In past months a number of conflicts have occurred between the emerging global power of Brazil and its smaller neighbors, in particular Ecuador and Paraguay. This has led Luiz Inácio Lula da Silva’s government to defend Brazil’s multinationals and to mobilize troops to protect the nation’s interests.
|The Itaipu Dam is just one example of the effects of Brazil’s national interests throughout
South America. Photo: http://www.solar.coppe.ufrj.br/itaipu.html.
The power vacuum left by waning U.S. influence in South America has been filled by new global world powers as well as a local power with the ambition of becoming a global player . As recent as the 1990s it was European capital—Spanish and French—that was most dynamic in South America, buying up privatized state-owned enterprises. More recently, China has tried to move into the economic void, importing oil and gas and investing in mining.
For some time Brazil has set out to expand its influence using the South American region as its springboard, a fact that has been the subject of various analyses and studies. However, lately this expansionist policy has generated serious conflicts such as that between Ecuadorian President Rafael Correa and Lula da Silva. In some of these disputes Brazil has deployed troops to reinforce its national interests, as happened recently on the Paraguayan border.
It is possible that the growing resentment toward Brazilian companies is the price to be paid for Brazil’s commercial and economic expansion. Recently Brazilians began hearing complaints about the country’s "imperialism." In 2004, Brazil’s Foreign Direct Investments (FDI) began to experience spectacular growth. That year Brazilian companies invested US$10 billion dollars abroad, as compared with just $250 million the year before. By 2005, the sum total of Brazilian FDI reached $71 billion, as compared with Mexico’s $28 billion (Mexico is Latin America’s second largest FDI investor). A significant proportion of this recent business expansion is taking place in countries that border on Brazil.
Colonization of Uruguay
This small cattle ranching country has a land mass 45 times smaller than its vast neighbor and its Gross Domestic Product (GDP) is 50 times smaller. In the last 10 years the international expansion of large Brazilian transnational corporations has changed the economic map of Uruguay, particularly since 2002. Estimates from 2008 suggest that more than 20% of Uruguayan land has been sold to Brazilians and Argentines, although exact data is unavailable and names are not given.
Of the 10 largest export-oriented corporations in Uruguay, half are Brazilian. Between July 2007 and June 2008 these 10 corporations produced $1.511 billion in exports, 43% attributable to a rice exporter and four meat processing plants acquired by Brazilian capital. In second place are Uruguayan companies, one of them the national oil and gas company. Together they contribute 29% of exports produced by the 10 major companies. Only one U.S. corporation figures in Uruguay’s top-10 exporters—a subsidiary of Cargill Inc. which produces10% of the top-10 exports.
Ernesto Correa, a Sao Paulo beef impresario, bought 100,000 hectares in Uruguay to supply his meat processing plant, PUL, of which he owns 75% of the shares. The Brazilian meat processors account for approximately half of Uruguay’s beef exports, beef being Uruguay’s principle export.
According to a report by journalist Samuel Blixen: "The Brazilian interest in Uruguayan meat processing plants is related to access to certain markets," as the Uruguayan sanitary laws for food quality are approved in markets where Brazilian beef is banned.
The rice industry is the second largest destination of Brazilian capital in Uruguay and 90% of its rice exports go to Brazil. In 2007 the Brazilian corporation "Camil" bought the "Saman" company, which makes up 45% of the Uruguayan rice exports. Even Uruguayan beer production has been monopolized by Brazilian investors. The Brazilian corporation Ambev is a significant player in Inbev (which owns, among others, the U.S. beer producer Budweiser) and maintains a monopoly of the Uruguayan market through its ownership of "Fábricas Nacionales de Cerveza" and Uruguayan "malterías" (barley processors).
The concentration and passage to foreign hands of land, meat processing, rice and beer production, and export leaves Uruguay very vulnerable to Brazil. Although there has been no direct conflict to date with Brazilian corporations, the Uruguayan authorities have expressed their fears of monopoly control and fixed prices due to their possible negative effects on Uruguayan suppliers.
Bolivia, Gas, and Dams
Brazil controls about 20% of Bolivia’s GDP, mainly through natural gas and soybean production. This is likely to increase in the next few years with strategic investments in infrastructure, energy, and mining. These investments have generated conflict. One is the construction of the Santo Antonio and Jirau hydroelectric dams on the Madera River, which crosses the border between the two countries. The dams have major affects in Bolivia, but Brazil considers them crucial to its national development.
These dams, under construction by the Brazilian consortium "Furnas-Oderbrecht," will cause flooding in Bolivia, affect fishing, increase the spread of malaria, and affect the indigenous and mining communities of Chacobo, Tacana, Cavineño, Esse Ejja, and Yaminahuas in the Bolivian states of Beni and Pando.
Peasant and indigenous organizations in Bolivia with the backing of the Brazilian Movement of Dam-Affected People (MAB), presented an appeal for the application of precautionary measures to the Inter-American Commission on Human Rights. They cited the "imminent attack" of the Lula government on the human rights and freedoms of the people.
