Both the nations, being members of various international groups such as G20 and BRICS, have agreed to expand economic engagement through the Preferential Trade Agreement after being stung in a similar manner by the punitive tariffs by Trump’s administration, and both want to deepen their trade relations.
Geraldo Alckmin, the Brazilian Vice President, during his visit in October, met various Indian political leaders, including External Affairs Minister Jaishankar, Defence Minister Rajnath Singh and Petroleum Minister Hardeep Singh Puri, to discuss cooperation in areas ranging from energy, investments and healthcare to all-important agriculture. This comes close on the heels of Modi’s recent visit to Brazil. During the meeting, Brazil invited Indian companies to participate in the auction of oil blocks, as the country aims to release six oil exploration blocks next year and a further 18 blocks that are in the pipeline, ready to be explored in the Campos and Santos basins.
Brazil exports 250,000 barrels of crude in the region per day to India and, in turn, imports sizeable amounts of Diesel and fuel oil from India. Since both countries, with vast natural resources, are the very voices of the global south, increased trade between them will boost not only the bilateral ties but also solidarity against adversity. India’s state-owned oil companies are benefiting in the ‘two-way partnership’ as Brazil’s Petrobras entered a six-million-barrel deal this year with Hindustan Petroleum for selling crude and getting refined products.
Greenfield Focus
Agriculture is another major sector that both countries expect to cooperate on and boost trade. Agriculture being its strongest industry, Brazil tops the world in coffee, orange, sugarcane and soya production. Its 2024 harvest produced nearly 300 million tonnes of cereals, legumes and oilseeds. Its agricultural exports contribute almost 50 per cent of the country’s total exports, amounting to USD 152 billion, which is three times more than what India exported in the same period. There is a lesson for India in this, as Brazil is emerging as the world’s agricultural powerhouse with large production and exports of commodities such as beef, poultry, sugar and soya. Brazilian soya has become a popular commodity among Indian traders, as there is a rising demand in China and the Far East.
They also look to cooperate in the area of climate change, which is seriously impacting agriculture and ushering in regional poverty due to slackening output in both countries. Climate change severely
impacts the precipitation patterns in the Latin American country, causing major wildfires affecting hydropower generation, agriculture and water supply for its cities. The fear is that vast swathes of the Amazon basin may turn into mere savannah, which is the very lung space for the global climate and vital for the livelihoods of the local population. Extreme events like severe drought and flash floods due to these occurrences are causing huge economic losses and resulting in poverty creation. They can learn lessons from each other’s crises to protect the environment and conserve nature.
Same scenario
Brazil, like India, a former colony of the Portuguese and British, is catching up fast with the rest of the world in terms of economic growth and is already the 11th biggest economy in the world with a nominal GDP of USD 2.26 trillion. The first of the megadiverse nations had a bitter and prolonged struggle to shake out the colonial mantle. But with its vast natural resources, the country has bounced back and has become a diverse and thriving economy, which now possesses a highly developed industrial sector. Brazil’s strength chiefly lies in agriculture, petrochemical, steel, automotive industries and service sectors. The extra-large federal country, with a population of just 205 million, spreads over an astonishing area of 8.5 million square kilometres of extremely varied ecosystems and sharply differing culture, history and race.
With huge mineral ore deposits, the country is the world’s second largest exporter of iron and one of the biggest producers of aluminium. With its huge reserves of crude, the nation could soon become one of the top producers of oil in the world.
Brazil’s steel industry is the fourth largest in the world, and its metallurgical industry has also stood out internationally recently because of the introduction of technological innovations.
Its automotive industry, with top guns such as Fiat Chrysler, Volkswagen, General Motors, Ford, Honda, Renault, Hyundai and Toyota having a big manufacturing base, spurs not only the local economic development between the regions but also the national growth.
Segment role
Its large service sector contributes 58.9 per cent of the GDP and 72 per cent of the country’s workforce, as the high added value services such as aeronautics and telecommunications are fast getting developed. These are the areas Indian businesses can tap into as Brazil seriously opens up investment and trade.
There are several reasons why a country such as Brazil, having its position as the 11th biggest economy, is only moving to 10th in the standings in 2050, with not much growth in its GDP. Brazil is only expected to gain from its current nominal GDP of USD 2.2 trillion to USD 3.51 trillion, hardly 60 per cent growth in 2050, despite its enormous resources, whereas countries such as India, which has a GDP of USD 4.1 trillion now, are set to grow to USD 38.68 trillion in another 25 years.
Even though Brazil owns such natural wealth, unlike India, it does not possess human capital. But to be one of the top 15 economies with this central handicap, one has to admire the country’s strong resilience, given the much-divided political discourse and the highest levels of inequalities between its regions, which are some of the worst in the world.
Political Impact on the Economy
Its political system is also a case in point that impacts the economy in the long term, with one group harping for the internationalisation of the economy and the other wanting it to remain conservative and regional so that the country’s resources are not exploited from outside. The internal disputes between the government and opposition are only raking up a mix of growth and stern fiscal challenges, even though Lula’s government is scrambling to implement major tax reforms to address the regional disparity. Fiscal pressures and major political manipulations of the budgets are also seriously affecting the sustainability of its economy.
Although Brazil bettered expectations in 2024, posting a 3.4 per cent growth due to high domestic demand from the private sector, the growth is expected to slow to 2.2 per cent for the current year and in 2026 and will be one of the slowest in the long term, according to the International Monetary Fund.