Photo Jonathan Blair

Tuesday, November 30, 2010

Brazil's rise and Canada's foreign policy

Brazil has now joined the very small club of global powers and is there to stay. Such a development is mostly good for Canada, though it coincides with our country's declining influence in global governance. While tensions may develop around a few narrow issues, there is much overlap between the two countries' strategic, political, and economic interests in the Americas and in the world. Moreover, space for active cooperation does exist, but it is not extensive enough for each country to see the other as a strategic or even a significant partner.

What is the place of Brazil in the world today?

In less than a decade, Brazil has become a key player in global governance and world politics: its opposition was the most important factor in the failure of the Free Trade Area of the Americas; it is one of the very few critical players (with the US, the EU, India and China) in global trade and environmental talks: Brazil was in the final four at Doha, and in the final five at Copenhagen; the G20 would have little legitimacy, and consequently little efficacy, if Brazil were not a member; and even on security issues, where its capabilities remain limited, it has shown, especially in the recent of case of Iran's nuclear program, that leaving it outside of a major diplomatic game can be very costly.

What are the main foundations of, and constraints on, Brazilian foreign policy:

Brazil's rising influence can be traced to three main factors:

Natural endowments: Brazil is a huge country with a large and relatively young population, it is also an energy, a mining and an agricultural superpower. Its energy matrix, in particular, places it in an extremely advantageous position, as it relies on local sources of hydroelectricity, biofuels, gas and oil, and to a lesser extent nuclear energy, with future potential already large and growing in all cases.

Effective development policy and credible commitment to macro-economic stability.

Relative insulation from the world's economic tribulations, linked to its natural endowments and relatively diversified industrial structure, but also, especially in recent years, to strong pro-poor domestic market growth: Brazil's development is not export-driven.
Strong diplomatic capabilities: exceptional leadership (Cardoso and Lula); very and effective diplomatic apparatus; broad consensus on foreign policy.

The main implication of these endowments for foreign policy, is that Brazil can play hard ball on most files because foreign players have little leverage on it. Their flip side is that Brazil can change its mind and be irresponsible and/or inconsistent, with little effect on its domestic economy, which potentially makes for unreliable policy.

The main limitation imposed on Brazil's foreign policy lies in its relative lack of hard power and strong economic leverage: its military is relatively weak by global standards, especially on the hardware side; although Brazil is a major player in global trade and finance talks, it is not a major trader, lender or investor.

What are the priorities of Brazilian foreign policy?

Brazil's foreign policy has two main priorities: regional but self-managed stability, and growing assertion of influence in the global arena

While South America has not seen major wars or military confrontations for years, it is regularly shaken by localized international tensions and domestic political instability. Sharing borders with all the countries of the region but Ecuador and Chile, Brazil has invested heavily in regional stability. Two main modalities have been used: quiet bilateral diplomacy and limited regional institution-building. The key such institution is UNASUR , the Union of South American Nations, which is a sloppily institutionalized organization that mostly works through meetings of the region's Presidents. Mercosur, long a central tenet of Brazils regional economic and political diplomacy, is receding in the background, as its economic, political, and strategic importance for Brazil becomes marginal. Much of Brazil's regional diplomacy focuses, albeit unofficially, on managing the regional implications of Hugo Chavez domestic tribulations and foreign activism. Finally, one crucial objective of its regional policy is to keep non-regional players, especially the United States, but also the OAS and the UN, out of South-America's security picture.

The second crucial dimension of Brazil's foreign policy is geared to gaining space, prestige and influence in global governance circles. In particular, it has been pushing strongly to get closer to a permanent seat at the UN Security Council but it is also pushing for reforms in international financial institutions, that would give it more leverage on their governance. Brazil's apparent enthusiasm for BRICS cooperation, its trilateral cooperation initiative with Indian and South Africa, its ambiguous behaviour towards Iran's nuclear program and global ambitions, its critical stand towards the Non-Proliferation Treaty, as well as its cynical treatment of human rights issues at the United Nations, can all be understood as means to expand its leverage on the Western powers that continue to dominate global governance institutions.

What will change with the new government?

