The airspace between South America and the Arab world is getting a lot busier. A number of carriers have recently added routes between Middle Eastern hubs and cities on the other side of the Atlantic Ocean. Emirates Airlines offers direct flights from Dubai to São Paulo, Rio de Janeiro, and Buenos Aires. Qatar Airlines and Etihad Airways now offer nonstop service to São Paulo. This development is good news for Gulf residents setting their sights on a vacation in Brazil or Argentina. But, more significantly, these flights reflect growing levels of business activity between the Arab world and Latin America.
In fact, economic exchange between these two regions has been on the rise for the past few years. Brazil is an especially active player on the Latin American side. In 2011, it conducted $25.11 billion worth of trade with Arab countries. Last year, that number jumped 3.26 percent to just under $26 billion. And in May of this year, Michel Abdo Alaby, CEO of the Arab Brazilian Chamber of Commerce (CCAB), expected that figure to reach $27.5 billion in 2013.
The biggest exports from Brazil to the Arab world are sugar, meat products, mining products and grain. Meanwhile, fuel, fertilizers and salt are Brazil’s most significant imports from the Middle East. The bulk of this trade occurs with Saudi Arabia, the United Arab Emirates and Egypt.
While Brazil is the leading Latin American country in this exchange, it is not the only one in its neighborhood with economic ties to the Middle East. Argentina conducted $300 million worth of trade with Arab countries in 2011 and received $500 million in foreign direct investment (FDI) from that region. Peru, for its part, sent $6.9 million worth of minerals, agricultural products, textiles, and ceramics to the UAE in 2011.
A number of conditions have given rise to such economic activity. The earliest example of partnership between the two regions was the 1960 creation of OPEC, which included Ecuador and Venezuela. More recently, countries in both parts of the world have recognized mutual benefits from working together, especially in light of dragging economic conditions in Europe and the United States. Latin America and the Arab world derive further common interests through shared economic ties to China.
Gulf countries lacking food security can turn to opportunities in Latin American agribusiness. Meanwhile, Brazilians and Argentines stand to benefit from Saudi and Emirati FDI promising to boost infrastructure and industry. Illustrating this arrangement, Al Gharrafa Investment of Qatar is a stakeholder in Adecoagro, a farming enterprise in Argentina, Brazil and Uruguay. At the same time, Mubadala, a UAE government investment vehicle, holds a $2 billion stake in Brazil’s EBX Group, an energy, mining, infrastructure and shipping conglomerate.
Recent government-level discussions underscore a shared interest in this kind of commercial partnership. In October 2012, Peru hosted the third Summit of South American-Arab Countries (ASPA), a convention initiated by former President of Brazil Lula da Silva in 2005 to promote cooperation. In addition, last fall, foreign ministers from the Gulf Cooperation Council (GCC) and the Community of Latin American and Caribbean States met to address trade and investment opportunities. More recently, in April 2013, the Argentine and Brazilian chambers of commerce joined forces to create the Arab-South American Commerce Federation, designed to foster cooperation between the two regions.
Despite these promising developments, there are potential obstacles to the future of economic exchange between Latin America and the Arab world. Aside from the airline routes discussed above, transportation and logistical coordination between the two regions remains underdeveloped. Political differences between autocratic Gulf states and Latin American democracies present a further potential challenge. By prioritizing human rights, President of Brazil, Dilma Rousseff, has not accorded the same level of importance to trade with the Arab world as did her predecessor. Meanwhile, the potential for popular unrest in Arab countries leaves room for political instability going forward.
In addition to these infrastructural and ideological question marks, the numbers are not uniformly encouraging either. In the first half of 2013, Brazil’s sales to Arab countries were just on par with results from the same stretch last year—rising 1.27 percent in volume but dropping .38 percent in revenue. In the month of June, Brazilian exports to Arab countries fell 27 percent in volume and 7.36 percent in revenue compared to June 2012, resulting from a decrease in iron ore sales. According to CCAB CEO Alaby, this drop points to a slow-down in the steel industry, potentially reflecting a general economic lull. Arab exports to Brazil were also down in the first half of the year, falling 7.34 percent compared to last year.
While these numbers may be concerning, they should be looked at within the context of a broader trend toward increased levels of trade and economic activity. The foundation for a prosperous future is in place. The two regions have complementary resources and needs. Moreover, they have already taken concrete steps to facilitate cooperation. As opportunities continue to arise, measures can be implemented to address logistical shortcomings. And, as demonstrated by the strong relationship between Saudi Arabia and the United States, for example, political differences are unlikely to derail commercial opportunities.
So book your round-trip ticket from Dubai to São Paulo and keep an eye on this growing inter-regional partnership. Opportunities abound in agribusiness, mining, energy and many other sectors.
