Esta es la versión HTML de un fichero adjunto a una solicitud de acceso a la información 'Communications on Brazil'.



All the redactions are done under Reg. 1049/2001
or out of scope
Ref. Ares(2018)5711626 - 08/11/2018
Ref. Ares(2019)2673845 - 17/04/2019
EUROPEAN UNION 
DELEGATION TO BRAZIL 
Brasília,  
Art. 4(1)(b)
ARES(2018) 
Note for the attention of 
Art. 4(1)(b)
– DG TRADE
Subject:     Brazil - trade & investment policy under the new Bolsonaro government 
1.
State of play
•  Current economic situation: The new government will face as from 1 January 2019 a
fragile economy, still convalescent from a very deep crisis. The growth rate is still shy,
with 1,8% expected for 2018. Unemployment, which skyrocketed during the crisis
(11,9% in Q3 2018), remains a major challenge, along with the large public-sector deficit
(7,2% in Q3 2018 ) which is fuelling a sharp increase in the public debt in the last years
(77% of GDP in Q3 2018 up from 56% in 2014). On the good side, inflation in a record
low (4,5% in Q3) following a steady decrease.
•  Brazil's market situation: Brazil, after decades of protectionism, is a very closed and
uncompetitive economy. Brazil stands extremely low in the composite index of Open
Market Indicators (which includes openness to trade – only 25% of GDP! - and
investment, trade policy setting and trade enabling infrastructure). Brazil is well known
for being a difficult market with numerous and persistent trade barriers and irritants.
"Brazil cost" ("custo Brazil") is also known internationally and reflects these difficulties,
in addition to high and complex taxation and bureaucracy.  As a result of the little
exposure to other markets, Brazil has not found yet its place in global value chains due to
a protected economy with low productivity.
•  EU-Brazil trade and investment relations: The EU is Brazil's second biggest trading
partner (after China for the first time in 2017), accounting for 18,3% of its total trade.
Brazil is the EU's 11th trading partner, accounting for 1,7% of total EU trade (figures
from 2017).  Brazil's exports to the EU are mostly primary products (mostly agricultural
and mineral ones). EU'S exports to Brazil are mainly machinery, chemical products and
transport equipment. Brazil is the largest exporter of agricultural products to the EU.
When it comes to investments, the EU is the biggest foreign investor in Brazil, covering
many sectors of its economy with a total stock of € 330 billion. Brazil is the third largest
destination of EU FDI, which shows its strategic relevance for EU companies.
Art. 4(1)(a) 3rd indent
• 
SHIS QI 07 Bloco A - Lago Sul - Brasilia-DF - 71615-710 
Fone: (61) 2104-3122 - Fax: (61) 2104-3141  
website: https://eeas.europa.eu/delegations/brazil_en 

Art. 4(1)(a) 3rd indent
2. Perspectives: what can we expect?
•  A new Economy Minister: Paulo Guedes will be Bolsonaro's super Minister of
Economy, following his advising role on economic matters during the electoral
campaign. Guedes will be in charge of an enlarged portfolio, which will the result of the
merge of three ministries: "Finance", "Planning" and "Industry and Foreign Trade".
Guedes is a "Chicago Boy" with strong free market and trade liberalisation convictions
that will be at the core of a supposedly ultraliberal economic agenda. He favours mass
privatizations, spending and tax cuts, unilateral tariff reductions and bilateral trade
agreements with advanced economic partners.
•  Centralised control of key economic policies: Already before taking up duties, Guedes
won his first battle to merge the three ministries with competencies in economic matters.
In addition to reducing the number of ministries and scaling down the size of the public
sector in general, Guedes will have under his control all the key economic policies (fiscal
and budgetary), while setting the direction of the country's industrial and trade policy.
Yet, this merge was opposed by powerful industrial lobbies, fearful of Guedes'
(unilateral) trade liberalisation agenda. After some hesitations from Bolsonaro, Guedes
managed to see this through.
• 
Art. 4(1)(a) 3rd indent
• 
A push for new trade agreements with key economic partners but uncertainty on 
Mercosul: 
We can expect a positive push by the new government. Ongoing negotiations 
with the EU, Canada, EFTA, Mexico, Japan, Singapore and South Korea are therefore 
expected to continue. New partners might be identified and negotiations launched. 
Among those, USA would certainly be a priority for many reasons, including a likely 
good chemistry between Trump and Bolsonaro. The possibility of Brazil negotiating 


trade agreements on its own, outside Mercosur, is an option that cannot be ruled out. 
Guedes has been explicit on this. Bolsonaro is considering a rewrite of Mercosur 
stepping back from further integration and introducing flexibility to allow members to 
negotiate individual trade agreements outside the bloc. 
Art. 4(1)(a) 3rd indent
• 
  Regarding the EU-MCS negotiations, this was not mentioned by Bolsonaro 
during his campaign. Guedes has not made direct references either. However, such 
negotiations with an advanced/developed partner are likely to be favourably considered 
given the policy drive towards North-South FTAs as opposed to South-South. 
Art. 4(1)(a) 3rd indent
3.
Art. 4(1)(a) 3rd indent
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Art. 4(1)(a) 3rd indent
Art. 4(1)(a) 3rd indent
Art. 4(1)(a) 3rd indent
Art. 4(1)(b)
Art. 4(1)(b)
cc: 
DG TRADE:           Gallina S; 
Art. 4(1)(b)
EU DEL BRAZIL:  Gintersdorfer C. (Acting Head of Delegation); 
Art. 4(1)(b)