Latin America, Brexit and Trump: The Consequences

Brian Winter – Americas Quarterly, 06/27/2016

Like waves caused by a faraway hurricane, big global events eventually tend to wash up on Latin America’s shores. In the 2000s, the rise of China and its appetite for commodities gave rise to a new Latin American middle class and a “pink tide” of left-leaning leaders who handed out the spoils. In the 1990s, the collapse of the Berlin Wall resulted in the “Washington Consensus” of free-market dogma and the growth of me-too trading blocs such as Mercosur, NAFTA and the Andean Community. And in preceding decades, the Cold War helped foster any number of dictatorships, guerrilla uprisings and midnight coups.

So what will be the fallout from “Brexit,” the rise of Donald Trump, and other manifestations of the new nationalism sweeping Western Europe and the United States? Will Latin America once again serve as a peripheral theater to the convulsions of the rich world? Or has the general prosperity and democratic consolidation of recent years bolstered Latin America’s own center of gravity, giving it the ability to resist – or perhaps even push back against – developments thousands of miles away?

There’s a distinct irony to all of this: The rich world is turning inward at precisely the moment when Latin America feels more open to trade and integration than it has in 20 years. The election of more outward-looking presidents in Argentinaand Peru, and overtures to trade by Brazil’s new interim government, have signaled a shift away from the leftism of the past decade. In broad terms, the region’s Atlantic coast is more actively embracing the trade-friendly ethos that has served the Pacific, Asia-facing countries so well in recent years. The tragic implosion of Venezuela and the opening of Cuba have only accentuated the belief in capitals from Mexico City to Buenos Aires that the future lies with more globalization, rather than less.

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Brazil hails long-awaited EU trade breakthrough

Joe Leahy – The Financial Times, 7/01/2015

Mercosur and the EU appear set to exchange formal offers on tariffs by the end of the year, raising hopes that the South American bloc is close to clinching the biggest trade deal in its 24-year history.

Armando Monteiro, the Brazilian trade and industry minister, told the Financial Times in an interview that the exchange of market access offers would mark an important step towards full implementation of the proposed trade deal as early as next year.

The South American bloc and the EU have been engaged in on-off talks on a deal since 1999.

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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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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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Brazil vote may affect diplomatic ties

Adriana Gómez Licón – Buenos Aires Herald, 9/21/2014

More than a decade of Workers Party rule has seen Brazil prioritize ties with its leftist regional neighbours, from helping muscle socialist Venezuela into the Mercosur trade bloc to financing a billion-dollar transformation of an industrial port in Cuba. But if President Dilma Rousseff fails to fight off the surging candidacy of reform-minded Marina Silva before presidential voting in October, South America’s largest economy could reset its focus.

Silva was thrust into the Socialist Party’s presidential nomination when its candidate of choice, Eduardo Campos, died in a plane crash last month. Since then, her anti-establishment profile has propelled her to a neck-and-neck race with Rousseff.

Silva says she would re-emphasize ties to the United States and Europe, mostly by working to land trade deals with each. Such moves could cause tension with Mercosur, which prohibits members from making bilateral deals without the group’s approval.

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US wheat exporters brace for drop in Brazil orders

Agrimoney, 8/19/2014

North American wheat exporters are preparing for a tumble in shipments to Brazil after the country reinstated a tariff on wheat bought in from countries outside South America, amid hopes of a bumper domestic crop.

Brazil’s foreign trade assembly, Camex, has reinstated a 10% tariff on wheat imports from outside the Mercosur trading zone, ditching a concession introduced last year after a poor domestic harvest, and a weak crop too in Argentina, the default origin of Brazilian buy-ins.

The move will likely call time on a upswell in Brazilian imports from North America, and in particular the US, which Brazil has turned to thanks to the shortfalls in local supplies.

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Brazil border law an important step for Latin America, says ASUTIL

Gavin Lipsith – The Moodie Report, 7/29/2014

ASUTIL President Enrique Urioste has welcomed Brazil’s move to introduce border duty free legislation for the first time, despite a “frightening Monday” when the country issued its quickly postponed decree halving the inbound duty free allowance to US$150.

The head of the South American trade association told The Moodie Report that the announcement reveals Brazil’s intent to make border duty free an “absolutely legal entity”, the first time the channel has held that status in the region’s biggest market.

“We are very supportive of this Brazilian law and we think it is an important step in furthering border duty free [across the region],” said Urioste, who as CEO of Uruguayan retailer Neutral would have been among those impacted by any decrease.

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Israel Faces Latin American Backlash

Robert Kozak – The Wall Street Journal, 7/30/2014

Bolivian President Evo Morales on Wednesday labeled Israel a “terrorist state” and announced that Israelis need visas to visit, the latest in a series of measures Latin American countries have leveled against Israel for the violence in the Gaza Strip.

Criticism of Israeli policies has come from some parts of the world. Latin American countries have stood out by coordinating a range of diplomatic measures, including recalling their ambassadors for consultations and issuing sharply worded statements, political analysts said.

“Israel doesn’t guarantee the principle of respect for life, and the basic right to live in harmony and peace in the international community,” Mr. Morales said Wednesday in a speech in the Bolivian city of Cochabamba. There was no immediate Israeli response to Mr. Morale’s accusations or Bolivia’s decision to require that Israeli visitors apply for visas.

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Brazil President will Ask Zero Tariff for Mercosur Partners

Prensa Latina, 7/29/2014

Brazilian President Dilma Rousseff will request today at the 46th Meeting of Head of States of the South Common Market (Mercosur) to apply zero tariff since 2015 to part of the trade with Peru, Chile and Colombia.

An official statement confirmed on Monday the attendance of Rousseff to this summit, in which she will request to forward the enforcement of the agreement of freeing business taxes for those three partner nations of Mercosur.

The agreement to implement the zero rates in the commercial area is sealed and its implementation is scheduled for 2019, but Brazil would like to discuss with the other members its implementation from 2015, emphasized in recent days Antonio Jose Ferreira Simoes, deputy secretary general for South America in the Foreign Affairs Ministry.

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Brazil Drops Wheat Tariff Until Aug. 15

Ben Potter – AgWeb, 7/2/2014

The Brazilian government has announced it will suspend the 10% applied tariff until Aug. 15. Up to 1 million metric tons of wheat can be imported tariff-free from non-Mercosur sources to ensure adequate supply.

Mercosur member countries include Brazil, Argentina, Uruguay, Paraguay and Venezuela. They have suffered from reduced production during the past couple of years and are currently off-season. Argentina in particular has decreased its production in recent years due to internal price controls and poor weather conditions.

Prior to the early 1990s, Brazil originated most of its wheat from the U.S. The Mercosur free trade agreement allowed for a duty-free import of Argentine grain. It also assigned a 10% tariff to non-Mercosur countries, including the U.S. Brazil is one of the world’s largest importers of grain. It brings in around 260 million bushels of wheat annually.

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