Author Archives: Ricardo Fagundes Leães

About Ricardo Fagundes Leães

Internacionalista, Pesquisador da FEE. International Affairs Researcher at the FEE.

The prevailing discourse on the Syrian Civil War as an aggravating factor in the refugee issue

The humanitarian crisis in Syria is one of the most prominent issues of the international agenda, given the huge amount of people forced to abandon their homes due to the civil war that has been raging the country since 2011. Generically speaking, it is stated that the humanitarian crisis has been triggered by the crackdown of dictator Bashar al-Assad, who has never been indeed willing to dialogue with the opposition. This perspective, although empirically true, is not enough to understand the extension of the problem, which is more multifaceted than it appears to be. In this paper, we will seek to show that the construction of this reductionist Manichean narrative by the United States and their allies in Europe and in the Middle East not only has proved to be misleading, but has also contributed to deteriorate the humanitarian situation by conceding power, tacitly and concretely, to fundamentalist organizations. Furthermore, our goal is to show that the main active governments in the conflict, which helped to increase the flow of expatriates, have been reluctant to shelter war refugees.

The Syrian Civil War is a local outcome of a broader phenomenon in the regional context, the Arab Spring, in which authoritarian governments were impelled to react to mass demonstrations nourished by demands that were as comprehensive as complex. According to the most widespread and heralded narrative by the U.S. government and in large news agencies, the Syrian government, by then, felt pushed by its own people demanding for democratization. From this perspective, Syria would be divided between the oppressive government forces and a pro-democracy opposition taking up arms for a fair cause.

In this view, it was common to distinguish the two main rival groups in the conflict. On one side, the repression forces of dictator Assad sought to suppress any manifestation against the government and to maintain the supremacy of his family, which has been in power in the country since 1971. On the other, the so-called “freedom fighters”, led by the Free Syrian Army (FSA), aimed to overthrow a despotic government, increasing support from public opinion. Thus, as Assad intensified repression to contain the internal pressures, groups willing to use weapons to overthrow him prospered, on the grounds of establishing democracy in the country. Indeed, soon it became clear that the assessment on Assad was justified, as his government did not avoid resorting to the most violent measures to suppress opposition, fostering a broad movement of internal and external displacement of the Syrian population.

However, contrary to what might seem, the situation in Syria could never be simplified to a dichotomy between an authoritarian regime and its democratic opponents. In fact, the Free Syrian Army was overrated by international analysts, both in terms of size and commitment to defend democracy. It soon became evident that this group was much smaller than announced and that its members controlled sparse and tiny regions. In addition, fundamentalist organizations such as Al-Nusra Front and the Islamic State (Daesh) were, in reality, the main opponents of Assad, thus weakening the hypothesis that if the Syrian President was deposed, democratic institutions would quickly flourish. Despite these issues, the United States and its allies in Europe and in the Middle East — including France, the UK, Turkey and Saudi Arabia — have remained faithful to the idea that it was necessary to remove Assad in order to end the civil war and to start a coalition government.

The unyielding stance of the United States proved to be decisive for the continuity of the conflict in Syria as it gave, in practice, “green light” for al-Nusra and Daesh, which were advancing by leaps and bounds. Under the guise of defending the moderate rebels, the anti-Assad fundamentalists were given a “blind eye”, hoping that their victory would strengthen the FSA. However, the result was the opposite: the success of fundamentalists further depleted the ranks of the FSA. Given the fact that many of the fighters who switched sides had been trained by the United States, we observe not an advance of democratic groups, but rather the strengthening of the fundamentalists, who have been relying on U.S. weaponry. Thus, pessimism among Syrian citizens increased, as they no longer hoped for a quick end to the civil war and were forced to flee not only from the government, but also from the al-Nusra and the Daesh.

