AFRICANGLOBE – Brazil’s foreign policy elite like to talk up their political solidarity and cultural affinity with Africa. Sympathetic observers note that Brazilians are more involved there than at any time since the 1960s. There is some truth to these claims. In the past decade, Africa became one of Brazil´s fastest growing trade partners. Brazilian trade to the continent expanded from $4.3 billion in 2000 to $28.5 billion in 2013. But what is really driving Brazilian engagement in the region?
Hardly surprising, there are some hard geopolitical and commercial calculations motivating Brazil´s rapprochement with Africa. While publicly advocating a selfless developmental — or south-south — project, Brazilian companies have business interests in most of Africa’s faster growing economies. And tighter relations with African counterparts also allows Brazil to secure its maritime control and influence over the South Atlantic.
The dramatic surge in Brazilian engagement in Africa was propelled by President Lula (2003-2010), who traveled on 12 separate occasions to 29 states. No fewer than 19 of the 37 Brazilian embassies operating in Africa opened their doors during the past decade. Likewise, 18 of the 34 African embassies in Brasilia were inaugurated during the same period. And while his successor, President Dilma Rousseff, significantly reduced Brazil’s global engagements since 2011, Africa still matters to some in the foreign policy establishment.
Brazil backed these diplomatic gestures with development muscle. The national development bank, the BNDES, has disbursed roughly $ 2.9 billion to underwrite projects in Africa since 2007. The Brazilian Cooperation Agency (ABC) and the Brazilian Agricultural Research Corporation (EMBRAPA) are also invested in African countries. ABC grew under Lula and EMBRAPA opened a new office in Ghana in 2006. The creation of a BNDES office in South Africa in late 2013 underlines the importance Brazil attaches to its partnerships there.
Brazil’s tropical agriculture know-how and bio-ethanol expertise have found willing partners in parts of Africa. EMBRAPA fielded major initiatives in the so-called “cotton 4+Togo” which includes Benin, Burkina Faso, Chad Mali and Togo. Meanwhile, Brazilian companies entered into significant bio-fuel deals in Mozambique, Angola and Nigeria with the idea of also investing in local technical expertise, infrastructure and technology.
Notwithstanding enthusiasm about Brazil-African relations, the partnership has been rocky. At the diplomatic level, Rousseff’s decision in 2013 to cancel (or restructure) $900 million worth of debt with 12 African countries did not get the reception she had hoped. Timed to coincide with the 50th anniversary of the African Union and intended to burnish Brazilian credentials and expand trade opportunities (since Brazilian law does not allow new loans or financial assistance with indebted countries), the move was roundly criticized by the left and right for allegedly favoring authoritarian and corrupt African economies. The President has since distanced herself from the deal.
Meanwhile, some major Brazilian corporations have come under fire for circumventing local laws and other forms of malfeasance. The multinational mining company Vale, already heavily invested in Africa, suffered financial and public relations setbacks over a suspect deal to acquire rights to the Simandou mining concession in Guinea. Other large oil, mining and infrastructure firms are also coming under extra scrutiny. This is likely to continue given the many corruption scandals rocking the government on the home-front.
Despite professions of brotherly love, Brazilian companies are finding it harder to do business in Africa than initially anticipated. Managing and mitigating risk in some states regularly translates into higher costs of entry for prospective investors. Despite remarkable progress in poverty reduction and improving living standards, the continent suffers from political instability, weakly enshrined property rights, poor communications infrastructure, limited transparency and real personal risks on the ground.
This is not to say that opportunities do not exist. To the contrary: foreign investment in Africa is clearly on the rise. According to a recent African Development Bank report, combined public and private financial flows to Africa rose 400% since 2000 and are projected to exceed $200 billion in 2014. Although countries such as France, the UK and US are still the top foreign investors in Africa, China, Brazil, South Africa and others are closing the gap. China alone has invested some $27.7 billion — almost half of what the BRICS are spending combined.
If Brazil is to make a dent in Africa, it needs to get ahead of the curve. Future economic and demographic projections indicate that African investment opportunities are changing. In the coming decades there will be less emphasis on resource-intensive extractive industries — which are already crowded markets — and greater opportunities for construction and consumer goods and services, especially in finance, retail and new information technologies. Foreign policy experts and investors should take note, and plan accordingly.
Brazil’s engagement with Africa has historically been driven by oil and gas, mining and infrastructure interests. Companies such as Andrade Gutierrez, Odebrecht, Petrobras and Vale have a sustained presence on the continent. And while these and other firms will loom certainly large in future Brazilian calculations, forward-looking policy makers and investors would do well to explore fast-growing sectors in which Brazil exhibits a comparative advantage. This is not just about enlightened politics toward Africa, but also about sustaining growth and development at home.
By: Robert Muggah