00:00First of all, you argue that the United States and China are already engaged in a second war.
00:06What even would mark this to an open conflict?
00:13And how close are we to that point?
00:16Well, George Orwell coined the phrase Cold War back in 1945,
00:20and he defined it as a peace that is no peace.
00:24And his observation was that nuclear powers can't fight wars in the old fashioned way because the stakes are too
00:32high.
00:32So you end up in this peace that is no peace.
00:35I think that is roughly where China and the United States are.
00:39Could they end up in a hot war?
00:42Maybe the most obvious place that this war could begin would be Taiwan.
00:47China says Taiwan belongs to China.
00:50The United States says that it preserves or reserves the right to stop China taking control of Taiwan.
00:57So that's the obvious flashpoint.
00:59In the same way that the flashpoint of Cold War I, the first Cold War, was Cuba.
01:04It was an island close to the United States.
01:07The Soviets tried to put missiles there.
01:09And that was the worst crisis of the first Cold War.
01:12So you could have the worst crisis of the second Cold War over Taiwan.
01:16That's the biggest risk, I think, for the next few years.
01:20And countries such as Brazil are trying to maintain close relations with both United States and China.
01:27So in a second Cold War, will that position remain possible?
01:34Or will Brazil eventually be pressured to choose a side?
01:38It's very difficult to be non-aligned in a Cold War.
01:43Lots of countries tried to do this in the first Cold War.
01:47India, for example.
01:49And India still is non-aligned in the second Cold War.
01:54You can't really say that India is an ally of the United States.
01:57That's simply not true.
01:59And I think Brazil is in a somewhat similar position now.
02:02It clearly has such close economic ties with China that it makes sense to have good relations.
02:09On the other hand, it's in the Western Hemisphere.
02:12And the Trump administration says that is America's backyard.
02:16And the tension, I think, between President Trump and President Lula stems from this difference.
02:23That Brazil is economically oriented towards China, but politically it's in the Western Hemisphere.
02:29Is it impossible to maintain this?
02:31I don't think it's impossible, but it's expensive.
02:34Brazil is obviously under significant U.S. tariffs.
02:38It would be nice if Americans decided on free trade for the Americas, but that seems very unlikely.
02:44But I don't see a way that Brazil just gives up its relationship with China.
02:49It's too economically important.
02:51So Brazil is doomed to be caught in the middle.
02:53It's doomed to be non-aligned.
02:55The good news is that Brazil is a long way from the battle zones.
02:59It's a long way from Eastern Europe.
03:00It's a long way from the Persian Gulf.
03:02It's a very long way from Taiwan.
03:04So although it's a difficult situation politically, the risks to Brazil are much, much less than the risks to, say,
03:12the United Arab Emirates.
03:13I would rather be in São Paulo than in Dubai right now.
03:17But this relation is not impossible to maintain.
03:23Due to the president, we will have a presidential election in this year.
03:30If we have, if Lula stays in the power or we have another president, something will change?
03:37Well, I am not an expert in Brazilian politics, so I should be very careful what I say here.
03:43My impression, and I base this on talking to Brazilian friends, is that President Lula stands a good chance of
03:50being reelected again.
03:51Because the Brazilian right is divided, and Flavio Bolsonaro is not a very popular candidate.
03:58If the right were to run a different candidate, then it might have a different result.
04:03But I think the way things are going, with Flavio Bolsonaro as the candidate of the right, then Lula gets
04:09reelected.
04:10Would it be better to have a conservative as president of Brazil?
04:14Well, in my view, yes.
04:15Everywhere else in Latin America, the trend is from left to right.
04:19This is most obvious in a country like Argentina, but we see it in Colombia, we see it all over.
04:24So Brazil looks like the exception to the rule, except that when you look at Brazil's parliament, the Congress, it's
04:31really moved to the right.
04:32So Lula is the kind of exception that tests this rule.
04:37It's partly because he's such a successful, effective politician, but I think it's mainly because the Brazilian right can't get
04:44its act together.
04:44It's the same as if we were in the United States and President Trump said, my son Don Jr. is
04:51going to be the Republican candidate in 2028.
04:54I mean, he could say that, but it would be a disaster for the Republicans and they would almost certainly
04:59lose.
