Exclusive: Brazil seeks to block return to free trade in autos with Mexico – sources

Ana Isabel Martinez and Alonso Soto – Reuters, 2/12/2015

Grappling with tumbling auto sales and weak economic growth, Brazil wants to derail a pact that would allow unlimited imports of cars from Mexico, sources familiar with the situation say, in a move that could stoke trade tensions between Latin America’s largest economies.

A treaty between the two nations and auto manufacturers, which sets quotas on how many light vehicles Mexico and Brazil can sell each other, expires in March. Auto trade between the two was then supposed to be fully liberalized.

Brazil this week invited a Mexican government delegation to a meeting in Brasilia between Feb. 20 and 25 for talks to revamp the treaty.

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Brazilian meats processor BRF looks to expand in Asia

Gustavo Bonato – Reuters, 1/23/2015

Brazil’s BRF SA, the world’s biggest chicken exporter, aims to expand further into Asia by building on a recent Indonesian joint venture with more partnerships and acquisitions, a top executive said.

“Our goal is to do in Asia what we did in the Middle East,” said Marcos Jank, BRF’s the head of corporate affairs in Brazil who will move to Singapore to become vice president of business development and corporate affairs for Asia.

BRF made 36 percent of its revenue in the third quarter of 2014 from the Middle East, where its Sadia brand has supplied poultry products for 30 years. In contrast, just 24 percent of revenue came from Asia despite a much greater population.

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Brazil’s Global Ambitions

Harold Trinkunas – The Brookings Institution, 2/5/2015

When President Dilma Rousseff first took office in 2010, Brazil’s future looked exceptionally bright. For nearly a decade, the country had benefited from Asia’s enormous appetite for its commodities. This allowed Brazil to reduce poverty and expand the middle class while at the same time sustaining a remarkable growth rate, becoming the seventh largest economy in the world in 2014.

But by the time Rousseff was sworn in for a second term on January 1, 2015, she faced serious decisions about Brazil’s future. Brazil’s development model based on domestic consumption and commodity exports has reached its limits and the real is significantly overvalued, thus undercutting the competitiveness of its non-commodity-based export sectors. Moreover, the Southern Common Market, Mercosur, which had once showcased Brazil’s leadership in regional integration, now ties Brazil’s flagging economy to two of the most troubled economies in South America—Argentina and Venezuela. At the same time, the two most significant global trade negotiations in a decade, the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership, are nearing completion without Brazil.

Brazil has sought to play the role of a major power on the global stage since the beginning of the twentieth century, but it will not earn this status just by virtue of its size, burgeoning population and impressive economic achievements. Historically, rising powers acquired dreadnoughts or sizeable armies to achieve influence. Today, they also seek to become a permanent member on the United Nations Security Council or lead the World Trade Organization.[1] Brazil under Dilma stands at a crossroads: it can try to parlay its rising economic might and soft power into global influence, or it can remain a regional power, albeit a significant one, with limited influence on the course of world events. To turn its aspirations into reality, Brazil will have to deploy its national capabilities more effectively to shape the rules governing the international order.

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DEALTALK – Banks pin hopes for Brazil IPO revival on Levy’s success

Guillermo Parra-Bernal – Reuters, 02/04/2015

Any revival in initial public offerings in Brazil seems to hinge on whether new Finance Minister Joaquim Levy can clean up public finances and get the country’s economy back on track.

Strengthening the market for new listings depends increasingly on how much leeway President Dilma Rousseff will give the University of Chicago-trained economist to cut Brazil’s record budget gap and reverse the interventionist policies that marred her first term.

Stung by dozens of deals that failed to deliver the promised returns in recent years, money managers have become cautious about Brazilian offerings. In 2014, only one company went public on the São Paulo Stock Exchange, the worst performance for domestic IPOs in 11 years.

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The Curious Case of Brazil’s Closed Economy

Otaviano Canuto – Huffington Post, 1/21/2015

Brazil’s is an unusually closed economy as measured by trade penetration, with exports plus imports equal to just 27.6 percent of GDP in 2013. Brazil’s large size is often used to explain its relative lack of openness. But this argument does not stand up to scrutiny: Among the six countries with larger economies than Brazil’s, the average trade-to-GDP ratio is 55 percent. Given the size of its economy, we would expect Brazil’s trade to be equal to 85 percent of GDP, three times its actual size.

Controlling for other dimensions of country size (surface area and population) and structural features often associated with trade openness (urbanization, manufacturing share in GDP) still cannot adequately explain Brazil’s lack of openness.

Lack of trade dynamism at the company level

Brazil’s lack of openness becomes even more apparent if we look at the number and characteristics of exporting companies. Very few Brazilian companies export. Indeed, the absolute number of exporters in Brazil — fewer than 20,000 — is roughly the same as that of Norway, a country of just over 5 million people compared with Brazil’s 200 million. This means that, while in Norway there is one exporting company for about every 250 Norwegians, the ratio in Brazil is one for every 10,000 Brazilians.

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Why Brazil Is A Surprisingly Closed Economy

Otaviano Canuto – Business Insider, 1/12/2015

According to traditional macro-level measures of trade penetration (share of exports and imports in GDP), Brazil is an unusually closed economy. For Brazil this measure was only 27.6% in 2013 – a figure among the lowest in the world. Notably, Brazil’s trade openness lags far behind its peers among the BRICS countries, all of which reached trade-to-GDP ratios of at least 50% in recent years.

Brazil’s size is often used to explain the country’s relative closedness. As the comparison with other large economies already indicates, this argument does not hold up to close scrutiny. While it is true that large economies tend to exhibit lower percentages of exports and imports to GDP, this feature fails to explain the exceptionally low levels of trade penetration observed in Brazil.

Looking at 2013 data from 176 countries available through the World Bank’s World Development Indicators (WDI) database, the average trade-to-GDP ratio is 96%. Even among the six countries with a larger economy than Brazil, the average is 55%.

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Brazil, Uruguay move away from US dollar in trade

RT, 12/3/2014

Brazil and Uruguay have switched to settling bilateral trade with local currency to stimulate turnover, bypassing the US dollar.

Payments in the Brazilian real and Uruguayan peso started on Monday. The agreement was signed on November 2 by the head of Brazilian Central Bank Alexandro Tombini and his Uruguayan counterpart Alberto Grana. Both countries believe such a move would strengthen trade across Latin America.

“The agreement was the result of long negotiations between the countries belonging to Mercosur [the common market of South American countries – Ed.], as well as the global strategies of BRICS,” RIA quotes Carlos Francisco Teixeira da Silva, Professor of International Relations at the Federal University of Rio de Janeiro.

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