Brazil’s isolation: a love affair - Bill Hinchberger (Global Finance)

 Brazil loves its isolation, says an ex-president. Is the country ready to play a larger role on the global stage?    

Global Finance magazine, SEPTEMBER 26, 2023

Author: BILL HINCHBERGER

Luiz Inácio Lula da Silva seems to log more time on his souped-up Airbus than he does at the Alvarado Palace, the presidential mansion in Brasília.

His jet-setting started in November with the COP27 climate summit in Sharm El-Sheik, where the then president-elect was “welcomed like a rock star,” according to the French newspaper Le Monde. He promised to clean up after his predecessor, climate skeptic Jair Bolsonaro, who oversaw a notable uptick in deforestation in the Amazon.

Since his inauguration in January for a second stint (on top of two terms from 2003-2011), Lula has visited over a dozen countries, outpacing even his American counterpart Joe Biden for his presence on the global arena.

Yet “Brazil remains closed,” states veteran Brazilian businessman Roberto Teixeira da Costa in a new book, “Is Brazil Afraid of the World? Discussing Brazilian Foreign Affairs and Challenges.” Of the world’s 15 largest economies, Brazil has ranked “among the lowest” when it comes to the importance of international trade to its economy, he said in the book. This even before Bolsonaro turned Brazil into a “pariah,” says the author, who founded and served as the first president of the Brazilian Security and Exchage Commission (CVM) and is currently chairman of the Arbitrage Chamber of the São Paulo Stock Market (Bovespa).

Relative to its size, Brazil scores lower than one would expect on international participation in all realms, including trade and historic incoming and outgoing FDI. Teixeira da Costa doesn’t blame foreign bullies for blocking Brazil. Instead, he quotes former President Fernando Henrique Cardoso: “Nothing makes Brazilians happier than isolation.”

Part diagnosis, part prescription, Teixeira da Costa’s book may serve as a primer for those who wonder why a continent-size nation of 215 million is often marked down as absent during important international roll calls. For Brazilians, it poses a series of Socratic questions designed to fuel debate, concluded reviewer Marcelo Consentino in the daily Estado de São Paulo.

“The thesis of the book is that Brazil fails to recognize the role it should play in international relations, and instead accepts a secondary role,” Teixeira da Costa says. “Brazil should become a protagonist.”

Many well-informed, well-meaning, and experienced Brazilians remain unconvinced, at least when it comes to the “just do it” modus operandi. “Brazil’s capacity is modest,” says Paulo Roberto de Almeida, a diplomat and director of international relations at the Institute of History and Geography of the Federal District University in Brasília. “First, because of its level of economic development, the average strength of its military force, and the limited resources devoted to international cooperation.”

National pride matters, as it does everywhere, but practical considerations loom large—including a longing to put to rest an old joke. Granted a permanent visa by President Getúlio Vargas during World War II, exiled Austrian writer Stefan Zweig published a book titled, “Brazil, Land of the Future.” Cynical Brazilians began to quip, “Land of the future, and always will be.”

Teixeira da Costa believes that greater international integration can help Brazil address sticky domestic problems, notably poverty and inequality, and help muffle that ostensibly antiquated joke. Brazil perennially ranks near the bottom on the Gini Coefficient, which measures economic inequality. At 12.4% in December 2022 (CEIC Data), Brazil’s low domestic savings rate means that it cannot go it alone. “We have to attract [foreign] investment,” said Teixeira da Costa.

Based on historical data, one would expect inflows from the United States and Europe. These traditional partners must shore up supply chains, given weaknesses revealed by Covid-19 restrictions and fallout from the Russian war in Ukraine. Brazil shores might seem to offer safe ports.

Reticence could be traced in part to the now infamous Custo Brasil (Brazil Cost), which Teixeira da Costa defined in the book as: excessive bureaucracy; high and complicated taxes; high labor costs; high social security costs; frequent regulatory changes; excessive legislation; and conflicts among federal, state and local governments. One example: As a technologically advanced, post-lockdown world adopts more flexible and creative working relationships, Brazilian labor laws remain mired in a model designed for early-20th century factories. “All of this insecurity messes things up,” says Lika Takahashi, head of equity strategy at Fator Asset Management in São Paulo, while referring to a few recent debates over big issues in Congress.

Abrupt alterations and intergovernmental conflicts create uncertainty. This inconsistency is particularly evident in the foreign policy realm.

Of the post-dictatorship presidents since 1985, Teixeira da Costa points to Cardoso and Lula as “particularly active abroad.” (He could have included Fernando Collor de Mello. Before his impeachment on corruption charges, Collor cut tariffs, facilitated foreign investment, hosted the 1992 Earth Summit in Rio de Janeiro, and signed the Mercosur regional pact with Argentina, Paraguay and Uruguay.)

Look at the contrasts between the Cardoso and Lula administrations. Cardoso proved “more balanced,” as Teixeira da Costa said in our interview, whereas Lula focused on South-South relations and what some would call “Third World-ist” policies. Now consider what the book calls the “Bolsonaro administration’s blind march toward Donald Trump’s America.” Add to that the lack of reliable foreign policy interlocutors in Congress or the business community. You can understand why outsiders might get weirded out.

One external actor appears willing to wade through the weirdness: China. As with the United States, Teixeira da Costa devoted an entire chapter to Brazilian-Chinese relations. Even under the watch of Trumpista Bolsonaro, “In the first half of 2020, for every dollar Brazil exported to the United States, US$3.4 went to China,” states the book.

Given his South-South proclivity and enthusiasm for the BRICS+, Lula might be expected to lean more firmly into China for FDI. With 11 members, the new BRICS+ accounts for over one-third of global GDP and nearly half of world population, though it is top-heavy with China on both accounts.

When it comes to prescriptions, Teixeira da Costa can seem exceedingly nitpicky and refreshingly specific. Do problems exist at all levels of government and business? Yes. And they can all be addressed. Poor language skills and understanding of the world? More and better education in those realms. If your company is big enough, the board should be required to examine opportunities abroad. Navel-gazing industrial associations should lift their heads and look around.

The 20th century Brazilian composer and poet (and career diplomat) Vinicius de Moraes, perhaps best known for his collaborations with Tom Jobim and other Bossa Nova personages, wrote the song “Medo de Amar (Afraid to Love).” A quarter of a century after de Moraes was expelled from the foreign service by the military dictatorship, it might be time for Brazil to overcome its fear of the global stage.

Or maybe it is time for Brazil to just get down and dirty. In the book, Teixeira da Costa recalls a comment he made in the 1990s to Bill Clinton’s special envoy to the Americas, Mack McLarty: “He who does not make dust, eats dust!” According to the Brazilian, they still get a laugh out of that one.