TRADE-MERCOSUR: The Road to Africa, Asia Runs Through Brazil

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 5 2003 (IPS) - Brazil’s diplomatic initiative in search of key alliances in the developing South, highlighted by Friday’s visit by the foreign ministers of India and South Africa, will also promote trade between South America’s Mercosur trade bloc and major markets on other continents.

Brazil’s aim to bring about unity among developing countries and strengthen their position in multilateral negotiations, especially in the area of trade, was explained to the summit of the Group of Eight (G8) most powerful countries by leftist President Luiz Inácio Lula da Silva in France on Sunday.

Foreign Minister Celso Amorim, putting Lula’s strategy into practice, will meet Friday in the Brazilian capital with his counterparts Yashwant Sinha from India, and Nkosazana Dlamini-Zuma from South Africa, to hold a ”trilateral” political dialogue to unify positions and forge closer cooperation.

The three nations are regional powers with ”converging visions” that ”want to have a voice in international affairs,” said Gilberto Saboia, the head of bilateral policy in Brazil’s Foreign Ministry.

The current thrust for forming closer ties is political as well as economic in nature, and more pragmatic than past attempts at achieving Third World unity, through the Non-Aligned Movement, for example.

India thus plans to sign a framework accord creating the conditions for the expansion of trade with the Mercosur – the Southern Common Market, made up of Argentina, Brazil, Paraguay and Uruguay – when the trade bloc’s biannual summit is held Jun. 18 in Asuncion, the capital of Paraguay.

Negotiations between India and the Mercosur on preferential tariffs for a limited number of products are to be completed in August, paving the way for a future free trade deal, Bruno Bath, the head of Brazil’s Regional Integration Division, told a press conference Tuesday in Brasilia.

The Mercosur and South Africa already reached a similar framework agreement in December 2000, although little progress has been made towards freeing up trade.

But ”favourable circumstances today and the accord’s limited ambitions will favour a swift conclusion of the negotiations with India,” Bath told IPS. Broad political agreement will also help, as all of the countries involved are interested in seeing rapid results.

Brazil will present a list containing only 300 products for which it will request preferential duties, the diplomat pointed out.

The products are mainly industrial, including vehicles, agricultural machinery, home appliances, chemicals, and furniture, but include agricultural products as well, because India is a large importer of food, he added.

The rest of the Mercosur partners should propose even shorter lists of products. Uruguay, for instance, which was already negotiating with India prior to the Mercosur talks with that country, is keen on opening up a market for its dairy products, beef and wool, said Bath.

Brazil’s policy of creating alliances with other large developing countries is related to the importance to the Brazilian economy that the markets of those nations have gained in the past few years.

Trade between Brazil and India climbed from 488 million dollars to 1.2 billion dollars a year between 2000 and 2002, thanks to a threefold rise in Brazil’s exports to the Asian country during that period.

However, trade between the two giants has been marked by ups-an- downs over the past two decades, and an agreement will help guarantee sustained growth.

Brazil mainly exports oil, soybeans, motors and other vehicle parts, fuel alcohol and minerals to India, while importing diesel fuel, petrochemicals and medicines.

Bilateral trade with South Africa is smaller, totalling 659 million dollars last year. But Brazil’s exports to that country also soared, by 58 percent, between 2000 and 2002.

China, another country of strategic and commercial interest to Brazil, has become one of the biggest importers of Brazilian products, second only to the United States.

Brazil’s exports to China amounted to 1.8 billion dollars between January and May – 230 percent up from the same period last year.

The car-making industry, which pressed hardest and derived the most benefits from an agreement on preferential tariffs with Mexico, is one of the main sectors interested in gaining greater access to markets in Africa and Asia.

The automobile industry is especially interested in making headway into new markets given its enormous spare capacity, a result of the stagnation of the Brazilian and Argentine economies.

The South African market, where some 300,000 cars are purchased annually, has ”great potential for growth,” and Brazil’s car- making industry will be more competitive there if an agreement on preferential duties is reached, Pablo Deruel, spokesman for the National Association of Automotive Vehicle Manufacturers (ANFAVEA), said in a conversation with IPS.

He noted that car exports are complicated by the fact that in South Africa, the steering wheel is on the right side of the car, a legacy of British colonialism. But, he added, since South Africans prefer to import components for local assembly, that would not affect Brazil’s exports of parts.

In India, the recent adoption of a fuel alcohol additive to gasoline is one factor that favours transnational car-makers’ assembly plants in Brazil.

Fuel alcohol has been added to gasoline in Brazil for over a quarter century, and around 25 percent of vehicles in the country now use the additive. Vehicles that run exclusively on fuel alcohol are manufactured, as well as cars that can run on either gasoline or fuel alcohol, at the driver’s convenience.

India is interested in that technology, as well as the production of fuel alcohol from sugar cane.

A Brazilian firm has already sold its technology for the construction of 30 fuel alcohol distilleries in India – another area in which Brazil can cooperate with other sugar-producing developing countries.