The meeting between Russian Foreign Minister Sergei Lavrov and Brazilian Foreign Minister Antonio Patriota in Rio de Janeiro is the latest in a series of bilateral diplomatic exchanges including Brazilian President Dilma Rousseff's December visit to Russia and Russian Prime Minister Dmitri Medvedev's February visit to Brazil. Brazil is engaging in a similar ongoing diplomacy with the United States, where Rousseff will travel for a state visit Oct. 23. This two-pronged approach to the United States and Russia underlines Brazil's emphasis on maintaining a neutral stance internationally while simultaneously reaching out to all potential international partners in an urgent effort to secure increased market access for its exports, thereby attempting to boost stagnant growth.
Russia and Brazil are discussing the kinds of deals that have come to characterize Russia's relationship with much of the world outside Europe. Brazil is weighing a range of weapons purchases while seeking to expand exports to Russia's consumer market. Brasilia is working with Russian state defense export monopoly Rosoboronexport to finalize a deal for the purchase of up to four Pantsir-S1 anti-aircraft systems. Reports have also emerged that Brazil may again be considering the purchase of Sukhoi Su-35s from Russia and that Russia is open to transferring the technology for their construction. Any deal for Russian fighter jets would directly conflict with U.S. efforts to persuade Brazil to purchase F/A-18E/F Super Hornets.
Brazil's current bidding round for fighter jets started in 2009. Russia is not an active participant in this round of bids. This leaves the United States in competition with just two other finalists, French manufacturer Dassault's Rafale and Swedish manufacturer Saab's JAS 39 Gripen NG. Any deal with Russia on the Sukhoi fighters would have to take place outside of the ongoing bidding round.
The international defense market is shrinking, giving large active buyers significant leverage with countries like the United States, France and Russia, which are seeing traditional customers reduce their purchases. Brazil is one of the largest active customers on the market. Not only is it re-equipping and retraining its military after decades of neglect, Brazil also maintains a substantial industrial base and is building up its own capacity for defense manufacturing. While in the long term that makes Brazil a potential competitor to countries with military industries, in the short term it means that Brazil is a customer with very little competition in the international market for defense systems. This has meant that Brazil has secured deals with countries like France for the purchase of submarines while also being able to participate in their engineering and construction. These kinds of deals help to boost Brazil's indigenous technological and industrial capacity, a key strategic goal of the Brazilian government.
Brazil increasingly is trying to boost its exports to markets around the world because its trade relationships in South America have deteriorated. Brazil is tied to Argentina in the Common Market of the South (better known as Mercosur), a relationship that allows Brazil to manage its complex relationship with its largest neighbor and rival. However, Argentina's recent economic troubles have negatively impacted Brazilian trade and Brazilian companies. At the same time, Brazil's persistent infrastructure and regulatory challenges at home coupled with a protective tariff scheme and a strengthening currency have made it difficult for Brazilian exports to compete internationally. Opening up to a freer trade regime would help boost exports. But it would also entail significant political and economic costs, and Brazil does not seem ready for such a step.
There are, however, opportunities for shifts in trade regimes that fall short of outright liberalization. The emphasis on agricultural trade during Lavrov's visit to Brazil is in line with the Brazilian-Russian trade relationship. Volatility in Brazil's sugar crop caused overall exports to fall by more than $1 billion (about 25 percent of total exports) from 2011 to 2012, and there may be some easy wins in that relationship that help make up for this. But Brazil's trade relationship with Russia is limited by distance, by the inherently competitive nature of their economies and by stringent Russian phytosanitary laws that frequently disrupt agricultural trade patterns.
The biggest potential gains for Brazil lie in securing long-term competitive access to the U.S. market. The U.S.-Brazilian relationship has been lukewarm at best for some time. Rousseff's visit to the United States later this year will be the first official state visit of a Brazilian president in two decades. As a major potential customer of the United States, Brazil wants more out of the trip than mere pomp and circumstance. The back and forth between Russia and Brazil at the same time that Brazil and the United States appear to be courting increasingly appears like a bid to boost Brazil's prospects in negotiations with Washington. At stake are trade and defense relationships that could define Brazil's position in the world for years to come.
