PARTNER-ATLAS

BRAZIL

as a partner for safeguarding our prosperity via free trade and innovation

01 — The key questions for the Partner-Atlas

RELEVANCE: What relevance does Brazil have for Germany with regards to “safeguarding our prosperity via free trade and innovation”?

Brazil is the largest economy in Latin America and, with a GDP of approximately 2 trillion US dollars is one of the most important emerging markets in the world. The country has a domestic market of 210 million inhabitants and is rich in natural resources.

Thanks to slight economic growth over the past three years, Brazil, with its rapidly growing middle class, is once again looking more optimistically to the future, although the coronavirus crisis significantly set this back again. There is great interest in modernising the industrial sector, creating a new transport infrastructure and in pressing ahead with the expansion of renewable energies. Innovative, sustainable solutions, and new technologies are in demand in all areas, and the topic of Industry 4.0 is becoming increasingly important in Brazil. Moreover, a modern start-up culture is emerging, particularly in the megacities of São Paulo and Rio de Janeiro.

For Germany, Brazil has traditionally been the most important trading partner in South America, and it is the only country in Latin America with which it has maintained a strategic partnership since 2008. In 2019, the Brazilian-German trade volume was around 17 billion Euro, with imports of German products totalling 10.1 billion Euro. This means that Germany ranks fourth among the most important supplier countries.

WILLINGNESS: To what extent is Brazil willing to work with Germany in realising this interest?

According to the official discourse, the Brazilian government is striving to increase openness to greater Brazilian integration into productive value chains, to implement structural reforms in tax and labour law, and to reduce bureaucracy. This could create a friendlier climate for international investors. In-depth cooperation with German companies and institutions could potentially offer added value for Brazil in the area of environmental and climate protection, or in the development of Industry 4.0 concepts.

Brazil has traditionally taken a positive stance with respect to international cooperation in multilateral formats and free trade, although it also tries to protect industrial products from competition, and its role within the WTO has not been very constructive in the past. The absence of European and German investments has also led to Brazil becoming very receptive to Chinese investments and interests, and to it seeking out other multilateral forums (such as BRICS) by the start of the millennium.

STATUS QUO: How close is Germany and Brazil's current cooperation in this area?

The exchange has deepened in recent years, for example on issues such as the environment, climate and biodiversity, energy, science and technology, and defence. It would also be good to work more closely together on more innovative topics, such as cyber security and urbanisation.

With funds from the Federal Ministry for Economic Cooperation and Development (BMZ) and the international climate initiative of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), Germany and Brazil are cooperating particularly on the protection of tropical rain forests. In the country that has 60 percent of the world’s largest rain forest on its territory, however, a case must still be made for economic and ecological interests not necessarily being mutually exclusive. With this in mind, the Bolsonaro government is focusing primarily on plans for further economic exploration of the Amazon region.

Brazil and Germany also have several bilateral cooperation programmes in the areas of energy security (German-Brazilian energy partnership), food and scientific development (The German Centres for Research and Innovation, DWIH). Initiatives such as these have fostered an environment for sharing experiences and are in line with the objectives proposed in the UN 2030 Agenda for sustainable development.

In trade and the economy, Brazil has endeavoured to increase its participation in global forums in which Germany is also actively taking part (OECD). The historic conclusion of the agreement between the EU and the South American trade alliance, Mercosur, is a decisive success, after almost 20 years of negotiations.

POTENTIAL: What is the potential for strengthening the partnership between Germany and Brazil in this area?

For Brazil, the agreement offers opportunities primarily within the agricultural industry. If it were ratified, the agreement would create the world’s largest free trade area with more than 770 million inhabitants. The planned elimination of 91 percent of the tariffs on traded goods could result in annual savings of 4 billion euros for European exporters alone. Over and above the importance for trade policy, the agreement is undoubtedly a (geo)-political signal for free trade, especially with respect to the two protectionist world powers, the USA and China.

The potential for strengthening the partnership between Brazil and Germany is also considerable in areas beyond trade policy. The large distances and the lack of infrastructure make production difficult and concentrate most of the industrial and logistics parks in the south and southeast of the country. An example of this is the low utilisation of Brazilian river transport and the de facto absence of a railway network. The solutions for overcoming this lack of infrastructure and to fully integrate the other regions must in turn meet the requirements of low cost and minimal environmental impact. This is where German industry, at the forefront of so much of technology, could provide tailor-made solutions.

