Brazil opened a new trade mission to Israel in Jerusalem on Sunday, edging back from earlier signals it would follow the United States with a full embassy move to the contested city.
The announcement came during a visit by Brazilian President Jair Bolsonaro, an outspoken admirer of President Donald Trump, who broke global consensus by recognizing Jerusalem as Israel's capital in late 2017 and moving the U.S. embassy there last May.
Prime Minister Benjamin Netanyahu said: "Welcome to (Israel) brother Jair. Welcome to the Brazilian president and delegation. I am very excited as Sara and I, along with our son Yair, were at your inauguration. You represent a new hope for Brazil. Clearly this is the start of a wonderful new period in Brazil-Israel relations."
The Brazilian President responded: "I feel as if I have arrived home. It looks like you named your son after me." Netanyahu responded that "chronologically, that is correct." Bolsonaro: "Brazil is a giant and rich country; that is why our two countries are close, religiously, culturally and democratically."
Bolsonaro had suggested in January he would follow suit. That could have been a boost for Israeli Prime Minister Benjamin Netanyahu, who hopes to win a fifth term in an election next week.
But Brazilian senior officials later backed away from the idea, for fear of damaging trade ties with Arab countries.
"Brazil decided to create an office in Jerusalem to promote trade, investment, technology and innovation as a part of its embassy in Israel," the Foreign Ministry in Brasilia said in a statement.
Like most countries, Brazil has an embassy in Tel Aviv.
"I hope, and I would like to believe, that this (office) is the first step toward the opening of the Brazilian embassy in Jerusalem, when the time comes," Netanyahu told reporters.
Bolsonaro offered no public comment on the embassy plans. His son Eduardo, a Brazilian federal lawmaker, said it took the Trump administration several months to implement the U.S. embassy move. "We are on the right path," he tweeted.
Bolsonaro: "I love Israel"
Greeting Bolsonaro at Tel Aviv's Ben Gurion airport, Netanyahu said he and the Brazilian leader would visit Judaism's holy Western Wall, "in Jerusalem, our eternal capital".
"I love Israel," Bolsonaro said in Hebrew at the ceremony. He later told reporters of his Christian devotion to the Holy Land and sense of cultural and ideological affinity to Israel.
Brazil has not officially recognized Jerusalem's as Israel's capital. Most world powers say the city's status should only be decided as part of a peace process with the Palestinians.
Israel captured East Jerusalem along with the West Bank and Gaza in the 1967 Middle East war. Palestinians seek to establish a state in the territories, with East Jerusalem as its capital.
The Palestinian Foreign Ministry condemned Brazil's opening of the Jerusalem office, calling it "a flagrant violation of international legitimacy (and) direct aggression against our people and their rights".
Visiting Brazil for the Jan. 1 presidential inauguration, Netanyahu said Bolsonaro had told him that moving the Brazilian embassy to Jerusalem was a matter of "when, not if".
But Bolsonaro's economic team and the country's powerful farm lobby have advised against.
Brazilian Vice President Hamilton Mourao, a retired army general, told Reuters last month that moving the embassy was a bad idea because it would hurt Brazil's exports to Arab countries, including an estimated $5 billion in sales of halal food that comply with Muslim dietary laws.