In July, Spain won the World Cup. Brazil did not. It has now been 24 years since we last won, and this time the realization that we have lost our edge hit harder. Europe seems to be facing a similar identity crisis.
For a decade, Brazilians told themselves excuses: a bad player, an unwise coach, an unlucky game. With time, the reality settled in. We had not got worse, it was true—but the other teams had become much better, and we had not kept up. The problem was structural, not cyclical. The defeat raises a more serious question about who we are: for years, being good at football was part of how we saw ourselves, and it is no longer the case. Europe—the continent known for making the very best products in the world, from machinery to luxury—is realizing that its edge may be gone. The 2024 Draghi report was the technical reading; now it is a widespread feeling. China is both the source of the problem and the spark for change. For 30 years, most in the West assumed China would either converge on the Western model or collapse under its own weight. It did neither. It is now simply a reality, and, like the United States, it cannot be ignored. The useful question is a different one: how do other countries live with China, and what can Europe learn from them?
Brazil has had a very dynamic and shifting relationship with China—as buyer, seller, investor, and employer. We do not share the degree of anxiety that colors the debate in Brussels, but we have had to learn, earlier than Europe, how to live with China as it is. Part of this is simple economic complementarity: China buys what Brazil produces—soya, iron ore, oil—and sells what Brazil struggles to make for itself. That is not to say there is no unease. Brazil worries about dependency: about becoming merely a commodity supplier while Chinese goods squeeze what is left of our industry. At the same time, we have tended to read China’s rise as part of a rebalancing it has sought since the 1970s, of which BRICS is only the latest attempt. Whether the institutions built after 1945 can hold in a rebalanced world is a question about multilateralism—and a political one first and an economic one second.
That was also the sense in Paraty this August, when CEBRI gathered 32 people from 14 countries for the first Paraty Dialogues: that whatever the rivalry between the great powers, cooperation remains not only possible but indispensable—and that the view from the tropics is worth hearing, precisely because the forums in the snow or the desert so rarely include it.
This essay argues for a stronger Europe. The rivalry between the United States and China has no clear resolution; countries simply learn to navigate it, and the discomfort of doing so is the price of keeping their options open. Korea has done this for decades. Europe has the diagnosis and the means; what it has not yet shown is the will. Brazil, for its part, has examples of dealing with China from which Europe can learn. A Europe able to compete with China is in the interest of the rest of the world, Brazil included, because the alternative is a duel between two powers with no one else at the table. Former Prime Minister of Singapore Lee Kuan Yew, answering an African proverb, used to say that “when elephants fight, the grass suffers; but when they make love, the grass suffers also.” Brazil is the grass.
SUBHEAD: Brazil as a Window on China Abroad
In 2021, an American carmaker closed its plant in Bahia after a century in Brazil. A Chinese company took it over and brought its own contractors and its own pace. We feared that the whole Chinese model would come with it: the “996” culture, the price wars, the involution that the Chinese call neijuan. Within two years of the takeover, labor inspectors described the conditions on site as analogous to slavery, videos of Chinese and Brazilian workers clashing went viral, and the company’s defensive reaction made everything worse. The first reading in Brazil was the one Europe is making now: that this is what Chinese capital does when it arrives.
It was not the end of the story. The company corrected course. It dismissed the contractor, rebuilt the site with Brazilian labor under Brazilian practices, brought in Brazilian executives, and put a Brazilian face on television. People who a few years ago said they “would never put their families in a Chinese car” now drop their children at school in one. The company that was mired in scandal in 2024 is a brand ambassador for China in 2026. A ride-hailing company took the opposite route: it bought a Brazilian start-up, kept the brand and much of the management, and added Chinese capital and technology; most users I know have no idea it is Chinese. The story is now repeating in food delivery. All in all, Brazil kept jobs in a struggling sector, got better products, and—so far—healthier competition in its tech sector.
