Q What is Brazil’s position on trade?
A Brazil’s position is aligned with the developing countries [the G20 group] and has been the same for the past year. We are dealing with three major trade constraints: export subsidies, market access and internal support [for agricultural prices in Europe and the US]. Before Cancún [last September’s WTO meeting that collapsed], we were able to join forces with several countries that have the same challenges as us. The major players were betting that the group would be dismantled and there was surprise when that didn’t happen.
In fact, today the group is more consistent than it was in the middle of last year. The group was created not to block the Doha round [the current WTO negotiations] but what we want is that the ambitions of the Doha round can be delivered. We understand that the WTO is the best instrument that we have to balance world trade in terms of fairness and reciprocity.
Q Do you feel that progress is being made on the issue of agricultural subsidies?
A Sometimes we feel “yes” and sometimes we feel the opposite. The UK and German authorities and some other members of the EU are moving ahead in understanding that agricultural subsidies are not producing wealth. On the contrary they are spreading poverty all over the world, depressing prices through artificial measures that increase production. Then rich countries need to throw away the goods and that is bad for the whole economy.
Most international companies realised a while ago that the large opportunities for growth are in the markets that are still unsaturated but the problem is the lack of consumer income. The only way to increase consumers’ income is to give them opportunities in terms of jobs. Most of the countries have strong links with agriculture. (Since this interview the EU has proposed ending farm export subsidies)
Q What did you feel about Mr Zoellick’s [the US trade representative] description of Brazil as a “won’t-do country”?
A I believe that Bob [Zoellick], at the beginning when he published that article in London, wanted to find a scapegoat for Cancún. At that time he suggested that Brazil and the G20 could be [the scapegoat]. But I was in Cancún and I know that the deadlock of Cancún was not related to the G20 or even to agriculture. The deadlock was because Mr Derbez [Mexico’s foreign secretary who led the trade discussions] together with Mr Supachai [WTO director general] decided to begin the agenda with item four rather than item one.
They believed that item four dealing with the Singapore issues [trade facilitation, investment and competition rules, transparency in government procurement] should be the easiest part. The African countries didn’t want to discuss this issue because they wanted to discuss agriculture, mainly the cotton issue.
Q What has changed since Cancún?
A For Brazil the Singapore issues are not the problem. We are currently facing three big negotiations: Mercosur, the FTAA [Free Trade Area of the Americas] and WTO.
Brazil is playing three games at the same time and all three are linked because if you move in one negotiation you give impetus to the others. For example, I was talking to Bob Zoellick about the concessions the EU will possibly give to Mercosur in tariffs. The negotiations at the WTO are not related to tariff quotas but to phasing out export subsidies. But the three negotiations will need to converge.
Q What about the role of China in trade negotiations? Shouldn’t it be working together with Brazil, South Africa and India to bring about change?
A China has similar interests to the G20 in agricultural issues but it’s going at a different pace from Brazil or even India. It’s important for us to have China as a partner but China is also a fresh member of WTO so it is acting very carefully.
Q What is Brazil doing to attract FDI?
A We are working hard to attract investments. Brazil has a large domestic market but increasingly international companies are using Brazil as a platform for exports. I recently visited Gillette based in the industrial area of Manaus [in the Amazon] which is expanding its investment in Brazil to export to the whole region. Recently we had a visit from the company that makes Nivea cream and it is also expanding; and Continental, the German tyre company, has announced a new plant in Bahia. Some Chinese entrepreneurs are investing in aluminium together with CVRD [a leading Brazilian company].
We believe we can attract between $15bn and $20bn on average of FDI a year, helped by the recovery of the Brazilian domestic economy.
Q Why aren’t you in the same league as China with FDI flows?
A One of the reasons is the dynamic of the domestic economy. We need to recognise that in the last five years in Brazil domestic income has fallen. In the past 10 years the tax burden increased by 10 percentage points of GDP from 24% to 36%. Also after privatisation, public prices and tariffs were indexed and we had increases of 30% taking money out of the family budget.
