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Brazil’s Lula, aiming to boost trade with Arabs, hosts summit

Brazil’s Lula, Aiming to Boost Trade With Arabs, Hosts Summit

May 10, 2005 (Bloomberg) — Brazilian President Luiz Inacio Lula da Silva opens an Arab-Latin American summit today aimed at increasing commerce between the two regions as he seeks to reduce developing nations’ dependence on the U.S. and European Union.

Heads of state and ministers from 34 Arab and South American countries will meet for two days in Brasilia, the first such gathering for the two regions. Leaders such as Venezuelan President Hugo Chavez, Syrian Prime Minister Mohammad Naji Otri and Iraqi President Jalal Talabani will seek to boost South America’s $10 billion of annual bi-lateral trade with Arab nations, as estimated by Brazil’s Foreign Ministry.

``The strategic importance is huge for Brazil and some other countries,’’ said Michel Alaby, vice president of the Brazilian- Arab Chamber of Commerce, in a phone interview from Brasilia. ``You need to create blocs that effectively combat the protectionism of the biggest, most developed economies.’’

The summit marks the latest push by Lula, 59, to create a group of developing countries that can press industrialized nations to cut farm subsidies and reduce barriers to agricultural imports to help boost trade. Brazil’s victory in two World Trade Organization rulings opposing U.S. government aid to cotton farmers and EU sugar producers bolstered Lula’s clout among leaders of other developing nations that also seek to depend less on industrial countries, said Jeff Vogt, an economist at the Washington Office on Latin America research group in Washington.

More Trade

The gathering may help increase trade between Brazil and the Arab world to $15 billion through the end of 2007, said Mario Vilalva, the head of the trade office at Brazil’s Foreign Affairs Ministry, in a news conference on May 6. Brazil currently accounts for about $8 billion of the total South American trade with Arab nations.

``It is a new axis of external policies, focused on trade and investments for regions that have traditionally been closed to open trade,’’ Vilalva said.

Sadia SA, Brazil’s biggest food processor whose sales to Arab countries accounted for 24 percent of all its exports in the first quarter, expects rising oil prices to boost capital inflows to the region and enable the company to export more poultry and processed food, Chief Financial Officer Luiz Gonzaga Murat said.

``We expect our sales to the region to grow by double-digit rates in coming years as oil prices boost income,’’ Murat said in an interview last week in Sao Paulo.

Vilalva said some of the countries may agree to a Mercosur- Gulf trade accord to be signed during the summit. Mercosur is a free-trade group of South American nations.

In 2003, Lula formed an alliance with developing nations, including China, called the G-20 group, to increase pressure on Europe and the U.S. that helped scuttle WTO talks in Cancun, Mexico. The group refused to discuss opening their markets until the U.S. and Europe curtailed aid for farmers.

WTO Rulings

The WTO, the sole global trade arbitrator encompassing 148 nations, ruled last year that U.S. aid to cotton farmers and EU subsidies to sugar producers violate trade regulations in two so- called panels brought by Brazil. The Organization for Economic Cooperation and Development says the world’s wealthiest nations give farmers $300 billion in aid annually.

Lula’s foreign policy has focused on uniting South American countries as a bloc that would make the region stronger in trade negotiations and help speed economic growth.

On Dec. 8, regional leaders gathered in the Andean city of Cuzco, Peru to sign an accord to pave the way for a South American Union, a trade bloc spanning the continent and accounting for gross domestic product of $1 trillion. The proposal includes seeking a common currency for all 12 signatory countries in the future.

The union would be based on the merger of the Mercosur trade bloc, composed of Argentina, Uruguay, Paraguay and Brazil, with the Andean Community of Bolivia, Colombia, Ecuador, Peru and Venezuela. Chile, Suriname and Guyana would also join.

The growing business Brazilian companies have done in the Arab world is due partly to Lula’s visit to five countries in the region in 2004, the first such trip by a Brazilian president.

 source: Bloomberg