Category Archives: Foreign Policy / Diplomacy

Two OpEds on Brazil-China with Australian implications

ANCLAS Senior Associate Dr Sean Burges has had two OpEds published this week dealing with Brazil-China relations and ideas for balancing the relationship through cooperation with Australia and Canada. The English-language version, structured around some of the challenges that could arise from Australia’s focus on Asia was published on December 5th in The Australian. A separate piece addressing how Brazil might get past its current challenges with China was published in the major Brazilian daily O Estado de São Paulothe English language text is appended below.

 

A new approach needed for China
Sean W Burges
Senior Associate, Australian National Centre for Latin American Studies at the Australian National University
Like many other countries, Brazil is struggling with the relentless onslaught of Chinese exports. The Brazil-China Business Council convened its fourth annual conference in São Paulo to try and address this challenge. Some interesting stories were told, but not much new thinking was displayed. More worryingly, there appeared to be little recognition of the subtle warnings that China is maneuvering Brazil into position as a subordinate, vassal state.

China’s ambassador to Brazil, Li Jinzhang, used a mix of oblique messaging and ancient imperial strategies to quietly underline relative power positions and the limits on Brazilian aspirations for the bilateral relationship. Jinzhang deliberately spoke in Mandarin, not the Portuguese that we might expect from an ambassador to an important global player such as Brazil. To be generous, it is possible that his Portuguese, a language reportedly difficult for the Chinese, was not up to a major public address. But if this was so, why not use a common second language such as English, the international language of business and diplomacy? His message was clear: you must come to us and adapt to our ways and priorities.

Quiet reminders that China dominates the bilateral relationship were accompanied by a subtle warning to Brazilian industrialists complaining about Chinese imports and calling on Brasília to engage in further protectionist measures. Jinzhang told the story of a small Chinese village that, like Brazil, was a predominantly agrarian community. Through hard work and innovation this village transformed itself into an industrial powerhouse and now contributes just over two percent of China’s exports from a tiny geographical footprint. While gently delivered, the lesson for the gathered Brazilian business leaders was very simple: we are not going to slow the pace of exports and it is up to you to innovate and compete with us. More chillingly for Brazil’s leading agro-industrial business sector, Jinzhang also noted that a central policy goal of the new administration in Beijing is food security with an ultimate aim of self-sufficiency.

An implicit aspect of CEBC President Ambassador Sergio Amaral’s closing address was a riposte to China’s challenge. Unfortunately, Amaral’s idea of reinvigorating Latin American integration ventures to create a larger internal market and a common set of high tariffs to exclude Chinese products is an old idea that has failed. Moreover, the idea is delusional, completely ignoring that Chile, Peru, Colombia and Mexico have banded together to form the Pacific Alliance precisely with the idea of looking West to China’s Asia and not East to Brazil.

Interestingly, Jinzhang’s story about a Chinese agrarian town transformed by innovation points to a path forward for Brazil, one that would involve a very different direction for Brazilian foreign policy and major, but ultimately productive shifts in thinking by Brazilian business. There are two concrete avenues for action.

First, Brazil must increase its rate of innovation. The Ciência Sem Fronteiras program will help, but it is not enough on its own. Lessons from the Chinese experience should be added to the mix. Industrialization in China was built upon successive waves of FDI, which brought new technology and processes – Chinese firms engaged in an extensive process of international collaboration to drive innovation. Thanks to Ciência Sem Fronteiras Brazilian universities are already beginning to experience this through active engagement by universities in the US, UK, Canada, Europe and even my own home institution, the Australian National University. Business should follow and actively seek dynamic partners with whom new markets, products and processes can be explored and developed. The Brazilian Government could actively assist with creative programming at institutions such as the BNDES or new financing lines through the Banco do Brasil or Caixa Economica.

Second, Brazil needs a new approach to managing China. One option that will not work is the middle power route Australia and Canada have long-used to manage bilateral relations with the US. The commonality of interests is simply not in place to make this viable with BRIC-member China. Instead, attention should be given to a sophisticated ‘balancing’ strategy involving a partnership with Australia and Canada. Why these two countries? Both are relatively small and actively courting Brazil, which makes them manageable. More importantly for the impact on Chinese perceptions, they are the two other major mineral and food exporters to China.

With Australia, Brazil and Canada – a new ABC group of countries – engaging China independently Beijing is able to engage in a divide and conquer strategy. The end result is that Chinese tariffs let in raw materials cheaply, but price value-added products out of the market. This leaves the ABC countries as breadbaskets for Chinese consumers. Collective action might be an avenue for reversing this process and forcing concessions from Beijing.
China is undoubtedly going to one of Brazil’s main economic partners for the rest of this century. The danger is that relying on tired integration models and an excessively autonomist approach to engaging Beijing will quickly shunt Brazil back into a peripheral position as little more than China’s pantry.

