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.
After Brazil seemed to be looking more optimistically to the future, thanks to some economic growth in the past three years and a rapidly growing middle class, the Covid crisis has hit the country hard since early 2020 and has set its development back. There is great interest in finally leaving the pandemic behind and starting a dynamic economic recovery process. In order to achieve this goal, there are plans for modernising the industrial sector, creating new transport infrastructure as well as expanding the use of renewable energies. Innovative, sustainable solutions, and new technologies are in demand in all areas, and the Industry 4.0 concept 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 more than 17 billion Euro, with imports of German products totaling 10.2 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 tries to further open the country to the idea of a stronger 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 on international cooperation in multilateral formats and free trade, although it also tries to protect industrial products from competition. Also, its role within the WTO was not very constructive in the past. The absence of European and German investment has also induced Brazil to become very receptive to Chinese investment and interests, and to start looking for other multilateral forums (such as BRICS) at the start of the millennium already.
STATUS QUO: How close is Germany and Brazil's current cooperation in this area?
The dialogue on issues such as the environment, climate and biodiversity, energy, science and technology, and defence, for example, has deepened in recent years. There is also a mutual desire to cooperate more closely on more innovative issues such as cyber security, urbanisation, the circular economy and hydrogen technology.
A focus of German-Brasilian cooperation is the protection of tropical rain forests. These projects are funded by 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) . In the country that is home to 60 percent of the world’s largest rain forest, however, the case that economic and ecological interests are not necessarily mutually exclusive must still be made. The Bolsonaro government is primarily focused 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 business, Brazil has endeavoured to increase its participation in global forums in which Germany is also actively involved (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. Its ratification, however, is still pending.
POTENTIAL: What is the potential for strengthening the partnership between Germany and Brazil in this area?
The agreement would create the largest free trade area in the world, with a population of more than 770 million. The planned elimination of 91 percent of customs duties on traded goods could produce annual savings of 4 billion Euros for European exporters alone. For Brazil, the agreement offers opportunities primarily for the agricultural industry. Beyond 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 US and China.
The potential for strengthening the partnership between Brazil and Germany is considerable, even beyond trade policy. The large distances and the lack of infrastructure are difficult conditions for manufacturing and lead to a concentration of most of the industrial and logistics parks in the south and southeast of the country. This is exemplified by the low utilisation of Brazilian river transport and the de facto absence of a railway network. The solutions for addressing this lack of infrastructure and for fully integrating the other regions must in turn meet the requirements of low cost and minimal environmental impact. This is where German industry, a technological leader in many fields, could provide tailor-made solutions.
German-Brazilian scientific cooperation can also solve another structural problem facing both countries, namely the lack of skilled workers, which is a significant obstacle to innovation. Joint training and further training programs 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 transmitting 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, intensified efforts by the German-Brazilian chambers of commerce would offer the opportunity of further expanding the presence of German companies in urban centers in Brazil that have yet to be explored and that promise major potential.
A closer and deeper relationship with the subnational units (federal states) would also be important. Although Brazilian federalism is much 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.
Generally speaking, it is important not to isolate Brazil, as the most populous and economically strongest country in Latin America, in response to 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.
Last update: July 21st, 2021
02 — Foreign Office
Foreign Office Brazil
Rua Guilhermina Guinle, 163, Botafogo
22270-060 Rio de Janeiro - RJ
04 — The region
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
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
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
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
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