The election of Dilma Rousseff does not change the equation very much. Two factors, however, could lead to minor reorientations of one or another dimensions of its foreign policy. The first one is the need for the new President to put her mark on the country's external image, essentially to assert an autonomy that she needs for the sake of managing the fractious coalition she currently heads. The second one is her lack of regional and global prestige and legitimacy, whose main consequences are likely to be felt in the region itself, especially for the managing of Hugo Chavez, which Lula had done extremely effectively, to some extent thanks to the tremendously positive image he enjoyed in the Americas.

Where does Canada fit?

Brazil's growing influence in Latin America and in the world should be seen as an asset and is generally consistent with the broad security and economic interests of Canada and of Canadians, as well as with the values that underlie the country's foreign policy.

Canada is not a priority for Brazil and it is extremely unlikely to become one in the future. In general terms, Canada looks from Brazil as a declining competitor in the global governance game, and certainly as an irritant in the hemispheric governance game. In particular, Brazil has been more or less openly trying to weaken the OAS and other hemispheric initiatives, favouring instead South American arrangements or inter-American ones that exclude, formally or not, Canada and the United States. By contrast, the OAS, with its large number of small and often aid-dependent states from Central America and the Caribbean, provides Canada with perhaps its best remaining multilateral platform. The problem, from Canada's standpoint, is that without Brazil's cooperation, not much can be done through the OAS outside of Central America and the Caribbean, which significantly reduces the scope of what Canada can do.

Three other issues around which disagreements could develop are worth noting:

While the G20 is possibly Canada's last chance to claim a voice in global governance, it is too big for Brazil, the gist of whose policy is precisely to look for the smaller possible club of which they can be a member. I would be very surprised to see Brazil support the institutional or political consolidation of the G20 into a major global player.

Nuclear issues are a key plank in Brazil's quest for a seat at the UN Security Council. While unwilling—for now?—to question its signature of the Non-Proliferation Treaty, Brazilian leaders have been questioning ever loudly the legitimacy of the deal on which it was based, with the Big Power disarmament that was supposed to be the quid pro quo, not accompanying the commitment of the signatories to refrain from developing nuclear weapons on their own. In the background, obviously, is the fact that the P5 is, de facto, a nuclear club. Such a stand is clearly incompatible with Canada's traditional position on the issue of proliferation.

Canada, finally is the home of private sector competitors for Brazilian public and private corporations in the large infrastructure construction market and in the resource sector. This is particularly the case in the three major and most stable Andean economies: Colombia, Peru and Chile. To the extent that the linkages between Brazil's multinationals, State corporations and the government are extremely tight, such a competition could take a clearly political dimension.

The scope and severity of such potential disagreements should however not be exaggerated. Brazil is a liberal democracy whose citizenry value human rights and freedoms, a society very much Western in outlook. Both strategically and economically, Brazil's government shares a lot of preoccupations with Canada's. In strategic terms, Canada's interests in regional stability can be served at least as well by effective Brazilian policy as by OAS or UN interventions. Brazilian multinationals have global supply chains and already rely on bits and pieces produced by Canadian companies. Canada's resources (from copper and nickel to potash) are also of interest to Brazil's mining giants, and Canada can be a useful ally in the very many coalitions that Brazil uses to promote and defend its interests. The same holds for Canada: Brazil is a huge, if still highly protected market, that can hardly be bypassed by Canadian corporations. In practice, Brazilian businesses and diplomacy is anything if not pragmatic and Brazil's broad range of allies, as well as its sizable and growing global legitimacy could make it a useful ally on particular questions. In building such cooperation, however, it will be important to keep in mind that raw fact that Brazil is gaining ground globally, while Canada is not, something that Canadians may not yet be ready to accept: it is in Brazil, for instance, that a newspaper series called "Our time to lead" makes sense in Brazil, not in Canada...

Tuesday, November 23, 2010

US Policy in in Latin America and the Caribbean: Where have all the Yankees gone?

