Brazil says workers at China's BYD site are victims of human trafficking

By Fabio Teixeira

RIO DE JANEIRO/SHANGHAI (Reuters) -Chinese workers at a construction site in Brazil for a factory owned by China's electric vehicle producer BYD are victims of human trafficking, Brazilian labor authorities said on Thursday in a growing controversy in BYD's biggest overseas market.

BYD and contractor Jinjiang Group have agreed to assist and house the 163 workers in hotels until a deal to end their contracts is reached, Brazil's Labor Prosecutor's Office said in a statement issued after meeting representatives from both firms.

The brief statement did not provide details on how prosecutors had reached their conclusion.

BYD and Jinjiang did not immediately respond to requests for comment. Jinjiang rejected the Brazilian authorities' assessment on Monday that the workers at the site in the eastern state of Bahia were operating under "slavery-like conditions".

Jinjiang said, in a social media post reposted by a BYD spokesperson, that the portrayal of the workers as "enslaved" was inaccurate and that there were translation misunderstandings.

BYD initially said it had cut ties with Jinjiang, but a BYD executive later accused "foreign forces" and some Chinese media of "deliberately smearing Chinese brands and the country and undermining the relationship between China and Brazil".

China's foreign ministry on Wednesday said its embassy in Brazil was communicating with the Brazilian government to verify and address the situation. The ministry did not immediately respond on Friday to a request for comment on the trafficking claim.

The Brazil prosecutors said they would meet again with the companies on Jan. 7 and propose a deal.

CHINA'S GROWING INFLUENCE IN BRAZIL

A deal could clear BYD and Jinjiang from an investigation by labor prosecutors, but they could still face scrutiny from labor inspectors and from federal prosecutors, who have requested the sharing of the evidence so that "measures can be adopted in the criminal sphere", the statement said.

BYD has been building the factory to produce 150,000 cars initially as part of plans to start production in Brazil, the Chinese EV company's largest overseas market, in early 2025. Nearly one in five cars BYD sold outside China in the first 11 months of 2024 was in Brazil.

The factory has become an important symbol of China's growing influence in Brazil, and an example of a closer relationship between both countries. BYD has invested about $620 million to set up the Bahia factory complex alone. 

The reports of irregularities in Bahia could prove to be a major sticking point in their relations.

Brazil has long sought more Chinese investment. But China's model of taking Chinese workers to the countries where it invests presents a challenge to local job creation, a priority for President Luiz Inacio Lula da Silva.

The investigation also brings unwelcome attention to BYD at a time when it is seeking to expand globally after having gained dominance in China, the world's largest auto market, where it now takes up more than a third of the market of EVs and plug-in hybrids.

BYD, which is poised to outsell Ford and Honda globally in 2024, has been on an extraordinary expansion this year both at home and abroad, growing capacity and undertaking a massive hiring spree. The company had nearly 1 million employees as of September.

While it still makes more than 90% of its sales in China, BYD has been building passenger vehicle factories in Hungary, Mexico, Thailand, Uzbekistan and Brazil to serve its major overseas markets and increasing investments in marketing abroad.

Jinjiang also does construction for BYD in China, according to records on the Chinese companies information database Tianyancha.

(Reporting by Fabio Teixeira and the Beijing and Shanghai newsrooms; Editing by Muralikumar Anantharaman, Christian Schmollinger and William Mallard)