In the Spotlight – Brazil and Latin America: regional integration or regional domination?

Compiled by Lauren Phelps, 07/27/2012

Latin American regional relations have been under the microscope as of late, especially in light of the recent political shakeups inside Mercosur. The trading bloc is representative of contemporary continental interaction; ties between nations, now more than ever before, are driven by economics and regional integration efforts. Though Latin America has been working to achieve greater integration since the days of Simon Bolivar, the last decade has seen a concentrated spate of efforts to link the continent economically.

However, as Latin America continues its process of integration, the role of its leading economy is being analyzed with more and more scrutiny. There is no doubt that many Latin American nations stand to gain from a more integrated continent, and polling data reveals widespread support across countries for increased integration. However, whether the fruits of these efforts will be enjoyed evenly across the continent or be concentrated in the hands of its largest nation remains to be seen.

Perhaps the benefits gained from integration correlates to the resources donated to its development. Of the 31 projects completed from 2005-2010 by COSIPLAN, the Latin American Infrastructure and Planning Council, Brazil was a sponsoring partner of 15 of them, more than any other nation. This makes sense; as Latin America’s largest economy, they have the resources. In fact, BNDES, Brazil’s development bank, has spent 39% of this year’s disbursement (a number totaling more than $US20 billion with room for future increases) on infrastructure projects. Brazil’s fiscal reserves allow them to invest large sums in regional integration ventures; however, this permits Brazil to have significant input in the direction of the projects.

That BNDES is one of the major sponsors of regional integration, which allows for the possibility of some pro-Brazilian bias in integration efforts. BNDES funded projects include  local-content requirements (LCR’s), thus giving Brazil great influence and leverage in decision-making. These requirements can vary from project to project, however, in the end, the employment of Brazilian companies in conjunction with outside investors means that Brazilian businesses will reap more than the standard benefits from these ventures. The LCRs have thrown more than a few wrenches into BNDES’ work and have even discouraged outside investment. For example, many foreign investors bidding on mining projects, oil extraction, and wind energy have balked at the high prices of local goods and services. However, Brazil sees these requirements as a chance to stimulate a lagging economy and continue to facilitate job creation. In a time where many of the continent’s countries are seeing market losses and shrinking growth projections, this can only be good news for the South American giant.

In addition to providing an opportunity to increase business for Brazilian companies through local-content, many of the projects, though they aim to integrate the continent and level the playing field, may disproportionately benefit Brazil. This makes sense as well; given that the majority of the projects are aimed at increasing transportation efficiency  and that Brazil is the continent’s largest exporter of goods, they have an advantage. For example, the newly operational Brazil-Peru interoceanic highway will allow Brazil to further expand trade with China, arguably cementing their role as the continent’s economic leader.

Environmentalists have put up a particularly strong fight against regional integration projects. Many of the trans-continental energy and transport projects must crisscross Amazonian rainforest and/or living areas of various indigenous populations. For example, Brazil and other nations have a vested interest in the construction of the TIPNIS highway throughout Bolivia that will eventually connect to the aforementioned transoceanic highway. Brazil has funds invested in the project as well, given that the Brazilian construction firm OAS is under contract to build it. However, the highway is planned such that it would bisect a large section of indigenous lands, possibly displacing many tribes and causing negative environmental impacts such as river pollution and species loss. Though Bolivian president Evo Morales canceled the contract for the highway’s construction after environmentalists’ protests, he has since returned to evaluating the original TIPNIS plan, arguably because of Brazilian pressure. Environmental concerns like these are echoed in protests against other large-scale infrastructure projects with regional impact, such as Brazil’s Belo Monte hydroelectric dam. Protestors have occupied the site and loudly declaim its negative environmental and social consequences. However, though the governments of nations like Brazil and Bolivia have expressed some environmental concern, the economic benefits attached seem to outweigh the costs.

Photo courtesy of Flickr user kvanmidd

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