American specialists of hemispheric affairs have been complaining about the Obama administration. After encouraging signs, during his campaing and in the first few months after the election, his administration appears to have done little of substance. The Western Hemisphere looks no more important to it than it has been for every other administration since Ronald Reagan's Cold War adventures in Central America. This should come as no surprise. Beyond Mexico, Colombia (for now), and to a lesser extent the Caribbean, the region does not matter much to the US. An indifferent policy reflects the absence of strong interests in the region, and the resulting lack of the strong domestic constituencies that would force the government to become serious towards it.

The Americas have long been seen as the US backyard. In fact they have been claimed as such by the United States since James Monroe famously barred European powers from interfering on the continent, at the beginning of the XIXth century. For a long time, there was not much substance to that claim and Britain, in particular, did as it wished, dominating the continent economically until World War II. For sure, a US-dominated Pan-American Union—which became the OAS in 1948—was created at the turn of the XIXth century, US marines and "advisors" have been roaming in the hemisphere since then, American multinationals have invested massively in the resource sectors of much of the continent and, from the 1950s until the 1990s, they had little "foreign" competition. From those standpoints, there was something like an American domination of the continent.

A closer look, however, reveals a much different picture. Throughout the XXth century, true imperial dominance was largely confined to the Caribbean and Central America, with the South largely free of outright intervention. Cuba, Nicaragua, Haiti, Guatemala, Grenada, and Panama bore the brunt of the Empire's dominance. The sub-continent, however, had a very different history.

Much fuss was made about US support for the military regimes of the Southern Cone and the coups that launched them in the 1960s and 1970s, but it was just that: support for regimes whose claim to power were largely self-sustaining. A convergence of interest between Cold War America and anti-communist and reactionary military and economic elites has long been painted as the manipulation by Washington of political establishments utterly dependent on that support to stay in power. It is easy to forget how nationalist and profoundly anti-liberal those regimes were, how free they all felt not to play into US' anti-Cuban policy or, to take specific examples, how nationalized Codelco became the cash-cow of the Chilean military, how it is the Peruvian military launched the land reform in their country, how Brazil's generals were not keen at all on US multinationals, how their economic policy is best understood as state capitalism and how quick they were to establish relations with communist Angola and to cut military cooperation with Jimmy Carter's America. Similarly, when the time came for the generals to leave, US influence proved marginal: elites turned their back on them, civil society mobilized and in some cases—Argentina and Chile for instance—sheer hubris brought them down. Differently from Central America and the Caribbean, in sum, domestic factors overwhelmingly determined both the rise and the fall of South Americas military dictatorships, not US schemes and manipulations.

Something has broken down since the end of the 1980s, but that something is partly an illusion, for the Empire's backyard had always been smaller than it looked. Still, what hard ground there was for that illusion is shrinking as American strategic and economic interests in the region as a whole diminish.

Strategically the most important challenges to America have disappeared, like the communist threat in Central America, they are wildly exaggerated, like the Chavez threat, or self-created, like the prohibition-induced illegal drug market and the "War on Drugs"-induced drug violence in Colombia and especially Mexico. Between 2001 and 2008, US military financing to the region represented less than 2% of world total, and 80% of that 2% went to Colombia. Moreover, when the US does not realize on their own that a strong presence is not a good idea, they are told. As the Colombian government's progressively wins its civil war, the legitimacy of a significant American presence in, and military cooperation with, the country will also shrivel. Recently expelled from Ecuador, the American military looks doomed to fully abandon the region soon, which may not matter that much, primarily because the stronger trend takes the region towards increasingly developed and democratic societies, whose interests are unlikely to conflict fundamentally with those of America.

Economically, the US is also losing interest in South America, whose proportion of US stock of investments has declined radically over the last ten years, from 6% of its global portfolio in 2000, to 3% in 2008. Much of US investments in the Americas—beyond Canada—is concentrated in Caribbean fiscal havens: Bermuda and the British Caribbean, with 9% of the global stock of investments, have more weight than South America and Mexico combined (6%). Trade numbers look slightly better, but much of that trade is made up of commodities which, by definition, are globally traded and priced. In 2008, Brazil, with 50% of South America's GDP, represented 1.45% of total US exports, and 2.48% of its imports. From the standpoint of US companies, consumers and economic policy-makers, in other words, South America, with or without free trade agreements, is a very minor part of the world.