We note, therefore, that those countries that consider Assad’s fall as a primary goal for Syria not only have failed to promote democracy, but have also toughened fundamentalist movements, thus intensifying pressure on the Syrians, who found themselves forced to leave their country. Probably the situation would have been even worse if the UN Security Council had approved a military intervention in Syria, as wished President Barack Obama in 2013. This initiative would have been tragic for the country’s population, given the fact that most of its inhabitants live in areas under Assad government’s control. The purpose of Obama, ultimately, was to bomb the most populated areas of Syria, which would likely increase the number of refugees and contribute to the expansion of the territory controlled by Daesh and by al-Nusra and even to strengthen popular support for such groups.

One of the central features of the Syrian crisis is the high number of people driven from their homes, around 11 million people by December 2015, according to the High Commissioner of the United Nations for Refugees (UNHCR) [1], representing almost half of the national population at the beginning of the conflict in 2011. The majority remained in Syria (6.6 million), while the number of refugees in other countries was around 4.3 million. Nearly 90% of the refugees in other countries have moved to the neighboring nations of Syria, notably Turkey (about 2.2 million, or nearly half of all refugees abroad), Lebanon (about 1.2 million, representing an increase of nearly 30% the population of that country), Jordan (630,000), Iraq (250,000) and Egypt (130,000). A share of just over 10% of Syrian refugees abroad has sought protection in Europe, especially in Serbia (275,000) and Germany (185,000).

Germany’s position in relation to the refugees has been dubious and irresolute. In August 2015, the German Government announced that it would no longer apply the Dublin Agreement, under which asylum seekers in the European Union (EU) must remain in the country through which they entered. In practice, the treaty is a burden on the poorest states of the continent — the main gateway for refugees — and allows rich countries to deport migrants who reach their territory. Paradoxically, however, Germany has proposed, within the EU, a package of €3 billion to Turkey in order to contain refugee flow into Europe. Between the lines, it was inferred that a “favorable” conduct of Turkey could accelerate its membership process into the EU. To make matters worse, in November, Germany announced that it would enforce the Dublin Agreement again, burying the hopes that the country would lead a policy of open doors to Syrian refugees.

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It is significant that, with the important exception of Turkey, several countries that have been actively involved in the conflict are not among the main receivers of war refugees, in particular the United States, which sheltered only 2,234 Syrian refugees until December 2015[2]. France has received 8,894 refugees[3], while Russia has welcome, officially, about 2,000 Syrian citizens in this condition in its territory[4]. Iran has limited itself to providing material assistance without registering significant incursions of Syrian refugees in its territory. The Gulf monarchies, some of which are crucial supporters of several rebel groups opposed to Assad, have been even more reluctant to receive refugees. Leaders of Saudi Arabia, Qatar, Kuwait and the UAE have limited themselves to extend the residence period for Syrian nationals already established in those countries[5]. This phenomenon is serious not only due to the participation of these monarchies in the conflict, but also because they are the countries of the region that exhibit the best financial conditions for hosting the refugees.

After four years of civil war, the outlook for Syria and its refugees remains adverse, to the extent that most of the country’s territory remains under the control of fundamentalists, although the most densely populated regions remain under the firm grip of Assad. Moreover, the absence of a feasible democratic alternative to Assad’s government intensifies the obstacles for stability in Syria, because the U.S. and its allies, although not offering a solution, insist on a regime change in that country, without bearing the costs involved in the intake and assistance regarding war refugees. Under such circumstances, there is an impasse, as the government and the fundamentalists are the most significant political forces in Syria, meaning that it is hard to fight them simultaneously. Indeed, Syria shows that the confrontation with the local government has not fostered a democratic solution, but rather generated a power vacuum that is quickly filled by fundamentalists, just as happened in Iraq and Libya. This scenario is detrimental to the Syrian population, who has little choice but to swell the contingent of refugees.

 

[1]   UNITED NATIONS HIGH COMMISSIONER FOR REFUGEES. 2015 UNHCR country operations profile — Syrian Arab Republic. 2015. Retrieved from on Dec. 30, 2015.

