Brazil Throws Its Hat Into African Ring
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Brazil Throws Its Hat Into African Ring

Brazil Throws Its Hat Into African Ring

Commentators have queued up to discuss the growing role of Asian powers in Africa over the past few years. China has greatly overshadowed India, Japan, and South Korea in the struggle to secure access to raw materials on the continent, but few have looked beyond Asia in the search for new influences on African economies. Yet another rising power is beginning to pay much more attention to the continent. Now the sixth-biggest economy in the world, Brazil is looking to Angola, Mozambique and much of the rest of the continent in an effort to secure an international role for the country that puts the B into BRICS. In this report, associate editor Neil Ford looks at the historic ethnic and cultural ties between Brazil and Africa, describes the growing presence of Brazilian companies on the continent, draws similarities between the two entities, analyses the diplomatic ties between the two and profiles some of the most influential Brazilian companies working in Africa today.

Earlier this year, former Brazilian President Luiz Inácio Lula da Silva, popularly known as Lula, said “Brazil must begin to repay the solidarity debt we have with Africa”. He added that his country “owes its current strength to the more than 300 years of slavery during which we exploited the sweat and blood of millions of Africans.” Indeed, Africans from areas lying within modern-day Angola, Democratic Republic of Congo and Mozambique in particular were taken as slaves to Brazil, mostly to work on sugar cane plantations.

It is often stated that Brazil has the second-biggest black population of any country in the world, after Nigeria. Indeed, there are strong cultural and historic ties between Brazil and West-Central Africa. The most recent research into the Atlantic slave trade suggests that about 40% of the estimated 11m Africans who were trafficked to the Americas were sold in Brazil, far more than in the US.

In addition, Brazil’s slaves seemed able to preserve elements of their African culture to a far greater extent than those shipped to North America, probably because they comprised a far bigger proportion of the total population of Brazil. They took their own music, dance and cuisine with them, while African religions, such as candomblé, are still practised in parts of Brazil.

Yet it would be wrong to put too much weight on any racial ties. The vast majority of Brazilian economic and political leaders are white. Far more important are the linguistic ties between Brazil and African states where Portuguese is the official language: Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé and Príncipe.

Lula’s next comments also suggested that economic potential rather than any historic debt lie behind Brazilian interest in the continent. He said: “The continent has been posting robust GDP growth for 10 years and in 2012, it can grow nearly 6%. The middle class there already totals 300m people. The number of young people in schools and universities is growing. More than 430m Africans use cellphones.”

Brazil’s rapidly growing international firms are also keen to secure access to new markets. Lusophone countries such as Angola and Mozambique are the biggest attractions but countries with fewer historic ties to South America’s biggest country are also attracting Brazilian foreign direct investment (FDI).

Wide-ranging investment

However, it would be wrong to categorise Brazil as another China: an emerging economic power that is keen to secure access to foreign raw materials. Brazil possesses plenty of iron ore itself and is benefiting from rising domestic oil production.

Investment in African markets by Brazilian companies appears to be almost entirely based on commercial rather security considerations. Investing in African iron ore, coal and oil is good business for Brazilian corporations, particularly at a time when many of them are seeking to widen the scope of their international operations. At the same time, the government of Brazil views Africa as an excellent market for its own exports.

More important still are the relative economic positions of Brazil and much of Africa. The former has enjoyed steady economic growth over many years and its leading companies are now in a position to adopt long-term international strategies. At the same time, most African economies are growing strongly by global standards and offer excellent investment opportunities. Without the coincidence of these factors, racial similarities between Brazilians and Africans would count for very little. Nevertheless, it serves both sides to play up their connections. Luanda and Maputo are obvious starting points into the continent for Brazilian investors. Aside from their common linguistic and colonial heritage, Angola and Mozambique are two of the fastest-growing African economies and Angola is well established as the biggest destination for Brazilian investment in Africa. Bilateral trade between Brazil and Angola reached a record $1.14bn in 2011 from virtually nothing a decade ago, although Brazilian exports to Angola accounted for 80% of the total. Total trade between Brazil and Africa increased from about $4bn in 2000 to $20bn in 2010 and then made a big jump to $27bn last year.

However, Mozambique is now vying with Angola for Brazilian attention. The biggest destination for Brazilian investment in Africa is already Mozambique’s Tete Province, where the world’s biggest iron ore producer, Vale, is investing heavily in coal mining and associated rail and port infrastructure.

As discussed below, Vale is just one of the giant Brazilian firms that have turned their attentions to the continent. Odebrecht is now a key player in the African construction market, while Embraer aircraft are becoming an increasingly common sight at the continent’s airports. Yet perhaps the biggest sign of Brazilian interest is the fact that service sector companies are also becoming involved. For instance, Brazilian-Portuguese insurance brokers and risk consultants MDS is in the process of setting up operations in Angola and is considering expanding into other African Lusophone states. The firm is forming a joint venture with Angolan firm, ISEM, and may adopt the same strategy in other markets.

In addition, Brazilian investment bank BTG Pactual aims to raise $1bn to kick-start an investment fund focused on Africa. BTG Pactual president Andre Esteves said: “It will be the biggest fund in Brazil with a special focus on the African continent. The creation of this ‘private equity’ is a demonstration of the enormous confidence and affinity Brazil has with this region of the world.”

Mozambican attraction

A report by Portuguese bank Banco Português de Investimento (BPI) in July concluded that Mozambique was “strategically well placed” to become an important raw materials supplier to Brazil. Economic growth has averaged 7.2% since 2000 and is expected to continue at the same rate over the next decade because of massive investment in the gas and coal sectors.

Paula Carvalho, an analyst at BPI, wrote recently: “Recent natural gas discoveries have made the country the focus of the attention of large international energy sector companies, as everything points to world-scale reserves.”

Carvalho added: “If current estimates are confirmed, development and economic growth will probably be altered in the near future, as will the country’s place in the international panorama. Along with abundant forestry reserves, Mozambique has precious stones and gold, and also has vast coal and natural gas reserves.”

New organisations to promote trade between Brazil and Lusophone African states are being set up on a regular basis. The Association of Brazilian Businesspeople and Executives in Angola, for instance, is one of the oldest and already has 50 member companies spread over a wide range of sectors, including agri-industry, construction, mining, oil and pharmaceuticals. Renato Azevedo, the organisation’s president, commented: “Our fundamental role is to promote integration and cooperation between Brazilian and Angolan companies and businesspeople, so that in partnership they generate growth for both sides and thus drive Angola’s development.”

It is not just the two large Portuguese-speaking African countries that are attracting Brazilian interest. A new shipping service between Cape Verde and the Brazilian city of Fortaleza in Ceará State is due to be launched before the end of this year. The chairman of Companhia Docas do Ceará (CDC), which manages the city’s port, revealed in October that his company had signed an agreement with Cape Verdean state port management company Enapor to jointly operate the service. Brazilian cargo must currently travel via European or African ports to reach the archipelago.

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Written by African Business Magazine

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