São Paulo – Bilateral trade between Brazil and the Arab countries grew sixfold from 1989, the date when the Ministry of Development, Industry and Foreign Trade started recording the figures, and 2012. Last year, trade between Brazil and the 22 countries represented by the Arab League reached US$ 25.98 billion. Twenty-three years ago, bilateral trade totalled US$ 4.1 billion. The growth was mainly boosted by appreciation in Brazilian exports. Despite the growth, there is space for further expansion of business.
The international economics professor at the Pontifical Catholic University of São Paulo (PUC-SP), Antonio Carlos Alves dos Santos, stated that trade exchange with the countries of the League of Arab States were meaningful when diplomat Azeredo da Silveira was in charge of the Itamaraty, the Brazilian Foreign Office (1974-1979), during the military government of Ernesto Geisel. At the time, Brazil imported oil from and exported cars to Iraq. Bilateral trade stopped, and would only start growing again during the Fernando Henrique Cardoso (1995-2003) and Luiz Inácio Lula da Silva (2003-2011) governments.
“To Brazilian diplomacy, the Arab world was never been a priority. There were good relations in the 1970s, with minister Azeredo da Silveira and, later, in the late Fernando Henrique Cardoso government. It boomed during the Lula government. But in the late years of the [Cardoso] government, the Itamaraty started expanding the Brazilian export basket. Closer ties were established, mainly due to economic aspects. And then Lula, in his first term in office, travelled to the region,” said Santos. In December 2003, Lula visited Libya, Lebanon, Syria, the United Arab Emirates and Egypt.
Arab Brazilian Chamber of Commerce CEO Michel Alaby also stated that in the Lula government sales to the region grew most, but he recalls that the Arab Brazilian Chamber had important participation in the process.
“It was the Arab Brazilian Chamber’s job to promote political and commercial activities alongside ministries. That is very clear. We must add value to the document regarding the potential of the region that we handed to Lula, and show that changes in Brazilian foreign policy towards the Arab world, making it into an effective partner, resulted in greater exports,” he said.
Early into president Lula’s first term in office, the organisation presented a study on the potential growth of trade with the Middle East and North Africa if trade promotion actions took place. The government adopted the document and triggered a series of initiatives for generation of closer ties.
Alaby also said that promotion of the Summit of South American-Arab Countries (Aspa) in 2005 brought the nations closer together. Meetings were promoted in Brasília in 2005, in Doha, in 2009, and in Lima, Peru, in 2012. The next ASPA is scheduled to take place in Saudi Arabia, in 2015.
Figures disclosed by the Development Ministry show that between 1989 and 2000, annual exports from Brazil to the region oscillated between US$ 1 billion and US$ 1.7 billion, but that they advanced much in the following years, climbing from US$ 2.2 billion in 2001 to US$ 15.1 billion in 2011, with slight reduction to US$ 14.8 billion in 2012.
Imports by the Arabs, in turn, gained strength starting in 2004, when they rose to US$ 4.1 billion. Last year, Arab purchases of Brazilian products reached a record US$ 11 billion.
However, trade is still greatly focussed on commodities, despite some changes. In 1989, 99.2% of the total imported by Brazil was oil and its products. Last year, hydrocarbons answered to 82.1% and fertilizers grew in importance, to 11.8%.
The Brazilian export basket, in turn, grew and included a greater volume of products, like meats, sugar, ores, pulp and machinery. However, most of the shipments abroad are commodities. There are always, however, higher value added items in the basket, like defence products, aircraft and vehicles.
The main trade partners for Brazil in the Middle East and North Africa are Saudi Arabia, Algeria, Egypt, the United Arab Emirates and Morocco. The main trade partner since 1989 has been Saudi Arabia, followed by Algeria and Egypt.
In recent years, trade relations with Qatar, Kuwait, the United Arab Emirates and Iraq have grown. Trade exchange with Libya, which reached US$ 1.7 billion in 2008 dropped to US$ 102.6 million in 2011, due to the Arab Spring, but in 2012 they started recovering and reached US$ 423.1 million, all in exports from Brazil.
Further
José Farhat, the commercial director at Pankommerz and a member of the board at the Arab Brazilian Chamber started operating in trade with the Arab world in 1974. At first he sold beef and imported oil. “I did that for 17 years, until Saddam Hussein (the Iraqi dictator who was killed in 2006) invaded Kuwait, in 1990, and everything stopped. Simultaneously, I explored other business in the area of food,” he said. Currently, Farhat exports to the region on demand. He sells coffee, sugar and live cattle.
The businessman says that exports and methods for sale to the region have evolved much, but there is still space for improvement. “We may export more live cattle, but that depends on sanitary protocol agreements with governments. It is also necessary to find new niches. There is demand for glycerol, which is a by-product obtained from soy crushing. I still believe that the great problem is our business world, which is not prepared to export,” he said.
Santos, from PUC-SP, also said that it is possible and probable for bilateral trade with the region to increase further in coming years. This is possible, says the director, as imports and exports between these countries are not competitive, but complementary. While Brazil buys oil and fertilizers, it sells food and machinery.
The professor pointed out that Brazil may strengthen ties with the countries that are currently living the unfolding of the Arab Spring. “Egypt, which has a great economy, may become a stronger partner when the Arab Spring is solved. This may take place with Libya, but in that case, Brazilian diplomacy took a long time to act, at the time of the problems. The countries that showed themselves ‘friendlier’ in the period may benefit. However, there are Brazilian companies that participate in the reconstruction of Libya,” he said.
Alaby believes in the growth of exports, but warns about great competition and about the economic conjecture. “With the crisis, Europe has become a heavyweight competitor for Brazil in the beef and dairy markets. China is also a threat as it can uses its bargaining power. But in the area of food, I believe we are unbeatable. There is a forecast that in 2020, food import of the Arab countries should rise from the current US$ 80 billion a year to US$ 120 billion due to their economic growth. Brazil has great chances of making use of this growth,” he said.
According to Alaby, among the ways to strengthen trade ties are reducing tax, signing free trade agreements, expanding trade delegations, creating bilateral companies and promoting reciprocal investment.
*Translated by Mark Ament