[2]    UNITED STATES OF AMERICA. Department of State. Myths and Facts: Resettling Syrian Refugees. 2015. Retrieved from on Dec. 30, 2015.

[3]    UNITED NATIONS HIGH COMMISSIONER FOR REFUGEES. Europe: Syrian Asylum Applications. 2015. Retrieved from on Dec. 30, 2015.

[4]    Россия приютила 2 тысячи беженцев из Сирии. Газета.Ру. 2015. Retrieved from on Dec. 30, 2015.

[In English: Russia has sheltered 2,000 refugees from Syria. Gazeta.ru.]

[5]   MARTINEZ, M. Syrian refugees: which countries welcome them, which ones don’t. Retrieved from <http://edition.cnn.com/2015/09/09/world/welcome-syrian-refugees-countries/> on Dec. 30, 2015.

Mercosur: far beyond the economic integration

In 2016, the Southern Common Market (Mercosur) celebrates its 25th anniversary amid uncertainty and criticism in Brazil and speculations about its extinction. Among the main alleged reasons for such a pessimistic view is, firstly, the bloc’s ineffectiveness in promoting closer economic ties between the countries; secondly, the persisting losses to Brazil; and, finally, the structural constraints when conducting negotiations with other countries or blocs.

Although criticism of Mercosur is pertinent, it is noteworthy to stress that integration should be more broadly viewed and issues beyond trade should also be considered. Although highly relevant, trade is not the only object of regional integration, which also involves security, culture and education. Moreover, the bloc has progressed at different paces in each sector, similarly to other regional integration mechanisms, including the European Union (EU).

Regarding the first criticism, the bloc is said to have failed in promoting economic integration among its member countries and the recent drop in intra-bloc trade, at least in relative terms, has been highlighted. The main reason seems to be the protectionist attitude of the Government of Argentina. In fact, both for Brazil and the State of Rio Grande do Sul, the Mercosur countries have significantly reduced their share in recent years due to the exceptional performance of exports to China.

However, stating that Mercosur has been ineffective or has lost its relevance is not totally true, especially when the historical data are expanded. Despite sharing borders which extend for more than 1,200km, Brazil and Argentina, until the 1990s, lacked relevant and lasting economic cooperation. For decades, Brazil’s main trade partners were the United States and West Germany. Moreover, the dynamics of bilateral relations between Brazil and Argentina has always been marked by ephemeral cooperation initiatives and the persistence of a rivalry logic.

The figure below shows that bilateral trade between Brazil and Argentina reached historic levels after the creation of Mercosur in 1991. In addition, a rise in trade can also be traced back to the early 1960s, which was subsequently discontinued. The creation of the Latin American Free Trade Association (LAFTA), a tripartite initiative between Brazil, Argentina and Mexico, explains that inflection. However, as governments lacked interest in maintaining the project, regional trade turned back to previous standards, which can be a warning to the proposers of the dissolution of Mercosur.

Share of Argentina in Brazilian foreign trade — 1953-2013

Mercosur was a path for the consolidation of multi-sectoral efforts of rapprochement between Brazil and Argentina initiated by the end of the Brazilian civil-military dictatorship. Actually, moments of greater optimism can be outlined, such as in the early 1990s, during the formalization of the bloc, as well as other critical phases, such as the devaluation of the real (the Brazilian currency) in 1999, which deeply disappointed the other Mercosur members, and shortly after that, when Argentina experienced a severe economic and social crisis. The recent stagnation in terms of value of trade flows certainly causes apprehension, but it is worth observing that the imposition of import quotas on Brazilian products by the Government of Argentina is a measure of trade protection in accordance with the rules of the World Trade Organization (WTO) in case a sudden surge in imports harms a given sector of the economy or its balance of payments, if proved the causal nexuses between them.

