Why Brazil and South America are becoming more important for us due to the Ukraine conflict
Brazil and the rest of South America could benefit from the war in Europe. The economies there are gaining from rising energy and commodity prices. In addition, the current geopolitical shifts are increasing South America’s weight in the world. We should not be passive bystanders to these changes and offer strategic partnerships now.
by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung
Looking at economic developments after Russia’s invasion of Ukraine, it is surprising to note: Few other countries around the world have since experienced a positive boost like Brazil. This is similarly true for Chile, Peru, Colombia and even Argentina. Evidence of this can be seen in the currency and stock markets in these countries, which have appreciated strongly since then.
There are several reasons for this unexpected development: For example, the countries’ export industries are benefiting from rising prices for raw materials and energy. This applies to agricultural commodities such as soy, corn and wheat, but also to ores and metals. In addition, with the exception of Chile, the countries mentioned are largely self-sufficient in their energy production or even export oil.
It is true that prices for energy and food are also rising in South America. With the lack of fertilizers on the world market, the price level for agricultural products will even increase worldwide. However, supplies are not under existential threat, as they would be in the event of a Russian gas supply freeze for European and, above all, German industry. Nor are food shortages to be expected, as may soon be the case in Middle Eastern countries dependent on Russian and Ukrainian grain supplies. Moreover, the South American central banks have responded more quickly to inflationary pressures by raising interest rates than the European Central Bank or the Fed in the USA.
Brazil in particular is currently benefiting from the fact that fund managers around the world are currently reallocating their investments: They are withdrawing their capital from companies, industries or regions that could be negatively affected by the war or because they are complying with Western sanctions against Russian corporations. Capital inflows to Brazil have grown at a record pace in the first three months. This is also true to some extent for the Pacific Rim countries of South America.
Brazil is also partially protected from the consequences of the Ukraine crisis in the global economy. This is because the country is one of the most closed major economies. The decisive factor for economic growth is local consumption, not foreign trade.
The geopolitical weight of Brazil, but also of South America, could now even grow in an increasingly polarized world: Each of the world’s power blocs – the USA, China, Russia, the EU – will try to win Brazil and South America over as partners.
In terms of foreign policy, Brazil and Argentina have usually understood how to use the various offers for partnerships in their interest without tying themselves too closely to one of the powers – or upsetting them. The diplomatically clumsy governments of Presidents Bolsonaro and Fernández are an exception.
The question, however, is whether we in Germany and Europe want to stand by while other powers assert and increase their influence in South America, or whether we want to become active and offer strategic partnerships.
Because it’s quite simple: We need reliable suppliers of raw materials, food and – green – energy more urgently than ever. We need markets for our products and the global exchange of personnel. And last but not least, we need democratic partners in the world. South America has it all.
We just need to get ourselves going and harness that potential before it’s too late and others are doing it.
COVID-19 in Latin America
Development of case numbers in the region
Currently reported cases in the countries
COVID-19 vaccine doses administered
Share of people vaccinated by country