Global Policy Forum

By Mario Osava

Trade is the cement with which President Luiz Inacio Lula da Silva aims to consolidate Brazil's alliance with the other heavyweights of the developing South. The three-day visit he just made to India marked progress in that strategy, which is based on specific economic interests and a shared attitude of pragmatism, unlike the efforts made within the Third World of the past. The aim is to construct a "new trade geography" in the world, said Lula, but stressed that this does not mean playing down the "fundamental" importance of exchange with rich countries. Instead, it means creating new alternatives, reducing dependence, and uniting developing countries to negotiate in equal conditions all global or regional agreements, the president said.

The outstanding result of Lula's India visit was the signing of a market access treaty that establishes tariff preferences between India and the countries of Mercosur (Southern Common Market), made up of Argentina, Brazil, Paraguay and Uruguay. Brazil's Mercosur partners sent representatives as part of Lula's retinue. Within four months, the two parties to the agreement will select the products that will have reduced tariffs in bilateral trade, and decide on rules of origin and dispute settlement mechanisms. The accord, a first step towards future free trade, "inaugurates a new era in South-South cooperation", said Lula.

Five other agreements - on cooperation in space research, including the joint launch of satellites, and on cultural exchange and tourism - were also signed in New Delhi. More than a hundred Brazilian business executives accompanied the president on his visit. Negotiations with their Indian colleagues extended through Thursday, as they explored the range of possibilities for bilateral trade, investment and technology transfer. But trade between Brazil and India today is relatively modest: just US$1.04 billion last year, or one percent of Brazil's total foreign trade flow. However, it is growing rapidly, more than doubling in the past three years.

Brazil's minister of development, industry and trade, Luiz Fernando Furlan, says bilateral trade could grow five-fold in five years. An annual flow of $5 billion is no exaggeration, he says, considering the size of the two markets (Brazil has a population of 174 million, India has 1.1 billion). Fuel alcohol mixed with gasoline is becoming more and more common in India, which throws open the door for massive Brazilian exports of this alternative fuel and the related technology. The two countries are leaders in the production of sugarcane, the raw material for alcohol, and over the past three decades Brazil has developed an intensive program for substituting gasoline with ethanol. Brazilian firm Dedini transferred technology to India last year that has led to the construction of alcohol distilleries. There will be as many as 15 of these fuel alcohol plants operating in India in two years, announced the company.

Aircraft, footwear, furniture and food could diversify Brazil's exports to India, which are currently concentrated in crude oil, soya, and iron ore. Imports from India are already quite diverse, however, including diesel fuel, medications, capital goods and chemical products. Trade holds a central place in the intensive diplomacy that Lula is carrying forward, both in terms of strengthening the national economy and firming up international alliances. His top priority right now is to consolidate and expand the Group of Three (G3), comprising of Brazil, India and South Africa. The latter two have already received visits and are negotiating trade agreements with Mercosur. Lula will pay a visit to the next target, China, in May.

Brazil's foreign trade is currently concentrated in the United States and the European Union, which absorb nearly half of the South American giant's exports. But progress has been made in the search for new markets. Argentina and China are the second and third leading importers of Brazilian products, surpassed only by the United States. The Brazilian effort to multiply exchange with countries in the developing world, which was begun with Mercosur and is continuing in the negotiations for South American integration, now extends to all continents. In June, when Brazil will host in Sao Paulo the meeting of the United Nations Conference on Trade and Development, Lula hopes to launch the bases of the System of Trade Preferences Among Developing Countries, an idea that emerged in the 1980s but was never implemented. The intensification of trade within the developing South is accompanied by other demands from these countries, or at least by the heavyweights, which are seeking the democratization of international relations. For example, Brazil, India and South Africa are pushing for an expanded UN Security Council, in which they would also hold permanent seats, today monopolized by Britain, China, France, Russia and the United States.

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