Beyond the trade issue, an institutional framework has been gradually established for implementing cooperation projects in several issues such as policy, education, culture, security, among others. In addition, the institution of the democracy clause by means of the Ushuaia Protocol (1998), and more recently the creation of the Mercosur Parliament, denotes the political commitment of governments to the democratic values and institutions, bringing together citizens in a more effective fashion. Although the deadline for parliamentary elections by direct vote has been extended to 2020, in Paraguay two elections have already been held (2008 and 2012).

Regarding the issue of costs, “mercopessimists” assert that Brazil is the most affected nation in the bloc. However, it should be noted that in many of the cases of formation of regional coalitions, the most powerful nations (in economic, political or military terms) are the proponents of regional integration initiatives, such as in the Franco-German condominium in the EU, Russia in the Eurasian Union, the United States in the North American Free Trade Agreement (NAFTA) and China in the negotiations of the Comprehensive Economic Partnership for East Asia. In all these cases, larger nations have granted some tangible or immediate advantages to smaller partners so as to increase the attractiveness of the bloc. For example, in the European Community and in Mercosur, the headquarters of the integration mechanisms lay outside the territory of the major nations: Brussels (Belgium) and Montevideo (Uruguay), respectively, attend to this function.

The benefits or concessions directed to smaller countries in any process of economic integration is usually explained by the fact that the economies of these countries, in many cases, lack the degree of competitiveness of the enterprises of the larger ones, which typically operate on a much larger scale and can explore opportunities faster than their counterparts. Another argument advanced by Uruguayan and Paraguayan politicians and negotiators is that their countries are more prone to trade diversion after the imposition of a common external tariff. According to this view, smaller countries tend to be more damaged, because their economies are normally more dependent on foreign trade than those of the bigger ones.

Adhering as minority partners, the more fragile nations in economic, demographic or territorial terms need to rely on tangible and immediate benefits to bring to bear their participation in the regional integration project. In the case of Mercosur, it is observed that the main political gains could only be obtained by Brazil, the only one that can rise to a global player status. If the integration process is proven to be successful, the Brazilian companies would be the most favored ones, Brazil would be a global power and in a better position to own a permanent seat at the United Nations Security Council. Therefore, it is expected that the actor with higher stakes in Mercosur should bear a greater part of its costs, in order to mitigate regional disparities and promote intra-bloc economic growth. It is not reasonable to imagine that Uruguayans, Paraguayans, Venezuelans and Argentines would desire to take part in a group led by Brazilians without obtaining material advantages in return.

A third set of criticism argues that Mercosur has hampered negotiations of trade agreements with other countries or blocs because of alleged low willingness of some of its members to strengthen relations with other countries. From this perspective, Brazil should abandon its regional commitments and alone conduct negotiations with the European Union and the United States. However, in this case, a complex yet common dilemma in international politics can be pointed out. Actually, it is possible to admit that any agreement between Brazil and the European Union may be more comprehensive in terms of content, but it is also likely that its terms will be more unequal than those of an agreement between blocs. The bargaining power tends to be higher when its actors prefer acting together to negotiating separately, but it is also likely that the final agreement will exhibit a more limited thematic scope.

This way, the 25 years of existence of Mercosur should be evaluated concurrently from both political and economic perspectives, considering their synergies. Analyzing its dimensions separately means viewing it as the individualized strategies adopted by each of its members in a zero-sum game. Although the economic dimension of Mercosur has been used as a gauge of its success due to how easy it is to measure the volumes and values ​​of its trade flows, it is imperative to highlight that any economic agreement is preceded by some sort of political understanding to mitigate the differences inherent in the integration process. For this reason, the political dimension of integration in Mercosur plays an important role. As its institutions are consolidated as integration and conflict resolution forums in the different areas of their respective governments, opportunities are created both to reduce costs and to increase the gains from the integration between its member countries.

