IN DEPTH: How will Brazil’s shift affect BRICS and Mercosur?

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From Sputnik Brazil – Translated by Paul Antonopoulos  –

“Mercosur will not be a priority,” said economist Paulo Guedes, appointed by then-newly elected President Jair Bolsonaro in 2018, hours after 57 million voters chose the former Army captain for the post. It was the first major demonstration that was dictated – the era of multilateralism in Brazil is in check.

The appointment of diplomat Ernesto Araújo to lead the Foreign Ministry a few days later only deepened the understanding that the country would depart from its tradition that has always favored international laws and agreements – much of them debated in arenas such as the UN and the World Trade Organization (WTO) – and the principle of non-interference.

Instead, the new government has promised to seek, both commercially and ideologically, bilateral partnerships with nations that have interests aligned with those of Bolsonaro’s vision for Brazil. The race behind the lost time is supposedly justified: between 1991 and 2013, Brasilia only managed to sign three bilateral agreements . In the last six years, the scenario has hardly evolved.

Mercosur is a regional bloc that aims to give more strength to member countries – Brazil, Argentina, Uruguay, Paraguay and Venezuela (thelatter is now suspended) – but this multilateral character, whether by internal trade disputes or by political and ideological aspects, has brought more harm than good in the past decade, analysts claim.

But will such a move by the Bolsonaro government bring more benefits or losses to Brazil?

More trade, less ideology

According to Ibmec economist and finance professor Gilberto Braga, the new moment led by the minister Paulo Guedes should be seen as a novelty, since Brazil has always adopted a more diplomatic tone in economic matters before the world. The change, leaving aside a preference that previously was for collective organs to the detriment of bilateral negotiations, should be seen as a positive, he said.

“What we can understand is that bilateral relations are obviously much faster. Block issues require much longer time, and therefore less effectiveness than direct relationships, which are timely and involve reciprocal economic interests,” he explained.

Braga also evaluated that Brazil has already been giving signals to some countries, particularly the United States, Israel and Chile, and that this may be a reflux of what was thought about as successful trade relations between countries after the Second World War, heavily influenced by the idea of ​​union between geographically close nations, in order to have more bargaining power and negotiation.

“I understand that, differently from what was projected at the beginning of this century, that the blocks would be the great solution to everything and we set out for a new geo-economic occupation of the world. This seems to have stopped, either because of economic crises or because of questions Although we can say that there has been progress on the issues of the economic blocs in a localized way – this does not make it impossible to develop bilateral relations that are more effective and faster, and that bilateral relations can then be brought into agreements of blocs,” he added.

However, the economist stressed that it is too early to assess whether the indicatives in favor of bilateral agreements will bring the benefits that the Bolsonaro government is waiting for, since the global geoeconomic scenario can be compared to a chessboard.

“It is not yet clear which is the practical result of this because it is a chessboard, in which you do not move your pieces by yourself. There is, first, on the other side a partner with whom you negotiate and, at the same time, you have a whole chessboard to the extent that, for example, you have a trade war between the US and China, you have skirmishes between Russia and some western countries, so it is a movement where, as you put your finger and move a piece , you move the entire board. It is not yet possible to know the actual result of this, but in fact we can say that there is a new moment,” said the economist.

Historical breakthrough: ‘dumb’ strategy?

With less than a dozen bilateral agreements now in force with other countries, Brazil is far from other countries, such as the United States, which currently has 20 commitments of the kind in force, or Asian nations like China and India, which have 45 and 42 bilateral agreements respectively. In this respect, the Brazilian movement seems justified.

However, the idea of ​​moving away from a multilateral tradition, inaugurated in the days of an Itamaraty conducted by the Baron of Rio Branco, and consecrated even by governments of the military dictatorship, especially in the era of General Ernesto Geisel (1974-1979), divides opinions , as explained by analysts.

