Brazil’s presidential elections and its commercial importance for South America

The presidential election in Brazil attracts worldwide attention because it is the sixth-most populous country (213 million inhabitants) after China, India, the United States, Indonesia, and Pakistan.

It has the fifth-largest geographical area and is the 12th-largest economy on the planet. But the decision on the continuity of the current president Jair Bolsonaro or the return of Lula Da Silva is of interest, above all, to South America.

Brazil is the largest economy in the region, comprising a dozen countries. It shares a 17,000-kilometer border with ten of them: Uruguay, Argentina, Paraguay, Bolivia, Peru, Colombia, Venezuela, Guyana, French Guiana, and Suriname).

And it has an important commercial exchange and cultural and political ties with half of them.

According to official data from eight South American countries (Venezuela, Guyana, French Guiana, and Suriname are not counted), in 2021, Brazil bought 8% of the total exported by its neighbors. In turn, 11% of the imports of these countries come from Brazil.

However, the percentages are significantly higher than these averages in Brazil’s three Mercosur partners (Argentina, Paraguay, and Uruguay) and Bolivia.

For Paraguay, Brazil is vital because it is the leading buyer of its products: 33.7% of Paraguayan exports go to Brazil. For Uruguay, Argentina, and Bolivia, it represents 16%, 15%, and 13% of exports, respectively.

In the cases of Paraguay and Argentina, Brazil is the leading buyer, while in the case of Uruguay and Bolivia, it is the second largest, surpassed by China and India, respectively.

Moreover, Brazil has a strong influence on the imports of these four countries: in the case of Paraguay, 24% of what it buys from the world comes from Brazil; in the case of Uruguay, 23%; Argentina, 20%; and Bolivia, 18%.

ELECTIONS IN BRAZIL: DO NOT EXPECT GREAT NOVELTIES IN TRADE DYNAMICS

Marcelo Elizondo, international economic analyst, president of the International Chamber of Commerce (ICC), and director of the consulting firm DNI said that the eventual return of Lula da Silva would not imply structural changes because the opening of trade is “a fairly large consensus” in the political leadership of the neighboring country.

“While he may not be as open-minded as Bolsonaro and [Paulo] Guedes (Brazil’s current Minister of Economy), Lula da Silva was the great promoter of the free trade agreement between Mercosur and the European Union (EU) and the BRICS (an acronym that stands for Brazil, Russia, India, China, South Africa).

“Furthermore, Lula’s running mate, Geraldo Alckmin, is a leader who comes from the center-right and was Lula’s great historical adversary. If Lula wins, we will not have a protectionist president,” he analyzed.

Elizondo said the difference between Bolsonaro and Lula is their view of Mercosur. The current president “despises it”, among other things, because of its high Common External Tariff (CET), which for him represents “an obstacle to competitiveness”.

Furthermore, he considers that Brazil is “one of the largest economies in the world” and, therefore, the region not only does not interest him but “annoys him”.

On the other hand, “Lula takes Mercosur as a platform for his internationalization projects, and that is why he tries to bring his strategic projects to the region”.

The historical series of Brazil’s commercial exchange with its South American neighbors confirms that, at least since 1997, the link with Uruguay, Paraguay, Argentina, and Bolivia is much more important than with the other group of countries, made up of Chile, Peru, Ecuador, and Colombia, according to data from the World Bank and the Brazilian Ministry of Economy.

The trade dynamics between Brazil and its neighbors remained practically unchanged with the last five presidents (Fernando Henrique Cardoso, Lula Da Silva, Dilma Rousseff, Michel Temer, and Jair Bolsonaro), notwithstanding the ideological profile of their governments.

With information from Chequeado