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Filed under Brazil, Foreign investment, Foreign Policy / Diplomacy, Trade

Washington’s view of Brazil’s rise

One of Brazil’s most prescient foreign policy observers and analysts — Professor Matias Spektor from the Fundação Getulio Vargas university in Rio de Janeiro — has spent the last few weeks talking to policy-makers in Washington about Brazil’s rise. As Spektor explains in his latest column for the newspaper Folha de São Paulo, there is generally a favourable attitude in Washington to Brazil’s international rise, but tempered with four main concerns:

  1. While Brazil’s activism has put it on the international map, there are worries that this has come at the cost of questionable or even negative impacts on Brazil’s core issues — Mercosul, Unasul, G20, the WTO and the UN Security Council;
  2. Concrete investment in foreign policy resources is not keeping up with official ambitions. Observers in Washington do not understand why Brazil keeps opening embassies in Africa and the Caribbean when it lacks the personnel to staff them;
  3. Brazil is running into major resistance in its own neighbourhood and diplomatic investments in South America are not helping with Brazil’s wider ambitions;
  4. Brazil is actively advocating a world less controlled by the North Atlantic with a greater role for emerging countries, but it is not offering a practical vision for how this would work.

Spektor’s comments fit neatly into the debate currently going on under the surface in Brasília. Diplomats at Itamaraty continue to ring-fence foreign policy as a private preserve for their department. Political guidance remains weak with officials very reluctant to press president Dilma Rousseff for additional resources unless their project involves China or the BRICs. Moreover, traditional attitudes of ‘not wanting to impose’, which translates in practical terms into not wanting to absorb the costs of leading predominate. The bottom line appears to be that Brazil has arrived at the main decision tables of global governance, but having achieved its seat now needs to sort out what it wants to do. As Spektor notes, for Washington Brazil’s rise is welcome. It is just that there is uncertainty in what it will mean and if it will last without a clear vision in Brasília and concrete resources to back ambitions.

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Here we go again? Brazil and Turkey trying to defuse Iran?

O Estado de São Paulo is reporting that the Brazilian and Turkish foreign ministers are talking of relaunching the May 2010 Tehran declaration on nuclear fuel swaps in an effort to prevent an armed attack on Iran. For those who don’t remember, the reaction from the US was, at best, frigid, or to quote one US diplomat talking off the record at the time “Hilary was pissed”. The clever thing that Brazil’s Antonio Patriota and Turkey’s Ahmet Davutoglu have done this time is to pull in another player, namely Sweden’s Carl Bildt.

Reviving the 2010 deal is likely to be received poorly by the nuclear powers trying to pull Iran back from the proliferation brink. That Brazil is pushing such an idea on the margins of this year’s UN General Assembly should not come as a surprise — Brazilian president Dilma Rousseff was explicit in her address that the world has too many weapons of mass destruction and should work to get rid of them all and focus on hunger and poverty instead. While it is hard to argue with her point, we might also ask awkward questions for Brazil about diverting resources away from small arms and warplane manufacturing towards development-facilitating activities, two lucrative export industries for her country.

Dilma is less beholden the hard left of her Workers Party than Lula was — we need only look at how she stared down recent labour action in Brazil — but still needs to throw the odd bone to the Party old guard who have found memories of resisting the empire with their Iranian brothers in the 1970s. What probably matters more in this instance is Brazilian desires to squash anything that might create a precedent for unilateral or multilateral violation of sovereignty, a principle that is utterly sacrosanct for Brazilian foreign policy. After all, another key theme in Dilma’s address to open the UNGA was that the doctrine of “Responsibility to Protect” should be accompanied with a parallel “Responsibility While Protecting”. In practical terms this would likely leave those participating in any internationally sanctioned intervention in a country such as, say Syria, liable for collateral damage. Given the difficulty of getting those with the capability to actually undertake R2P actions to participate, the Brazilian coda, if accepted, would make the potential legal and political costs of such missions even more prohibitively high. And with no R2P being practiced another threat to sovereignty is defused.

All this cynical analysis aside, hopefully the world will get lucky and Sweden will find a way to work with the established team of Brazil and Turkey to rein in Iran’s nuclear ambitions and prevent another conflagration in the Middle East.

–Sean Burges

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Pointed analysis of Mercosur from former Uruguayan President Sanguinetti

Former Uruguayan president Julio Maria Sanguinetti (1985-1990, 1995-2000) has published a very insightful article about the state of Mercosur on the Infolatam.com site.