In the view of the political scientist from the Federal University of Minas Gerais (UFMG), Leonardo Avritzer, the Bolsonaro government has so far shown no strategy in foreign policy, based only on ideological alignments – including in the commercial area. According to him, such a view must be considered “dumb” and harmful to Brazil.

“It is a rupture that establishes an extreme right-wing ideological vision in Brazilian politics. Obviously we have had a decrease in US influence in the global order and it is already evident, for example, in the Syrian crisis at the moment the US has not negotiated, they have established a precept of unilateral retaliation and China has also retaliated against the US, The two economies are close to being equivalent in size in the coming years, we have both: ideological, which is important to say that it is a dumb vision, because it does not fit the new correlation of forces of a world that is quickly becoming post-American,” he said.

Avritzer used Israel to exemplify his point of view. The political scientist said he believes that Brazil’s foreign policy, which focuses on strengthening trade ties with Tel Aviv, for example, runs away from the real interests of Brazilian businessmen, since, according to him, it is only aimed at aligning itself with US hegemony and, of breaking, irritating the Arabs, major buyers of the country’s commodities for decades.

“With the Israeli issue, it is all the more impressive because Brazil has a ridiculous economic agenda, trying to compare it with other countries in the Middle East. Brazil is basically an exporting country of agricultural and mineral commodities – the countries of the Middle East are large consumers mainly of agricultural production, so it is not clear that government policy expresses any kind of realism, either with regard to the real role of the United States at this juncture or with regard to Brazilian business interests in the region,” he said.

The UFMG political scientist recalled that Brazil’s main trading partner is China, precisely one of the countries most criticized by Bolsonaro during the 2018 election campaign, which means that if there is a bilateral agreement there that Brazil should make, it should be with Beijing, not the effort to align with a “weakened” government, such as that of US President Donald Trump.

“China is already the main influence in most African countries, it is a military power, it owns land in most Latin American countries, and it has a large export bank. Obviously Bolsonaro is reinforcing his position vis-à-vis with the US, at a time when the Trump’s government is weakened and already lost the Lower House elections in November last year, and has not really been able to impose his economic agenda against China. In fact he [Bolsonaro] is exchanging multilateralism for a weak ally and an end to government. It does not seem to have any kind of relevant economic or political consequence,” he said.

In several public appearances, Bolsonaro has stated on more than one occasion that he wants to see Brazil doing business with everyone, criticizing a supposed preference that previous governments – especially those of Luiz Inácio Lula da Silva and Dilma Rousseff, both of the Worker’s Party – would have given to left-wing and Bolivarian countries. Consequently, such new dynamics in Brasilia would be opening the country to trade with a new range of countries.

Thus, the idea of ​​advancing towards bilateral agreements accompanies the new government’s goal of delivering rapid results, as awaited by the financial market and national business. In 2017, then WTO Director-General Pascal Lamy explained the reasons for the success of direct commitments between two countries in the face of complicated multilateral agreements

“Fewer countries mean that preferential trade agreements can be closed within a shorter period of time. Second, they can enter new territories. Owing to similarities of interests and often more frequent values, bilateral trade agreements can reach new areas such as investment, competition, technical standards, labor standards or environmental provisions, where there is no consensus among WTO members. Third, many of the recent free trade agreements contain political or geopolitical considerations,” he commented at an event in India .

“For developing countries that negotiate with more powerful developed countries, there is usually the expectation of exclusive preferential benefits as well as expectations of development aid and other non-trade rewards. Bilateral trade agreements are also useful for negotiators to learn how to negotiate, Many regional trade agreements have been the basis for peace and greater political stability, and they are often used as instruments of internal reform in areas where the multilateral system offers weaker leverage,” he added.

