The Brazilian approach to South-South trade and investment: the case of Angola.

• Author: Sanchez Badin, Michelle Ration

1. INTRODUCTION

   In recent years there has been a slightly changing geography for trade and investment flows, featuring a new role for developing countries. In 2013, foreign direct investment ("FDI") flows to developing economies, the South, accounted for fifty-four percent (U.S. $778 billion) of global inflows. (1) During this same period, FDI flows to developed countries, the North, have accounted for only U.S. $566 billion. (2) In relation to FDI outflow, the South has retained resilient records, rising by three percent and reaching a new high of U.S. $454 billion; (3) while the North, which still accounts for sixty-one percent of global outflows, have stagnated at U.S. $857 billion in 2013. (4)

   The increased share of developing country participation in global trade is also noteworthy. While the share of world exports of developed countries dropped from sixty-six percent in 1980 to fifty-three percent in 2011, the share of developing economies rose from thirty-four percent to forty-seven percent in the same time period. Part of this increase is attributable to trade performed among developing countries. According to the World Trade Organization ("WTO"), the share of South-South trade in global trade rose from eight percent in 1990 to twenty-four percent in 2011. (5) While North-South share has also slightly increased in this period, from thirty-three to thirty-eight percent, North-North trade dropped from fifty-six to thirty-six percent. (6)

   Today's increase in the participation of the South in trade and investment relations, including transactions with each other, is a result of a long-standing contestation movement lead by a group of developing countries in reaction to inequality in the international allocation of wealth. This movement can be traced back to 1955, when a group of twenty-nine countries from Africa and Asia convened in Bandung (7) and drafted a Final Communique of the Asian-African conference. (8) This contestation movement, (9) among others, led to the creation of the Group of 77, (10) and its feats. (11) In the twenty-first century, new momentum on South-South coalition for trade and investment matters is identified in initiatives such as the BRICS countries, (12) the G20, (13) the IBSA forum, (14) and in the South South cooperation movements.

   In the context of the contemporary South-South trade and investment relations, this paper suspects that a variety of legal instruments have been put in place to regulate a plethora of different arrangements. If the paper takes the example of Brazil, which has been characterized as one of the emerging leaders of the new political economy, it takes notice that the country has signed few regional trade agreements ("RTAs") and that it never ratified a bilateral investment treaty ("BIT"). Although Brazil does not rely on model-based agreements (15) to regulate its trade and investment relations, the flows of commerce to and from the country has increased in the last decades, as well as its inward and outward investments' flows. What is then happening in Brazil with respect to trade and investment regulation? Are there other legal arrangements that may be promoting the increasing flow of investment and trade of the country? If so, are they in consonance with the models of RTAs and of BITs?

   In order to answer these questions, this paper has chosen the example of the economic relations established between Brazil and Angola. As one of the largest economies in Africa, (16) it should not be a surprise that Angola is the country with which Brazil has increased its flow of investment and trade in the last ten to fifteen years. While in 2002, Brazil's investment flows to Angola were about U.S. $18 million; in 2012 they were about U.S. $1 billion. (17) Angola exports to Brazil increased from U.S. $11 million in 2002 to U.S. $726 million in 2013. (18) Brazil's exports to Angola increased from U.S. $199 million in 2002 to U.S. $1,271 billion in 2013. (19) What justifies the choice of Angola is, then, not the volume of economic flows, nor the margin that it takes in Brazilian overall trade and investment flows (about 0.4 percent), but its four times increase in the last few years. Angola-Brazil trade and investment flows have been one of the most dynamic for the economies of both countries in the last years.

   What is the role of law in promoting trade and investment between Brazil and Angola? The underlying hypothesis of this paper is that if there was such an increase in Brazil-Angola economic relations, they might have had legal arrangements supporting this movement. The questions that arise are: (1) if Brazil does not structure its trade and investment relations in RTAs and BITs?; (2) what are the main legal instruments leading these processes?; and (3) what types of legal institutions are each of these two countries mobilizing? This paper will look at the characteristics of the policies supporting this movement and rules designed to promote that increase of economic relations, and how they may blur some concepts on international economic law ("IEL"). (20) In order to develop the proposed analysis, we conducted a case study of Brazil-Angola trade and investment relations, and followed it with preliminary concluding remarks.