The challenges of Rio Grande do Sul in the emerging nations era

Luciano D’Andrea

Luciano D’Andrea is International Relations and Foreign Trade manager of the Federation of Industries of the State of Rio Grande do Sul (FIERGS). He holds a Bachelor’s Degree in Business Management from Virginia Commonwealth University (VA) and a Master’s Degree in International Strategic Studies from the Federal University of Rio Grande do Sul (UFRGS).

In an interview to Panorama, Luciano D’Andrea comments on the current trends of the international environment, Brazil’s insertion into the global market and the activities of the BRICS — a group gathering Brazil, Russia, India, China and South Africa. Our interviewee also makes observations on the exporting sector of Rio Grande do Sul and on the activities of the Brazilian Development Bank (BNDES).

Panorama:The last two decades have been characterized by an intense geopolitical and economic dynamism in the globe. In this sense, there are several government and private research centers dedicated to a systemic analysis of the international scene. At the local level, what can be learned from these analyses for the decision-making process of private companies and government institutions?

Research into and analyses of political and economic data on the international scene are of key importance for any actor aiming at developing a global strategy and/or a particular form of relationship with other economic blocs or countries. Likewise, the study and the systemic framing of information are regarded as essential for a country that aspires to qualify and prepare its industry and trade for an increasingly competitive and globalized scenario. Knowledge is one of the central aspects of the decision-making process, both for government institutions and for private companies, but the organization framework of the government and private actors does not always allow for the collection and the analysis of strategic data. Therefore, diversifying agencies that produce knowledge and, especially, share intelligence through an accessible and transparent fashion is indispensable for the national or the local development, either collectively or individually. By understanding the international conjuncture, it becomes possible to set objectives, goals and fields of operation and also guide the strategic planning proccess and implement it in a safer and more assertive way.

Panorama:Besides the international protagonism of traditional actors, such as the United States, Europe and Japan, countries such as Brazil, China, Russia and India have been achieving international preeminence in various issues on the international agenda. How do you evaluate Brazil’s recent international presence? To what extent can this integration provide opportunities for Rio Grande do Sul?

Since the mid-1990s, the bilateral and multilateral relations of Brazil have been expanding, following a global process of international openness and consolidation of foreign relations driven by the end of the Cold War. In the last fifteen years, there has been a clear shift in the Brazilian foreign policy, and the country has been making political efforts to consolidate partnerships in Latin America, Asia and Africa. This new approach invests in multilateralism and in non-traditional markets with high potential. Altogether, this current foreign policy has been positive for the trade of goods and services with these nations and for new investment projects. Undoubtedly, China is the most prominent case, becoming the main trading partner of Brazil and of Rio Grande do Sul thanks to its extraordinary economic growth over the past decades and to its astonishing demand for commodity goods, such as iron ore, soybeans, meat, and other products that our country has to offer. On the other hand, imports from China have been of great concern for the Brazilian industry due to the flood of Chinese goods into the country, facilitated by the excessive overvaluation of the Brazilian Real in the last decade.  Thus, based on this scenario, we can conclude that China has strongly contributed to the overall positive trade balance of Brazil in recent years, but, on the other hand, has caused a huge deficit of more than a hundred billion in the balance of the manufactured goods in this period, given its exports of machinery, equipment and intermediate and consumer goods. In this paradoxical context of threats and opportunities, Rio Grande do Sul has been one of the most successful Brazilian states for offering products strongly demanded by the Chinese, especially soybeans, meat and tobacco. The exports of these commodities have also benefited from their high prices in the international market. Africa was the first origin of the state’s imports due to the Petrobrás (Refap[1]) purchase of fuel and derivatives, especially from Nigeria, Algeria and Angola. In 2014, the imports from Africa accounted for 23% of the state’s purchases, totaling US$3.52 billion. Therefore, the establishment of stronger ties with the other BRICS members has been positive due to their booming economic performance, which took place particularly between 2000 and 2008. However, while progress has been observed within the BRICS, a relative setback can be noticed between Brazil and the advanced markets, such as the U.S. and the European Union, whose markets remain as the backbone of the world economy, accounting for almost half of the global GDP. Right now, an effort to recover the interaction with these players through bilateral agreements and free trade as well as other initiatives have been outlined within the National Plan for Export issued by the Brazilian Ministry of Development, Industry and Foreign Trade on June 24, 2015.

