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Monday, May 07, 2012
Perspectives

The Embrace of the Anaconda

Brazilian companies are the biggest foreign employers in Angola, here represented by capital Luanda. (Photo: Erik Cleves Kristensen)


A rising
Brazil enters Africa.

BY LORO HORTA

While a lot has been said about China and Indian penetration of the African continent another rising power has went unnoticed. In recent years Brazil has been emerging as a major economic and political actor in Africa.

Brazil’s ties to Africa date back to the 16th Century when the Portuguese began to import large number of slaves from Angola in what was to become the worst case in slave trafficking with an estimated 4 million mainly Angolan natives being stolen from their land. Today Brazil has the largest African population outside Africa.

Ironically a rising Brazil with a growing powerful business community is eager to find new markets to invest its new found wealth. Brazilian investment is going primarily to the former Portuguese colonies, in particular to Angola and Mozambique. According to several sources Brazil’s largest investment so far in the continent is a US$1. 7 billion one in the railway sector in Mozambique by Vale. Vale officials announced that the company expects to invest up to $9 billion in the country by 2014. Most Brazilian investment is likely to go to the mining sector in particularly to coal mining.

Agriculture may emerge as another area of significant Brazilian investment. In early 2012 several media outlets reported that the Mozambican government was offering large amount of land to Brazilian investors. According to one of Brazil’s main newspapers, A Folha, the Mozambican government is offering up to 6 million hectares to Brazilian farmers to produce cotton, soya beans and corn. Brazil is one of the world’s leading agriculture exporters and possesses some of the most advanced technology in the world. Brazil has also shown interest in biofuel production and extended to Mozambique a $97 million credit line to help small agriculture projects. This credit line was later expanded to $300 million.

Angola is Africa’s second-largest oil producer and possesses the world’s fourth diamond fields. Between 2002 and 2008 Brazilian investment in Mozambique has grown 20 times. Brazilian state-owned oil company Petrobras has invested $2 billion as of 2011 in the country and has announced a $1 billion investment for 2012. Brazilian company Odebrecht has invested $ 220 million in biofuel and has built several infrastructure projects in the tune of hundreds of millions of dollars. According to the BBC Brazilian companies are the second largest employee in Angola in stark contrast with China who has been accused by the Conference of Angolan Bishops and many others of not creating jobs for the locals.

Brazilian group Camarco has also invested heavily in Angola with a $500 million investment in the cement sector in 2010 alone. The company has also invested an estimated $150 million in sugar mills.  Camarco has also expressed interest in investing in the construction of a dam in the country. As of 2011 Brazilian investment in Angola totaled $4 billion. Other Brazilian companies active in the Angolan market are Queiros Calavao, Andrade Gutierrez and Vale.

While Brazil has focused most of its investments in Portuguese Africa, its presence is growing in other parts of the continent. In Malawi, a country bordering the northern provinces of Mozambique, Vale has won a contract to build and operate the rail system in the south of the country. The project is estimated in several hundred million. The Malawi railroad is to be linked to a $1. 7 billion rail project run by Vale in Mozambique. Malawi is a landlocked country and its most direct access to the sea is either by the port of Nacala in Mozambique or through Tanzania.

Brazil has also begun to show interest in Zimbabwe, another landlocked country boarding Mozambique. Brazil is reported to have granted Zimbabwe $300 million to assist the country in recovering its once- prosperous agriculture sector ruined after years of internal strife and Western sanctions.  Brazilian companies are eyeing the country for possible investment opportunities and several business delegations have visited there. With the West African nation of Ghana, Brazil signed $95 million credit lines to assist the country develop its small scale farmers.

Brazil has also given loans to Namibia and trained hundreds of officials with an estimated 800 Namibians having received training in Brazil. Brazil was instrumental in creating the Namibian navy shortly after independence in the early 1990s. This cooperation has continued to this day. Even remote Burkina Faso has requested Brazilian support in the area of agriculture.

Brazil’s growing involvement with the African continent has been creating growing competition with another rising power who has in the past decade been building an impressive presence throughout the continent: China. While Brazilian officials play down the emerging competition several observers are skeptical. During the Brazilian president’s visit to Africa in early March this was rather evident. In Angola, Dilma Rousseff declared three main principles to guide Brazil’s relations with Africa. First, Brazilian companies are to do their outmost to employ local Africans. Secondly, training and transfer of technology are to be a priority. Thirdly, Brazilian companies are to engage in joint ventures with local partners and respect the laws of the host country.

It is no coincidence that Rousseff made such statements in Angola where accusations that Chinese companies have failed to employ locals are the most prevalent. During the visit, Brazilian officials made a point of noticing that Brazilian companies are the biggest foreign employers in the country. This is despite the fact that China has a much larger presence in the country. It is also hard not to notice that Brazil and China have been investing in very similar areas, such as mining, rail roads, infrastructure and agriculture, land leases.

It is also worth noting that most Brazilian and Chinese investment is focused in the southern Africa region that has experienced stability and rapid economic growth. As noted above, Vale has invested several billions in the coal mining sector in Mozambique Chinese company Wuhan Iron and Steel has invested $1 billion in coal in the same region and Kingho was reported by the local media to invest an initial $20 million in a coal terminal.

In Angola, China clearly gets the upper hand in terms of economic gains. However, Brazil seems to enjoy much higher degrees of soft power. A common language has made Brazilian culture very popular through the Lusophone world, with TV series, music soccer and fashion being widely embraced. In Mozambique while Sino-Mozambican trade was $950 million comparing to Brazil’s $46 million. Brazilian FDI is growing fast. In November 2009 in this publication the author noticed that allegations that China was not creating jobs were damaging its reputation. In the same article the author noticed that the Mozambican government was taking steps to address the issue. Mozambican government statistics from late 2011 showed that China was now employing a greater number of locals. This has help China build a better image in the country.

Brazil and China are both rising powers looking for very similar things: resources, land, markets and prestige. Other powers such as India have joined them on this quest. The growing involvement of new great powers in Africa brings both opportunities and challenges to the continent. In the past great power competition brought very little to Africa. Let’s hope this time things are different.

Loro Horta is a graduate of People’s Liberation Army National Defense University (PLANDU) senior officers course and Chinese Ministry of Commerce Central School. He is also a graduate of the US Naval Postgraduate School, the US National Defense University and Nanyang Technological University. He lived and worked in Africa for 23 years and he has been living in Asia for over a decade. He has won several awards for his research on China.

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