Thursday, September 04, 2008

Brazil, China, Sugar, Ethanol and Politics

It is with some interest that I note the recent trade mission sent by Brazil to China. The mission was potentially important enough to earn a notice by petroleum interests. See China wants Brazilian technology in ethanol, Brazil-Arab News Agency, July 8, 2008 (Translated by Gabriel Pomerancblum). "This week, Brazilian government officials and businessmen are in China exchanging information, with the aim of opening up more investment opportunities in different sectors. One of them is biofuels." Id. The mission suggests a number of converging interests and points to the evolution of trade strategies among emerging nations.
The Chinese have long been interested in how Brazil manufactures and uses alcohol, which is obtained from sugarcane. Even though the Chinese government is not interested in producing alcohol from sugarcane, the country wants to know how Brazil produces, stores and transports alcohol. The trade mission to China is going to visit the cities of Macao, Hong Kong and Beijing, where the seminar "Investment opportunities in Brazil" will be held. The trip is headed by the Foreign Trade secretary at the Brazilian Ministry of Development, Industry and Foreign Trade (Mapa), Welber Barral, and aims to attract further investment from China into the country.

Brazil is energetically seeking trading partners where it can obtain them. It has become less fussy and more focused on economic objectives since the appointment of former university law professor Welber Barral to the office of Foreign Trade Secretary. A sense of the change under Mr. Barral's leadership can be gleaned from Brazil's recently announced export strategy:
The Ministry of Development, Industry and Foreign Trade of Brazil launched yesterday (3) the "2008-2010 Brazilian Export Strategy", a study that defines a series of actions to expand and diversify the country's foreign trade. Publication is an unfolding of the Productive Development Policy (PDP), disclosed in May by the federal government. The PDP established a target of expanding Brazilian exports to 1.25% of global trade by 2010, which would now be equivalent to US$ 210 billion. "At that time, we established targets, but did not say how we would get to them," said the Foreign Trade secretary at the ministry, Welber Barral, according to Agência Brasil. This year, according to estimates by the ministry, foreign sales should exceed US$ 190 billion.
Government launches export expansion program, Brazil-Arab News Agency, September 4, 2008 (Translated by Mark Ament). The focus of the program is traditional. It seeks to reduce agency and transaction regulatory costs generated by the governmental apparatus. "According to a press statement by the Ministry, the study raised some challenges that must be won by the country, like the improvement of the Brazilian competitive environment, reduction of bureaucratic costs and financing and improvement of infrastructure." Id. It also seeks to diversify economic output through a conventional stimulus package, though one which continues to rely on dependence on traditional developing state model exports--agricultural products and unprocessed natural resources. "to add value to Brazilian exports. Agricultural commodities and ores still have a significant weight in the trade basket and the government wants to stimulate the sale of goods with greater added value through programs to provide incentives to innovation in companies, foster efficiency and competitiveness in the productive chain and develop alternative energies." The plan thus suggests both growing pains for the economy and a willingness to aggressively seek greater engagement in globalized markets for the purpose of evolving away from the dependence status of developing state models.

For Brazil, China is viewed as a consumer of natural resources, and agricultural products, of course. But also a potential consumer of its ethanol products. China is also viewed as a potential source of investment in Brazilian first tier industries. Consequently, Mr. Barral presented "projects . . . for investing over US$ 10 billion in the areas of infrastructure, logistics and power generation. The mission is part of the strategies forecasted in the document "China Agenda: Positive Actions for Economic-Commercial Relations Between China and Brazil," launched on Thursday last week in the Brazilian capital Brasília." And Brazil believes it has an advantage that might be exploited in the same way that English speaking countries exploit Hong Kong--the use of the former Portuguese possession of Macau as a gateway to Chinese investment--both ways. "Macau is a fundamental factor for carrying out Brazil’s objectives of increasing exports to China, the Brazilian secretary for foreign trade, Welber Barral said on a recent visit to Macau. "The cultural proximity between Brazil and Macau and the logistic possibility of the territory as a services city is being publicised in Brazil in order that it be used as a gateway for Brazilian companies into the Chinese market,” said Barral, who was in Macau heading up a mission from the Brazilian government." Macau: Macau Business Mission Travels to Brazil and Mozambique, MacauHub: Ecnomic Information Service, August 20, 2008.

But China is also interested in self sufficiency. For them, Brazil represents not merely a source of resources for consumption but a source of technology for its own programs of self sufficiency.
In conversations with technicians at the Mapa, the Chinese expressed their intention of extracting alcohol from cassava, potato and sweet sorghum, a grain with high sucrose content. "No matter what the raw material, the refinery plants remain practically the same. [The Chinese] also want to learn how Brazil handles the transport, how the mix with petrol is done, where this mixing is done, how Brazil stores alcohol and how much can be mixed without compromising older automobiles," explained Luís Carlos Job, head of the sugar and alcohol coordination division at the Mapa. According to the ministry, five provinces in China already use a 5% mix of alcohol into petrol.
China wants Brazilian technology in ethanol, supra. China is sensitive to the use of corn for the production of energy, a topic that has become politically sensitive since the Cuban propaganda machinery kicked into full gear last year to thwart American efforts in that respect. See Larry Catá Backer, Fidel Castro, Hugo Chavez, and the Response to the U.S. Brazil Deal on Ethanol Production, Law at the End of the Day, March 3, 2007 ( And, of course, petroleum producers are interested.

Sugar and ethanol equal political opportunity. Political opportunity is effected through economic relations. Those relations bring together nations that ought to be competitors (both offer havens of cheap labor, an abundance of resources, strategic locations and social and political systems now ready and more able to project power). But rather than both compete for the favors of developed states (though there is plenty of that, to be sure), China and Brazil evidence a new and, to the United States, what ought to be a disturbing trend--an increasingly successful proclivity to deal directly with each other rather than through the United States. Of course, the origins of these mindsets are now over a decade old. But it does suggest that neither the European Union nor the United States can retain, without some effort, their prior positions as clearinghouses of trade. And that has significant repercussions for law and the structure of global economic relations. As Brazil and China, India and Nigeria become accustomed to dealing directly to greater economically positive effect, their willingness to be led to a particular vision of a legally institutionalized world economic order to the taste of the developed states becomes less likely. The latest round of multilateral trade talks ought to have been a wake up call for developed states. Instead, especially in the United States, the reaction among political elites and their media and Hollywood running dogs, have been to resurrect a perverted version of the self hating and inward looking global escapism (except perhaps, as tourists) that marked American policy almost a century ago. Just as the Russians now assert (though less correctly) that the Americans are less relevant militarily in certain sectors of the world (Larry Catá Backer, Russia and the New Medievalism in the International Law of States, Law at the End of the Day, September 1, 2008), so the Chinese and Brazilians are demonstrating that the Americans could lose their privileged economic position if it abandons that field to those sectors of American public opinion that seek to turn the desire for personal advantage into naitonla policy within the Democratic and the Republican parties.

No comments: