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

Brazil hardly boasts a stellar reputation as a promoter of free trade. Over the past few years the World Trade Organisation (WTO) has often criticised the country for adopting protectionist measures. Now the man tasked with defending Brazil’s reputation at the WTO, Roberto Azevêdo, has been chosen as its new director. Ahead of the final nomination, Azevêdo insisted that his country’s track record would have no bearing on his performance in office. “As director of the WTO, I will not be representing Brazil,” he said. His supporters argue that his critical, go-slow approach to trade liberalisation will prove useful in keeping developing economies on-board as the organisation tries to restart stalled global trade talks.

Azevêdo’s victory, at the expense of the candidacy of the Mexican Herminio Blanco (a key architect of Nafta), was hailed as a sign of “the transformation of the global order” by Brazil’s foreign minister, Antonio Patriota. Brazil’s President Dilma Rousseff, who personally promoted Azevêdo, issued a congratulatory note in which she called on the organisation “to give a new, equitable and vigorous impulse to world trade, fundamental for the [global] economy to enter into a new phase of growth and social justice”.

In his first interview upon taking office, Azevêdo issued a warning about the “threat of protectionism” and sounded an ambitious note. The Brazilian acknowledged that the WTO was going through a crisis and that it needed to “regain relevance and importance”. In recent years, the WTO has been used more as a forum to settle trade disputes and monitor policy than as a host for serious trade negotiations. But Azevêdo said that his priority would be the conclusion of the Doha Round, the global trade negotiations which have now been going on for 13 years. “We must find a solution. This will unlock the WTO”, he said. As a WTO insider who has taken part, in various capacities, in virtually all WTO ministerial conferences since the launch of the Doha Round, his supporters believe he is well placed to do so.

Among the hagiographies in the Brazilian press for Azevêdo, there were a few notes of caution. Marcos Troyo, a commentator for the daily, Folha de São Paulo, welcomed Azevêdo’s appointment but wondered whether Brazil had sufficient clarity of vision in its international diplomacy to capitalise on the prestige of the position. “Brazil seems to know what it wants for the world. Not necessarily what it wants of the world”, he wrote. He bemoaned an ‘ideologically driven’ foreign policy and complained that “instead of promoting [domestic] micro reforms and setting up robust commercial agencies in the global cities of North America, Europe and Asia”, Brazil prefers to open diplomatic outposts in Africa. This gets votes and sympathy in international forums, but little in the way of trade flows, he suggested.

• Ports law docks at two minutes to midnight

On 16 May Brazil’s federal chamber of deputies, quickly followed by the senate, finally approved new legislation to open up the country's ports sector to new private sector investment, just hours before a provisional measure (MP 595) expired at midnight.

The senate voted in favour by 53 votes to seven, with five abstentions. The MP, first signed by President Dilma Rousseff in December 2012, will now become law, replacing the previous ports law (Law 8,630, 1993), but it was a tough battle for the executive, underlining yet again its erratic relationship with the chamber of deputies. The new legislation will allow for the executive’s new public-private framework plan to attract US$27.6bn in investment and the concession of some ports to private sector companies. The government intends to go ahead with concessions worth an estimated US$372m to restructure ten ports this year and has identified as its first priorities seven ports in Santos and three in Belém.

Brazilian port terminals charge some of the world's highest prices to move goods. Some of the high cost stems from labour agreements; but red tape, taxes and lack of competition between terminals are also to blame. The draft bill would allow more private operators to handle cargo at state-owned ports and privately owned ports to handle third-party cargo in general. Rousseff has repeatedly stressed the need for investment in infrastructure to lower the infamous ‘Custo Brasil’ and make the country more globally competitive.

Port workers went out on strike in recent months in objection to plans to shift management responsibilities to the central government and away from the port authorities. The proposals would allow new (privately-run) terminals to directly recruit workers, ending an obligation to source them through a central agency, Órgão Gestor de Mão de Obra (Ogmo). The unions are also concerned that the new rules would allow private ports to operate under rules that would lower costs for exporters compared with the public ports.

• Infrastructure

According to the 2012-2013World Economic Forum’s Global Competitiveness Report, Brazil ranks 107^th of 144 countries assessed for the quality of their infrastructure, putting it below all its fellow Brics (Russia, India, China and South Africa) and almost every other emerging country including the Philippines, Indonesia, Mexico, Cambodia and Thailand. Brazil’s ports and airports are crucial to its success as a commodities exporter, but their poor quality puts Brazil among the ten worst countries in the world.

• Brazil’s star ascends again among investors

Brazil’s treasury said it raised an estimated US$750m in its 9 May reopening of its dollar-denominated benchmark global bond maturing in 2023. The State oil giant, Petrobras, later sold a record US$11bn in new debt, while the national petroleum agency was overwhelmed with bids of US$1.4bn for its first oil auctions in five years. Elsewhere, the German auto manufacturer Volkswagen (VW) announced in mid-May that it would invest R$8.7bn (US$4.3bn) in the Brazilian market to 2016. Finally, Brazil received US$65.3bn in foreign direct investment (FDI) in 2012, on figures from the United Nations Economic Commission for Latin America & the Caribbean, down slightly (2.0%) on 2012 but still accounting for 41% of regional FDI inflows.