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

RIO DE JANEIRO/SHANGHAI - 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 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 on Friday. 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 said on Friday it has maintained communication with the Brazilian side to verify the situation, adding that China protects workers' rights and requires Chinese companies to operate in compliance with the law.

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 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 early next year. Nearly one in five cars BYD sold outside China in the first 11 months of 2024 was in Brazil.

The factory has become a symbol of China's growing influence in Brazil and an example of a closer relationship between both countries. BYD has invested $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 bilateral 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 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, poised to outsell Ford and Honda globally this year, has been on an extraordinary expansion 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.

RARE CHINESE BACKLASH AGAINST BYD

The case has triggered a rare backlash on Chinese social media against BYD, opening a discussion over worker rights, with several internet users saying living conditions for the workers in Brazil were typical of those found on construction sites in China.

Brazilian prosecutors released videos of the workers' living quarters that showed bunk beds without mattresses. They said the workers labored for excessively long hours, sometimes seven days a week, in conditions the authorities called degrading.

In Brazil, "slavery-like conditions" include forced labor but also degrading work conditions, long hours that pose a risk to workers' health, debt bondage and any work that violates human dignity.

Prominent Chinese commentator Hu Xijin, a former editor of the Communist Party tabloid Global Times，echoed Jinjiang in saying there could be misunderstandings but said Chinese construction companies should improve the living conditions of their employees.

For BYD, the case shows how it is likely to encounter more controversies in future as it emerges as China's most powerful EV brand, Hu said.

"The only thing BYD can do is to raise its own requirements and match its growing influence in all directions. This is not easy, but BYD should be able to do it."

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