[1] Refinaria Alberto Pasqualini, an oil refinery located in the State of Rio Grande do Sul.

Panorama: Notwithstanding the contradictions among the BRICS members, the group has been consolidating itself as a counterpoint to the current international system established in the post-World War II era (UN, WTO, World Bank and IMF). How do you evaluate the dynamism of this ongoing process?

A more cohesive action of the BRICS depends on central issues in political, economic and security terms. The position of the participating countries on these issues is considerably divergent due to their national interests, which follow opposite paths, thus hindering the political consolidation of the group. However, the increasing trade between these countries has been gaining more and more representation in the international scene and can be a facilitating vector of cooperation. Furthermore, the establishment of the BRICS Development Bank is somehow consistent with these countries’ strategy to reduce their dependence on funds and international banks controlled by the developed countries. Although the bloc still lacks a common established agenda — albeit bilateral agendas have been strengthening — the fact that countries with such representation in the world economy are gathering and willing to discuss joint guidelines is an important step towards their consolidation and strengthening through effective economic development actions.

Panorama: In 2014, the remaining BRICS countries accounted for around 27% of the state’s total exports. In your opinion, how can the state exporters and the local government defend their interests in the context of the BRICS negotiations?

Back to the question concerning the relevance of analyzing the international scene, it is necessary for both the government and the entrepreneurs to understand the potentialities that the BRICS market has to offer to Rio Grande do Sul. Studies on commercial and strategic intelligence can guide the companies’ perspective on the BRICS. Moreover, the government, by understanding both the local reality and the bloc itself, can develop an approach to defend the interests that are in line with the potentialities of the private sector, that is, agriculture, industry and services.

Panorama: Soybeans are the leading export products of Rio Grande do Sul, and China, South Korea, Vietnam, India and Thailand are the main purchasers of this commodity. Besides soybeans, tobacco, poultry, rice, leather and agricultural machinery are shipped to emerging countries in Africa, Asia and Latin America. How do you view the economic dynamics of these regions on the state’s exporting sector? What measures can the private sector and the local government take to increase the volume of the state’s exports to these countries?

It is true to say that Rio Grande do Sul meets the demands of the emerging markets in the south-south trade with its traditional range of products of the soybean complex, meat and tobacco. However, there is no doubt that there are innumerous opportunities for exporting other products to these countries. In order to intensify the dynamism of the exporting sector, it is mandatory to diversify the supply of products through the expansion of knowledge about the quick transformations that have been going on in terms of consumers’ habits and export needs in these markets. China, for instance, after years extensively importing basic products, such as food, iron ore and oil, is now not only demanding larger amounts of consumer goods, but is also being urged to provide wealthier and more demanding consumers with higher value-added goods. In this sense, in order to take advantage of this expanding consumer market not only in China, but also in other booming nations in the region, such as Vietnam, Malaysia and Thailand, the exporting sector of Rio Grande do Sul must be competitive and knowledgeable about the market and the specific characteristics of its respective industries. The introduction of free trade zones in China, for example, reflects the implementation of recent economic and financial reforms intended to boost the domestic consumption of imported products. The Chinese case opens new possibilities for higher value-added Brazilian items, such as premium food, for example. In relation to Latin America, a strategic market for manufactured products made in Brazil and in Rio Grande do Sul, the region must be urgently revitalized, improve its payment mechanisms and create effective means for the integration of high-value productive chains, focusing on productive specialization. Nevertheless, this region requires investments in infrastructure and logistics to reduce its foreign trade operating costs, so that it can catch up with other markets in terms of competitiveness, especially the Asian ones. Economic and political instabilities and recurring crises are also obstacles that governments and private companies must overcome.

