World stage: New status still relies on global economy
By Jonathan Wheatley
Published: July 6 2009 16:23 | Last updated: July 6 2009 16:23
For Brazilians only just waking up to their country’s new-found global status, it was a revelatory moment.
“He’s my man. I love this guy,” Barack Obama, US president, was captured saying by a television crew as he approached his colleague Luiz Inácio Lula da Silva of Brazil at the G20 summit in London in April. “He’s the most popular politician on earth.”
Never mind that the comment was flippant (“It’s because of his good looks,” Mr Obama added). The effect on Brazilians was electric. Here was recognition indeed.
Brazil’s global ambitions have often been thwarted in the past. It granted market economy status to China in the hope of Chinese support for its claim to a permanent seat on the United Nations Security Council and on the expectation of $8bn of Chinese investment in infrastructure in Brazil – neither of which have materialised.
In South America – a continent from which Brazil often feels peculiarly distant – it has met uppity behaviour from trading partners, such as Bolivia and Ecuador, with a magnanimity whose driving impulse often appears to be little more than a need to be liked.
But over the past year, Brazil has found itself being taken more seriously.
The stability of its banking system and capital markets in the face of the global crisis have made regulators in other countries keen to hear its views.
Brazilian officials have newly prominent roles on the Financial Stability Board (the enhanced and re-launched Financial Stability Forum), the Basle Committee on Banking Supervision, the International Accounting Standards Board and the International Organisation of Securities Commissions.
Last month Mr Lula da Silva took part in the first heads of state meeting of the Bric countries. If many commentators wondered what Brazil, Russia, India and China had in common, beyond forming a catchy acronym dreamt up by the sell side of an investment bank, few would deny that the countries will have a higher profile on the post-crisis international landscape.
“The world knows it cannot go forward without these countries,” says Rubens Barbosa, a former ambassador to London and Washington.
Mr Barbosa says Brazil should resist a tendency to concentrate its diplomacy on “south-south” relations at the expense of building closer ties with developed countries. The US and Brazil, for example, while on perfectly friendly terms for years, have also been happy largely to ignore each other.
Yet many aspects of Brazilian monetary and fiscal policy – not to mention the strength of its institutions and diversity of its economy – have more in common with developed nations than emerging ones. As the shape of the world’s multilateral organisations changes at a rate accelerated by the global crisis, Brazil’s position can only be strengthened.
Last month, it agreed to buy $10bn of bonds to be issued by the International Monetary Fund – an institution that Mr Lula da Silva and his followers used to enjoy telling raucously to go home.
Just a few years ago it was unthinkable that the G7 group of the world’s richest nations should take a back seat to the G20, composed of the biggest developed and developing ones. Now the reverse is true.
Nevertheless, Brazilian officials are wary of celebrating their new status too soon.
“It is a fact that the G20, rather than the G7, is at the centre of the global response to the crisis,” says one diplomat. “But we don’t suffer from the illusion of seeing this as a definitive conquest.”
The advance of Brazilian diplomacy has been mirrored by the private sector. Petrobras, the government-controlled oil group, is already one of the biggest companies in the global industry and is destined for greater prominence with the discovery in 2007 of massive new reserves off Brazil’s coast.
Vale, the world’s biggest producer of iron ore, has been expanding for years – although the global crisis forced it to fire more than a tenth of its workers last year and scale back production. It came close to buying rival Xstrata last year and has again been the focus of acquisition rumours as the mining industry shows signs of pulling out of the downturn.
AmBev, formed by the merger of two Brazilian brewers in 1998, first merged with Interbrew of Belgium, then bought Anhauser-Busch of the US last year to form AB InBev, the world’s biggest brewery, firmly under Brazilian command. Yet even in a “defensive” sector such as brewing – where sales tend to hold up even in times of crisis – AB InBev has been trying to sell some of its smaller brewers to pay its debts.
Brasil Foods, formed in May by the merger of Perdigão and Sadia, two food processors, is being described as “the AmBev of chicken”. But the company’s origins suggest a note of caution: Sadia agreed to merge with its formerly smaller rival after losing R$2.3bn ($1.2bn) in bets on Brazil’s currency that went badly wrong.
Jorge Gerdau, chairman of Grupo Gerdau, one of Brazil’s biggest steel makers, which makes more steel outside than inside Brazil, says the “irresponsible euphoria” of recent years has disappeared. “Consolidation used to be driven by the search for profit,” he says. “Now it is being driven by the need to cut costs.”
That is a sober warning not only to Brazil’s newly emerging multinational companies but also to its diplomats. The biggest threat to their future success – fresh turmoil in the world economy – lies largely beyond their control.
..........................................................
Banker making waves on world stage
André Esteves is overflowing with enthusiasm. A billionaire in his early forties, a workaholic who is also a dedicated family man, his energy levels are so high he cannot sit still but is apologetic to the point of being embarrassed when he has to step outside briefly during an interview to take a phone call.
He also admits to having been annoyed – though he is perfectly nice about it – when the FT accused him of having reversed his strategic thinking.
In 2006, he hailed the benefits of being part of a large global financial institution as he explained the decision to sell Pactual, the Brazilian investment bank, to UBS for $2.5bn. But in April this year, he argued that the private partnership could expand globally as he revealed that BTG, his new investment vehicle, was buying back Pactual from the Swiss bank.
“I didn’t change my view,” he says now. “The world changed.”