04:59Talking about Brazil, China is the Brazil largest trading partner while the United States remains central to the investment and
05:09technology.
05:10What is the greatest strategic risk of Brazil's dependence of two rival partners' powers?
05:18Well, let me give you an example of what Brazil could do differently right now.
05:23Brazil has exceptionally cheap electricity. It's actually got a very, very low price of electricity.
05:29Where are the data centers being built? Not in Brazil.
05:33And that's partly because when you try to import semiconductors into this country, you pay 100% tariff.
05:40So Brazil needs to be more, I think, creative about how it plays the artificial intelligence revolution.
05:47This revolution is not about to stop. It's transforming the global economy.
05:52Brazil doesn't have an AI game. It could be a major player in the data center revolution.
05:59It's getting harder and harder to find places to build data centers in the United States.
06:04You've got cheap electricity. You've got, it seems to me, all kinds of advantages.
06:08So why is Brazil not taking advantage of this? Apart from anything else, if Brazil became a major source of
06:15compute,
06:16that would change its relationship to the United States.
06:19The United States would start to care more about Brazil if Brazil brought something like that to the table.
06:25So these are the kind of things you need to think about.
06:27The other obvious area is critical minerals, rare earth elements.
06:31The Chinese monopolize those. Brazil has abundant reserves.
06:35And so Brazil could be, again, making itself more valuable to the United States by developing those resources.
06:42And I think that would change the relationship between the US and Brazil.
06:46You know, for many, many years, Brazil was its own world.
06:49You know, protectionist, inward-looking, a world to itself.
06:53I don't think that's a credible policy anymore.
06:56Brazil needs to open up. It needs to be more engaged with the world.
06:59And it needs to exploit its advantages.
07:02And will leadership in artificial intelligence determine the next dominant global power?
07:08Well, artificial intelligence is transforming the US economy.
07:13It's transforming the Chinese economy.
07:16And everybody else is just trying to choose between the American models and the Chinese models.
07:22Because there really are no other players in this race, apart from maybe one or two European companies.
07:28So I think you've got to ask yourself, what role are we going to play in this world?
07:33Are we just going to stand and watch?
07:35I think that's a risky thing to do.
07:38Clearly, what is going to happen will be that sector after sector is transformed by this new technology.
07:44Finance is going to be transformed. We're here at a finance conference.
07:48Ten years from now, an enormous amount of what we do today with human beings is going to be done
07:52by artificial intelligence.
07:54So I think people here need to understand this is a global revolution.
07:58But it's being made in the United States and it's being made in China.
08:02And this is going to create another dilemma for Brazil.
08:05Do you go with the American tech stack? Do you go with the Chinese tech stack?
08:09My recommendation is go with the American tech stack.
08:13Because if you go down the Chinese path, that comes with strings attached.
08:18The Chinese models are loyal to Xi Jinping and the Chinese Communist Party.
08:23This is a democracy.
08:25We're fundamentally committed to individual freedom and the rule of law in Brazil as much as in the United States.
08:31So the natural thing for Brazil is to gravitate towards the United States, not towards China, especially when it comes
08:38to technology as important as AI.
08:41But could Brazil build our own path without the United States, without China?
08:48The phrase that people like to use is digital sovereignty.
08:53I hear this in Europe a lot.
08:55The trouble is, it's not credible to me that Brazil, or for that matter Germany, could build its own AI,
09:04its own cloud computing, its own semiconductors, its own fabs.
09:10It's a tech stack, meaning it's a whole bunch of things you need in order to run large language models.
09:17You need a vast amount of computational power to train them and then even more to do inference.
09:22So I think it's too late for Brazil to say, oh, we're going to have our own AI company.
09:27We're going to have our own large language model.
09:29We can do our own anthropic.
09:31We can have our own open AI.
09:32That ship has sailed, just as it sailed for the UK, just as it sailed for Germany and all the
09:38European countries.
09:39So the question is, what relationship do you want to have in a world of US and Chinese large language
09:46models?
09:47The US models are probably superior, but they're also more expensive.
09:52The Chinese models are very accessible, but you then become part of China's AI empire.
09:57And that is a dangerous choice.
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