Aside

Brazil as a World Power Beyond 2030: Geographic, economic, and military dimensions

The Global Trends 2030 report depicts three hypothetical future worlds and examines their implications. Roughly put, in one the U.S. turns isolationist and major conflict breaks out in Asia. In another, the U.S. and China build a productive working relationship around which the global economy flourishes. In the third, global institutions falter and major powers become the focus of regional economic blocs, hindering the world economy and technological cooperation.

In each of these scenarios, Brazil is largely a passive player. It inherits a global political, economic, and security environment that derives from other players—particularly China and the United States—and events like an Asian pandemic or international armed conflict in the Middle East. The closest Brazil comes to playing an important role is one mention of a possible future in which Brazilian diplomacy brokers a peace-making agreement between China and the United States (and is rewarded, in return, a seat on the UN Security Council!).

I agree with this view, for two reasons: first, Brazil’s geographic isolation from the world’s key economic and geo-strategic zones; and two, Brazil’s lack of global presence—particularly in security affairs.

The original BRICs countries (I do not include South Africa, because it is included for political reasons, not because it appears destined to become an economic power) share several characteristics, especially market size. Brazil differs from the others, however, in a crucial way. China, India, and Russia are important to other large, influential countries not only because of their size but because they are territorially and economically involved in flash points of instability, countries and/or regions with troubles that affect core interests of powerful countries around the world. South America includes no such flash point. Naturally, this benefits Brazil because it faces relatively little interference from outside powers (the Cold War era being somewhat of an exception, though U.S. and Soviet interference was rather less severe than in East Asia, Afghanistan, or Germany). Brazil also needs not allocate resources and political attention to deter or respond to threats posed by heavily armed, nuclear capable neighbors.

Brazil’s isolation from the world’s critical chokepoints and hot spots is also a disadvantage, because it means Brazil is an important country in terms of economics and perhaps diplomacy, but not in terms of security. For other powers, Brazil is a good partner to have but not an essential one.

Brazil’s position on nuclear weapons reflects this conundrum. Brazil signed the nuclear Non-Proliferation Treaty (NPT) in 1997, a reasonable step considering Brazil faces no apparent threat to its territorial sovereignty that a nuclear weapon could be used against (i.e., no nation-state antagonist to be deterred). Critics of the decision point to India, claiming that India’s refusal to sign on to the NPT was a key reason why the U.S. under President George W. Bush announced its support for a seat for India on the UN Security Council, and in general why countries with far fewer resources and far smaller economies than Brazil’s—e.g., France, the UK, Israel, Pakistan—seem to  receive more respect and generosity from other powers than Brazil. Brazil has established a type of middle path. It has advanced nuclear capabilities which it uses for energy, industry, and military purposes (it aspires to build a nuclear-propulsion submarine over the next decade). It skirts and sometimes ignores its NPT obligations. But it does not go so far as to build or test a weapon, a step that could not help but destabilize its regional relations.

Another, related, factor that limits Brazil’s global presence and its influence is its lack of capacity and willingness to develop and use military capabilities beyond its borders. Unlike Asia or Europe, South America is a community of countries with low propensity for international conflict, and small militaries. The use of military might beyond a country’s borders is almost unheard of.

Brazil’s attitude is changing, somewhat. Brazil’s armed forces supported the UN’s peacekeeping mission in East Timor in 1999, and have supported and led the UN peacekeeping mission in Haiti. In 2011 the Brazilian navy led an UN-authorized multinational maritime force off the coast of Lebanon. Still, when compared to its BRIC rivals, and even against other “middle powers” like the UK, Canada, Australia, and South Korea, Brazil at present and at least for the next ten years (because it takes time to build a sea-going naval capability) has yet to involve itself in coalitions and actions that determine outcomes in faraway but strategically important regions. Brazil’s government shows an interest in building such a capacity, at least in terms of ships, aircraft, and other technologies—areas with obvious economic and industrial spillover effects. But investment lags in the equally difficult processes of military professionalization and modernization, such as the training and utilization of junior enlisted and non-commissioned officers.

