Brazil and Qatar - The Perfect Partnership

June 1, 2005

The new Qatar and Brazil business relationship could signal to the world not only that the seeds planted at the first Arab-South American Summit in Brazil, already started producing positive economic results, but also would highlight the new partnership between a rising leader in the Arab world – Qatar - with the leader of South America and rising world economic power - Brazil.

By: Ricardo C. Amaral

On May 23, 2005 the Al-Hayat newspaper from Beirut, Lebanon had an interesting article regarding the Latin American-Arab Summit in Brazil. The article was written by Mr. Ali Mohsen Hamid - Ambassador, Head of the Arab League bureau in the UK.

Mr. Hamid said: “…Brazil is not far from the US and still does not fear it. Ever since Brazil recuperated its independent national decision and regained its sovereignty under President Lula da Silva's mandate, it is achieving great strides in all realms. In the economic and trade sector, Brazil is considered to be one of the top economic giants among southern countries, with annual exports exceeding $100 billion. Brazil is also a contender for a permanent membership at the UN Security Council; a seat which the Arab World with its 300 million citizens is unable to gain.”

The Security Council currently has 5 permanent and 10 rotating members. Five of the rotating members are elected each January 1 by the General Assembly to serve two-year terms, and they are chosen from several regional groups.

Several weeks ago, Secretary-General Kofi Annan proposed expanding the permanent membership of the Security Council beyond the 5 members: Russia, Great Britain, United States, France and China to include world powers that have emerged over the last 50 years. Among the most talked-about candidates are Brazil, India, Germany and Japan. The proposals for reform at the UN are under preliminary discussion.

The Qatari government has asked various countries to help it win a rotating seat on the UN's Security Council. Qatar's candidacy is for the 2-year term 2006 – 2007, and Qatar has a very good chance of winning the Security Council’s membership due to the support of Asian and other nations of the world.

The government of Qatar under the leadership of Emir His Highness Sheikh Hamad Bin Khalifa Al-Thani has earned credibility and respect from other nations worldwide. Qatar deserves this opportunity and the support of other nations, because of its rising influence and leadership in the Arab world.

Al-Jazeera Satellite Channel that is owned by the state of Qatar, has reported that 15 years ago Qatar decided to nominate itself to occupy the 2-year term Asian seat for period 2006-2007; which is the same seat of Arabs currently occupied by Algeria according to a cordial agreement between Asian and African continents.

The Arab-South American Summit – May 2005

The Brazilian media reported that the Brazilian government refused the US request to attend the summit, to make sure that the South American and Arab countries could discuss their issues freely, without American intervention. After the rejection American pressure was applied on many Arab leaders to boycott the summit in Brazil.

The United States is becoming aware of its declining influence in South America, and they know that an Arab-South American countries political and economic cooperation could further undercut the US international influence. The US government was also worried because of some of the issues that might be discussed at the summit, and many of these issues would be at odds with U.S. policy ranging from the war in Iraq to terrorism.

Brazilian President Luiz Inacio Lula da Silva said to the heads of state and foreign ministers participating in the event: "We are facing a historic opportunity to build the foundation for a bridge of solid cooperation between South America and the Arab world.” The meeting became a great success and from the list of nations invited to participate in the Arab-South American Summit, 15 heads of state attended the event including 7 of 22 Arab heads of state, and 8 of 12 South American leaders, and the other remaining countries were represented by their foreign ministers.

Some Arab leaders gave in to the American pressure and they missed this golden opportunity in Brazil to conduct direct dialogue and discuss trade, foreign-policy and also to establish a common ground between the Arab and the South American countries

The Emir of Qatar

Among the attending Arab heads of state, one in particular deserve’s a special mention and recognition for his foresight and understanding of the importance of this first summit. The Emir of Qatar, His Highness Sheikh Hamad Bin Khalifa Al-Thani, a rising influential leader of the Arab world, realized the potential economic benefits that can be achieved from a strong trade and investments relationship between Qatar and Brazil.

Today, Qatar’s economy is the fastest growing economy in the Arab world. Its citizens are also the region's wealthiest, with per capita income of $40,000.

In the last few years, high-energy prices for oil and gas has fuelled an economic boom that led Qatar’s economy to achieve an outstanding growth rate of 20 percent per year.

