The Emperor Has No Clothes

This post is also available in: Português 

Wilson Dias / Agência Brasil

In contrast to most of the world’s major emerging nations, Brazil lives in a very comfortable neighborhood. Unlike, for example, its BRICS partners—China, Russia, India, and South Africa—it has no serious conflicts, indeed only friendly relations, with the nine countries on its borders and all other Western Hemisphere nations. Not only is Latin America a region at peace, it is relatively prosperous—with a per capita income that puts it in the upper middle income category worldwide. Moreover, despite its recent setbacks and deepening challenges on many fronts, Brazil remains Latin America’s political and economic heavyweight, and continues to wield substantial influence throughout the region, particularly in South America. Officials in Washington acknowledge that they need Brazil’s cooperation (or tolerance, at least) to pursue the US agenda successfully in the region.

Brazil’s policies in Latin America seem less and less to be serving the country’s interests or advancing its priorities.

Yet, Brazil’s policies in Latin America seem less and less to be serving the country’s interests or advancing its priorities. At a time of economic recession, with trade and investment flows contracting, Mercosul, Brazil’s only significant free trade arrangement, may be more of a burden than a productive commercial alliance.  Its two largest Mercosul partners—Argentina and Venezuela—are beset by deeply troubled economies. 

But it is not only that the economies of Brazil’s trade partners are badly ailing, Mercosul itself has become largely dysfunctional. Brazil and other members regularly violate their own rules, and have erected a variety of protectionist barriers against one another. Mercosul also stands in the way of Brazil’s commercial relations with the rest of the world. After 20 years of negotiation, the Mercosul group has made scant progress toward a trade pact with the European Union, which buys more from Brazil than either China or North America.  While countries like Mexico, Chile, and Peru have signed dozens of free trade agreements worldwide, Mercosul remains as Brazil’s only significant trade pact.  

At a time of economic recession, with trade and investment flows contracting, Mercosul, Brazil’s only significant free trade arrangement, may be more of a burden than a productive commercial alliance.

To be sure, the Mercosul countries, particularly Argentina, are important commercial partners and large importers of Brazilian manufactured goods. There are good political reasons as well for Brazil to sustain a strong relationship with its immediate neighbors. At the same time, however, to recover its economic dynamism, Brazil needs to build a more vigorous network of trade and investment relations across the globe—which can compensate for slowing Chinese demand and low international commodity prices—and develop a longer term commercial strategy.

Reforming Mercosul and turning it into a genuinely productive trade group is a Herculean task, although the results of forthcoming elections in Argentina and Venezuela might open the way for some reform.  More likely, Brazil will have to find a way to loosen its bonds to Mercosul, and thereby open the way to reshaping its international and regional commercial ties. A good place to start would be with the Pacific Alliance—which now includes Mexico, Chile, Peru, and Colombia, Latin America’s most open economies and robust traders. While full membership will probably take some time to achieve, Brazil would almost certainly be welcomed as an associate of the Alliance. With Brazil, it would represent some 70 percent of Latin America’s economic activity.  

Progress toward two mega-regional pacts, involving most of the world’s major traders, may soon force Brazil to adjust to dramatic changes in global trade patterns. Negotiations have already been completed on one of the pacts, the Trans-Pacific Partnership or TPP, which is now awaiting final approval in the legislatures of a dozen Asian, Latin American and North American nations. Together, these nations are responsible for about 45 percent of world trade, and include two of Brazil’s largest commercial partners—the US and Japan.  In a second set of negotiations, the US and European Union are pursuing a free trade area among countries that account for more than a third of Brazil’s foreign trade. If and when these agreements go into force, Brazil will almost surely lose competitiveness in several of its biggest markets—that is, unless it begins now to develop plans for associating with the new pacts and adjusting to their rules, which again means loosening its Mercosur bonds.

[caption id="attachment_44604" align="alignleft" width="447"]Dilma_Rousseff_e_Nicolás_Maduro Dilma Rousseff and Nicolás Maduro in July 2015 at the 48th Mercosul summit in Brasilia.[/caption]

Brazil’s regional policies are not only cramping its trade prospects and economic potential. They are also hampering the country’s ability to deal with crises and potential conflicts in South America.  Today, Brazil’s greatest foreign policy test, and a challenge for all of Latin America, is neighboring Venezuela. The Bolivarian Republic appears on the verge of a nationwide humanitarian crisis. Its economy is projected to shrinks by 10 percent or more this year, while its inflation, the highest in the world, may be upwards of 200 percent. The steep drop in the price of oil, Venezuela’s only money-making export, has depleted its currency reserves and led to extreme shortages of foodstuffs, medicines, and other vital imports. Its capital city, Caracas, suffers the world’s highest murder rate.  The politics of the country are polarized and volatile, and could become more violence-prone as December’s crucial parliamentary elections near.

Brazil and its South America neighbors have largely ignored Venezuela’s steady deterioration—which has included an increasingly authoritarian and lawless government, the destruction of the country’s press and other independent institutions, and mounting human rights abuses of all kinds. It was 18 months ago, at Michelle Bachelet’s inauguration in Chile, when UNASUL, the political grouping of South American nations first assembled by Brazil, agreed to mediate the escalating confrontation between government and opposition.  Since then, however, as the two sides have become ever more hostile, UNASUL mediation efforts have hardly been visible. Now, UNASUL is the only outside institution that the Venezuelan authorities are allowing to “accompany” their upcoming elections. Yet, even this limited oversight, which falls considerably short of a full monitoring or observation mission, is currently is in jeopardy.  Brazil withdrew from the exercise on orders of the country’s Electoral Tribunal, following Venezuela’s rejection of former Supreme Court President and Defense Minister Nelson Jobim as mission chief.

Today, Brazil’s greatest foreign policy test, and a challenge for all of Latin America, is neighboring Venezuela.

The Bolivarian Republic has, in addition, also provoked confrontations with neighboring Colombia and Guyana in recent months. In the case of Colombia, the far more serious of the two, the Caracas government moved military units to the border, closed bridges and other frontier crossings to Colombia, and chased many Colombians from the area—all supposedly to halt large-scale smuggling, but more likely aimed at generating nationalistic sympathies for its candidates prior to December’s parliamentary elections. Brazil and most other South American nations meekly deferred to Venezuela, when they declined to support an OAS discussion of possible responses to the Colombian confrontation.

Clearly Venezuela is close to an internal crack up, which, if it occurs, will have devastating consequences for most Venezuelans and unpleasant spillover effects for other countries in the region. There may still be time for Latin America to find a collective approach to helping Venezuela—either to avert a tragic outcome or  recover in its aftermath—but  it will be up to Brazil to take the leadership.  Although Venezuela may be the most dramatic, it is not the only problematic situation that has gone unattended or been badly managed in South America. Improving that record will require Brazil to reconsider its attitudes and policies in the region, and be more ready to act together with other nations to intervene in particularly troubled situations. National sovereignty is important, but there are other fundamental values that cannot be ignored.

There should be no doubt that Brazil’s largely peaceful and friendly neighborhood represents a huge asset for the country. It doesn’t have to worry about hostilities on its borders or spend great sums on maintaining its armed forces and intelligence agencies. National security issues do not crowd the agendas of it leaders, who can focus on other vital challenges like national economic growth, social equity, and building stronger democratic institutions. But it is an asset from which Brazil could draw even greater strength—by taking advantage of the opportunities that its congenial neighborhood offers for cooperation and integration, which are absent in other regions of the world.