Kuwait Times

Published Date: October 26, 2008
By Raymond Colitt

Brazil has tried hard to forge South American unity but its economic boom is breeding resentment among some countries and a resurgence in nationalism is making its neighborhood a risky place to do business. "Brazilians are the new Yankees of the region, we're seen as imperialists in some sectors," said Alcides Costa Vaz, head of international relations at the University of Brasilia.

Brazilian President Luiz Inacio Lula da Silva has bet much political capital on closer economic ties with his neighbors, financing infrastructure projects and helping forge a single trade bloc to counter US and European interests. On the coattails of that policy, Brazilian multinational companies and farmers accelerated their expansion in the region, in part backed by government export financing. But a resurgence of nationalism under left-wing leaders in Venezuela, Ecuador, Bolivia and Paraguay risk profit
s of Brazilian companies and challenge its foreign policy.

Peasants in Paraguay occupied Brazilian owned-farms this week, trying to settle them. The country's president, Fernando Lugo, wants more money for power produced at the jointly owned Itaipu hydroelectric plant. Ecuadorean President Rafael Correa threatened to default on a government loan after expelling two Brazilian companies over a contractual dispute.

Last week, Ecuador followed the Bolivian and Venezuelan lead a few years ago to strong-arm oil and gas companies, including Brazil's state-owned Petrobras, into contract changes. In Bolivia, Petrobras was pressured to sell two refineries at below-market price, analysts said, after the industry nationalization there in May 2006.

Correa last month expelled Brazilian construction firm Odebrecht, froze its assets and sent troops to seize projects worth a total of $800 million. A Brazilian military maneuver near the border this week "touched a raw nerve with Paraguayans," said Lugo, who backed landless peasants as a former Roman Catholic bishop. "Neither the government nor the companies are prepared for this type of risk," said Denise Gregory, executive director of the international affairs think tank Cebri, in Rio de Janeiro.

Brazil doesn't have investment treaties, which usually include insurance or litigation clauses, with any of the countries in the region, said Gregory. For Brazilian companies, much is at stake. In 2006, they invested $27 billion abroad - much of it in South America - compared to $18.8 billion of incoming global investments. The state development bank, BNDES, has roughly $2.2 billion in outstanding loans in the region.

Ideology aside, Brazil's growing economic might and ambitions generate doubts and envy among some neighbors, analysts said. "They look to us for development aid but also fear and sometimes doubt our intentions," said Costa. Brazil has a trade surplus with most countries in South America. It exported $660 million to Ecuador and imported only $30 million from there in 2007. Bolivia's budget is roughly as big as Petrobras' annual investments.

The Lula administration, which had made many concessions on its neighbors trade and investment concerns, lost its patience this month with Correa's threats and said it was concerned about possible violence against Brazilians in Paraguay. Brazil's foreign minister, Celso Amorim, warned Correa that a default would end bilateral trade. But his comments also reflected the government's dilemma in protecting domestic corporate interests without upsetting ties with its neighbors. "What do you want me to do? Invad
e Ecuador?" Amorim said. - Reuters