And why is it improving? Because it is in China’s interest. Beijing is now trying to regulate neijuan at home, and a government suppressing price wars in Shenzhen is increasingly mindful of them abroad. Chinese counterparts frequently ask me about these companies in Brazil; they know that China’s image abroad is now made by its companies and that the companies are learning faster than the diplomats. The deeper reason may lie in the language. In Chinese, the word for business, mǎi mài, is written with two characters: buy and sell. It has two directions. A relationship in which one side only sells is not business; it is a transaction that ends when the buyer is exhausted.
For most of its rise, China sold because it had the best product at the best price and saw no reason to do more. It made few friends that way, as it discovered when its reputation suffered during the pandemic. Selling alone is not sustainable and China knows it. It is now learning what the United States learned with the Marshall Plan: that a great exporter needs partners who can buy. The Chinese economists I speak with already talk of cooperation with Europe on the green transition, industrial AI, and third markets—and a Beijing that has learned it needs to buy has less reason to reach for the minerals weapon. Chinese companies in Europe will go through the same cycle and we should expect a fast learning curve.
Supplier, client, competitor: Brazil has watched China pass through the same three phases as Europe. First, a supplier of cheap goods and inputs. Then a client, creating a boom for Brazilian commodities and European products. Now a competitor—and here the two experiences part. Brazil sells soya to a country that makes cars. Europe sells cars to a country that now makes better ones, and the overlap is almost total. No other region faces Chinese competition so squarely in its own core industries. But none of it was a secret: electric vehicles have been a stated Chinese priority since 2009 and the European executives who were shocked at the Shanghai motor show in 2023 had had a decade’s notice.
SUBHEAD: Europe, Back to De Gaulle
Europe’s approach has tended to focus on fairness and on the relationship it would prefer to have with China. But the challenge is more practical than theoretical. The harder point is that the relationship, if it is to work at all, will not be of a single kind. It will be partnership in some areas, competition in others, and rivalry in a few—often with the same counterparty in the same week. Brussels wrote this down in 2019—partner, competitor, and systemic rival—and has struggled ever since to act on all three at once. Balancing each strand will demand more courage and patience than choosing a side ever did.
Some countries already do this well and the most useful comparison for Europe is not China but, Korea. South Korea has a population and an economy the size of Spain’s, a vibrant democracy, few natural resources, and challenging neighbors. It trades with China, hosts American troops, sells weapons to Poland and key electronic inputs to everyone—and it manages the contradictions because it has never had the option of not managing them. It competes at the frontier in semiconductors, electric vehicles, shipbuilding, nuclear power, defense, and popular culture. Koreans message on KakaoTalk and navigate with Naver Maps, built at home for 50 million people; Europe, with 450 million, uses WhatsApp and Google Maps and treats the creation of an alternative as an impossible challenge. Korea has none of the perceived advantages China enjoys. What it does have is focus and a survival instinct.
Before Europe can deal with China, it must decide what it is. Nothing Europe is now contemplating is new; it is a pendulum swinging back. Post-war Europe had two visions of itself. Former German Chancellor Konrad Adenauer’s was liberal, Atlanticist, and efficient: partner with Washington, concentrate on prosperity, outsource the rest. It worked magnificently for 60 years and his successors took it further than he would have, until it rested on three dependencies—American security, Russian energy, and the Chinese market. That seems to be the diagnosis in Brussels, and it is shared in Beijing: an article in the August edition of Qiushi, the Party’s theoretical journal, attributed Germany’s decline to the weakening of exactly those three supports and argued that external competition could force the reforms Germany has avoided at home. What needs to be done is no longer in dispute. What is in dispute is how.
