Facing South? Brazil and the Rising Powers

Brazil Africa

The Presidency of Luiz Inácio Lula da Silva saw Brazil dramatically change its international profile, his charismatic leadership saw a transformation of the Brazilian economy from risky emerging market prospect, to a thriving modern economy. His foreign policy focused on relations with the global south looking to India, Africa and China, rather than the traditional pivot north to the USA.

Over the life of Lula’s presidency the country rapidly increased its trade not only with China (now its biggest trading partner), but also Africa, while this remains a fraction of its trade with Europe and the USA, the seeds have been sown for Brazil to play a major part in the continent’s rise. Building on its traditional strengths with Lusophone states, Brazil has increased its African footprint, developing closer ties with Nigeria and South Africa and specialising in mining projects as well as agribusiness ventures, two areas where the country has a comparative advantage.

Brazil has probably the most positive image of any rising power, it has played on its historical links with Africa and its forthcoming hosting of the World Cup and the Olympics. Both events should be in theory be a positive advert for the country, assuming they both run smoothly they will help raise Brazil’s profile and reputation. Russia has a similar prospect, with the Winter Olympics in Sochi 2014 and the World Cup in 2018 to look forward to. Because Russia is less democratic than Brazil, the potential for mishap is higher, as the events could become flashpoints for anti-Putin directed anger. The net result of these events on the two rising powers’ reputation will be fascinating to assess in years to come.

Brazil has also reached out to other rising powers and developing countries in an effort to diversify its international political and economic portfolio. But outside of their connections to China and Africa, links to other rising powers are still very much in their infancy, the BRICS have developed a nascent political alliance, but their economic and business ties remain underdeveloped. Links between Russia, India, South East Asia and Brazil do not form a key plank of the world economy as yet. If these countries continue to grow their economies rapidly, which is of course by no means certain, then we could see the further development of these trade and investment routes.

Brazil – India trade has jumped enormously in the last 15 years, with bilateral trade now at $10 billion, and expected to rise even higher. The two countries share some common ground, both being developing world democracies with a significant agricultural sector, both desire the accolade of a permanent seat at the United Nations Security Council and support one anothers’ bids, while both having regional rivals which seek to thwart them, namely Argentina and Pakistan.

The two countries appear to be natural trade partners, India exports chemicals, engineering goods and pharmaceutical goods to Brazil, while the South American giant plays to its strengths sending agricultural products as well as metals such as aluminium, copper and nickel and crude oil to help feed India’s fast expanding demand for energy and food.

India will need raw materials and energy inputs if it is to sustain economic growth and diversifying away from the Gulf region for energy and Asia and Africa for metals and minerals is a sensible move. Brazil imports pharmaceutical goods, auto parts and other manufactured parts, raising the thorny issue of whether this will undercut its own industrial sector, as many analysts are warning.

Others argue that imports of this nature are complementary, benefiting consumers with lower prices and forcing Brazilian manufacturers to be more competitive. This is a miniature version of the central Brazil – China commercial dilemma, and any Brazilian policy change towards importing manufactured goods, such a subsidies, trade protectionism or currency devaluation will likely impact on Indian trade as well as Chinese.



Categories: BRICS, Frontier Markets, Geo-Economics, Kula Ring Trade Blog

Tags: , , , , , , , , , , , , , , ,

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