Panorama: In the 21st century, Africa has stood out due to its high economic growth rates, in contrast to its poor performance in the previous decades. As many countries across the continent have been developing largely owing to agriculture, what can be done for Rio Grande do Sul to seize this opportunity and expand the sales of agricultural machinery to Africa?

Exports of agricultural machinery to Africa represent a very important niche to the state’s companies. According to 2015 data from the Brazilian Ministry for Development, Industry and Trade, 42% of the overall Brazilian exports to Africa consist of manufactured goods, and the level of technological intensity used in these products has risen in the last three years. Thus, Rio Grande do Sul may also take advantage of the idiosyncrasies in the process of agricultural development in Africa by adapting and designing equipment that can better suit its market needs. According to 2014 data from the International Labour Organization, agriculture in Africa can and must be boosted through integrated solutions involving industries, rural areas, and services. Another very important measure aiming at expanding this sector’s exports involves lines of credit provided by the government through the Banco do Brasil, directed primarily to the African countries that are granted funds for acquiring agricultural machinery and equipment made in Brazil. Therefore, the long experience of the government and the business community of Rio Grande do Sul along with the extension of lines of credit can serve as a competitive asset in the African market.

Panorama: In all the countries that have been successful in boosting their exports — such as the United States, Japan, Germany and China —, we notice the presence of a specialized bank to internationalize their national companies, in order to promote their investments and foreign sales. In what ways can the Brazilian Development Bank contribute to the integration of the national companies into the global market?

A bank dedicated to promoting international trade is a fundamental mechanism for increasing the Brazilian investments and exports abroad. The role of the Brazilian Development Bank in international trade involves both granting credit for the export-driven production of goods and services and for the overseas commercialization of Brazilian goods and services, providing special maturity dates, interest rates and payment conditions consonant with the size of the company. The Brazilian Development Bank also supports projects abroad, financing not only the acquisition of capital goods, but also the working capital of the companies. These policies expedite the opening of new markets, the insertion of Brazilian companies into global value chains and the growth of the Brazilian trade flow. Additionally, it is paramount to be up-to-date on the financial policies offered by the export credit agencies of other countries, such as the U.S. and Germany, to adjust the resources management of national funding to the level of the competition, allied with the real needs of the companies and their respective exporting profiles.

The developing countries on Rio Grande do Sul’s trade radar: the case of agricultural machinery

It is common to analyze the insertion of the State of Rio Grande do Sul in the global economy by taking into account topics such as its exporting partners — Argentina, China and the United States, not necessarily in this order — and the traded goods — soybeans and its products, meat (beef, pork and chicken), tobacco and chemicals. Although an increase (or maintenance) in the economic flows to these destinations and in these sectors is desirable, it is convenient to explore the opportunities in countries with high potential of economic growth in the next decades: the developing or emerging markets, especially those in southern Asia and in Sub-Saharan Africa.

Graph 1 - Share of countries and blocs in the exports of Rio Grande do Sul — 2003-14

Currently, most exports of Rio Grande do Sul are already directed to developing and emerging countries, thus following the trend of Brazilian exports, as shown in Graph 1. According to data from the Economics and Statistics Foundation (FEE), exports to the other four BRICS members (China, India, Russia and South Africa) and to the remaining Latin American countries comprised, in 2014, more than half of the state’s total exports (the proportions were 27.2% and 23.8% respectively). If other developing countries in Africa, Asia and the Middle East are considered, this proportion will certainly increase. The developed world — North America (9.2%), Europe (16.8%) and Japan (1.22%) — remains relevant, but its share has reduced over the last two decades.

