Brazil & Southern Cone - May 2013 (ISSN 1741-4431)

On 9 May Brazil’s President Dilma Rousseff broke with protocol to receive Venezuela’s new president, Nicolás Maduro, with the military honours normally reserved for an official State visit. Maduro was in Brasília on a ‘working’ trip.

Maduro’s four-day tour of his political and commercial allies of the Southern Common Market (Mercosur), Uruguay, Argentina and Brazil, had two goals: to shore up his weak legitimacy in the aftermath of his pencil-thin victory on the 14 April presidential elections; and to secure the supply of food and other essential basic goods that Venezuela needs from its Mercosur partners. Inflation in Venezuela hit 29.4% year-on-year in April, on the back of soaring food prices.

“We have constructed relations with Brazil like never before”, Maduro declared. “We have asked for more support from Brazil for an agri-food revolution in the country, so to become an export power, just as we have already done with rice and maize”. That might come as news to Venezuelans who often can’t find sufficient rice on supermarket shelves. The ‘scarcity index’ compiled by Venezuela’s central bank, which measures the availability of basic goods on shop shelves, was at a 64-month high of 21.3% in April, meaning that of every 100 basic products, 21.3 were scarce. Scarce food products included wheat flour, maize oil, butter, sugar and powdered milk.

The late president, Hugo Chávez (1999-2013), made food sovereignty a State policy from the time he first took office in 1999 but after 12 years in power Venezuela was still importing up to four fifths (80%) of its total food needs. Maduro said that upon the discovery of oil in Venezuela there had been “a mutation, more than a mutation, an amputation” of the rural productive sector. With Brazil’s help, he said, Venezuela aimed to recover it and build a new model.

Brazil is happy to be of service. Its exports to Venezuela have soared in recent years to reach US$5.05bn in 2012, up 10% year-on-year. In 2003, the year the leftist former president Lula da Silva (2003-2010) first took office, the figure was just US$600m. Brazil’s imports from Venezuela were valued at US$996m last year, down 21.3% year-on-year from US$1.26bn in 2011. In 2010, they were worth US$832m.

Brazil’s imports from Venezuela are made up almost entirely of oil, fuel and derivatives, along with urea (the base product of fertilisers) and aluminium. Its exports to Venezuela comprise everything from food and live animals to finished manufactured goods and inputs, machinery and equipment. In the past five years, Venezuela has imported goods worth about US$28bn from its Mercosur partners (mainly Brazil and Argentina), of which about US$12bn corresponded to food supplies. In return it has sold its partners only about US$1.0bn in non-oil exports, as well as oil supplies at heftily preferential financing rates for the likes of Uruguay.

In other words, it’s a win-win situation for both the Mercosur sharks (Brazil and Argentina) and the minnows (Uruguay – and potentially also Paraguay, if its conservative political elite could ever see fit to reach a political ‘understanding’ with Venezuela).

Venezuela’s private sector complains that the only gains from Mercosur members are accruing to state-owned companies that ink lucrative supply deals with their counterparts in Brazil and Argentina, while it struggles to compete with a flood of cheap imports. After their meeting, Rousseff and Maduro announced new deals for fertiliser and chemical factories in Venezuela - to be set up by the Brazilian construction colossus, Odebrecht, and the chemical giant, Braskem, with the output destined for export to Brazil.

• This is our back yard

Brazil’s strong support for Venezuela’s Bolivarian Revolution might well be explained in terms of the commercial relationship favouring Brazil. But it goes beyond that to serve Brazil’s broader foreign policy interests. Welcoming Nicolás Maduro to Brasília, President Dilma Rousseff threw in a political lob at the US (which is still dithering over the Venezuelan election result). Noting that the partnership with Venezuela was important to rejecting any sort of “hegemonic pretensions”, Rousseff stressed that it was “an honour” for Mercosur that Venezuela would take over the bloc’s pro tempore presidency (for the first time) in June. Rousseff will visit US President Barack Obama in Washington in October, with the US vice-president, Joe Biden, due in Brazil in late May.