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Trade triangle

Frontline, India

Trade triangle

By John Cherian in Brasilia

The India, Brazil and South Africa Trilateral Cooperation Forum has helped the three democracies in trade and international politics.

Volume 23, Issue 19, 23 September - 6 October 2006

The two-day visit of Prime Minister Manmohan Singh to Brasilia, the capital of Brazil, is being projected as a decisive step in the consolidation of relations between three important countries of the South - India, Brazil and South Africa. It was the first visit by an Indian Prime Minister since Indira Gandhi’s in 1968. The three nations have come together under the India, Brazil and South Africa (IBSA) Trilateral Cooperation Forum, set up three years ago at the United Nations General Assembly Forum. Besides being major powers in Asia, Latin America and Africa respectively, the countries pride themselves as being among the leading democracies in the world. Brazil is Latin America’s biggest democracy since the end of military rule in 1988, while South Africa has been a democracy since the fall of apartheid in 1994.

Manmohan Singh, along with President Thabo Mbeki of South Africa, was in Brasilia in the second week of September to attend the first IBSA summit. President Luiz Inacio Lula da Silva of Brazil, who is facing re-election on October 1, has made the IBSA one of his priority issues. Addressing the media, Lula said that he had kept the promise he had made at the beginning of his first term in office to strengthen relations with other developing countries. Although Lula may no longer be the hero of the working class, polls show that he is expected to get more than 50 per cent of the votes in the first round itself, which will ensure that there is no second-round run-off.

There was a minor diplomatic glitch just before Manmohan Singh arrived in Brazil. Minister of State for Commerce Jairam Ramesh, in an interview with a leading Brazilian newspaper, virtually played down the importance of the IBSA. The Minister implied that India and Brazil had competing economies with very little in common. The Opposition in Brazil played up the issue and accused Lula of wasting his time on foreign policy initiatives aimed at bolstering his own image as an international statesman. Indian officials managed to douse the controversy by claiming that Ramesh had not given any interview.

Manmohan Singh made it a point to emphasise in all his speeches the "cooperative nature" of the Indian and Brazilian economies. Lula on his part said that both countries had "already overcome the barrier of prejudice" and "the obstacles of distance". South Africa’s Commerce Minister, however, said that there was "need to identify the areas of complementarity much more actively". The Brazilian Trade Minister also cautioned about the dangers of "predatory trade".

With his rhetoric obviously aimed at the electorate, Lula said that during his presidency, Brazil had diversified its relations. Lula emphasised that the stress was no longer exclusively on "the privileged relations" with the United States and Europe. "The IBSA is a quest for a more democratic world," Lula told the media. He said that the IBSA would forge closer links with countries such as China and Argentina. "What we really want is for business and trade in the world to be truly more democratic." Since coming to power, the Left-leaning Lula has visited many countries in Asia and Africa, regions previous Brazilian Presidents had rarely ventured to. Lula was the guest of honour at the 2004 Republic Day celebrations in New Delhi. He referred nostalgically to the trip during his interaction with the media.

Manmohan Singh tacitly endorsed Lula for a second term in office by describing him as a "world statesman" in front of the Brazilian media.

In May 2005, Brazil organised a South America-Arab summit, which was attended by 15 heads of state. Brazil, the economic engine of Latin America, is an important player in global trade negotiations. The major South American trading bloc - MERCOSUL, of which Brazil is a member, has concluded agreements with the E.U. and the Southern African Development Community (SADC). On issues such as agriculture and trade at the World Trade Organisation (WTO), Brazil, India and South Africa, as part of the G-20, have been vocal in their opposition to the stance taken by developed countries.

Trilateral cooperation under the auspices of the IBSA envisages closer cooperation in areas such as agriculture, energy, defence, Information Technology and other important areas. Foreign Minister of Brazil Celso Amorim said that the formation of the G-20 in the WTO was a "direct outcome" of the formation of the IBSA. As Manmohan Singh pointed out in Brasilia, after the formation of the IBSA, trade ties have improved among the three countries.

India’s trade with South Africa grew from $2.4 billion in 2003-04 to $4 billion in 2005-06. India’s trade with Brazil showed an even more impressive growth, from $589 million in 2003-04 to $2.5 billion in 2005-06. Indian officials expect two-way trade $5-10 billion between the two countries in the next two to four years. Brazil’s trade with South Africa doubled in 2005-06. In 2005, trade between the two countries was estimated at $1.5 billion.

"The increase in intra-IBSA trade over the last three years is a matter of satisfaction. We need to pursue with determination the target of $10 billion in inter-IBSA trade that was set in the New Delhi Plan of Action in March 2004," Manmohan Singh said during an interaction between the heads of states and CEOs in Brasilia. It is expected that trade between the three continents will receive an extra fillip as ties among India, Mercosur (Common Market of the South or Mercado Comun del Sur) and the SACU deepen. It is the hope of the three countries that the growing interaction among them will also help the less advanced countries of the three continents to be incorporated into the developmental process and help them achieve the Millennium Development Goals sooner.

On the investment front, there is reason for optimism. Big Indian companies specialising in the automotive and pharmaceutical sectors have already invested heavily in Brazil and South Africa. The Indian public sector company ONGC Videsh Ltd. (OVL) has acquired a significant stake in offshore oilfields in Brazil. Petrobras, the leading Brazilian oil company, is expected to bag a contract for an offshore field in India. Petrobras has agreed to share its considerable expertise in deep-sea oil exploration with OVL. "The Ethanol Initiative" was another important agreement signed during Manmohan Singh’s visit. According to the initiative, Brazil will provide technology related to the production of ethanol (fuel extracted from sugarcane). It is a pioneer in the field of alternative bio-fuel technologies. Many of the vehicles run on ethanol in Brazil.

The first day of the visit was set aside for bilateral talks. Manmohan Singh and Lula, in a joint statement, affirmed their commitment to a "qualitative upgrading of the broad-based bilateral relationship between the two large democracies that share a multicultural and pluralistic ethos and common developmental aspirations".

India and Brazil are also part of the Group of Four (G-4), along with Germany and Japan, to campaign for permanent seats in a restructured U. N. Security Council. The joint statement emphasised the priority both governments attach to "the reforming of the United Nations to make it more attuned to present-day realities". Both countries said that they would work closely within the framework of the G-4 in order to realise their aspirations to serve as permanent members.

Interestingly, South Africa has chosen to stay out of the formation though it too is for a speedy reform of the United Nations system. The African Union (A.U.), of which South Africa is a key member, has refused to endorse the candidature of the G-4.

Brazil is the current chairman of the Nuclear Suppliers Group (NSG). The NSG’s role will be crucial if the current sanctions against India relating to nuclear technology are to be lifted. The NSG operates on the basis of consensus. Some Scandinavian and Nordic countries are reportedly reluctant to go along with the United States on the issue. U.S. diplomats have been lobbying on behalf of India even in places such as Beijing. Indian officials say that Brazil will stand by India on the issue. Brazil itself has an advanced nuclear programme.