Guilherme Casarões on Brazil: “The trade relationships with the Middle East are not easy”

Ever since the presidency of Luiz Inácio Lula da Silva, from 2003-2010, Brazil has been one of the world's largest and most competitive agricultural exporters. It now continues to expand trading partnerships all over the globe, including with Russia and Middle Eastern countries. Let's hear from Guilherme Casarões, an International Relations professor at the Getúlio Vargas Foundation in São Paulo, on the agribusiness giant's rise.

Guilherme Casarões
"It is not a real issue, but historically Brazil has always had a strong relationship with the Middle East and their trade relations have always followed the political situation there." © All rights reserved
ByTheEast: Brazil was a net importer of agricultural products in the 1970s. It now ranks among the world’s five largest agricultural producers and exporters. Can it overtake the others?

Guilherme Casarões: Brazil has come a long way since the ’70s, thanks to President Lula’s strategic flair and diplomatic skills, and it has great ambitions. It is already the world’s top soya producer, as well as the number one producer of coffee, sugar, orange juice and beef. It is the third biggest producer of corn and chicken. Brazil definitely plans to overtake the United States, the number one, and that’s not impossible. The development of the agriculture sector has been phenomenal since the ’90s when the country became an agricultural tech power. We have a state of the art research institute called EMBRAPA (Brazil Agricultural Research Corporation, founded in 1973). Trade liberalization has also proved an important factor in the growth of agricultural productivity at a time when other Brazilian economic sectors remain relatively closed to trade.

“Brazil definitely plans to overtake the United States, the number one, and that’s not impossible”

BTE: Brazilian agricultural products are being sold all over the world, from Asia to North America to Europe, Russia and the Middle East. Just in the last few days, Lebanon and Brazil committed to strengthening bilateral ties. How is the trade relation evolving between the two countries?

Casarões: The large trade deficit of Lebanon with Brazil is mostly due to the import of Brazilian beef. Lebanon is the 11th biggest importer of meat from Brazil. There’s a huge potential between the two countries, Brazil exports meat, Lebanon exports gold and phosphate. Despite his very low popularity and appalling record, one thing that must be granted to President Michel Temer is that he has done a lot to revive the trade relations between the two countries. He is very interested in the Middle East.

BTE: Has that anything to do with the fact that he was actually born in Lebanon?

Casarões: There are lots of Brazilian politicians of Lebanese or Syrian descent. It is estimated that there are between eight and 12 million Brazilians with Lebanese or Syrian family history. So it is not a real issue, but historically Brazil has always had a strong relationship with the Middle East and their trade relations have always followed the political situation there.

BTE: With its ups and downs?

Casarões: Yes. In the 70s, Brazil mainly exported arms and cars to the Middle East. Now it exports mostly meat. These trade relations reached a peak in 2011, then collapsed because of the economic recession in Brazil and the unrest in the Middle East. Since 2016, under current President Temer, the trade perspectives have vastly improved. That is partly due to the growing demand for Halal chicken in the Middle East and the deliberate choice by Brazil to make agricultural exports the centerpiece of its economic revival. In the Middle East, Egypt and Lebanon have seen their economies recover, while Saudi Arabia is also slightly improving. But the trade relationships with the Middle East are not easy.

BTE: Why?

Casarões: They always depend on the political situation. Because Lula was a skilled diplomat, Brazil benefited a lot from a prosperous Middle East in the 2000s. He was even dreaming of getting a Noble Prize for his involvement with Palestine. Brazil wants to be friends with everybody and that’s its strength, if you will, when it comes to pushing trade relations. But in the Middle East, it’s complicated to be friends with everybody, especially with Israel and the Arab countries at the same time. Also, trade relations – being mostly based on the export of halal chicken, beef, soy bean, coffee for Brazil and the import of mineral resources, including fertilizers from the Middle East – are not sophisticated enough. They would need to be more diversified.

“The deliberate choice by Brazil to make agricultural exports the centerpiece of its economic revival”

BTE: If being friends with everybody is the trademark of Brazilian diplomacy and has been central to becoming an agricultural superpower, can we talk about Brazil’s agriculture being as a “soft power” weapon?