In the recent political crisis in Bolivia caused by the subversive activities of oligarchic groups in Bolivia’s Half-Moon states the Lula government strongly suggested that President Evo Morales negotiate with opposition groups in the Half-Moon states. Brazilian interests in Bolivia are not spread evenly throughout Bolivia, but concentrated in the rebellious states that reject the indigenous central government. Both the oil and gas sectors as well as soybean mono-cultivation (the first supplying natural gas to Sao Paulo and the second the product of large haciendas owned by Brazilian capital) are located in the states of Tarija and Santa Cruz, centers of support for the anti-Morales campaign.
Ecuador vs. Brazilian Transnationals
Problems between Brazilian corporations and the Ecuadorian government are nothing new. They began with the Brazilian oil and gas company Petrobras that was exploiting an oil and gas petroleum reserve in a national park and was sued by indigenous groups. Due to the suit, Petrobras was forced to abandon reserve 21, which was later reallocated to Petroecuador. The involvement of large Brazilian corporations in mega-projects developed as part of the South American Integration of Regional Infrastructure (IIRSA), a Brazilian initiative, generates conflicts on several levels.
The latest problem occurred on Sept. 23 when problems in the Brazilian construction of the San Francisco hydroelectric dam in the Ecuadorian Amazon region by Odebrecht led to a lien on Odebrecht properties in Ecuador. Inaugurated in June of 2007, the dam was considered a strategic project for the country, but later had to be shut down due to severe structural problems. From the outset, the Lula government defended Odebrecht, which built a large part of the IIRSA Manaus-Manta project that connects the Brazilian Amazon with the Pacific, creating a corridor for Brazilian commodities to be shipped to Asia.
There were other problems with the dam project. Oderbrecht began the project after receiving a loan of $243 million from the Brazilian National Economic and Social Development Bank (BNDES)—a loan that Ecuador is now unwilling to pay since it states that the contract was signed "outside national laws." The case exposes the BNDES process of financing other countries to hire Brazilian contractors, a common modus operandi for all large global powers.
In November, President Correa announced that his country would take the case to the International Chamber of Commerce Court of Arbitration in Paris to stop payment on the BNDES loan. On Nov. 21, "for the first time since the War of the Triple Alliance (which destroyed Paraguay between 1865 and 1870) the Brazilian ambassador was ‘called back for consultation’." This is the last step before freezing diplomatic relations and the Brazilian chancellor, Celso Amorim, was quite clear in saying: "There are no plans for the ambassador’s return to Quito."
Although Odebrecht has accepted the existence of major faults in the construction, the Brazilian government was unhappy with the way the problem was brought to light in an international tribunal since there was no prior communication with Brasilia before the case was made public. According to the Brazilian defense magazine Defesanet, "By calling back the Quito ambassador to Brasilia for consultations, Lula is notifying Quito of a radical shift in relations, quite different from the ‘peace and love’ style that he adopted to win the 2002 elections."
Odebrecht is the largest construction company in Latin America and among the 25 most important on the planet, as well as being Brazil’s third largest company. Founded by Norberto Odebrecht in 1944, it operates in 20 countries, including all of the South American countries. In 2007 it registered earnings of $17 billion, a sum that represents more than the combined GDP of Bolivia and Paraguay. In Brazil it registered gains of $11.5 billion, in South America $3.1billion, and just $1.6 billion in the United States. These numbers reveal the importance of the subcontinent to the expansion of Odebrecht. It employs 59,000 people and Norberto Odebrecht is one of the principle donors to Lula’s Workers’ Party (PT).
Paraguay, the Weakest of Brazil’s Neighbors
Just two months after the Bishop Fernando Lugo moved into the president’s palace in Paraguay (Aug. 15, 2008), thousands of peasants began occupying the soybean farms owned by Brazilian capital, particularly in the Paraguayan border States of Itapúa, Alto Paraná, San Pedro, Concepción, Amambay, and Canindeyú. These rich lands now covered with soybeans were once a center of family agriculture, and strong peasant tradition, which was a base of support for the Lugo presidential campaign. Today, these lands are Brazilian property.
The renegotiation of the Itaipu Dam Treaty, signed in 1973 by Brazilian and Paraguayan dictators, is pending. This could consolidate the position of the Lugo government. The border river dam on the Itaipu River (the second largest on the planet) has an installed capacity of 8,250 megawatts of power. Paraguay consumes just 5% of this capacity, exporting the rest to its neighbor Brazil, at cost. The Itaipu Dam provides 20% of the electrical power consumed in Brazil, for which Paraguay receives just $300 million per year. This price per megawatt hour is considerably below the international price and basically only covers the production costs.
Ricardo Canese, energy specialist, estimates that the 53,000 gigawatts that are sold annually to Brazil have a minimum market price of $4 billion, equivalent to half of the gross national product of Paraguay. While President Lugo does not expect to reach that amount, he claims that his country should receive between $1.5 and $2 billion (five or six times the current rate).
