June 1, 2023 will mark Brazilian President Luiz Inácio Lula da Silva’s, or Lula’s, sixth month in office, this time. In January, Lula was sworn in to serve his third term. Put in perspective, only one president, Brazil’s beloved Getulio Vargas, has managed to serve three times.
Lula’s victory was greeted with relief in Western capitals as his leadership would present a departure from the isolationist stance of Jair Bolsonaro, his predecessor. His election was welcomed by many European leaders and the US administration, who were hoping for a normalized relationship with South America’s largest economy.
However, Lula’s anti-Western rhetoric and actions have widely irritated Western leaders, and his closeness with China is giving rise to speculation about the political direction of Brazil and its potential departure from alignment with Western democracies.
How Lula decides to position Brazil’s role in the world may shape the relationships between Western democracies and Brazil for the years to come.
Lula’s first two terms in office were widely successful from an economic perspective. When Lula entered office in 2003, Brazil’s GDP was $558 billion. At the end of his second term, it quadrupled to $2.2 trillion. This extraordinary growth was not necessarily an outcome of his policies but a result of an extraordinary commodity boom from which Brazil profited enormously.
Nevertheless, Lula deserves credit for not changing the policies of his predecessor, the popular Fernando Henrique Cardoso. When Lula returned to office on Jan. 1 of this year, he faced a more difficult political and economic environment. For this year, Brazil’s GDP is predicted to be $1.7 trillion and includes moderate growth of 1.61% in 2023 and 2.1% for the coming year, respectively. The commodity boom is long gone, and the capital Brasília resembles a metropolis whose futuristic view seems to be somewhat a symbol of past times.
Brazil is economically much stronger than when Lula took office over twenty years ago, and a lot has to do with the shift in trade relationships between Brazil and the rest of the world. During a speech at the National Press Club in Washington, DC in 2002 when Lula took office for the first time, he remarked about his intent to increase trade with China, stating that “what is good for the US must also be good for Brazil.” In 2009, China surpassed the US as Brazil’s main trading partner and is seen today as a strategic ally because of its demand for agricultural products and raw materials.
In terms of numbers, bilateral trade with China reached $152.8 billion in 2021, which is a 37-fold jump from 20 years ago. Brazil enjoys a hefty surplus of $62 billion, as China is the largest destination for Brazilian commodities, with mainly soy, iron ore, and oil accounting for roughly 75%.
THE BRAZIL-CHINA PARTNERSHIP
How does the Brazilian-Chinese partnership affect the relationship between Brazil and Western democracies?
Maintaining good relationships with Western democracies and, at the same time, building up strong economic ties with China seems to be a key strategy for Brazil. Many political observers describe this as a great balancing act. While Lula assured American leaders during his first foreign visit to Washington in February that “the US and the rest of the world can count on Brazil in the fight for democracy,” his actions and anti-Western comments have contradicted this view.
To understand the context of such comments, it is worthwhile to analyze how Lula has seen Brazil’s role during his first two terms when the term BRICS was created to describe the emerging economies of Brazil, Russia, India, China and South Africa.
The key objective of the BRICS countries was the creation of a multipolar world order without embracing political values. BRICS, which was at first a term to describe a region of emerging investment opportunities, became a more defined regional block through regular meetings between the involved countries’ leaders and respective multilateral policies. The BRICS Development Bank, for example, was founded in 2014 to support public or private projects through loans, guarantees, and equity participation.
During his first two terms, Lula was a strong supporter of the BRICS as a balancing power in a post-Cold War world. Lula has been enthusiastic about the group since its inception, touting it as an effective mechanism to reduce power imbalances, as outlined by Ryan Berg from the Center of Strategic Studies.
With the idea of being politically neutral and pursuing a non-alignment strategy in a US/China-dominated world order, Lula’s apparent belief was that neutrality must also be a key position in the current conflict between Ukraine and Russia. However, Lula’s comments that the US and European countries would just prolong the war through the delivery of weapons — comments which were praised by Russia — raise doubts about his position of neutrality. Various comments and actions have further irritated Western partners. Lula also refused to sign a declaration from President Biden’s Summit for Democracy that condemned Russia’s invasion of Ukraine.