However, Lamy was of the view that bilateral agreements cannot replace multilateral trade rules, explaining that “preferential trade agreements can create an incentive for even greater discrimination, which will ultimately harm all trading partners” and that “bilateral agreements cannot resolve systemic issues such as rules of origin, agricultural subsidies and fisheries. ”

“For many small and weak developing countries, entering into a bilateral agreement with a large and powerful country means less leverage and a weaker negotiating position than in multilateral negotiations. It may not be the case of India, China, Brazil , the United States and the European Union but will be true for Mauritius, Sri Lanka, Cambodia or Ghana,” said the WTO representative.

Such a trade imbalance between countries has created within the WTO a mechanism of protection for the poorest or developing countries. And it is precisely this benefit, which Brazil enjoys, that the US wants the Bolsonaro government to give up. On more than one occasion Brazilian authorities have sought the agency to question agricultural incentives from other countries.

If Brazil accepts, it should win the sponsorship of Washington to enter the Organization for Economic Cooperation and Development (OECD), as is known the bloc of the richest countries in the world. In addition to the clash with the departure of multilateral arenas already observed by the Planalto Palace and the Itamaraty, the idea that associating with developed countries, Brazil being a notoriously unequal nation, will bring certain benefits is worthy of challenge.

In the opinion of economist Gilberto Braga, an eventual Brazilian entry into the OECD seduces the desire to gain the status of a great economic power, a goal that would gain outside the “sponsorship” given by Trump. However, there are still many uncertainties about the real benefits of the move, should it occur.

“It is not very clear what is the real advantage that Brazil will have to be in this club without actually being a rich country, on a par with other powers that are part of this block, nor is it very clear what Brazil will have to give up to be there, especially in relations with other blocs and abdicating or not other blocks. This game is not understandable to the market, you need to wait a little longer, in my view,” he said.

Before dreaming about the OECD, Brazil will have to be clearer about its future within the blocs of which it already forms part, such as Mercosur and BRICS. For Braga, it is a time of optimism, since there is a scenario for the bloc to return to its essence, of a commercial and tariff nature, abandoning the ideological spectrum acquired in the years 2000.

“Mercosur in the last few years ended up being swollen by countries that did not have a great economic contribution, they were there much more for a continental and political interest than it was economic. It was a block with the characteristics of the region, but the bias and its DNA has always been economic and commercial. Then it is a marketing regime with a tariff differentiation, and that essence can perhaps be recovered now, for example, if Venezuela is excluded from the bloc. I think Mercosur has a chance to be, somehow sanitized in the aspect of the prevalence of a greater economic interest in the region and not of political interest that he apparently had in recent years,” he said.

But the political scientist Leonardo Avritzer does not see the same potential for the South American bloc, which, according to him, “cannot move economically.”

“The Mercosur case is already a much more regional issue, which can not be economically triggered by the fact that the countries are in an almost permanent economic crisis,” he said. Still, according to him, Brasilia has even more to lose if it moves away from BRICS.

“The BRICS are a very successful articulation in the last decade, and Brazil departure from it will mean Brazil moving away from very important emerging economies. In any case, Brazil, in disengagement from the BRICS and Mercosur, would have to have a multilateral agenda that makes sense and fails to do because the Bolsonaro government is an ideological government that does not change [positions] from political realism,” he added.

Braga, meanwhile, is cautious about Brazil’s participation in BRICS in the Bolsonaro era, especially in the face of the yearning for entry into the OECD. The Ibmec professor suggested that the precepts so distinct and distant between the two commercial and economic blocs may present an unequal and challenging dichotomy of the Brazilian government over the course of this and the next years.

“With regard to the BRICS, it is still not clear what the role of Brazil is because, at the same time as Brazil is a member of the BRICS and has many similarities with the other members, it aspires to be in the group of greats, it comes so it’s hard for us to understand if you can get under two hats, that is, one hour I’m from the OECD, another time I’m from the BRICS because, apparently, although you may have convergent interests, there are also many divergent interests in which the BRICS, in a joint effort, tend to impose certain conditions on the richer countries that are more present in the OECD, so I see this in a still undefined way,” he concluded.

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