Increasing global demand for oil and gas should help the Qatari economy to sustain its high growth rate without overheating the economy in the coming years.

On May 22, 2005 Reuters reported that Qatar’s Minister of Economy and Commerce, HE Sheikh Mohamed bin Ahmed bin Jassim al-Thani, announced that the Qatari government is planning to spend $100 – $120 billion in projects in Qatar within the next five to eight years. He also said that the investment plan calls for: “$70 billion to go into the hydrocarbons industry and the rest in infrastructure projects.”

Brazil and Iraq

In the past, Brazil had a great business relationship with Iraq, and during the years 1976 to 1990 Iraq became one of the major importers of Brazilian products and services. Brazil exported over US$ 30 billion dollars of goods and services to Iraq during that period, a volume of business larger than the business that Brazil had individually with any European country. Iraq was the ideal partner for Brazil at that time, and the Brazilian Ambassador Paulo Tarso Flecha de Lima had been the great architect of this partnership when he lead various commercial trade missions to Baghdad.

The trading with Iraq is the only example we have of Brazil having a strong and close business relationship with one of the petroleum producing countries of the Middle East. Brazil bought a lot of oil from Iraq under a special agreement, and Iraq bought from Brazil automobiles, chicken, beef and pork products, tractors, coffee, sugar, military armament, and Brazilian construction companies built some of the most important infrastructure projects in Iraq. The Brazilian construction company Mendes Júnior employed over 30,000 people in Iraq over the years, and among its most important projects they built the Baghdad-Akashat railroad, a major expressway and an irrigation system at the Tiger and Euphrates rivers.

During these fourteen years the Brazilian government had very close ties with the Iraqi government of Saddam Hussein. Brazil always had some kind of foreign exchange crisis happening, and the Iraqi government was the only Middle East government willing to trade with Brazil at that time. In 1990 Brazil had to accept the United Nations economic embargo against Iraq, but Brazil continued trading with Iraq over the following years under the “United Nations - Oil for Food” program.

For Brazil and Qatar the Future is Now

The timing of the Arab South American Summit in Brazil was perfect, since it was followed by this major Qatari government infrastructure investment plan announcement.

And the current Qatari infrastructure development plan opens the door for Brazilian companies - because they have extensive and actual prior experience from the time when they helped Iraq with similar infrastructure development projects.

On May 11, 2005, The Daily Star published an article saying: “It's a deal: South American-Arab summit results in free-trade negotiations” - Businessmen describe the two regions as being highly complementary.

The article also said: “As leaders from South America and the Arab world rounded up meetings in the Brazilian capital during a two-day summit to boost political and economic ties, many business executives on the sidelines were trying to strike deals between two regions they said were highly complementary.

Their efforts at a parallel investors conference got a boost when ministers announced negotiations on a free-trade area between six Arab Gulf nations, many of them rich in oil, and a South American economic bloc that includes the continent's two largest economies.

The trade zone would link nations of the Gulf Cooperation Council - Saudi Arabia, the United Arab Emirates, Oman, Bahrain, Kuwait and Qatar - with the Mercosur bloc, whose full-fledged members are Argentina, Brazil, Paraguay and Uruguay.”

The US Influence is Fast Declining in South America

The Arab-South America Summit offered to the Arabs commercial alternatives not available before, which will reduce the European and American hegemony in the Arab world. The Arab Summit laid the foundations to further reduce the gap between the Arab world and South America, an area of the world that is becoming one of the major industrial and commercial trading blocs in the world.

On January 26, 2005 The Financial Times of London had an interesting editorial - “How America became the world’s dispensable nation.”

That Financial Times article started by saying: “In a second inaugural address tinged with evangelical zeal, George W. Bush declared: “Today, America speaks anew to the peoples of the world.” The peoples of the world, however, do not seem to be listening. A new world order is indeed emerging – but its architecture is being drafted in Asia and Europe, at meetings to which Americans have not been invited.

….The US, it turns out, is a dispensable nation. Europe, China, Russia, Latin America and other regions and nations are quietly taking measures whose effect, if not sole purpose, will be to cut America down to size.

Ironically, the US, having won the cold war, is adopting the strategy that led the Soviet Union to lose it.”

To further illustrate the United States loss of clout and influence in South America, we just have to look at the results of the latest election of the head of the OAS.

