Since the advent of the Lula government in January 2003, Brazilian industry has gone through a rapid process of expansion and concentration that is turning it into a global powerhouse. It is no longer happy to be the ‘junior partner’ in its relationahip with the USA. Tensions are growing.
It seems scarcely believable now, but foreign bankers and the chief executives of the world’s largest multinational companies felt mounting alarm back in 2002, when former militant trade unionist Luiz Inácio Lula da Silva attracted huge crowds as he toured the country and then in October won Brazil’s presidential elections with a large majority.
Now, as he begins his last year of government, it is clear that Lula, far from rocking the boat, has done more than any other president to establish Brazil as a global capitalist power. What we are seeing is the rapid concentration of Brazilian industry, so that the country now possesses some of the biggest and strongest companies in the world. According to Vinicius Torres Freire, a respected commentator from “A Folha de S. Paulo” newspaper, this is the moment for Brazil to ‘set up, Brazilian-style, its equivalent of Korea’s chaebols or Japanese keiretsu’.
Huge companies are emerging in many areas. JBS, which began 50 years ago as a small butcher’s shop in rural Brazil, is already one of the world’s biggest beef producers and is on a spending spree to become the very largest. In September 2009 it paid US$800m to take over a large bankrupt Texan chicken company, Pilgrims Pride Corp, which means that it is now diversifying into chicken as well. For several decades Brazil has had some of the world’s largest construction companies – Odebrecht, Camargo Corrêa and Andrade Gutierrez – and they have won big road construction deals in Africa and Asia.
Now these companies are diversifying rapidly. Today Odebrecht, which was founded by the grandson of a German immigrant in 1919, has nearly 200 subsidiaries and affiliates in 14 countries. It has carried out numerous large-scale projects – building dams, thermoelectric plants, hydroelectric plants, nuclear and petrochemical complexes, refineries, resorts, subways, highways, railways, bridges, airports and irrigation systems. Now, in association with Petrobrás, Brazil’s mixed public and private oil company, Odebrecht has taken over almost all of Brazil’s petrochemical production. It is also planning (like its rival, Camargo Corrêa) to move into electricity distribution. Odebrecht says on its website that it has set itself the goal of becoming in 2010 “one of the top five non-financial private-sector conglomerates in the Southern hemisphere”.
Another area of big expansion has been agriculture, particularly the potentially gigantic biofuel market. In early 2010 Royal Dutch Shell, Europe’s second biggest energy company (after Total, in France), signed a memorandum of understanding with Cosan, Brazil’s largest bioethanol manufacturer, in a deal said to be worth US$12 billion. The joint venture intends to more than double Cosan’s existing bioethanol production of 2bn litres. The market, which is already huge, because almost all new cars in Brazil run on ethanol, could grow very rapidly, particularly if Shell is successful in lobbying the US administration to reduce tariffs on biofuel imports. .
Far from being worried by the growth of these giant companies, the Brazilian government has encouraged the process of consolidation and concentration. When he became president of the country’s national development bank, BNDES, in 2007, Luciano Coutinho announced his goal of creating Brazilian ‘world champions’. With resources of RS$180 billion (US$96 billion) from the Brazilian treasury for the two year period 2009–2010, he has funded some of the biggest deals. BNDES has financed much of JBS’s expansion and has helped the country’s two largest poultry producers, Perdigão and Sadia, which merged in June 2009, increase their control over the market. As well as being the world’s largest poultry exporter, the new company, called Brasil Foods, has a 75% share of the domestic frozen foods market, with its products ranging from lasagne to chicken nuggets. BNDES has also helped Oi, Brazil’s largest landline telephone company and a big player in the mobile market, to consolidate its expansion.
Policy disagreements with US
Brazil’s expansion under Lula means that the country is no longer willing to operate as a regional partner, subordinate to the USA. In December 2009, the Council of Foreign Relations, the powerful US foreign policy think tank, held a seminar in association with the Fundação Getúlio Vargas, Brazil’s leading economic foundation. According to some reports, “the US participants in the seminar did not speak the same language as the Brazilians”. There were policy disagreements over Colombia, Venezuela and Honduras (where a coup was under way).
In January 2010 Susan Purcell, a conservative US analyst, publicly expressed US disappointment in an article in the Washington Post. She said that, as Brazil will soon become the fifth largest economy in the world, it had seemed only natural to expect that Brazil would become “more like us” and play a “constructive role” in the hemisphere where the two countries’ “political and security interests would largely coincide”. However, she went on: “This now seems like wishful thinking. On a number of important political and security issues, Washington and Brasilia recently have not seen eye to eye.”
She drew attention to disagreements over the US bases in Colombia and over Iran. “Instead of expressing concern over Iran’s activities in Latin America, Brazil is growing closer to Iran and hopes to expand its US$2 billion bilateral trade to US$10 billon in the near future. President Lula recently hosted President Mahmoud Ahmadinejad in Brazil.”
Fulfilling its destiny
With hindsight, it is not surprising that Lula has been the president to pursue more aggressively than any of his predecessors the emergence of Brazil as an independent global power. He grew up in São Paulo in the 1950s and 1960s, when Brazil was going through a rapid process of urbanisation and industrialisation. For him, as for thousands of other Brazilians, the “lost decade” of the debt-ravaged 1980s and the fierce neo-liberal reforms of the 1990s were no more than accidents along the way. Finally, he believes, Brazil is fulfilling its destiny.