Brazil to Fine BYD For Each Worker Found Doing 'Slave Labour'

Brazil is planning to fine Chinese electric vehicle giant BYD for each worker that had been found working in “slavery-like” conditions at its upcoming factory in the country.

The carmaker will also face continued scrutiny at the factory site, from which 163 Chinese workers were rescued last month.

The factory — BYD’s first outside Asia — has become a symbol of China’s growing influence in Brazil and an example of a closer relationship between both countries.

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Authorities who raided the site said the workers there were working and living in inhumane conditions, including cramped and unsanitary lodgings, long hours and an environment that amounted to “forced labour”.

BYD contractor Jinjiang, which was responsible for hiring, had also withheld the passports of 107 of the workers, investigators said.

Brazilian authorities probing BYD’s labour practices in the country now say the carmaker brought hundreds of Chinese workers on irregular visas to build the factory.

About 500 Chinese workers were brought to work in the Brazilian factory, said Liane Durao, who has spearheaded the probe announced in late December by the labor authorities in Bahia state.

The 163 workers who were rescued by labour authorities in December are leaving or have already left Brazil, Durao said.

“All of this was irregular,” she said, adding that BYD would be fined for each worker found in this situation, without elaborating on the total amount to be paid. Durao is a labour inspector with a team that monitors workplace safety for Brazil’s Ministry of Labour.

Labour inspectors will also continue to monitor BYD’s construction site, Durao said, to make sure that the workers who remain employed in the factory are not being submitted to abusive working conditions.

Shenzhen-listed shares of BYD were down 1.77% at close of trade on Wednesday, compared to a 0.02% gain on the Shanghai Composite.

Factory key to BYD’s global expansion

In Brazil, slavery is legally defined as forced labour as well as debt bondage, degrading work conditions and long hours that pose health risks.

Investigations into slavery can carry powerful consequences for employers in the country.

Brazil publishes a “slave labour” list — also known as the “Dirty List” — every six months. Companies added to the list remain on it for two years, if no new offence is found within that period.

Businesses on the list cannot bid for federal government contracts or receive state loans. The list is also used by private banks to gauge credit risk and by international buyers concerned about their supply chains.

That would make the ongoing probe a giant headache for Beijing and BYD, considering Brazil is the carmaker’s biggest market outside China.

Nearly one in five cars BYD sold outside China in the first 11 months of 2024 was in Brazil. The country is also the biggest export market for Chinese new energy vehicle-makers.

BYD has been building the Bahia factory to produce 150,000 cars initially as part of plans to start production in Brazil. It has invested $620 million to set up the Bahia factory complex alone.

China in damage control mode

With the ongoing scrutiny BYD has now agreed to adjust the conditions of the hundreds of workers who will remain in the country to comply with Brazilian labor laws.

A person close to BYD told Reuters that the Chinese company believes that their visas were issued properly and that all employees came voluntarily to work in Brazil.

Labour authorities and representatives from BYD and its contractors working in Bahia also met on Tuesday to negotiate how to protect the rights of all workers employed in the factory.

It is unclear whether construction will be delayed by the investigation into working conditions at the factory. The Brazilian government has, for now, suspended temporary visa issuance to BYD.

The reports of irregularities in Bahia could prove to be a major sticking point in bilateral relations between China and Brazil.

Brazil has long sought more Chinese investment. But Beijing’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.

On Wednesday, meanwhile, Chinese authorities seemed to be in damage control mode.

Responding to the report that BYD had brought Chinese workers to Brazil on irregular visas, Foreign Ministry spokesperson Guo Jiakun said “the Chinese government attaches great importance to protecting the legitimate rights and interests of workers.”

It has “always required Chinese-funded enterprises to operate in accordance with laws and regulations,” he added.

China was willing to continue to work with Brazil to strengthen exchanges and cooperation, Guo said.

Reuters, with additional editing and inputs from Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]