Casarões: No, this is not soft power, like Hollywood in the United States, culture in France or language in China. This is pure economic hard power. Now, we don’t export military equipment anymore, we export agricultural products.

BTE: Brazil seems to be getting ready to take part in the reconstruction of Syria through its agricultural might. Does it have a role to play?

Casarões: Absolutely, and not just with agriculture. We have three major assets: civil construction with the giant Odebrecht, mining with the giant Vale and agriculture with giants like JBS. Brazil has always been even handed with Syria. It was one of the few countries not to take sides between the government and the opposition and it always left a window open for when the war would end. Brazilian companies will definitely play a major role in the reconstruction of Syria in these three fields.

BTE: But these three Brazilian giants have been marred by corruption scandals. Does that impact Brazil’s global power ambitions?

Casarões: Corruption has a negative impact on Brazil’s reputation. Odebrecht has been damaged by the “Lava Jato” scandal (the “Car Wash” corruption investigation began in 2014 and is the biggest in Brazilian history, it is ongoing). Vale has been impacted by the biggest environmental disaster in the history of Brazil in 2015 and the meatpacking company JBS has been embroiled in scandal for much of 2017, even if accusations about cardboard paper being found inside meat were false. Brazil has been caught in various scandals around the quality of its meat and that has hurt our economy a lot.

BTE: Among the many countries banning Brazilian meat, there was Russia, a big importer. How has the trade relation evolved since then?

Casarões: The meat scandal had a negative impact. Our exports went from 4.2 billion dollars in 2012 to 2.7 billion dollars in 2017, but they are going up again and should regain their lost ground rapidly thanks to our huge investments in innovative technology and research. Sixty percent of meat imports in Russia come from Brazil.  But compared, with China, that’s nothing. We exported 50 billion dollars of meat to China in 2017. We have a light trade surplus with Russia with our imports reaching 2,7 billion in 2017, mostly in minerals and fertilizers. The Russian fertilizer giant Acron is planning to buy plants from Odebrecht, which has been disinvesting after the corruption scandal, so there’s potential for both countries. Russia has the technology and we have the space and resources. Russia has also used Brazil to counter US and European sanctions, so there’s a potential as well but nothing that justifies huge enthusiasm, if you compare with China. Our total trade with China reached 78 billion dollars in 2017. It was only 5,4 billion dollars with Russia. With Russia, our economies are not really complimentary, the trade is based on a few range of products.

BTE: The recession, the corruption scandals and the ongoing political crisis mean constant bad news about Brazil, despite the potential. Is the country capable of fulfilling its expectations?

Casarões: Brazil has to fight corruption more efficiently and to add value to its production. It needs to industrialize and not be so dependent on agricultural exports and manufactured goods imports. Brazil is vulnerable to food prices, climate changes and global instabilities. But the potential is enormous.

“THE NATIONALIST CANDIDATE Bolsonaro has stated many times that he wants to establish a relationship of brotherhood with Israel and that he is no friend of the Arab countries”

BTE: Brazil seems to be at a turning point in its young democratic history, with the far-right candidate Jair Bolsonaro leading the polls ahead of the presidential election on October 7th. What would be the potential effect of a far-right president?

Casarões: We might see a u-turn in foreign policy and trade under the nationalist candidate Jair Bolsonaro. Just about the Middle East, he has stated many times that he wants to establish a relationship of brotherhood with Israel and that he is no friend of the Arab countries. If his main rival Fernando Haddad, who is of Lebanese descent, gets elected, it would be the opposite. We are now in a transition period and there are many unknown factors.

BTE: Finally, experts have raised the alarm over the deep inequalities, hunger and deforestation in Brazil. That seems to clash with Brazil’s ambition to become a major powerbroker in the international system.

Casarões: Hopefully agriculture productivity growth in Brazil can continue its upward trend, while being environmentally sustainable, creating jobs, and increasing incomes for the rural poor. Brazil is a responsible country and is deeply committed to the Paris Agreement. In the coming decades, technology should be a main factor for finding the right balance.

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Guilherme Casarões is a professor of International Relations at the Getúlio Vargas Foundation in São Paulo, Brazil.