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October 12, 2010
Brazil Expanding Links in Africa: Lula’s Positive Legacy
While the results from October 3 presidential election left his former chief of staff and handpicked successor, Dilma Rousseff, just shy of a first-round victory, forcing an October 31 runoff with second-place finisher José Serra, Brazilian President Luiz Ignácio Lula da Silva is nonetheless basking in his countrymen’s favor as well as most of the world’s approbation—U.S. President Barack Obama famously dubbed him “the most popular politician on Earth”—as he completes his second four-year term. It did not start that way. The 2002 election of the former trade unionist from the left-wing Partido dos Trabalhadores (PT, “Workers’ Party”) caused a panic in the financial markets. The Economist last week highlighted the remarkable change:
The markets’ mood could hardly be more different. By way of a pre-election boost, Lula even travelled to São Paulo’s stock exchange to hail a $67 billion share issue by Petrobras, the national oil company, to raise funds to develop Brazil’s vast new deep-sea fields. Brazil’s circumstances and its standing in the world have been transformed during Lula’s presidency and mostly for the better. Poverty has fallen and economic growth has quickened. Brazil is enjoying a virtuous circle: soaring Asian demand for exports from its farms and mines is balanced by a booming domestic market, as—partly thanks to better social policies—some 20 million new consumers have emerged from poverty. No wonder foreign businesses are piling in, while a swelling group of Brazilian multinationals is expanding abroad.
Ironically, the part of Lula’s foreign policy that deserves to be trumpeted is one that is largely overlooked: his leading his country into an unprecedented engagement with Africa.
Coming into office with the PT’s left-wing bias in favor of South-South relations—one of his first acts of office was a federal decree that made the study of African history and African and Afro-Brazilian culture mandatory at all levels of Brazil’s national curriculum—Lula reversed the preceding Fernando Henrique Cardoso administration’s policy of closing diplomatic posts in Africa. During the first Lula term, Brazil not only reopened six shuttered embassies, but also opened thirteen new embassies and a consulate general so that the country now has a network of thirty-two embassies and two consulates general across the African continent. Clearly distinguishing itself from earlier Brazilian governments which focused their diplomatic attention on cultivating relations with the five Lusophone African countries—Angola, Cape Verde, Guinea-Bissau, Mozambique, and São Tomé and Príncipe—Lula’s administration has broadened the scope of action for Brazilian diplomacy in Africa. The proof that Brazilian-African relations have intensified is that there are currently twenty-six embassies from African states resident in Brasilia and four African consulates general open in other Brazilian cities.
Lula is clearly personally invested in the building of ties Africa. During his two terms, he visited the continent on a dozen different occasions—most recently in July when he swung through Cape Verde, Equatorial Guinea, Kenya, Tanzania, and Zambia, en route to the Fifa World Cup final in South Africa. However, at the summit meeting of the Economic Community of West African States (ECOWAS) in Santa Maria, Cape Verde, he told the African leaders that “Brazil—not just me—took a political decision to make a reencounter with the African continent,” explaining that Brazil could never repay its “historical debt” to Africa and that it “would not be the country it is today with the participation of millions of Africans who helped build our country.” Reviewing the trade, investment, and technology transfers that occurred under his administration, he laid a charge for his successor: “Whoever comes after me has the moral, political, and ethical obligation to do much more.”
Beyond the rhetoric of historical and political solidarity, however, there is substantive economic diplomacy with Africa, following upon the project for the creation of a free trade area initialed in 2000 between Brazil and the other member states of the South American Common Market (Mercosur)—Argentina, Paraguay, and Uruguay—and South Africa.
After having forgiven the relatively minor debts of Cape Verde ($2.7 million) and Gabon ($36 million) early in his presidency, Lula wiped out 95 percent of the public debt Mozambique owed to Brazil, some $315 million, in August 2004, and renegotiated the outstanding balance of $16 million. Subsequently, the Brazilian mining giant Companhia Vale do Rio Doce (CVRD, now Vale) was awarded a 25-year renewable contract to develop Mozambique’s Moatize greenfields coal project that is expected to produce approximately 11 million tons of both metallurgical coal and thermal coal to be exported not only to Brazil, but also to Europe, Asia, and the Middle East. This project alone requires the participation of twenty other Brazilian firms, in addition to Vale, and will turn Mozambique into Africa’s second largest coal producer, after South Africa. Its implementation will create 3,000local jobs and the eventual production will employ 1,500 permanently.
Mozambique is not Vale’s only investment in Africa. In March 2009, the company announced the creation of a join venture with the South African mining company African Rainbow Minerals Limited (ARM) aimed at enlarging the strategic options for growth in the African copper belt. In addition, the company is also present in Angola, Guinea, South Africa, and the Democratic Republic of the Congo (DRC).
In Angola, the Lula administration extended lines of credit totaling $580 million in 2005, which enabled the Brazilian engineering and construction firm Construtora Norberto Odebrecht (CNO) to rebuild the war-damaged Capanda hydroelectric power plant. Subsequently, other subsidiaries of CNO’s Salvador da Bahia-based parent company, Brazil Odebrecht, got involved in joint ventures with Angola’s state-owned companies in diamonds and bio-fuels as well as commercial and residential real estate.
Angolan President José Eduardo dos Santos came away from his state visit to Brazil this past June with an additional $1 billion line of credit from his Brazilian counterpart to help fund reconstruction efforts in the African country after more than a quarter-century of war. On top of the $1.6 billion the Brasilia had previously committed to help Brazilian firms win those building contracts. The additional money ensures that Brazil will advance the lead it already enjoys as the leading funder of Angolan reconstruction—only China comes anywhere close to the capital for infrastructure provided by Brazil. The former’s management is convinced that geological formations off of Angola are remarkably similar to Brazil’s own pre-salt deposits which have already transformed the Latin America country into a rising oil power.
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