Brazil’s good diplomatic relationship with Arab and Muslim-majority countries has paved the way for it to become the destination of choice in trade and investments.
Although Brazil has not yet adopted regulations aligned with Islamic finance principles, it is a major partner for Muslim-majority countries in the export of Halal products, especially, animal protein products.
Review of 2020
At the end of 2019, Brazilian President Jair Bolsonaro visited Saudi Arabia and met Crown Prince Muhammad Salman who mentioned that Saudi Arabia would be willing to invest up to US$10 billion in Brazil. The investment would be made by the Saudi Public Investment Fund (PIF).
The PIF has invested in two Brazilian funds managed by Patria Investimentos, a fund manager that creates businesses in the infrastructure, real estate and agribusiness segments. The amounts involved and the economic segment of these funds were not disclosed. However, this is a clear demonstration that the PIF is, indeed, interested in investing in Brazil.
This interest was evident when a meeting was organized on the 11th August 2020 by the Executive Office of the President of Brazil (Casa Civil), where the federal government presented to PIF representatives the main projects being developed in Brazil, especially in the infrastructure, energy and agricultural sectors.
During the meeting, Moreira Franco, the secretary of the Investment Partnership Program (Programa de Parcerias de Investimentos or PPI) presented the portfolio of PPI projects in areas such as transportation and sanitation. Representatives from the Ministry of Economy, Ministry of Infrastructure and Ministry of Agriculture also participated in the meeting.
It is always good to remember that Mubadala, an Abu Dhabi sovereign fund, has been investing for years in Brazil and it seems that it is always looking for possible good investments.
As to trade, Agribrasil, a Brazilian trading company focusing on the commercialization of grains, is planning to export transgenic soya to the MENA region.
In turn, Brazilian company Weg has entered into a transaction with Saudi governmental company Saline Water Conversion Corporation which operates desalination and electric plants. The object of the transaction is the supply of 24 medium voltage engines to be used in plants located in the Saudi western city of Yanbu for the pumping and transportation of water to the city of Medina.
Preview of 2021
Brazil is a major exporter of agribusiness products to Muslim-majority countries, especially in the MENA region, and this trend is expected to continue in 2021.
It is also foreseeable that Brazil will continue to be a destination of investments for Muslim-majority countries, particularly GCC countries.
The Brazilian currency has suffered a devaluation vis-à-vis the US dollar. In view of this, Brazilian companies may be seen as ‘cheap’ for foreign investors, either by the totality of the company or by a portion of its capital stock.
As for the aforementioned PPI, the federal government has a policy in place to privatize certain activities by means of concessions for a determined period of time.
It is undeniable that an infrastructural shortfall is facing Brazil with the federal government planning to privatize more airports. Highways and port terminals could also be seen as possible target projects for foreign investors in 2021 with privatization also taking place at the state level.
Agribusiness is an economic segment that will be developed further in addition to the Brazilian pharmaceutical and construction services industries that have better opportunities through enhanced trade relations with the Arab countries.
The trend of trade activities related to agribusiness where Brazil is a major exporter to Muslim-majority countries should continue not only in 2021, but also in the following years. This is due to the fact that an increasing number of Brazilian companies have identified these countries as excellent markets for their products. Other companies in Brazil that offer different types of products should identify possible markets in these Muslim-majority countries — one good example is the cosmetic industry. It is also clear that foreign entrepreneurs see Brazil as a good destination for their investments.
Fabio Amaral Figueira is a partner at Catao & Tocantins Advogados. He can be contacted at [email protected]