The new world economic order is being built, BRIC by BRIC, and that’s presenting us in Florida with opportunities and challenges. The acronym BRIC refers to Brazil, Russia, India and China and was coined by a Goldman Sachs analyst who hypothesized that the four nations will become the world’s most powerful economies in 50 years.
Floridians can observe the new world order unfolding in Cuba, mainly because
the United States decided to be a non-player there.
These new economic powers don’t play by our rules. Of course, private corporations take center stage in global BRIC investments, but so do state-owned or state-controlled corporations. The BRICs need neither free trade agreements nor do they depend on private banks. And they’re received with open arms by recipient nations such as Cuba because they attach fewer strings to their investments and exports and promise more technology transfer.
I’m not saying this is good or bad. The economic growth and wealth redistribution the BRICs have managed to generate speak for themselves.
But Florida is now in competition with new players that receive generous support from their governments. The good news is we can also take advantage of new, dynamic markets and corporations.
Opportunities range from tapping new tourism source markets to finding new export destinations to investing in real estate in those markets.
For geographic reasons, the most important of the BRICs for Floridians to watch is Brazil. Under the direction of President Luiz Inácio Lula da Silva (Lula for short), a left-leaning former labor union leader, Brazil has emerged as a power of its own.
Consider a few recent news items: No. 1: Embraer, the world’s third-largest aircraft manufacturer based in Brazil, in May announced it will build a state-of-the-art manufacturing facility at Melbourne International Airport on Florida’s Space Coast, its first in the United States. The major components of the aircraft will be shipped from Brazil. In Melbourne, the company will perform final assembly and prepare the aircraft for delivery. The number of jobs to be created by the Embraer plant isn’t clear yet, but believe me, economic development officials all over the Southeast had been salivating over this prize.
No. 2: Gerdau Ameristeel Corp., the Tampa-based subsidiary of Brazilian steel producer Gerdau, was one of the hottest items on the U.S. stock market earlier this year. Gerdau Ameristeel, which specializes in so-called mini-mills, reported net income of $163 million for the first quarter of 2008. Partly due to an acquisition, but also thanks to healthy internal growth, net sales for the three months were $2 billion, a 53.8 percent increase from $1.3 billion for the year-ago period.
No. 3: In May, Chicago real estate guru Sam Zell sold his stake in Homex SA, Mexico’s fastest-growing home builder, for $113 million, to put all of it into Brazilian real estate companies such as home builder Gafisa. (Zell’s Equity International fund is a major investor in BRIC construction companies.)
No. 4: The Brazilian government just announced it would increase funding for programs to support agriculture this year by 12 percent to $40 billion. If Brazil follows the pattern of U.S. agricultural subsidies, this increased funding will boost large ag business interests. Brazilian ag exports to the United States, in turn, would rise.
No. 5: State-controlled oil company Petrobras announced the Carioca oil field off the Atlantic shore of Brazil had reserves of 33 billion barrels. That came barely half a year after Petrobras’ discovery of up to 8 billion barrels in the Santos oil field nearby. The combined find will make Brazil the world’s third-largest oil producer and a major exporter. Already, Petrobras commissioned $5 billion worth of ships to be built by Brazilian shipyards to supply the nascent offshore oil industry.
Much to the chagrin of Washington, the country already announced it would want to join OPEC, the cartel of oil-producing nations. Also, without causing much international stir, Brazil wants to become a nuclear player. What’s more, Brazil is seeking Russian armaments such as fighter jets and nuclear submarines.
To top it out, Brazil has been an eager participant in preparations for the South American Defense Council, a Hugo Chávez-led project.
At the same time, though, Lula has sent signals to Washington that he would not team up with Chávez in seeking to maintain high oil prices within OPEC. Also, he has been cooperating with the Bush Administration on biofuels production. Lula has been a willing strategic partner in exporting the Brazilian sugarcane-to-ethanol model to other Latin American countries, which in turn could supply the United States with biofuels.The political ball is in our court now.
The foreign policy establishment in Washington is publicly exasperated about the administration’s insistence on unilateral and military actions. The Council on Foreign Relations proposes a total sweep of the underlying philosophy of U.S. foreign policy. Suggesting a “new direction for a new reality,” the authors of a position paper presented in May say that the era of U.S. hegemony is over. The council is not just any organization: It’s considered the most influential foreign policy group in Washington.
Here’s what the report says: “It’s not up to Washington to lose Latin America, nor can Washington save Latin America. Latin America is mainly in the hands of Latin America.”
The list of recommendations: The United States should deepen its relations with Mexico and Brazil, improve relations with Venezuela, and lift the embargo against Cuba.
Wow. After 150 years of Monroe Doctrine and 110 years since Teddy Roosevelt rough-rode into Cuba, this is quite a step.
If the next president listens to these recommendations, I am hopeful we can do business with Brazil.
***
This is my last column for a while from Sarasota. I’m spending the next 12 months in Guadalajara, Mexico, one of the big proving grounds of the late 20th-century development model based on debt, privatization and free trade agreements. I’ll try to find out for you whether that model is still showing any signs of life.