RIO DE JANEIRO (Reuters) -Chinese workers found at a construction site for a factory owned by China's electric vehicle producer BYD in Brazil's Bahia state are victims of human trafficking, Brazilian labor authorities said on Thursday.

Chinese workers at BYD's factory site in Brazil's Bahia were identified as human trafficking victims. The company and contractor Jinjiang Group are negotiating contract terminations for 163 workers. Allegations of slavery-like conditions create a potential diplomatic issue amid China's deepening investment in Brazil.

Brazilian officials found 163 Chinese nationals working in "slavery-like conditions" at a construction site for a factory owned by Chinese electric vehicle producer BYD in Brazil's Bahia state, the local labor prosecutor's office said on Monday.

A spokesperson for Chinese automaker BYD has objected to reports about poor conditions at a construction site in Brazil where it is building a factory, saying the allegations were aimed at “smearing”