By Fabio Teixeira and Luciana Magalhaes
-Electric vehicle producer BYD (SZ:002594) brought hundreds of Chinese workers on irregular visas to build a factory in Brazil, a key labor inspector told Reuters on Tuesday, adding the company has pledged to comply with local labor laws for the workers remaining in the country.
A total of 163 of those workers, hired by BYD contractor Jinjiang, were found last month to be working in what Brazilian authorities said were "slavery-like conditions."
The 163 workers who were rescued by labor authorities in December are leaving or have already left Brazil, said Liane Durao, who has spearheaded the probe announced in late December by the labor authorities in Bahia state.
"All of this was irregular," said Durao, 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 labor inspector with a team that monitors workplace safety for Brazil's Ministry of Labor.
She said the firm agreed to adjust the conditions of the hundreds of workers who will remain in the country to comply with Brazilian labor laws. About 500 Chinese workers were brought to work in the Brazilian factory, she said.
BYD and Jinjiang did not immediately reply to a request for comment. BYD has previously said it cut ties with Jinjiang, which disputes the charges by Brazilian authorities.
A person close to BYD told Reuters that the Chinese company believes that the visas were issued properly and that all employees came voluntarily to work 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.
Chinese foreign ministry spokesperson Guo Jiakun, asked about the case on Wednesday at a daily news briefing, said the Chinese government had always required Chinese-funded enterprises to operate in accordance with laws and regulations.
China was willing to continue to work with Brazil to strengthen exchanges and cooperation, he added.
Labor authorities and representatives from BYD and its contractors working in Bahia met on Tuesday to negotiate how to protect the rights of all workers employed in the factory.
KEY TO BYD'S GLOBAL EXPANSION
BYD has been building the factory to produce 150,000 cars initially as part of plans to start production in Brazil, its biggest market outside China, in the beginning of this year. It is unclear whether construction will be delayed by the investigation into working conditions at the factory.
It has invested $620 million to set up the Bahia factory complex alone. Nearly one in five cars BYD sold outside China in the first 11 months of 2024 was in Brazil.
In December, the labor prosecutor's office described the workers, who had been hired by Chinese construction firm Jinjiang Group, as human trafficking victims. The firm had withheld the passports of 107 of the workers, investigators said.
Investigations into slavery can carry powerful consequences for employers in Brazil, including a restriction on their access to bank loans.
Since the workers were found in slavery-like conditions, the Brazilian government has suspended temporary visa issuance to BYD.
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 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.
The probe has also brought unwelcome attention to BYD when it is seeking to expand globally and build on its dominance in China, the world's largest auto market, where it makes up more than a third of the market of EVs and plug-in hybrids.
Labor inspectors will 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.