One of US Secretary of State Condolleezza Rice’s goals in her trip to Brazil in late April 2005 was to convince President Lula to change his mind and have Brazil vote for the US candidate that would head the Organization of American States (OAS) for the next 5 years.

One week later, the candidate that Brazil was supporting all along, in opposition to the United States, Mr. Insulza from Chile was the winner. It was the first time in the organizations 60-year history that the candidate supported by Washington did not win.

This particular election sends a clear signal to the world of how fast the United States is losing its influence in South America. At the same time that the US is losing its influence,

China is quickly replacing the United States influence in the Area.

China’s Rising Influence in South America

In a very short period of time China is becoming the most important business partner of Brazil. China has been quickly replacing the United States’ influence in Brazil – and that is also happening in other South American countries

On May 17, 2005 - The Financial Times of London had another article trying to explain why US influence was declining in South America: “Latin lessons the US faces a loss of leadership.”

The article said: “Why have relations turned so sour? Economics is part of the reason. During the late 1980s and 1990s Latin America embraced free market policies and moved enthusiastically into the US orbit. But when reform often failed to produce growth that began to change, with many Latin Americans blaming the US for their problems.

The failure of the Bush administration to help Argentina when it ran into a disastrous debt crisis at the end of 2001 was particularly damaging to its image in the region. "Whether or not Washington or Wall Street really bear the blame, many Latin Americans believe the US led them down the primrose path but then were simply not interested when times got tough," says Julia Sweig, a Latin America specialist at the New York-based Council on Foreign Relations.

After a number of South American countries embraced democracy, and many of the economic policies prescribed by Washington including all kinds of privatizations, the result of these changes did not benefit the South American population as expected. And South America's less than impressive economic performance over the past 15 years has led to a fresh bout of soul-searching about what kind of economic model is right for the region.

… In particular, the role of the state - which policymakers were trying to cut back for most of the 1990s - is undergoing a rethink, in part reflecting South America's growing economic relationship with parts of Asia that have achieved much higher rates of growth.”

There is another factor that contributed to the current state of affairs in South America. After the collapse of the Soviet Union in 1991, the United States lost its interest regarding South America.

Some South American countries including Brazil, instead of whining or crying over spilled milk, did something about it, as a capitalist country they started searching around the world for new partners to establish new ties to replace their lost business.

The US decline of influence with Brazil did not happen overnight or because of political or ideological reasons; it was as a result of economic reasons as Brazil found new partners. The Brazilian need to find new markets for its products coincided with the economic explosion that has been happening in the Chinese economy in the last few years. Today, China has an insatiable need for commodities of all kinds to feed its amazing production machine.

A Brazilian Plan for the Future

The international media did give very little coverage at the time, but early in 2004 President Lula of Brazil, started talking with various countries to form the Group of Five (G5); for them to have meetings on a regular basis. This new G5 group would counterbalance the economic power of the current G6 group. The G6 group more or less represents the past the new G5 group will represent the future. The original members of the new G5 group will be: Brazil, Russia, India, China, and South Africa. In the last 12 months Brazil has finalized extensive economic agreements with these four countries.

Here is where the Arab Gulf nations such as, Saudi Arabia, the United Arab Emirates, Oman, Bahrain, Kuwait and Qatar enter the picture – they are also a part of the Brazilian strategic international business and economic development plan for the future.

Right now, Brazil is on its way to becoming one of the major countries of the future in terms of international business and economic development. Brazil is in a special position to help Qatar build its planned infrastructure, since Brazil has a large population of Arab descent.

Today there are over 10 million people of Arab descent living in Brazil, and they have made a valuable contribution to the social and cultural development of Brazilian society. And these Arab/Brazilians will become an asset for Brazil, and once again with the business experience acquired in doing business with Iraq all these years, they will help implement with success these new international business endeavors in Qatar.

Finally, Brazil should give its total support to Qatar regarding its bid for a United Nations seat, and Brazil also should help Qatar secure a wide-scale support from the other countries of South America.

Qatar can become the first major economic link between Brazil and the Arab Gulf nations. After this first step, we hope to establish a strong friendship between these countries and Brazil, and also the foundations for a new business and economic relations that will be mutually rewarding: for Brazil and for all these Arab countries of the Middle East.

By: Ricardo C. Amaral
Author / Economist

brazilamaral@yahoo.com