By Patricia Galves Derolle
Brazil is the largest country in size and population in comparison to other Latin American countries, and it is the seventh largest economy in the world by nominal GDP. Since the mid 2000’s, Brazil has become a more attractive global player: it has diversified its economy and its partnerships, and launched the Growth Acceleration Plan (2007) in order to increase investment in infrastructure and provide tax incentives for economic growth. Brazil has also decreased domestic poverty through development plans: according to the World Bank, poverty (people living with USD 2 per day) has fallen from 21% of the population in 2003 to 11% in 2009. An overall view of Brazilian economy shows that the level of foreign direct investment is increasing, the wages are rising, the middle class in growing, and the unemployment rate is low, which offers a wide range of opportunities in different areas. Despite the positive scenario, Brazil is an emerging economy and faces issues and challenges to be surpassed.
Commercial and Economic Partnerships
Brazil has strong commercial and economic ties with both the developed and the developing world. To diversify partnership so that its economy is not entirely dependent on the West is not a recent action plan for Brazil. Since the 1960’s, with the Independent Foreign Policy, Brazil has searched for different markets to export primary goods. In the 90’s, Brazil focused its economy on the developed world, being the United States its primary partner. During Lula da Silva’s government, Brazil started searching for alternatives to boost economic growth and increase exports, although keeping traditional partners.
After the Goldman Sachs report on emerging economies, released in 2001, Brazil started again to diversify its partnership with other countries that were similar to it. In this context, Brazil, Russia, India and China decided to strengthen their relationships and to create a non-structured grouping called BRIC. Only in 2011 South Africa joined the grouping, turning the acronym BRIC into BRICS. Recently, the BRICS created a Developing Bank, which offers its members credit to infrastructure needs. With the traditional western partners, Brazil intensifies commercial and economic relations, mainly bilaterally or through regional groupings. In a simple analysis, Brazil exports primary and imports manufactured goods. In a multilateral level, Brazil disagrees with the West on issues that concern the International Monetary Fund (quotas) and the World Trade Organization (agricultural subsidies).
Moreover, Brazilian Foreign Minister A. Patriota proudly claimed already by 2011 that Brazil has more embassies in Africa than Britain. As prof. Anis Bajrektarevic indicated: “…in the years to come, we will see tarevic indicated: “whether the current African frustrations were exploited for the geopolitical and geo-economic ends by the non-traditional players in Africa such as China, India and Brazil, and if the cost-exposure faced by the traditional ones became unbearable.
International Trade
Brazil is a founding member of the General Agreement on Trade and Tariffs (GATT), guiding principle of the World Trade Organization, and has helped the establishment of the WTO itself after the Marrakesh Agreement, in 1994. Currently, the Brazilian Ambassador Roberto Azevêdo is WTO’s Director-General. His presence at the institution might mark the view of the developing countries towards world trade policies and regulations. As an active member, Brazil has utilized the Dispute Settlement Body several times. A 2013 statistics shows that Brazil used the DSB 113 times: 26 as a complaint (most remarkable cases: 10 against the USA, 7 against the European Union, and 3 against Canada), 14 as a respondent (most remarkable cases: 4 against the USA, 4 against the European Union, and 1 against Canada), and 73 as a third party. The presence as a third party (73 times) shows the willingness of Brazil to understand better free trade policies as well as influence regulations in favor of the developing countries.
Regional Groupings
The Americas has several blocs, but according to South American theorists they do not overlap each other. A Brazilian author mentions that the Central and South American blocs are concentric circles, in which each country prioritizes the most important blocs. Brazil is a member of some blocs (Unasur, Celac etc) , but Mercosur is by far the most important to the country. The exchange of goods among the members is high, being Brazil and Argentina the most important trading partners. The bloc’s objectives at the moment prioritize the strengthening of commercial and economic ties, the dialogue among businessmen of the member countries, the mobility of academics and the proper establishment of Funds in order to decrease asymmetries among its members. FOCEM is the most important fund because its goal is to develop members’ competitiveness, social cohesion, and infrastructure. Brazil, as the most important member, finances most of these objectives alone, with Argentina coming in second. At the moment, however, Mercosur faces a major challenge: the Pacific Alliance, a grouping of other Latin American countries (Chile, Colombia, Mexico and Peru) that have extra-regional agreements with important global players such as China. The competitiveness among the Latin American countries might give a reality check for Mercosur’s unsustainable ambitions, in which Brazil is its major defender.
Business and Investment
Since the beginning of the 2000’s, Brazil’s objectives are to promote economic growth and to fight poverty, although along the years the country has faced many adversities, such as having to reduce foreign debt and to implement measures so to tackle inflation, including the adoption of high interest rates, affecting therefore the political and economic stability. The economic uncertainty has directly affected investment to Brazilian businesses, which were unable to modernize and to become more competitive. Brazil is emerging and becoming a more solid place to foreign investments. The government welcomes foreign investment, as long as it represents a long-term commitment to economic development, which focuses specially in the areas of agriculture, technology and industries and manufacture of goods that are currently being imported. Brazil is known as a global commodities powerhouse, exporting a great variety of products such as animal produce, grains and sugar. Moreover, its economy includes several types of industries, including state owned companies, private and foreign companies, semi-state companies etc. It can be bureaucratic to do business in Brazil, but the local market welcomes foreign investment.
Conclusion
Brazil is a thriving economy that welcomes foreign investment that is aligned with its main principles. It is also a global player in economic terms and in global and regional issues. The 2014 elections are coming and the unpredictable political and economic scenario is once more arriving. The commercial and economic partnerships should remain both diversified and traditionalist, with Brazil’s national interests set as priorities.
Patricia Galves Derolle is the founder of Internacionalista and resides in São Paulo, Brazil
