BRAZIL-VENEZUELA: Chavez and Lula Doing Business

By Humberto Márquez Reprint | | Print |

Humberto Márquez

CARACAS, Apr 24 2003 (IPS) - Brazilian President Luiz Inácio Lula da Silva and his Venezuelan counterpart Hugo Chávez will agree Friday on the details of new business deals worth around one billion dollars at a meeting in which they will also review Brazil’s mediation in Venezuela’s political crisis.

”Venezuela’s chest is facing the Caribbean, but its right flank is facing the giant to the south, Brazil,” said Chávez during a rally held before hed headed to Recife, the capital of the northeastern Brazilian state of Pernambuco, where he will meet with Lula.

”We are embraced, and with the strength of the (Brazilian) people and the clarity of Brazil’s leaders, we will walk together throughout the 21st century,” the populist left-leaning leader added.

Venezuela’s ministers of energy and social development, Rafael Ramírez and Nelson Merentes, visited Brazil last week, where they discussed business agreements to be financed by a one billion dollar credit-line offered by Brasilia, Chávez said Tuesday. He and Lula will put the final touches to the credit agreement Friday.

After Lula, the head of Brazil’s leftist Workers’ Party, took office in January, he promoted the creation of a ”group of friends”, made up of Chile, Mexico, Portugal, Spain and the United States, to back the mediation efforts of Organisation of American States secretary-general César Gaviria in Venezuela’s political crisis.

At the time, Venezuela’s economy had been partially brought to a halt by a December-January general strike declared by the broad opposition movement aimed at cutting short Chávez’s six-year term. For example, oil shipments, which provide half of government revenues, were interrupted.

Chávez invoked the ideological values he shares with Lula to urge Brazil to seek the inclusion in the group of friends of countries with governments more inclined to support his democratically elected government in the face of the strong opposition. But the pragmatic Lula declined Venezuela’s request.

However, Brazil did sell Venezuela 20 million dollars worth of gasoline in January when despite its abundant oil reserves it found itself temporarily without fuel supplies due to the nationwide work stoppage.

After successfully overcoming that phase of the political conflict, the Venezuelan president, who survived a brief coup d’etat last year, smoothed over differences with Colombia’s hard- right President Alvaro Uribe at a meeting Wednesday in Ordaz, a northeastern Venezuelan port.

After that, he headed to Brazil to breathe new oxygen into economic ties with Latin America’s giant.

Brazil’s aim is to ”take advantage of an opportunity to deepen its ties with Venezuela, independently of political circumstances,” a Brazilian diplomat told IPS, speaking on condition of anonymity.

The new business opportunities will be made possible by Brazil’s offer of a credit line that will enable Venezuela to purchase goods and services for around 10 different projects in which Brazilian companies are already taking part, such as 50 million dollars in imports of pharmaceutical products by Caracas, financed by Brazil’s powerful Bank of Economic and Social Development.

Venezuela is keen on aid from Brazil for improving its crops, irrigation system and stockbreeding industry – it has plans to import 40,000 head of cattle – as well as for building sugar mills. In addition, it plans to purchase AMX-T planes for advanced training of combat pilots.

A number of bilateral projects are already under way, starting with a more than 1,000-km power line that carries 200 megawatt hours of electricity from the Guri dam in southeastern Venezuela to Boa Vista in northern Brazil.

In addition, a Brazilian firm, Odebrecht, is building a road and railway bridge across the Orinoco river, 500 kms from the border, with an investment of 530 million dollars, 85 percent of which is provided by the Banco do Brasil.

Odebrecht is also taking part in the construction of new subway lines linking Caracas and its dormitory suburb Los Teques, with an investment of over 400 million dollars.

In addition, the company has contracts worth 137 million dollars for upgrading irrigation systems in Venezuela.

Although the oil question hangs over all negotiations between the two countries, the construction of a new refinery in northeastern Brazil, which would process up to 200,00 barrels of crude a day and would cost two billion dollars to build, has been put on hold by the state oil companies Petroleo Brasileiro (Petrobras) and Petróleos de Venezuela (PDVSA).

Petrobras estimates that it could cover its current refining deficit of 150,000 barrels a day by investing 900 miillion dollars in existing refineries, while PDVSA has been forced to scale back all of its projects abroad after suffering some five billion dollars in losses during the two-month general strike.

Venezuela’s oil-dependent economy has taken a beating by the political upheaval that has shaken the country since even before the frustrated April 2002 coup. The economy shrank 8.9 percent last year, and is set to contract by at least that much this year, according to forecasts.

Ramírez, who pointed out that Petrobras is a leader in offshore production, said Brazil would be invited to participate in projects for oil exploration and drilling in Venezuela, and Brazilian sources say Caracas might use oil as a guarantee for the new credit lines.

Trade between Venezuela, a country of 23 million, and Brazil, population 170 million, peaked in 2000 at 2.08 billion dollars. In 2002, the trade flow shrank to 1.4 billion, with a trade balance favourable to Brazil, which exported 796 million dollars and imported 626 million.

Since then, Brazil has reduced its purchases of crude oil, and the main products it now buys from Venezuela are diesel and jet fuel. The main products that Venezuela imports from Brazil are cars, automobile assembly components, machinery and equipment.

Lula and Chávez will inaugurate a monument to Brazilian independence hero José Ignacio Abreu e Lima, who was born in Pernambuco and fought alongside Venezuelan hero and Latin American liberator Simón Bolívar.

Chávez refers to Bolívar constantly in his speeches, and named his ”social revolution” for him.

* Mario Osava in Brazil contributed to this report.