Former French President Charles de Gaulle answered that question 60 years early. He wanted a France, and a Europe, that could say no: its own energy, its own deterrent, its own industry, and the freedom to disagree with allies when interests diverged. The two visions were also two economic philosophies—Adenauer’s liberal and Atlanticist, de Gaulle’s statist and planned—and here the pendulum has a twist. For 30 years, most in the West believed that China would converge on the Western model. Convergence is indeed happening—but in the other direction: industrial policy, subsidies, strategic sectors, export controls, and state capital are now the tools of Washington as much as of Beijing. In this contest, Europe has the means. It has a tradition of industrial policy that never quite died, and manufacturing is still central to it—something America gave up and now regrets. A Gaullist turn would not ask Europe to become something new, but to return to its origins. And it can pay for it: de Gaulle’s independence is expensive—a defense industry, an energy policy, a bold foreign policy—but Europe is one of the world’s great creditors; it need only attract that capital back home.
The question, then, is not whether Europe is able but whether it is willing. That takes boldness, risk, sacrifice, and discomfort. It also takes unity, which is no longer a goal but a necessity. There are signs that Europe is now prepared to make bolder moves—moves that could put the relationship with China at risk, but that it sees as not only fair but necessary to defend itself. The signing of the Mercosur agreement and the conclusion of negotiations with India are encouraging evidence. Both were long treated in Brussels as too costly politically and moved only when it became evident that the alternative was costlier. A new sense of urgency is coming from the east. Poland now spends close to 5 percent of GDP on defense; Ukraine has built a defense-technology industry during a war; the Nordic and Baltic states treat energy and security as a single question. They have Korea’s survival instinct because they do not take the Union’s freedoms for granted, and they will bring that vitality to decisions the rest of Europe has been postponing.
SUBHEAD: Navigating Between a Rock and a Hard Place
None of this is easy. The world is now organized around two systems that are each, in their domain, unbeatable: American capital markets and Chinese manufacturing—the two sources of most of the world’s innovation, and both easily weaponized. De-risking from American capital and technology will prove as difficult as de-risking from Chinese supply chains. Dependence on both is a fact, not a choice. There is nothing a country can do to avoid it; there is only the question of how it adjusts and how uncomfortable it is willing to be while doing so.
The countries that adjust well do two things. They make themselves indispensable and they keep their options open. While many debate who will win between China and the U.S., what matters is how good the top two rivals are compared with the rest and how much room is left for everyone else. Korea and Japan understood this and made themselves indispensable to America while trading with China more than anyone. Brazil and most emerging economies do not compete with China in manufacturing and have less to lose, so they keep the door open to trade and investment from both sides. A good relationship with both is the objective, not a problem to be managed. Europe, with exceptions such as the Dutch ASML, has done neither. It must compete with both—a “sour spot”: neither indispensable to the U.S. nor open to Chinese investment and technology.
In Latin America, the pattern is already familiar. In recent times, Washington has been clear about what it does not want in the region, but silent about what it offers instead. The region’s needs are concrete: infrastructure, technology, capital, and export markets. When China was the party most willing to meet them, the choice made itself—and it was not ideological. That does not make the region pro-Chinese; polls in Brazil find the United States and China about equally well regarded. Some countries in the region do fear integrating fully with the United States only to be instructed on tariffs, security, and foreign policy; but opposing it outright has not succeeded either, as became clear this year.
Most kept their options open to the astonishment of foreign visitors: commodities to one side, aircraft and services to the other, Chinese carmakers and American cloud providers on the same industrial estate. Brazil’s relationships with both the U.S. and China are good precisely because they are balanced—we are neither a client state nor a rival and both know we will not become either. In 2024, just before hosting President Xi after the G20 summit in Rio, Brazil declined to join the Belt and Road Initiative, in part because we did not want to risk a relationship that was working well for both parties. Holding that balance against Washington and Beijing at once takes constant work, involves some risk, and brings a good deal of discomfort. Yet, it is still the optimal strategy.