The flip side of that declining interest has been a growing presence of new players in the region. Canadian companies dominate the mining sector of most Andean countries, and of the continent as a whole for exploration. European banks, particularly Spain's, along with Canada's Scotia, have aggressively invested in the region. China, while still tentative and not particularly welcome, should soon make significant forays in the resource sector. Russia and France are strong players in the regional arms market. Even Iran is now expressing interests, albeit essentially for diplomatic reason. The overall effect is that while the Americas decline in US global portfolio, the US also declines as an investor in, and trade partner for, the region.

The breakdown of imperial America's continental hold makes hemispheric arrangements superfluous. The project of a Free Trade Area of the Americas collapsed less as a result of Brazilian resistance than of Washington's and especially Wall Street's indifference. The OAS has long been a diplomatic backwater, notwithstanding its recent ventures –sometimes successful—into local crises. Its recent reinvention as a bulwark of democracy on the continent, already tested in the recent Honduran crisis, could soon break on the reefs of Chavez' autocratic consolidation, in the face of which it will likely be impotent and divided. The Summit of the Americas' process is quickly sinking into irrelevance. There simply is no more need for such arrangements and their survival is becoming at best a matter of inertia: meetings follow meetings, treaties beget commitments, diplomats sustain posting locations, and bureaucrats hold on to their jobs.

The region is left without a frame, but the idea of one survives, and ideas still matter. This one still structures much of the diplomatic activity in the region, and it explains why in the face of low and declining interdependence, existing if weak institutional arrangements survive and why new ones keep popping up, just as weak and institutionally deficient. It also explains why the United States remains a constant reference in the region's nationalist discourse while, paradoxically, American analysts keep deploring their country's indifference towards the region.

[A slightly different version of this piece has recently been published by the Robarts Centre's Canada Watch]

Sunday, November 21, 2010

Brazil: Defense policy as industrial policy, and more

This morning's Estado de São Paulo has a piece on Brazil's plans for a massive development of its submarine stable,  with six nuclear ships and twenty conventional ones, six of which refurbished. The project is big and long-term, with at least 3 billion Euros for the nuclear part alone and a schedule of delivery for the program as a whole that extends to 2047.

There is a security rationale to the move, with Brazil's growing reliance on off-shore oil and gas deposits possibly justifying the development of a capacity to protect them. The problem is, over such a long time frame, who knows what threat will emerge and how handy submarines will be to tackle it, making for a somewhat flimsy case for such a massive investment.

In the shorter term, however, the project fits very well with two central objectives of Brazil's industrial and foreign policy. On the development side, the plan is consistent with Brazil's systematic preference for technology transfer and the development of a domestic capability in high-tech industrial capacity. The forthcoming announcement regarding fighter jets will clearly rely on a similar rationale, with technology transfer, not narrowly-defined military capabilities THE critical factor (more on this on this blog soon). The technology will come from France and Brazil will pay dearly for it (the cost of the first subs is currently estimated at 2bn Euros), as it probably will for the fighter jets. But construction will be done in Brazil, and Brazilian companies will get the know-how.

Beyond a pattern that is generalized in Brazil's military procurement--another example is the new large transport plane being developed by Embraer--there is a second component to the submarine announcement whose implications are clearly short-term: Brazil is trying to gain a louder voice in the global nuclear debate without--for now at least--getting nuclear weapons. This in turn is part of an equation that underlies much of Brazil's recent behaviour on the nuclear front, including its disastrous foray in the Iran controversy: all the members of the security council have nuclear capabilities, and Brazil wants in, badly.

So, while developing a nuclear weapons program looks like a very risky proposition, from a diplomatic standpoint, Brazil tries to claim a piece of the nuclear turf by making a minor fuss on inspection, by announcing plans to develop a domestic nuclear capability that arguably it does not need--given its already ultra-diversified and low-carbon energy matrix--and now, by moving into nuclear-powered submarines.

Tuesday, November 2, 2010

Brazil's Halloween elections: Too much mystery?

