.

“Despite the importance of the federal government, the governors (of Brazilian states) have other policies, and what they want carries a lot of weight,” he said.

Miranda said Chinese diplomats in Brazil had cultivated relations with all the regional governments, making it difficult for Bolsanaro and some of his allies to follow Trump’s policies. “I can’t see a scenario where Chinese technology would be banned in Brazil,” he said.