Foreign Trade Without Ideological Bias

SÃO PAULO – After three years in which the country’s foreign trade policy proved erratic, it seems that in its final year in office, the current government has awakened to the importance of diplomacy without ideological bias, focusing primarily on economic results. It’s unfortunate that the President’s visit to Moscow occurred precisely at a time when the Russian government is embroiled in a crisis with its neighbor Ukraine and this visit could be seen as a challenge to the United States and the nations forming the North Atlantic Treaty Organization (NATO), confirming the erratic course of the Brazilian government.

Once this crisis between Russia and Ukraine is resolved, it is believed that Brazil can increase its trade relations with Russia without harming its relationship with the United States, its second-largest partner, and the powers of NATO and the European Union. After all, trade with Russia has been declining in recent times. In 2021, Brazil sold only $1.7 billion worth of products to that country, equivalent to 0.6% of our total exports, the lowest share in at least two decades.

As a result, Russia, which has the ninth-largest population on the planet, ranks 36th in the list of countries receiving Brazilian products, which is regrettable since trade between the two countries has fluctuated between $8 billion and $9 billion. Russians mainly buy soybeans, chicken, meat, coffee, sugar, and even peanuts.

However, today, the value of sales to Russia is very insignificant when compared to exports to China ($88 billion in 2021). Sales to the United States reached $31 billion, and the trade balance reached $70 billion, a result significantly higher than in 2020 when trade between the two countries recorded the worst result in 11 years ($45 billion), nearly 24% lower than that registered in 2019.

Furthermore, in recent times, rules have been put in place to simplify business between the two countries and, in fact, have removed obstacles raised by the rules of Mercosur, which require the full agreement of its members for the signing of agreements with other blocs or countries. This has undoubtedly prevented the South American bloc from establishing more significant agreements.

In addition to strengthening trade relations with the United States and China, Brazil needs to increase the presence of its products in other markets. One such market is the United Kingdom, the fifth-largest economy in the world but only the twentieth-largest trading partner of Brazil. Obviously, this requires a free trade agreement that could lead to $40 billion in trade over the next five years. Not to mention that a trade agreement with Russia could help increase the presence of Brazilian products in Eastern European countries, which is currently quite limited, considering the region’s consumption potential. This could be directly affected by Russia’s war with Ukraine.

Finally, it should be emphasized that agreements between countries and blocs are extremely important because they help avoid double taxation, increase the trade in services, stimulate the trade in goods, reduce financing costs, and acquire new technologies. This is what Brazil lost in 2005 when it began to torpedo the signing of the agreement to create the Free Trade Area of the Americas (FTAA), which would have opened up other major markets. Just look at Mexico, with an economy nearly one-third smaller than Brazil’s, exporting nearly twice as much as Brazil. All because it had no qualms about joining the North American Free Trade Agreement (NAFTA) alongside the United States and Canada.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Manager of Environmental, Social, and Corporate Governance (ESG) at the Fiorde Group, consisting of Fiorde International Logistics, FTA Transport, Warehouses, and Barter International Trade. Email: lianalourenco@fiorde.com.br. Website: fiorde.com.br.

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