Sanguinetti starts with a quick review of the bloc, noting that the first eight years from 1991 to 1998 were marked by numerous successes, but when Brazil devalued the real in 1999, the institutional fragility of the bloc became clear. Dispute resolving systems were barely in place and didn’t work. Argentina then shifted to a highly protectionist trade policy within a common market. What little institutional and legal strength Mercosur retained took a serious blow with the opportunistic suspension of Paraguay earlier this year.

The Treaty of Ushuaia was implemented to vouchsafe the democratic nature of member-states after a nearly successful attempted 1996 coup in Paraguay. This is the mechanism that was used by Argentina and Brazil to suspend Paraguay and let Venezuela into the bloc. But, as Sanguinetti points out, the Treaty requires that extensive consultations with the questioned country take place before it is suspended. His problem with the procedures followed in Mendoza is that these consultations did not take place and that massive political pressure was used to silence Uruguayan objections to a clear violation of the Mercosur treaties by Argentina and Brazil.

As intrinsically distasteful as Lugo’s impeachment may have been, Sanguinetti reminds us that it took place through the constitutionally appropriate mechanisms in what amounted to a political trial. It should not have mattered that Lugo was seen as something of a friend by Dilma and Cristina.

A quick Google Translate rendition of Sanguinetti’s last paragraph is worth including for the non-Spanish reading:

“What happened in Mendoza is a setback in the process of regional integration and the international validity of the statutes and the recognition of their underlying principles. In the name of democracy, [Argentina and Brazil] have ignored all the values ​​that underpin it. There are no laws or principles. In the name of solidarity or political enmities, [they are] acting without the constraints of law. Neither has the principle of nonintervention been left standing. From now on, anything goes.”

What Sanguinetti is getting at is a much deeper systemic problem with inter-American affairs and a central remaining challenge to total democratic consolidation in the region. Elections are an important part of democracy, but their significance is limited when you have an attitude in the political class that because they are in charge they can do whatever they want.

The operating concept here is what Guillermo O’Donnell called ‘horizontal accountability‘, the idea that there are rules, procedures and institutions that restrain the arbitrary actions of the state in a clear and predictable manner. There are clear signs from Argentina and Brazil, let alone Paraguay, that elected leaders at all levels have not quite internalized the idea that in a fully consolidated democracy there is a system of checks and balances that restrain executive caprice. Indeed, the big story right now in Brazil is about the mensalão corruption scandal, which charges that political advisers around Lula were running a ‘cash retainer’ system to buy votes in congress to get the get governmental legislation through.

The short-shrift given to regulatory and legal restraints by some political actors is amplified when we turn to the international arena. The open secret in inter-American affairs is that most issues are settled through presidential diplomacy, hence the large number of regional summit meetings. Legal and institutional structures are not put in place to effectively govern bilateral and multilateral relations (for example, what is the institutional and juridical strength of CELAC and Unasur?), and when they are in place, they are either ignored or marginalized. This latter case is exactly what we see happening in Mercosur. We don’t have the bandwith to list all of the unresolved intra-Mercosur trade spats that have blithely ignored the bloc’s internal dispute resolution and juridical mechanisms. Suffice it to say that member-countries have had to either threaten or go to the WTO dispute body to get satisfaction. Sanguinetti’s point, which is particularly problematic for a small country like Uruguay, is that the legal frameworks for important groupings such as Mercosur have become just so much window dressing in the face of presidential want and desire in big countries such as Brazil.

There is also an important foreign policy point in Sanguinetti’s comments. Brazilian diplomats are very clear that the international sovereignty norm is sacrosanct — one state may not intervene in the internal affairs of another state. Yet, this is precisely what has happened in the Paraguayan case. Indeed, the deeper irony is that while the historical case was that the political right pushed hardest for regime change, the tide has now shifted and it is the left that has the most pronouncements and interventions for its neighbours. This has been particularly evident in the Brazilian case where the willingness of Brazilian presidents and presidential advisors to make direct intervention in the internal political developments of other regional countries has been rising since 2003.

Taken its totality, the critique leveled by Sanguinetti goes a long way to explaining why the increasingly technocratic and regulatory sound states of Chile, Peru, Colombia and Mexico have bound together to for the Pacific Alliance rather than tying themselves more tightly to the ever-more politicized groupings such as Mercosur and even the now predominantly political Unasur. Why to the expense and pain of negotiating and signing onto rules and norms when they are unlikely to have any impact?

