By Fabio Teixeira RIO DE JANEIRO/SHANGHAI (Reuters) -Chinese workers at a construction site in Brazil for a factory owned by China's electric vehicle producer BYD are victims of human trafficking, Brazilian labor authorities said on Thursday in a growing controversy in BYD's biggest overseas market.

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.

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” China and Chinese brands.