The negotiations, however, are not going well. After two rounds of negotiations, Brazil has not budged on the topics of price or Paraguay’s freedom to sell energy to others nations. The Lugo government feels that an increase of one or two billion dollars could be invested in building schools, hospitals, roads, and the many other necessities of a poor country plagued by 61 years of the corruption of the Colorado Party.
Paraguayans feel exploited by their neighbors. Months ago, a band of Paraguayan peasants burned a Brazilian flag, an event often repeated by the media. A crisis erupted when the peasants began to occupy the large farms owed by Brazilian capital. This happened mostly in the state of San Pedro, the poorest Paraguayan state, where Lugo was ordained bishop in 1994. The government reacted with caution and made it known that they were willing to enter into dialogue. The Institute for Rural Development and Land Rights (INDERT) announced a plan to purchase lands for agrarian reform, which means the government will be in desperate need of funds from the Itaipu Dam.
However, the Lula government has lacked of sensitivity and even the traditional northern good humor. On Oct. 17, 10,000 soldiers were deployed in a massive operative known as Southern Border II, in which they utilized planes, tanks, ships, and live munitions. The press in Asunción reported that the operation included exercises such as occupying the Itaipú Dam and rescuing Brazilian citizens. The Lugo government weighed in and assured that Brazil only wanted to negotiate peace for the soybean farmers for the benefit of Itaipú.
Declarations made by General José Elito Carvalho Siquiera, chief of the Southern Military Command, made things worse. On October 18, he stated to the Brazilian daily Ultima Hora, "The time for hiding things is over. Today we have to demonstrate that we are a leader, and it is important that our neighbors understand this. We cannot continue to avoid exercising and demonstrating that we are strong, that we are present, and we have the capacity to confront any threat." With regard to the security at Itaipú, he said that it was a military issue even should the dam be occupied by a protesting social movement.
Chancellor Amorim asked the Paraguayan government, point blank, to control the "excesses" against the brasiguayos (Brazilian-Paraguayans). Lugo took up the issue at the Permanent Assembly of the Organization of American States (OAS), where he stated that the Brazilian attitude made it hard to engage in a friendly dialogue between neighbors. He insinuated that the military operation was a "message about Itaipú." In Washington Lugo stated that: "No agreement is sustainable when inequality is established nor is it ethical when disparities are generated as a result of a shared effort."
In October, some 4,000 campesinos mobilized in front of one of the farms belonging to Tranquilo Favero, perhaps the most emblematic brasiguayo. The campesinos tore down the fence and threatened to burn down one of the 30 silos. In the departments of Canindeyú and Alto Paraná alone, which border the Brazilian states of Paraná and Mato Groso, the brasiguayos own 2.9 million acres, or 40% of the total land surface and 80% of the soybean cultivation.
Although there are no official numbers, it is estimated that approximately half a million Brazilians have moved to the border regions of Paraguay since the 1960s, which is equal to 10% of the population of the country. They tend to be medium-sized producers, most with an average of a little more than 1,000 acres worked by laborers brought in from Brazil. In some areas the preferred language is Portuguese and the local currency is the real.
Tranquilo Favero is known as the "king of soy." He cultivates some 136,000 acres of the crop, 86,500 on his own property. He came to Paraguay 40 years ago and is now a citizen. In a long interview with Ultima Hora on Nov. 2, he revealed his own peculiar perspective on the disturbances, stating, "There is no doubt that the campesinos are protecting marijuana plantations." He added that the occupations of campesinos who do not own land "are a nest of criminals."
He has employed similar terms to invoke the concept of "narco-guerrillas" created by U.S. military strategists and applied in the brasiguaya context. Kaiser Konrad, director of Defesanet, wrote after interviewing General Carvalho, "Operation Southern Border II attempts to send the message to the Lugo government that the Brazilian military is aware of the situation confronting the brasiguayos, and that they face land invasions and threats to their legally acquired lands."
Brazil and the "Foreign Threat"
On Oct. 2, Lula enacted Decree 6.952, which regulates the National Mobilization System dedicated to confronting "foreign aggression." The decree defines "foreign aggression" as "threats or injurious acts that harm national sovereignty, territorial integrity, the Brazilian people, or national institutions, even when they do not constitute an invasion of national territory."
An editorial column of Defesanet states that the approval of the decree constitutes a clear message to neighboring countries: "Any act of aggression or persecution of Brazilian citizens residing in Paraguay (brasiguayos), in the Pando region of Bolivia, as well as new threats to cut gas lines and take over Brazilian installations and companies operating in other countries are now characterized as external aggressions and a military response from Brazil will be legally sanctioned."
The issue transcends the Lula government. It is basically the affirmation of an emerging power that its borders extend to wherever its national interests are. All great powers were built up in this way, with an attitude that has always been known as "imperialism." Maybe that’s why many South Americans feel that Brazil is creating its own "backyard."