Characterizing the current trade with emerging countries in general lines is a complicated task, as we can observe differing patterns for each geographical area. While soybeans and its products predominate in the commerce with East Asian partners (China, India, South Korea and Vietnam), in Africa and in bordering countries of Brazil, the export basket is more diversified. In the case of Rio Grande do Sul’s exports to Argentina, for instance, in spite of recent fluctuations and restrictions, products of medium and high added value, such as agricultural machinery, transport vehicles, industrial inputs and chemicals, are still relevant. When it comes to African and Middle East nations, other sectors are more salient, as the case of meat products to Angola (roughly US$108 million in 2014, or almost 54% of exports to that country), tobacco to Indonesia (47% of the basket to the country), and rice to Cuba (45% of the basket), according to statistics from the Brazilian Ministry of Development, Industry and Foreign Trade (MDIC).

An observation of this recent trade dynamics should not undermine the considerable potential of intensifying the trade with most emerging countries. The expectations about the broadening of agricultural frontiers in Latin America and in Africa offer, at the same time, opportunities and challenges to the insertion of the state in the global economy. African and other Latin American markets are competitors of Rio Grande do Sul as producers and exporters of soybeans and corn and also partners as importers of agricultural machinery. This may be not only a very profitable niche for the local companies and entrepreneurs, but also a convenient solution for the risk of excessive commoditization of state exports in recent times.

Graph 2 Composition of Rio Grande do Sul’s exports of agricultural machinery by destination — 2003-14

Currently, African and Latin American countries purchase 92% of Rio Grande do Sul’s exports of agricultural machinery, as can be seen in Graph 2. This figure is even more significant when we bear in mind that it was only 72% in 2005. Such process is in line with a wider movement within the Brazilian commercial policy over recent years, focused on the expansion of economic activities in emerging markets. With respect to the agricultural machinery industry, such strategy provides an additional demand for the industrial sectors of Rio Grande do Sul which have been struggling to compete in foreign markets. As the primary sector is still predominant in most of Latin America and Africa, the state’s industry may restore its share within the state’s exports.

In Africa, Ethiopia, Chad, Mozambique and Rwanda are among the top ten countries in economic growth rates in the 21st century. Unlike Angola and Nigeria, they are not rich in mineral resources and have prospered thanks to agriculture. Placed in the earliest stages of development, these nations still need machinery to expand their rural production, which represents a significant room for the economy of Rio Grande do Sul.  In fact, the Brazilian government signed an agreement in 2013 aimed at financing exports of agricultural machinery to Africa, through the Financing Program for Exports (Proex). Such measure is part of the international More Food Program, whose purpose is to promote the development of agriculture in Africa. Finally, the line of credit offered by the Brazilian National Bank for Economic and Social Development (BNDES) for exports-driven and non-agricultural products can be used by the state industry interested in exporting to Africa.

Furthermore, among Latin American countries, we highlight Bolivia and Paraguay, whose economic growth rates have been sound due to the expansion of family farming and to the advance of soybeans cultivation respectively. These processes have been influencing the state industry, which increased its sales to Bolivian and Paraguayan farmers. Concerning Paraguay, the strong presence of Brazilian-origin farmers (many of which, born in Rio Grande do Sul) strengthens the ties between the rural production in that country and the state’s industry of agricultural machinery. In addition, the increase in exports to Venezuela, despite its acute economic crisis, is probably a consequence of the accession of that country to the Southern Common Market (Mercosur), an initiative supported by many Brazilian industrial groups. Argentina has been an exception to the norm: its protectionist stance on trade, more visible after 2009, has induced a stark reduction of 56% on local sales from 2007 to 2013.

Economic and Trade promotion overseas, in contrast to the political and diplomatic relations, is not an exclusive competence of federal authorities. States and city authorities may — and are expected to — encourage local business beyond the borders of the nation. Actually, the activity of subnational governments in global economy has become more and more common, which operates, in most cases, as a complement to the national diplomatic bodies, or as a link between the latter and the business community. The forging of economic ties of Rio Grande do Sul with nations and regions traditionally underrated within the state trade outlook meets the interest of society and reinforces the current Brazilian foreign policy.