One factor that could drive change in Brazil’s security capabilities is the rise of concern, across South America, over border and territorial control. The regional surge in drug trafficking—to major consumption markets within Brazil, in the U.S., and in Europe—has led to recognition that illegal armed groups regularly cross borders and operate in territories across the region. As long as this problem persists, there will be demand for more capable, mobile, and outwardly disposed security forces.

In the coming decades Brazil can certainly continue to gain international influence as an economic power, and a diplomatic actor, regardless of its involvement in security matters. But the more widely Brazilian people, companies, goods, and investments spread around the world, the more Brazilian leadership will perceive the benefits of having the capability to protect and serve them and the interests they create.

Despite these complications (and leaving aside Brazil’s medium-term reliance on China’s economy), Brazil is well-positioned to continue to rise as an important player on the global stage. The first blog discussed the long-term, positive prospects for Brazil of becoming an important exporter of both food and energy—an enviable position. From the point of view of resource abundance, especially when intensifying effects from global warming are considered, Brazil/Southern Cone stands with the United States/Canada, and Russia, as the regions best-equipped to serve as global providers of natural resources.

Brazil’s isolation from global hot spots is also advantageous, because Brazil is relatively protected from crises and armed conflict that could erupt in East or South Asia, or the Middle East, and engulf other powers with longstanding equities in those regions. Among the most provocative sentences I found in the GT2030 report is one that asserts that Brazil would benefit from major geopolitical tensions and a worldwide pandemic. As other powers succumb to economic crises and conflict, perhaps including de-industrialization as occurred in Europe and Japan after the last major war, they and the rest of the world may turn increasingly to the less-affected industries of Brazil and South America for their requirements. From a purely nationalistic viewpoint, one that imagines Brazil as competing with other countries for wealth and influence, this scenario of global turmoil and crisis offers Brazil its best chance for maximum advantage. Could it be that this type of long-term strategic thinking underlies Brasilia’s flirtation with rogue regimes like those of Hugo Chavez and Ahmadinejad?

Good fodder for speculation, but between today and 2030 what Brazilian leadership should focus on is strengthening various internal institutions and policies that underpin a democracy’s strength and vitality, including the judiciary, the education system, the defense ministry and the armed forces. For a country as large and rich in resources as Brazil, more efficient and reliable domestic institutions would go far to ensure its greatness. Foreign policy will come along.

— Ralph Espach, director of the Latin American Affairs Program at CNA

Brazil as a World Power Beyond 2030: Geographic, economic, and military dimensions

Aside

One of the United States’ top experts on Brazil offers the following comments that expand on the last blog’s description of Brazil’s industrial challenges:

“Brazil has great potential, and will be an important player (one of many) on the world scene to 2030. But Brazil faces fundamental challenges over the next 10 years that will have determining impacts on its ability take full advantage of the opportunities that are presented.  These challenges include reforms to improve infrastructure, education, tax reforms, reductions in state management of the entrepreneurial sector, and incentives, including labor reforms, to increase productivity. 

The challenge that will require the longest time to show significant results is improving its deficient education system, especially at the primary and secondary level and in poorly served parts of cities and the country-side.  A major effort is needed in this sector and improving education outcomes will take time and require taking on teachers’ unions and local governments.  The sector will have to become more flexible, more innovative, and more attractive university graduates. Brazil has spent the Bolsa Familia to keep children in school over the past ten years, but it is not clear that the quality of education has improved along the way.  Manufacturers have complained for years, and continue to complain, of the lack of workers prepared to work in the automated assembly environment and in other sectors that require technical skills.  Brazil ranks 127 on “quality of math and science education, and 91 in “availability of scientists and engineers” in the World Economic Forum’s Global Competitiveness Index.   Its score on Innovation is the lowest of any.