Europe will likely find itself in similar situations whether it wants to or not. The question is not whether to choose, but whether to position oneself in advance—so that, when the choice is demanded, the answer can still be “both.” Positioning means taking what each side offers. China’s move along the value chain has two faces. On trade, it is a threat: a competitor in your own core industries. On investment and technology, it can be a partner: factories, know-how, and supply chains that did not exist before. Brazil takes the second—that is what the plant in Bahia is. Chinese investment in Europe reached its highest level since 2018 last year, but it went where it was welcome: battery and car plants in Hungary, Spain, Portugal, and Slovakia. Europe’s periphery has been quicker to take the offer than its industrial core. European companies, similarly, have not waited: the German Chamber of Commerce’s own survey found that most German firms in China already work with Chinese companies expanding abroad. One of the constraints lies in the boardrooms, which are not used to making such decisions in dynamic and fast-moving market environments, unlike their American peers. But the dynamic is changing, and fast.
The next test is artificial intelligence. The leading American models are closed and not inexpensive; the leading Chinese models are open-weight, cheap, and, on many tasks, comparable. Neither is neutral. Former President of the European Central Bank Mario Draghi himself recently warned that either could be used as leverage and concluded that Europe must control some part of the value chain or watch growth and sovereignty pull against each other. A Europe that used both—building its own systems on whichever foundation suited the task—would be doing what Korea does, and what Brazil is learning to do. A Europe that excluded Chinese models by reflex, without a security judgment of its own, would be Adenauer’s Europe in a new domain: outsourcing not defense this time, but technology.
SUBHEAD: A Third Elephant
Why is that relevant for Brazilians? Because the alternative to a strong Europe is a binary world and a weakened multilateralism—and the Global South has lived in such a situation before. The Cold War was in fact very hot in the periphery: in regimes sponsored by both sides, in proxy wars, in the demand to choose. Nobody in Brasília, Jakarta, or Pretoria wishes to have a repeat of those times. Non-alignment today is not neutrality but flexibility—Singapore says it does not take sides, it upholds principles—and it is far easier when there are more than two sides to stand between.
BRICS is the example that Europeans most often misread. It is a forum, not a bloc—a grouping of mostly non-Western rather than anti-Western countries, whose weight in the post-war institutions never caught up with its weight in the world—and it is where Modi and Xi held their first formal meeting in five years. The usual criticism is that China’s weight makes it simply China’s instrument. Brazil was wary of the expansion, and China’s weight is what carried it; but that weight also gave the group critical mass and the 30-odd countries that expressed interest in joining were not asking to be governed from Beijing.
If Europe becomes more absent from the world stage and its products and technologies less relevant, the gap will be filled exclusively by the U.S. and China. At first, it makes little difference to a Brazilian buyer whether the machinery, the trains, or the telecoms come from one side or the other. But it makes a difference over time: every third-party supplier that disappears narrows the Global South’s options, and a world in which everyone understands the need to hedge cannot afford to lose one of the few large suppliers there are to hedge with.
Europe does not need to be the complete answer for the Global South. It needs to fill the gaps that the superpowers leave—not a so-called third way, but a third counterparty with a stake in multilateral institutions. This is where the elephants come back. The unbeatable systems of the U.S. and China will not weaken any time soon, and whether these elephants fight or make love does not save the grass: it suffers in a trade war and it suffers in a G2. Peace between the two elephants would not protect the grass. A third elephant would.
That is the Brazilian case for Europe: not that it should choose China over America, or the reverse, but that it should become the kind of power whose independence stabilizes the relationship between the other two. China is closer than most realize to understanding this. A Beijing that only wanted to sell would prefer a divided Europe, picked off capital by capital. A Beijing that has learned to buy—that needs strong partners with purchasing power and room to maneuver—should want a Europe strong enough to say no to both Washington and Beijing.
The message from the Paraty Dialogues was that multilateralism, however battered, remains indispensable—and that it needs more than two guarantors. Brazil hopes for a long and healthy competition between the two great systems of our time; its interest is in a Europe strong enough to ensure that the competition never becomes a duel. And Brazil’s experience, even in a domain where we were always the best, is that the first step is to admit that the problem is structural—and that the world is not waiting for us to catch up.