–Sean Burges

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Filed under Analysis, Argentina, Brazil, Democracy, Foreign Policy / Diplomacy, MERCOSUR, Paraguay, Uruguay

Venezuela into Mercosur: devil in the details and hints of a Paraguayan push-back

Although Venezuela appears to be quickly on its way into Mercosur thanks to the suspension of dissenting Paraguay’s political rights in the bloc, things may move more slowly than desired. A report from Brazilian business daily Valor Econômico points to the devil in the details. Political declarations need to be translated into bureaucrateeze, which in this case means that Venezuela has to sort out how to translate its trade coding terminology into the Common Mercosur Nomenclature. Brazil is apparently looking for five days of negotiations a month until the end of the year to ensure progress. Such an aggressive approach is perhaps necessary to keep focus if we look back to the problems of the Lula/Chavez-brokered PDVSA-Petrobras refinery and the collapse of the anel energetico South American gas pipeline ring.

Paraguay’s congress also appears to be pushing back on its Mercosur castigators, threatening to finally vote on Venezuela’s petition to join Mercosur. They reputed promise is to deny the petition. So far the vote has not taken place, which is perhaps a judicious decision given the increased presence of Brazilian anti-contrabanding and drug interdiction forces in the tri-border region as part of a likely strategy to pressure Paraguay’s illicit elites, which may well be leaning on the nation’s political representatives.

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Prizes and prices for Venezuela’s entry into Mercosur

As expected, Venezuela was formally admitted to the South American trade bloc Mercosur yesterday despite concerns from Paraguay, which is politically suspended from the bloc on charges of being anti-democratic. Indeed, Paraguay is thinking challenging Venezuela’s entry through a judicial review of the decision using the Mercosur institutional frameworks and may (being very optimistic here) get the newest member kicked out. Don’t hold your breath.

It does look like Chávez is moving quickly to settle his debts with Dilma over his admission to Mercosur. He arrived (fashionably late) in Brasíila for the summit meeting with signed contracts in hand. What was the initial payment on his account? Six Embraer 190 aircraft priced at US$271.2 million, with an option to buy 14 more for a total cost of US$904 million. One of the interesting sidelines to this deal will be the US reaction, who may be able to block the purchase through its control of licensing on key parts of the aircraft systems such as navigation aids. This is precisely what the US did when it blocked the sale to Venezuela of 24 Super Tucano prop fighters in 2006.

More to the point, Brazil is getting set to move quickly to take advantage of this new market. Buried at the end of a story on Brazil’s industrial policy is the strong hint from Minister for Development, Industry and Foreign Trade Fernando Pimentel that an August mission to Venezuela is in the works to explore the new opportunities opened by Mercosur’s enlargement.

Speaking of enlargement, the Brazilian foreign ministry Itamaraty noted that Venezuela’s entry might prompt other observer countries to think about becoming full members, which would fulfill ambitions from as far back as the 1980s to create some kind of a viable South American trade bloc centered on Brazil. In all likelihood Itamaraty planners were thinking of Bolivia and Ecuador as the next entrants, but it is interesting to note that the other observer members are Chile, Colombia, Mexico and, the surprise, apparently New Zealand.

Finally, the prize for neatly working a trenchant editorial line into upstanding newspaper journalism goes to O Estado de São Paulo. A major story on Venezuela’s joining of Mercosur started with the line: “Quatro presidentes anunciaram nesta terça-feira, 31, em Brasília que o Mercosul agora tem cinco integrantes,” which translates to “This Wednesday the 31st in Brasília four presidents will announce that Mercosur now has five members.” Never has Paraguay had such a loud voice in Mercosur deliberations.

–Sean Burges

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Filed under Analysis, Brazil, Ecuador, Foreign Policy / Diplomacy, MERCOSUR, News brief, Paraguay, Trade

News Brief: Venezuela on for Mercosur; Air Dilma ready to launch in Brazil?

Brazil appears set to hold course and bring Venezuela into Mercosur at a special meeting of the bloc at the end of July. Venezuelan president Hugo Chávez has reportedly tweeted that Dilma has invited him to the Merocsur meeting.

 

Meanwhile, Dilma’s recent lengthy voyages appear to have caused her to loose patience with the ‘Air Lula’ Airbus A319 that bought shortly before Lula started his globe-trotting presidential foreign policy ways. Apparently four different sources have told Reuters that Dilma is talking to Boeing about buying the same sort of 747 as used for Air Force One. Dilma’s gripe is that she will be undertaking at least one trip a year to India and China and that Air Lula lacks the legs to do the trip with anything less that two refueling stops. This wastes time and, worse for the nervous flyer Dilma, requires more take offs and landings.

The wider story flagged by Reuters is that Dilma’s talks with Boeing might be a sign that the US aircraft maker is going to crack the Brazilian market and might also show that it has a leg up on the competition for the Brazil’s long-delayed FX-2 fighter contract. Of course, it could also become a consolation prize if the lucrative air force renovation project goes to the French or Swedish bidders. This particular soap opera has being going on since the dying days of the Cardoso administration.

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Filed under Brazil, Foreign Policy / Diplomacy, MERCOSUR, News brief, Venezuela