The diminishing of Brazil

The Economist May 11th 2006

Brazil's Lula da Silva has been humiliated by Venezuela's Hugo Chávez.
But there are limits to the new giant's clout.

IT HAS long been the dream of Brazil's politicians and diplomats to augment their country's stature in the world by positioning it as the undisputed leader of a united South America. But as Latin America's leaders gather this weekend in Vienna for a meeting with their European counterparts, their region has rarely looked so divided. And many Brazilians complain that their president, Luiz Inácio Lula da Silva, is being turned into an irrelevant bystander in his own backyard by Hugo Chávez, Venezuela's oil-rich populist leader.

The immediate uproar was prompted on May 1st by the decision by Evo Morales, Bolivia's socialist president, to order the nationalisation of his country's oil and gas industry. He was fulfilling a campaign promise. But he was advised, and apparently inspired, by Mr Chávez. The chief victim of his decision was Brazil. It is the largest consumer of Bolivian gas. Petrobras, the Brazilian national oil company, was the largest investor there. Brazil may now have to pay up to 60% more for the gas.

Lula's response looked feeble. Instead of asserting Brazil's contractual rights, he held a meeting not just with the Bolivian leader and Argentina's president, Néstor Kirchner, but also with Mr Chávez on May 4th. Lula said that Bolivia was acting within its rights. In return, Mr Morales offered to refrain from cutting off gas supplies and to negotiate their price.

To critics of the Lula government, Brazil's meekness unmasked the confusion at the heart of its foreign policy. In making alliances, they claim, it has put presumed ideological affinity above national interest and a rules-based approach to regional integration. “The entire thrust of Brazilian diplomacy for the past 20 years has been damaged,” wrote Rubens Barbosa, a former ambassador to Washington, in a newspaper column.

Since Lula is likely to seek a second term at an election in October, there is some partisanship in such criticisms. Officials say that Brazil will never use a big stick against its neighbours. But there is also some foundation. Take the United States, Brazil's largest single trading partner. Celso Amorim, the foreign minister, insists that good relations are “essential” for Brazil. But according to his deputy, Samuel Pinheiro Guimarães, who is the foreign ministry's chief ideologue, Brazil must “react to the political initiatives...of the hyperpower” by “promoting political alliances with the states of the periphery.”

That has led Brazil to stress relations with countries in Africa, the Middle East and Asia, with meagre results. For good reasons, Brazil favoured the Doha round of world-trade talks over the 34-country Free Trade Area of the Americas (FTAA), sponsored by the United States. But with the Doha round floundering, Brazil is left with few alternatives.

On taking office in January 2003, Lula proclaimed regional integration to be his top foreign-policy priority. Yet Mercosur, the putative customs union established by Brazil with Argentina, Paraguay and Uruguay in 1994, has never been in greater disarray. “Brazil went for a dream of South American unity before strengthening and deepening Mercosur,” says Alfredo Valladão of Sciences-Po, a French university.

A 12-country South American Community of Nations, launched in 2004, is doomed to irrelevance by internal splits. Colombia and Peru have joined Chile, Mexico and Central America in signing bilateral trade agreements with the United States. Now Uruguay is threatening to follow suit. “Mercosur is more a problem than a solution for Uruguay,” its president, Tabaré Vázquez, said recently. Brazil has done nothing to restrain Argentina's Mr Kirchner from trying to bully Uruguay into halting two big paper mills, which he claims will pollute a shared river.

“We have not done everything we should have done for smaller economies in Mercosur,” admits Mr Amorim. The group needs an “integrated industrial policy” and a common policy on government procurement, things which require “a change in culture, especially in the bigger countries,” he says.

Mr Chávez's project is very different from Brazil's. He has signed up Mr Morales to the “Bolivarian Alternative”, his political alliance with communist Cuba. He wants nothing to do with countries that sign trade agreements with the United States. Where Brazil wants to integrate, Venezuela wants to divide. Under Mr Chávez, an elected autocrat, Venezuela has respected neither contracts nor democratic norms. Yet not only has Brazil remained silent about such conduct, it has encouraged Venezuela to join Mercosur. Such reticence to scold is partly because Brazilian construction firms have big projects in Venezuela, says Rafael Villa, a Venezuelan at the University of São Paulo.

A hard line against Venezuela would backfire, counters Mr Amorim. He says that within the limits of non-intervention Brazil uses whatever influence it has to reinforce democracy in Venezuela. That influence, he claims, is limited by the United States, which has blocked the sale of Brazilian aircraft to Venezuela. The “verbal cold war” between Mr Chávez and George Bush's administration makes it much more difficult to build bridges between Venezuela's government and the opposition, he says.

Maybe so. But Brazil has failed to articulate a clear alternative to chavismo. Not so long ago, its leaders had a vision of regional integration based on the outspoken defence of democracy, respect for treaties and on linking Mercosur to the world through, for example, a free-trade pact with the EU. It is hard not to conclude that this vision is being sacrificed to a puerile impulse to embrace those who peddle the populist rhetoric of “anti-imperialism”. For that, Brazilians may soon pay a price.