Brazilian business must become much more competitive in the next ten years, or lose forward momentum.  Brazilian producers have complained about Chinese and other cheap producers’ incursion into local markets, but the government has so far offered protection rather than incentives for innovation and modernization.  Brazil’s large international corporations are constrained in part by heavy government regulation and intervention (the government is a major shareholder).  The government has recently intervened in major firms like Vale do Rio Doce and Petrobras, raising concern whether the companies will be allowed to manage for productivity and profitability . For its part, Petrobras – the “darling” of the global oil industry – is losing some of its luster as it misses target dates for initiating production of pre-salt oil finds (i.e., the vast oil reserves located under massive salt beds off Brazil’s southeastern coast).  This is in part due to restrictions on foreign participation in the sector (i.e., local content requirements), which limits the involvement of foreign companies with the necessary experience and expertise in this type of complicated extraction.  Given the long time horizons for bringing complex operations into production, these delays postpone the diversification of Brazil’s export base.

Brazil needs to become self-sufficient and diversified (which can include further integration with South America) in order to be able to ride out major fluctuations in the global economy.  Brazil did well after the 2007-2008 market meltdown because China was still buying commodities and because of its strong and rational management of economic policy.   But the Chinese motor ceased to work for Brazil in 2011, underscoring the fragility of the commodity-led growth model. Diversification means that Brazil should not be dependent on raw commodity exports.  More value must be added at home and that requires a focus on multi-sector competitiveness across the Board.”  — Margaret Daly Hayes, Evidence Based Research

Brazil’s current industrial policy creates risks and potential rewards. Professor Daly Hayes has described the risks. The rewards the government seeks, however, in expanding state involvement in key industries are: 1) to build strong corporations capable of competing globally (perhaps reflecting a reasonable assumption that the key competitors of Petrobras and Vale are Chinese and Russian state-owned corporations, more so than Exxon-Mobil); and 2) that greater state control will allow more distribution of the profits and other benefits to public goods like long-term strategic investments, social programs, job creation, etc. instead of to shareholders’ pockets. Many nations—Japan, South Korea, Germany—have had significant success with such policies. Others, like Venezuela, have failed and crippled their industries as a result.

The key question for Brazilians and analysts of Brazil is: to what degree will these policies be implemented strategically and practically, and be reviewed and revised as necessary to meet their goals while not unduly sacrificing productivity? Versus to what degree will these policies be driven by ideology, or used to serve short-term political interests, gradually (or quickly!) losing sight of their original goals?

The recent trend does not bode well. Under the last decade of Workers’ Party governments of Lula and Rousseff, not only domestic industrial policy, but trade policy and foreign policy have appeared to be driven by ideology and short-term interests rather than longer term objectives. Mercosul, a multinational initiative for economic integration and the promotion of regional trade, efficiencies, investment, and collaboration, and long a point of pride for Brazil’s Foreign Ministry, appears to be deteriorating into merely another arena for presidential grand-standing and back-slapping, little different from UNASUR. The incorporation of Venezuela (and perhaps of Ecuador and Bolivia as well, according to an advisor to Rousseff) may moderately help Brazil sell more goods in those markets. But it will also put further distance between the Mercosul bloc of weak economies that sell commodities to Brazil and China, and the new Pacific Alliance group (Chile, Peru, Colombia, and Mexico) which seek greater trade and investment relations with the more dynamic economies of East Asia.

These trends are not alarming, yet. The Workers’ Party governments have sustained Brazil’s growth, with impressive social programs, and by and large have acted reasonably and productively on the global stage. Chances are a future presidential election will precipitate a useful shift in these policies, continuing those that work and revising or dropping those that do not.

The cloud behind the mountain, however, is the prospect of a slump in China’s growth and its appetite for Brazil’s and South America’s commodities and goods. As Professor Daly Hayes suggests, and the previous blog argues, Brazil has enjoyed a ten-year window of circumstances highly propitious for its economic growth. If those circumstances change, there will be much less margin for error.

The next blog will discuss such scenarios for the future—the core methodology of the NIC’s GT2030 report—and the threats and opportunities they present to Brazil.

Ralph Espach, director of the Latin American Affairs Program at CNA

Brazil’s Social and Industrial Policies: The Korean Path, or the Venezuelan Cliff?

By ralphespach Posted in GT2030