While neutrality as a main strategy may have worked when the term BRICS was created, it is difficult to understand how such an approach would work in current times. It is true that Bolsonaro also chose neutrality over a clear position against Russia’s invasion, but Lula’s comments and actions are clearly confrontational and at odds with his comments about supporting democratic values.
A DEMOCRATIC AND AN AUTOCRATIC WORLD ORDER
As a result of the Russian invasion, the world has become firmly divided between an autocratic and a democratic world order, with significant implications for international business relations. This division raises important questions about supporting democratic values and human rights.
None of the current BRICS countries are part of the Western sanctions regime or are supporting any kind of sanctions against Russia. This is understandable in the case of China and perhaps India, which rely on Russian oil to power their economic expansion and are taking advantage of the price cap issued by the G7 countries. However, Brazil is not dependent on trade with Russia, with the exception of Russian fertilizer, which may not be a permanent dependency, as outlined by industry lobby group Sinpiofert.
The theoretical approach to creating a multipolar world order where fast-growing economies serve as a counterweight to the West is now challenged by the current realities that come with the consequences of war.
The theoretical approach to creating a multipolar world order where fast-growing economies serve as a counterweight to the West is now challenged by the current realities that come with the consequences of war. George Bush said 20 years ago, after the Sept. 11 attacks, ”You are either with us or you are with the terrorists.” The world is different since Russia’s brutal invasion of Ukraine, and the question ”Which side are you on?’ needs to be asked as well.
The current state of the BRICS must also be evaluated based on their support for Russia’s brutal war. Every country that is part of the BRICS is now viewed in terms of its support for or against Russia’s invasion. And this is the main difference between the current times and when Lula was president 20 years ago. Brazil’s strategy of non-alignment does not work well when a war in a European country is the number one geopolitical event that has divided the world into those who seek democracy, human rights, and self-determination as key pillars of governance and those who prefer autocracy with little regard for the aforementioned pillars.
The Russian invasion in Ukraine has the implication that business leaders are asking themselves if it is acceptable to support a totalitarian regime that is waging war against its neighbor who has chosen a democratic path towards Europe. Are European leaders willing to form a free trade agreement with Mercosur, the South American trade bloc, if Brazil is neutral concerning Russia’s brutal invasion in Ukraine? Since the Russian invasion, over 1,000 Western firms have left Russia. Today, 20 years after President Bush’s war on terror, Western democracies are asking the question ”Are you with democracy or autocracy?” That question is directed to those independent countries that are thriving democracies. And it is very much directed at Brazil.
Supporting its economic expansion does not mean that Brazil needs to tolerate an autocratic political agenda. Germany, for example, enjoys strong economic ties with China, its largest trading partner. In fact, the trade volume between Germany and China is more than double that of Brazil and China. Yet, Germany, like every other Western democracy, understood that an invasion into a European country has changed everything and led to the Zeitenwende, the turn of times, as German Chancellor Scholz has articulated. Germany is the third largest donor of military aid to Ukraine after the US and Britain and has made a clear commitment to support Ukraine during and after the war militarily, financially, and in a humanitarian way. Will this strong commitment to Ukraine change German and Chinese economic relations? The answer is clearly no. And it would not change Brazilian and Chinese relations if Brazil would signal strong support for democratic values, human rights, and a clear opposition to the war.
A MULTIPOLAR WORLD AND THE QUESTION OF DEMOCRACY
The BRICS’ pursuit of a multipolar world order, once seen as a counterbalance to Western dominance, now raises concerns about undermining democracy as a model of governance.
Seeking a multipolar world order through the BRICS has the sole effect of weakening democracy and human rights while strengthening autocratic rule. The current US administration’s Summit for Democracy has outlined the importance of strengthening human rights, preventing corruption, and defending freedom of expression and self-determination. In the face of a global ideological conflict between democracy and autocracy, Brazil needs to decide where it stands.
Ingo Steinhaeuser is a member of the Anti-Corruption Advocacy Network, the ESG Working Group and a contributor to the Thomson Reuters Institute. His opinions are his own.