German-Brazilian scientific cooperation can also solve another structural problem facing both countries, namely the lack of qualified workers, which is a significant obstacle to innovation. Joint education and further training can help to increase the number of skilled workers.

The potential for digitising production processes is associated with expanding the country’s connectivity and broadband infrastructure. It is not just a matter of providing mechanisms for transferring information, but also of truly integrating the most distant regions into the Brazilian national production market. Germany can compensate for the lack of investment and technological capacities by contributing resources and expertise, and by expanding its participation in Brazilian economic development.

POLICY RECOMMENDATION: What in German foreign policy has to change in order to fully exploit this potential?

It would be in both countries’ interests to use other foreign policy instruments in addition to the traditional diplomatic channels. For example, intensification of work in the German-Brazilian chambers of commerce would offer the opportunity of further expanding the presence of German companies in potential centres in Brazil that have yet to be explored.

A closer and deeper relationship with the subnational units (federal states) would also be important. Although Brazilian federalism is very centralised, some states and municipalities have secretariats for international relations that can serve as channels for implementing new cooperation agreements. This so-called paradiplomacy represents another possible instrument for deepening the relations between Brazil and Germany.

The common ground in foreign policy (such as the approach towards the political situation in Venezuela), the consolidation of free trade in terms of rules and a commitment to guaranteeing individual freedoms should be used to promote dialogue on sensitive issues, such as environmental protection and climate change.

It is of paramount importance not to isolate Brazil, as the most populous and economically strongest country in Latin America, following the results of the last presidential election in 2018. Brazil is needed to solve global issues as well as deal with regional problems.

Anja Czymmeck heads the KAS Office in Brazil.

BRAZIL

  • Population: 212,559,417
  • Capital: Brasilia
  • Interest: Safeguarding our Prosperity via Free Trade and Innovation
  • Region: Latin America
  • Potential partner countries: Argentina, Brazil, Chile, Costa Rica, Colombia, Mexico, Panama, Peru

04 — The region

Latin America

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PERU

Peru is an exception in Latin America in terms of its enormous wealth of resources and biodiversity. The country has three large landscape zones: the coast, most of which is covered by desert, the Andes and the jungle region. According to the World Resource Institute, Peru is one of only eight megadiverse countries in the world, possessing 84 of the 104 existing life zones. 76 percent of the country is occupied by rainforest, which means that the country has the largest share of the Amazon rainforest after Brazil.

  • Population: 32,971,854
  • Capital: Lima
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MEXICO

In connection with organised crime, drug trafficking, and the penetration of the state by criminal groups, Mexico – a regional leader and member of the G20 – is facing major challenges that affect both internal and regional security. In view of the cross-border effects of organised crime in Mexico, which extend far beyond the American continent, migration from Central America and other regions of the world through Mexico towards the USA, the significant economic potential as a production location with a well-qualified workforce and privileged access to the US market via the North American Free-Trade Area, Mexico is of great importance for the stability of the region.

  • Population: 128,932,753
  • Capital: Mexico City
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COLOMBIA

According to official data from the Colombian migration authorities, approximately 1.8 million of the more than 4 million Venezuelan migrants are currently in Colombia. According to estimates by the Colombian Ministry of Foreign Affairs, the flow of migrants could increase to 3 million by the end of 2020, not including “transit migrants” or commuters.

  • Population: 50,882,891
  • Capital: Bogota
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URUGUAY

In comparison to other Latin American countries and despite its modest size, Uruguay serves as a model with its impressive political and socio-economic status. In a region that is not always stable, the country can look back on a long democratic-republican tradition with functioning institutions and a diverse media landscape.

  • Population: 3,473,730
  • Capital: Montevideo
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BRAZIL

Brazil is the largest economy in Latin America and, with a GDP of approximately 2 trillion US dollars is one of the most important emerging markets in the world. The country has a domestic market of 210 million inhabitants and is rich in natural resources.

  • Population: 212,559,417
  • Capital: Brasilia
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