Brussels, 10 October 2013
Enhance industrial cooperation with Brazil – win-win for businesses on both sides
Brazil is a key market for European business. Brazil is the EU's largest trading partner in Latin America: in 2011 Brazil's trade with the EU accounted for 37% of the EU's total trade with the region, and 43% of all EU's investments in Latin America went to Brazil. But the wealth of opportunities in this vibrant and growing economy are hindered by a series of challenges to both EU and Brazilian companies. European Commission Vice-President Antonio Tajani will therefore travel to Brasilia today 10 October to hold discussions exploring opportunities for industrial cooperation between the EU and Brazil. The EU seeks to further enhance business opportunities with Brazil during a meeting of a dedicated EU-Brazil working group, established as a pragmatic way of looking at how to further underpin the important economic bonds between Brazil and the EU. The Group, chaired by Vice-President Antonio Tajani, responsible for Industry and Entrepreneurship, works in close liaison with the European Commissioner for Trade, Karel De Gucht, and the Commissioner for Research and Innovation, Máire Geoghegan-Quinn.
During the two day trip from 10 to 11 October, meetings will be held with members of the Brazilian government, including Fernando Pimentel, Minister for Development, Industry and International Trade; Aloizio Mercadante, Minister for Education; Luiz Alberto Figueiredo, Minister for Foreign Affairs; and the acting minister for Small and Micro Enterprises and for Science, Technology and Innovation.
Strategic fields the Working Group seek to address include:
For its part, Brazil proposes to explore a number of concrete areas, where increased cooperation could benefit both sides. These include:
The EU is Brazil's most important trading partner
The EU is the number one area for Brazil's exports and imports. More than 18% of Brazil's exports go to the EU. And 20% of Brazil's imports come from the EU.
Trade data indicates a slight growth of overall bilateral trade flows with Brazil, from €75 bn in 2011 to €76.7 bn in 2012. In 2012 the also EU recorded, for the first time, an overall trade surplus in goods with Brazil of €2.2 bn; in 2011 the deficit was €3 bn. EU companies exported goods worth €40 bn to Brazil, an increase of 10% over the previous year. However, due to the economic crisis in the EU, exports from Brazil to the EU decreased by 4.7% in 2012, from €39 bn in 2011 to €37 bn in 2012.
Around 90% of EU exports to Brazil in 2012 were manufactured goods - automotive, aircraft, chemicals, and other machinery. Transport equipment and machinery consisted of 49% of exports, and chemicals accounted for 21%.
Primary products such as food and drink and raw materials - soy beans, oilcake, iron ore, coffee and crude oil - accounted for more than 70% of EU imports from Brazil. The largest export category from Brazil to the EU is crude materials representing 35% of Brazil's exports into EU. Brazil still remains the EU’s most important provider of agricultural products. The second most important export category is food products, which represented 28% of Brazil's exports into EU.
Trade in services and investment
The EU had a surplus of €5.7 bn in trade in services with Brazil, exporting €12.7 bn of services to Brazil in 2012, while imports amounted to €7 bn.
Brazil attracts 40% of the EU's foreign direct investment (FDI) outflows into Latin America. In 2011, €28 bn of EU FDI went to Brazil, a decrease from the €43.9 bn reached in 2010.
The EU is also the biggest foreign investor in Brazil with more than 40% of the total stock of FDI in the country in 2011: €238.9 bn - more than twice the amount of EU's FDI stocks in China.
The EU is the most important recipient of Brazilian FDI. Brazilian direct investment flows into the EU decreased from €10.2 bn in 2010 to €3 bn in 2011.
The EU has overtaken the US as the largest investor in Brazil in the last few years, but China is also growing in importance as an investor in Brazil, in line with a general trend in Latin America.
Barriers to trade
The Brazilian market is relatively highly protected, with an applied customs tariff averaging 12%. And such barriers are increasing: according to a recent report - the 10th EU Report on Potentially Trade-Restrictive Measures - since May 2012 there has been a sharp increase in the use of trade restrictive measures applied by Brazil, in particular tax incentives linked to local content conditions and tariff increases. Of all countries surveyed in the report, Brazil also accounted for more than one-third of restrictions related to government procurement. Such restrictions can force the use of domestic goods and relocation of businesses. Brazil also continues to strongly shield some of its domestic industries from foreign competition, to the disadvantage of their consumers and other industry sectors.
The EU therefore consistently encourages Brazil to reduce tariff and non-tariff barriers, and also to maintain a stable regulatory environment for European investors and traders.
Following the 6th EU-Brazil Political Summit in January 2013, the President of the European Commission, José Manuel Barroso, decided to strengthen cooperation between Brazil and the European Union by formally establishing a high-level dialogue in the form of a Working Group. The Groups aims to more systematically analyse bilateral economic issues, including competitiveness and investment and its outputs will form the foundation for the preparation of the 7th EU-Brazil Summit, to be held in 2014.
The Group's objective is to explore industrial cooperation opportunities between the EU and Brazil, in particular focusing on innovative sectors and technology and improving the environment for business and investment. The Group also aims to strengthen trade in industrial innovation, research and development, and support small businesses.
During the same meeting, BusinessEurope, CNI and EuroChambres agreed to launch in parallel an additional Joint Working Group to explore options to advance the bilateral agenda. Both groups work closely together to develop synergies and complementarity.