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OPINION AND ANALYSIS | 31-05-2023 21:01

JP Spinetto: Lula’s dreams ignore Brazil’s economic reality

Brazil’s president talks a lot about the need for a united political front in Latin America, but he should focus on trade and economic integration.

The return of Luiz Inácio Lula da Silva to Brazil’s presidency is bringing back one of the most tiresome topics in Latin America: the need for the region to present a unified front to the world. It is a powerful idea with a storied history, but Latin American unity will remain elusive until it is based on trade and economics instead of just politics and ideology.

A glimpse of this difficulty has come during Lula’s South American summit meeting in Brasília with 10 other heads of state. Even before the meeting started, Lula gave Venezuelan President Nicolás Maduro a hero’s reception at the presidential palace. Lula thus rekindled all the regional tension over the authoritarian Venezuelan regime, effectively dynamiting any prospect of progress on economic or business issues.

Unlike his predecessor Jair Bolsonaro, Lula has always aspired to speak for the rest of Latin America. Now in his third term, the 77-year-old president quickly moved to try to get back on the global stage by offering to be a mediator in Russia’s invasion of Ukraine. On Monday he articulated the same rationale, claiming that the meeting represented “the return of the South American integration.”

Lula is right when he says leaders of the region need to “learn how to chat.” One of the most damaging consequences of the region’s political polarisation has been the inability of governments with differing ideologies to have an honest dialogue. An example: during the three years when the leftist Alberto Fernández and the conservative Bolsonaro were presidents of Argentina and Brazil, respectively — South America’s two largest economies — they did not have a single formal in-person bilateral meeting.

Yet by giving Maduro the red carpet and calling reports of his authoritarian rule part of a “constructed narrative,” Lula is undermining Brazil’s power to influence its neighbours. In the space of just a few months, Brazil has gone from forbidding Maduro’s entry to presenting him as a kind of champion of democracy. Even acknowledging that governments and policies change, and that restoring diplomatic relations with Caracas is a worthwhile goal, the move doesn’t exactly inspire confidence in Brazil as a steady regional leader.

Meanwhile, the work of more worthwhile integration — that is to say, economic integration — is falling behind.

In the past decade, the share of Brazil’s total trade with the rest of Latin America has fallen from 19.5 percent to 15.4 percent. Last year’s figure represents an increase over 2020’s 14.2 percent, but it’s still quite low given Brazil’s exporting boom and rhetoric about the need for Latin American nations to trade together.

Mercosur, the US$2.8-trillion trade bloc formed by Brazil, Argentina, Paraguay and Uruguay, is effectively paralysed and without a common strategy. Its deal with the European Union is languishing without ratification four years after it was agreed, which was two decades after negotiations started. Uruguay’s attempt to sign a free-trade agreement with China, bypassing the bloc entirely, is also on hold amid discussions about whether a larger Mercosur deal is possible. Even worse, Argentina is drifting toward hyperinflation without any kind of regional anchor.

Other common problems that would benefit from a unified response — the growing criminal and drug networks, for example — mostly lack a regional perspective. Even relatively straightforward opportunities for infrastructure improvements are challenging: Brasília isn’t directly connected by plane to Santiago, Chile’s capital, for instance, and passengers travelling from Mexico City to Rio de Janeiro need to make a stopover in Panama or São Paulo. Decades after Mercosur was launched, just a handful of Brazilians live in Argentina, and vice-versa, despite preferential visa terms.

The cause of Latin American unity would be better served by less political but more substantive (if mundane) projects — and, to his credit, Lula mentioned some of them at the meeting, such as harmonising financial regulations and reducing bureaucracy. But more should be done, and less said. If Brazil wants to lead the region, it needs to do more than organise summits to sell itself as a loud alternative in a US-led world.

 

*Juan Pablo Spinetto is a Bloomberg News managing editor for economics and government in Latin America.

 

 

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by Juan Pablo Spinetto, Bloomberg

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