The surge is hardly surprising given that China became Brazil’s largest trade partner in 2008. But it has sparked a public debate in Brazil. Does China’s state-led capitalism, driven by a hunger for resources and a need to export low-cost production, pose a “neocolonial” threat? Or are Chinese investors a boon to Brazil’s thriving economy?

Brazil has been here before: 40 years ago it experienced a boom in Japanese investment. That experience suggests Brasilia has to do much more to manage the Chinese investment tide.

Between 1964 and 1974, bilateral trade between Japan and Brazil increased by nearly 3000 percentage points. Brazil provided Japan with much-needed commodities; in turn, Japan supplied Brazil with cheap consumer and capital goods for import-substituting industrialization. Eventually trade matured into FDI, and Brazil became the third-largest recipient of Japanese overseas investment in the mid-1970s.

Many of the strategies that Japan used in Brazil are now being mimicked by China. On the diplomatic front, LDP Prime Minister Kakuei Tanaka made a landmark visit to Brazil in 1974 to bolster investment deals. His efforts focused on joint ventures with Vale do Rio Doce (CVRD) in steel, aluminum, and pulp processing. In 2004, President Hu Jintao made his first visit to Brazil to pursue similar objectives. Again, agreements were signed with CVRD, as well as with Petrobras.

In finance, Japan’s policy banks OECF and JEXIM issued soft loans so that Japanese consortia could leverage their investments in Brazil. In a similar move, China Development Bank (CDB) issued a US$10 bn loan to Petrobras last year to help Sinopec secure a long-term partnership.

Personal ties to Brazil’s elite have also proven useful. Elezier Batista, the former president of CVRD, forged deals with Japanese companies like Kawasaki and Nippon Steel in the 1970s. Now, his son Eike Batista is president of the mining, gas, and logistics group EBX, which is partnering with Wuhan Iron and Steel and other Chinese SOEs.

Of course, historical comparisons only go so far. Brazil has undergone sweeping changes in the last 40 years. China’s SOEs are quite different beasts from Japan’s keiretsu conglomerates.

But the past still provides valuable lessons. In the 1970s, Japanese investment was seen as a welcome source of funds for Brazil’s capital-scarce economy. But it was largely an attempt to offset rising oil and metals prices on the world market. When these prices fell in the 1980s, investment plunged.

Brazil runs the same risk now: the commodity super-cycle could end once Chinese demand wanes. Meanwhile, worries are growing about “Dutch disease” – commodity-driven currency appreciation that undermines manufacturing. The bulk of Brazil’s exports to China consist of commodities; by contrast, manufactures constitute more than half of Brazil’s exports to the US and Europe. China’s cheap manufactures are hurting Brazilian industry in home and third markets. It is ironic that Brazil is filing more anti-dumping suits against China just as China is increasing its investments in Brazil.

With many projects still at the planning stage, the Brazilian government has time to ensure Chinese investment generates value, whether it is greenfield or corporate acquisition. Compared with investors from the US and Europe, Chinese companies have little to offer Brazil in technology or know-how transfer. Resource-seeking FDI may upgrade Brazil’s oil refining and steel-making capacity, but many of these projects entail social and environmental costs.

Under president Luiz Inacio Lula da Silva, the government did not adequately respond to these challenges. Brazil has a smaller diplomatic presence in China than in Paraguay. Little has been done to train China experts for the diplomatic corps. The bilateral strategic dialogue framework has had few results. Lula’s visit to Beijing last year was his first since 2004, and it lasted just two days. His newly-elected successor Dilma Rousseff has a real opportunity to make a mark.

Brazil’s Ministry of Development, Industry and Foreign Commerce has been reluctant to support a unified chamber of commerce for Brazil and China. Consequently, there are now dozens of Brazil-China chambers in Sao Paulo alone. They receive little to no public funding. Without central coordination, Brazil’s local governments are engaging in bidding wars to attract FDI from China.

Earlier this year, the Brazilian government proudly announced the establishment of a Beijing office for the Brazilian Export and Investment Promotion Agency (APEX). Given APEX’s limited resources, however, it looks to be only a small step in the right direction. More comprehensive measures are needed.

Iacob Koch-Weser is a graduate student at Harvard University