Betting on Brazil

While the long-term effects of recent protests in Brazil are still unclear, the short-term upheaval has shone a harsh spotlight on Brazil and its economy. The country’s rapid growth has slowed, but is the biggest economic success story of the Americas really in danger? OpenCanada asked Canada’s Ambassador to Brazil, the Honourable Jamal Khokhar, about Brazil’s economic prospects in the face of challenging global trends, and the future of Canada-Brazil relations.

Brazil’s economic and political future is looking less certain than it did a decade ago. What global trends do you think pose the greatest economic challenges and opportunities to Brazil today? 

Brazil is a neighbour in the Americas, a major global economic player, and a priority market for Canada. It is important that we further develop our broad, dynamic, and multi-faceted commercial relationship. Increasing and deepening trade and investment between Canada and Brazil will directly benefit both our countries.

Brazil’s GDP growth for this year is expected to come in somewhere between 2-3 percent. This would be a respectable performance considering what remains to be a challenging global economic environment.  There has been slower growth in the last two years that has affected not only Brazil but the global economy as a whole.  Ultimately, one cannot ignore the important ways in which the Brazilians continue to experience significant economic progress.

Millions more have joined the middle class – a total of nearly 40 million in the past decade. That’s more than the equivalent of Canada’s entire population joining a burgeoning consumer class.  At the same time, Brazil has kept unemployment at around 5 percent and wages rising above inflation. This broadening of the consumer middle class has created a dynamic domestic market that is propelling Brazil to become the fifth largest economy in the world by 2050.

The globalization of value chains is one global trend that matters to Brazil – especially to create jobs for its growing middle class. As Brazil tries to addresses its competitiveness challenges, there will be growing opportunities in areas such as infrastructure, education, science & technology and natural resource development.  These correspond to core Canadian strengths and are at the center of our commercial, economic and political engagement with Brazil.

Brazil is a country with many options and very bright prospects.  “Quarter-over-quarter” progress and metrics can be disappointing at times, but it is important to keep an eye on the longer-term trend lines which continue to be positive and offer significant opportunities.  This is particularly true against the backdrop of dramatically growing global demand and rising populations in Asia.  Few countries are as well placed as Brazil to help meet those challenges.  In the aftermath of the global recession, and while some of Brazil’s traditional economic partners struggle to maintain their market share, Canadian suppliers, investors, and partners have been and can continue to be increasingly active and successful.

When you consider the global trends that are shaping economic relations between developed and developing economies more broadly, are you optimistic about the future of the Canada-Brazil relationship?

As a long time Brazil watcher, I’m interested in a number of trends. As mentioned earlier, I believe the globalisation of value chains can be transformational for Brazil, developed economies, and the international trading system at-large.

Another trend is the stronger role played by several emerging economies – and not only the BRICS – in both the large multilateral institutions and those with a regional focus. Countries like Brazil will exert increasing influence and geo-political clout on the world stage, in step with the diversification of their economic and political interests.  The recent election of Roberto Azevedo, a Brazilian, as director of the WTO is a good example of the potential for emerging economies to redefine the face of traditionally G8-led global architecture.  How these dynamic, emerging economies will wield that increased influence will depend both on the reaction of the traditional developed economies and on their own interests.  When looked at positively, they bring new perspectives and relevance to the table while at times posing challenges to more established views amongst industrialized economies since the establishment of the Bretton Woods institutions. It is crucial that multilateral institutions remain forums of open dialogue aimed at constructively shaping the rules-based approaches to trade and international cooperation. Only then can these rules benefit from broad support from both developed and developing economies alike. This requires openness and flexibility from all parties.

Several years ago, our Prime Minister made the Americas a foreign policy priority and Brazil was distinguished as one of the priority countries in the Global Commerce Strategy. Our bilateral relationship has expanded considerably, from people-to-people ties to all aspects of commerce and bilateral dialogues on strategic issues.  Over the past decade, Canada-Brazil bilateral merchandise trade has grown by 170 percent, while bilateral investment has grown even stronger, by around 300 percent. Today, large corporations from Brazil have made strong investments in Canada and the same is true of Canadian corporations in Brazil. Brazil and Canada matter to each other and for sound reasons.

When I look at Canada’s strategic focus in Brazil over a number of years, I’m convinced that the wise choices made greatly contributed to the progress in the relationship and success of Canadians active in Brazil. Today, we’re seen by Brazilians as credible partners in areas such as education, science & technology, infrastructure, and resource development, where we have strong capabilities. We have a strong base to build on, but it now takes energy and commitment to drive the range of opportunities forward.  Meanwhile, the aura effect and branding we gain is, of course, beneficial to all other aspects of the relationship.

What attitude or approach do you think emerging economic powers should adopt to best increase their chances of achieving success in the global economy over the next 5 years? 

The newly emerged economic powers have already demonstrated they are very capable of succeeding internationally. Now, just like more traditional trade partners, the newly emerged economies also need to be selective and strategic. It would be difficult to undertake everything unilaterally.  Collaborative approaches involving partnerships are important in the long term, especially when pursuing opportunities in third countries. For example, much has been said about Brazil’s interest in the African continent, a region with attractive economic growth prospects and similarities with Brazil’s own geography and economic opportunities. Between 2002 and 2012, Brazilian trade with Africa has jumped from US$5 billion to US$26.5 billion. It’s also a region where Canada has had historical engagement through our Francophonie and Commonwealth ties as well as decades of on-the-ground commercial experience and know-how. There is an opportunity for Canadian and Brazilian companies to collaborate on joint undertakings in Africa.