Brazil and Mexico in Trade Talks

By Karen Shishiptorova, Contributing Reporter

RIO DE JANEIRO – Last week, on his last stop during a visit to South America – which included Columbia and Uruguay – Mexican President Felipe Calderón met Brazilian President, Luiz Inácio Lula da Silva, to discuss several issues of bilateral trade. Mr. Calderón stated his interest in seeking Brazil´s help in developing a bio-fuel program, as well as increasing bilateral trade between Latin America´s two largest economies.

President Lula called for a real strategic joint venture with Mexico stating it is not acceptable that their international trade amounts to just US$7.4 Billion [in 2008]. “This is nothing for countries the size of Brazil and Mexico,” Lula stated. Calderón reminded him that, “there is much resistance to overcome, some ideological, at times based on prejudice and stemming from the lack of understanding of Brazil and its potential.”

Calderón added, “the fast growth that we need will not come from developed economies like the United States, Europe or Japan, but from emerging economies. Our strong dependence on the American economy is the reason Mexico was hit so hard by the global crisis triggered by the United States.”

The Brazilian leader seemed to share similar views: “The crisis has shown that the more diverse our trade balance and interaction with other countries, the less dependent we will be on a single economy. Brazil no longer depends solely on the United States or the European Union. Our trade with them grew 20%, whereas it has increased 400% with Africa.”

Lula also expressed his interest in extending Mercosul, the South American Common Market agreement, to Mexico. It is currently composed of Paraguay, Uruguay, Brazil and Argentina, with Venezuela underway to become a fifth member.

Calderón´s agenda included a meeting at FIESP, Federação das Indústrias do Estado de São Paulo (Industry League of the State of São Paulo) which originally proposed the talks on a free trade agreement with Brazil, something in the works since at least 2000, however, without any concrete outcome to date.

There, he met with Brazilian as well as Mexican businessmen and with Governor José Serra (PSDB), of São Paulo. He stressed that Brazil and Mexico together represent half of the entire Latin American territory responsible for seventy percent of the region´s GDP, with a sum of 297 million people. Calderón also noted that while Mexico´s largest investments in Latin America are focused on Brazil, amounting to US$16 Billion, Brazil´s investments in Mexico totaled only US$2 Billion.

Calderón´s other two key engagements were a sit down with the heads of Unica, União da Indústria da Cana-de-Açúcar (Sucar Cane Industry Union) the main Brazilian manufacturers of sugar and ethanol, as well as a visit to a Petrobras R&D pilot program center.

The aim is to sign an energy assistance agreement to transfer Brazilian technology and experience in bio-fuels, adding to other agreements already sealed by both countries on biotechnology and nanotechnology to promote a greater cooperation between Pemex – Mexico´s oil giant – and Brazil´s Petrobras.

Mexico considers this a key measure due to its decrease in oil production and the current oil market instability, as well as its need to reduce greenhouse gases emissions. According to figures provided by the Mexican delegation, Pemex’s output of crude oil has fallen from 3.3 million barrels a day in 2004 to 2.5 million this year.

Mexico plans to achieve greater fuel independence with the help of Petrobras expertise, something also on President Obama´s agenda, since Brazil remains the largest world manufacturer and exporter of sugar-cane ethanol with over four decades of experience on bio-fuel production and has begun to add bio-fuel to mineral diesel.

The majority of vehicles manufactured in Brazil are built to use both ethanol and gasoline. Promoting bio-fuel manufacture in other countries is already a Brazilian reality intended to boost the creation of a world market for ethanol and bio-diesel.