   Angola suffers from a limitation on publicly available data. Similarly, information on Brazil and Angola negotiations is also scarce. This feature of Angola is due to political disputes during the civil war, which lasted until 2002, and a lack of transparency, leading to the inclusion of a confidentiality clause in many of the agreements negotiated between Angola and Brazil. In this context, empirical research was crucial to this project. Besides a bibliographical survey, we also conducted a search for primary sources in historical databases and performed eight exploratory interviews with Brazilian officials, businessmen, NGOs' activists, and academics working on the field. None of the interviewees will be identified at this point.

2. ECONOMIC RELATIONS BETWEEN ANGOLA AND BRAZIL

   1. Brazil's policy towards Africa in the 1960s: Filling a "political vacuum" (21)

      Brazil was the first country to recognize Angola's claim for independence in 1975, in what was considered a dissenting move during the Cold War. (22) Ernesto Geisel (1974-1979) was the Brazilian President at the time. Geisel became known for promoting an independent foreign policy and, domestically, for having promoted the strengthening of state companies, and the coordination of a new policy for the energy sector. (23) As part of the latter, we highlight the construction of Hydropower Company of Itaipu Binacional, the creation of Brazil's National Ethanol Program (known as "Pro-Alcohol"), the nuclear agreements with Germany, and, above all, the search for alternative oil suppliers. (24) Angola became then one alternative at that high point of the global oil crises.

      Although Geisel's pragmatic policy towards the new independent countries in Africa had a welcome commercial effect--establishing a market to the excess of Brazilian manufactures and guarantying the provision of oil (25)--academic experts and officials in Brazil concur that this policy should not be read as limited to commercial ties. (26) As in the independence process, in its relationship with Angola, Brazil always evokes historical and cultural similarities, geographical conditions, as well as economic and political advantages of an alliance of southern countries. (27) As a consequence, the official discourse always gets back to the gracious landmark of 1975 and its narratives.

      Brazilian foreign policy towards Africa, including Angola, has been described as cyclical. (28) However, the diplomatic narrative tends to shape the perception of continuity of the Angola-Brazil relationship. For example, after the downturn of Brazilian foreign policy towards Africa in the 1990s, in 2003, President Lula, in his first year in charge, visited Luanda and declared in the bilateral ministerial meeting:

      Angola and Brazil are long-standing partners, and these countries are consolidating and expanding their cooperation now.... This relationship is based upon spontaneous affinities, and mutual solidarity. These are the reasons why Angola is, since its Independence, a priority to Brazilian diplomacy. (29) Cooperation has been the leitmotiv of this pragmatic approach by these two countries placed on the political South of the globe. (30) This is clear in all official statements by Brazilian diplomatic representatives, as well as in the letter of the legal instruments signed between Angola and Brazil. (31) South-South cooperation, as a marginal and alternative movement, incorporates many elements--some of them complementary and others even paradoxical. This cooperation intends to go beyond Official Development Aid ("ODA"), (32) having as a guiding principle the non-conditionality of assistance. (33) But, it is also fundamentally based on the expansion of investment and trade between southern countries. The United Nations General Assembly recently reaffirmed these particularities, and their importance:

      Flows of development assistance from the North and the South are significantly different, however, and South-South cooperation is much wider than financial and technical support; it is a broad consultative and collaborative process engaging all developing countries, aimed at improving their collective economic, social, and political capacity and welfare. (34) Brazil and Angola signed about seventy agreements and protocols. (35) The "Economic, Scientific and Technical Cooperation Agreement," signed on June 11, 1980, was the first--and amongst the most important agreements. (36) This agreement opened the possibility of being amended and further detailed by later agreements and contracts between the parties, (37) and it also established a Joint Commission to manage bilateral relations. (35) The "Economic, Scientific and Technical Cooperation...