Elections are supposed to tell us something: where a country is heading, how it will be governed, or at the very least who will govern it. Brazil's Oct. 31 presidential elections told us nothing of the sort. The meaning of Dilma Rousseff's victory is shrouded in mystery, not only for outside observers and most Brazilians, but for Dilma Rousseff herself.

Clearly a few things won't change, and they matter a lot: state-led but market-friendly economic policy are here to stay, there is no real debt repayment to suspend, and inflation is widely seen as too dangerous a monster to let out again. Above all perhaps, Bolsa Familia, the country's famously successful conditional cash transfer program, is a sacred cow nobody will touch. In a sense, this election was thus about nothing much, an accident of institutional design that prevented Luis Inácio Lula da Silva, Brazil's most popular politician ever, from staying in power for at least four more years, doing roughly what he has done since 2002.

Yet Lula will soon be out, and Dilma Rousseff in, as quite a different political game will get under way. That game has many levels and their dynamics and combinations are so complex that nobody can say what will come out. Hence the mystery.

The first of these levels is the Partido dos Trabalhadores (PT, Labour Party) itself. Having finally reached power in 2002, but exclusively thanks to Lula’s charisma, the party had to let him govern, which he did, but often in a way and with people the party establishment did not quite like. The petistas have swallowed it for eight years but now, many feel that the party's time has come and they will clearly try to stake their claims on government priorities and budgets.

It may not be easy. Their first problem is with Lula, who is out, but not quite, and could well be tempted by a comeback in 2014. Call him the party's zombie: dead in a sense but well alive in another. Their second problem is with Lula's social base, which some analysts have called lulismo. As it now appears, lulismo forms a large movement, mainly rooted in the Northeast but spanning the whole country through its poorest sectors. Those sectors were not reached by the social movements and political organizations linked with the PT and to this day they remain impervious to the orthodox leftism or sophisticated post-Marxism of PT intellectuals. They are devoted to Lula himself and to what he has given them: stability and a sense of security through prudent economic policy, and a cheque every month that for the first time enables them to make ends meet. They used to be the social base of the old oligarchy and they are resolutely conservative, in part by necessity as they know they will be the first to fall off if the boat is rocked, but also by choice as the vast majority —Catholic or Protestant— is intensely religious. Rousseff discovered it the hard way when her ambiguous stand on abortion became a major issue and probably played a key role in pushing the presidential contest into a second round.

If Rousseff takes a chance, sides with the petistas, and moves a bit to the left, will the lulista base follow? Above all, will Lula let it happen, leaving his chosen successor —"himself with a skirt" as he put it, perhaps already thinking about Halloween— turn against "his" people?

As if these uncertainties were not enough, Rousseff will also need to piece together majorities for every law she will try to push through Congress. To do that, not only will she need to garner support from the whole PT delegation, a large part of which got to power thanks to lulistas' support, but like all Brazilian presidents, she will need to threaten or buy off a great many "centrist" deputies and senators, mostly from the PT's major ally, the Partido do Movimento Democrático Brasileiro (PMDB, Brazilian Democratic Movement Party). Though not quite the "gang of bandits" former governor and presidential candidate Ciro Gomes called them, most of its elected members move only under threat or when bought off with ministerial posts for party members, jobs for their followers, expenditures for their constituents, or raw cash. Lula, whose immense popularity meant he could impose political sanctions, nonetheless had to resort to one or another of those other ways to get what he wanted. Rousseff, who is devoid of her predecessor’s massive political legitimacy and most unlikely to build it in the short or medium term, won't have a choice: she will pay dearly to get what she wants from Congress. How much? Nobody knows because what the lulistas will think, what Lula will do, how PT congresspeople will react, how much the centrist "allies" will demand, and how all this will play out, is anybody's guess.

By the way, nobody knows too well what lies behind the mask Rousseff has been wearing during the campaign, how much of a lulista or petista she is, how she plans to deal with the Zombie and how much she is willing to pay to get her way in Congress. Her program tells us nothing either and, as if to emphasize its irrelevance, it was launched in the last week of a two-month-plus campaign...

In the end, for the next few years, all this may not matter much, because Brazil's "fundamentals" are so sound. But over the longer term, or soon if Goddess Crisis strikes again, Brazilians may wish to have had a less mysterious election night.