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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 There’s a promotion for everyone here at Ladbrokes Casino!If you’re new to Ladbrokes Casino, make sure that you check out our latest welcome no deposit bonus mobile es and promotions. 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

“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?

Brazil on the Rise?

Ever since a Goldman Sachs report coined the term “BRIC”s in 2001, acknowledgment of Brazil’s, Russia’s, India’s, and China’s shared future as major players on the world stage has become a touchstone of global strategic analyses. The NIC’s Global Trends 2030 (GT 2030) agrees, though it eschews the BRICs shorthand for the term “emerging powers,” a grouping that remains (wisely) undefined. The group seems clearly to include India and China, and Brazil and Russia most of the time. Occasionally Turkey, Mexico, and other countries are mentioned as potential actors of rising influence. A close reading of the GT 2030 suggests that regarding Brazil there is a higher level of uncertainty. In future scenarios, Brazil is not categorized as a “major power” as the others, but as the largest of a “middle tier” group of countries. Nowhere does the GT 2030 give Brazil in-depth analysis.

There are several reasons why Brazil is assumed to have an especially bright future. The foremost are its domestic market of almost 200 million people, with an expanding middle class, and its steadily growing economy. Brazil’s always been large. Over the last twenty years, however, several factors have combined to create conditions for GNP growth rates of 6-7 percent: a set of successful social programs that have increased school attendance and helped pull millions out of poverty; expanding financial and communications service sectors; increased foreign and domestic investment; and rising demand and prices for Brazil’s exports (driven chiefly by Chinese and East Asian demand).

Will Brazil be able to sustain such growth rates for another 20 years? Optimists point to numerous industries, many involving agriculture or natural resources extraction, which have ample room for long-term growth. Rising education rates and improved health, mostly among the poorest segments of the population, also give reasons for optimism. But most hopeful is the trend for steady, responsible economic and monetary policies now sustained across presidential administrations of different ideological stripes. Brazil’s economic and political institutions appear sound.

There are reasons, however, for uncertainty. First, while access to education has improved for many Brazilians, its education system is still poor by OECD standards. Businesses investing in Brazil, especially in the high-tech manufacturing and services industries of the future, lament the lack of trained Brazilian engineers, scientists, technicians, and laborers capable of learning and operating advanced systems. Other elements of the infamous “custo Brasileiro” or Brazilian cost remain: the lack and poor quality of roads, railways, waterways, and ports; burdensome government bureaucracies that slow investment and decision-making; an inefficient and unreliable judiciary system that increases risk; high labor costs; and corruption.

The government plans to spend over a trillion dollars in the coming years on a “Growth Acceleration Plan” which includes boosting energy production and building new infrastructure, but the timeline for the completion of those projects is uncertain. The current government seems no closer to reforming the federal government and civil service structure, the judicial system, and labor regulations than its predecessors who were concerned with these problems back in the mid-nineties.

These deficiencies do not preclude an ever-rising Brazil. After all, every nation suffers from inefficiencies and the largest often seem to suffer the worst. Nevertheless, without serious reforms the Brazilian cost will continue to hinder the country’s growth. One comparison to watch in the coming years is Brazil’s success at passing important reforms and improving its overall business and investment climate, versus its regional competitors Mexico and Colombia.

At the moment South America seems to be dividing into one economic block along the Pacific coast (including Mexico, Colombia, Peru, and Chile) that is pursuing freer markets and increased trade and investment, especially with Asia, and an Atlantic block led by Brazil and Argentina that prefers heavy state involvement in key industries and trade restrictions. Industrial and trade policies of this sort influence productivity and economic trajectories, often for decades. Given certain conditions it would not be shocking if, by 2030, Brazil is regarded rather as the sick giant in the region, instead of its most vibrant economy.

One of the values of the GT 2030 is that it reminds readers that the world is in flux, and we should not assume the trends and conditions of the last twenty years will continue. In Brazil’s case, one looming issue is how well could the country cope with an economic recession, or worse, in China? Brazil tolerated the recent recession in the U.S. and Europe’s continuing malaise largely by selling soybeans, iron ore, food products, and other primary goods to China, along with growth in its domestic market.

China’s appetite for South American primary goods has boosted investment and economic growth across the region, with the markets of which Brazil is ever more integrated. A Chinese slump, or a crisis in East Asia—the GT 2030 discusses possibilities of pandemics, economic crises, and conflict in the region—could challenge political and economic institutions across South America. How well is the Brazilian government prepared to make the hard decisions in its spending and investment that such events would require? Would Brazil still be able to wield influence around the world, if its neighborhood were to again become synonymous with poverty, social division and inequality, and internal conflict as during much of the previous century?

Less dramatic but more certain are the demographic changes occurring in Brazil. Brazil is among the nations whose demographic advantages, due to having a high ratio of working-age people to non-working-age people, will shrink significantly between now and 2030. In 2030 Brazil’s median age is projected to be 37.4, and the country will face rising demands for pensions and health care programs for seniors, with a shrinking labor pool to support that spending. As is happening in the advanced industrialized countries that are ahead on this curve, these pressures will slow economic growth and create new political pressures for the redistribution of wealth and public services. If we assume there is a reasonable likelihood of slowing rates of economic growth in China, along with slow growth in the U.S. and Europe, then with this demographic shift Brazil is likely to face much more difficult conditions a decade or two in the future.

But economic growth rates are not the only important variable in determining a nation’s international influence. Looking to 2030 and beyond, Brazil has at least two important advantages. First, global strategic assessments inevitably highlight the shrinkage of natural resources of all kinds, particularly as billions of Indians, Chinese and others demand goods and lifestyles typical of the U.S. or European middle-class. Brazil has an abundance of natural resources of all kinds: land for farming and ranching, the world’s largest fresh water flow, oil and gas, minerals, and vast biodiversity. Brazilians are also leaders in the technologies for developing these industries. Global warming and bad water conservation policies are expected to devastate China’s and India’s capacity to grow food. Brazilians can be optimistic that a time will come in the 21st Century when Brazil is among the world’s major exporters (perhaps alongside the United States, Canada, and Russia) of both food and energy, an excellent position from which to engage in geostrategic planning.

A second advantage for Brazil is its geographic isolation from the zones of the world considered most likely to suffer from instability, humanitarian crises, and inter-state conflict in the coming decades. To some extent, Brazil’s position as the giant within a region devoid of major wars has limited its geostrategic importance relative to the other giants. This could change in the coming decades, if Latin America continues to grow as a source region for critical goods and resources. But Brazil’s distance from zones of conflict and instability could be especially advantageous under potential conditions of severe crisis, conflict, or collapse which would engulf other powers more so than Brazil.

I plan to return to the topic of strategic positioning and international security in another blog later this week. For now, I look forward to your comments and reactions.