Brazil continues to suffer through its worst economic recession in decades, coupled with political turmoil that has made it unclear which person and party will be governing the country several months from now. Against that backdrop, media reports have speculated on the role and clout of Brazil in the next BRICS summit, scheduled for October in India. Have Brazil’s high-profile problems changed the way the nation sees its role in the world and as a leader of the “global south?” Has Brazil’s leveraging power on the international stage been diminished by its ongoing scandals and deep economic problems? How would Interim President Michel Temer, who reportedly plans to attend the BRICS summit if suspended President Dilma Rousseff is ousted from offi ce in August, change the way Brazil deals with the bloc’s agenda, compared to Rousseff’s handling of the group of emerging market powers?

The following commentary was originally published in the Inter-American Dialogue’s Latin America Advisor on July 14, 2016.

Margaret Myers, director of the China and Latin America Program at the Inter-American Dialogue

Brazil’s global influence has undeniably decreased as the country has entered into a period of economic and political turmoil. Brazil has for many years been a vocal champion of the new global south, along with China and other emerging powers. It joined BRICS in 2008 and became a member of the grouping’s New Development Bank in 2014. Dilma agreed in 2015 to join the China-backed Asian Infrastructure Investment Bank, or AIIB, a supposed alternative to the Bretton Woods multilaterals, despite some Brazilian opposition to the endorsement. At the time, Brazil’s $3 billion capital subscription to the bank was a tall order for a slowing domestic economy. One year later, Brazil’s deteriorating economic situation has further weakened the country’s ability to support these institutions. Active participation in new and
existing financial institutions is also far less politically viable now that Brazilians are facing growing inflation and unemployment at home. Brazil’s potential for economic growth and global leadership is nonetheless immense. It is still the region’s largest economy, and one that is rich in agricultural and other resources. Brazil has aspired to great power status for more than a century, moreover. This recent boom period was not the first time, and will not be the last, that Brazil seeks a prominent global role. For the time being, however, Brazil’s global clout has diminished. The Olympics will be a critical litmus test of Brazilian leadership’s capacity to govern even at home.

Gary Clyde Hufbauer, Reginald Jones Senior Fellow at the Peterson Institute for International Economics

Political upheaval plus a deep recession should inspire radically different trade policies in Brazil. Hardship opens the way for new thinking, and Brazil’s trade policies certainly need fresh air. The geo-economic alliance with Russia, India, China and South Africa gave Brazil a high profile on the world stage and helped torpedo the Doha Round, but it did less than nothing to spur the Brazilian economy. Instead, the alliance provided a cover for dirigiste protection (often through local content requirements) that has hobbled the industrial and service sectors. The Temer government wants to join the Trade in Services Agreement (TiSA), a welcome step toward bringing efficiency to the Brazilian economy. It is quietly exploring ways to jettison Venezuela from Mercosur, opening the way for Mercosur to actually promote trade rather than spout anti-market rhetoric. More ambitiously, the new government is putting out feelers to the Pacific Alliance, which might lead to a pan-South American agreement. And most ambitiously, depending on the outcome of the U.S. presidential election and ratification of the TPP, Brazil might explore membership in a second phase of accessions (after the likes of Korea, the Philippines and Colombia). Along the way, rather than playing the role of naysayer to post-Doha initiatives in the WTO, Brazil could use its diplomatic heft to promote promising plurilateral pacts. If pursued energetically, such possibilities could do much to stimulate the lagging Brazilian economy.

Evandro Menezes de Carvalho, professor of International Law at the Getulio Vargas Foundation and Fluminense Federal University in Rio de Janeiro, and member of CECLA

The economic downturn is exacerbated by Brazil’s political crisis and reflects the end of a more-than-two-decade era during which politics were dominated by two figures: former presidents Fernando Henrique Cardoso (of the PSDB) and Luiz Inácio Lula da Silva (from the PT). Now, the country is experiencing a transition of political forces with a power struggle that goes beyond the 2018 presidential election. The rupture of democratic process through an impeachment, whose legitimacy and legality is widely discussed, contributes to the economic situation and contradictions of the current politics. The disapproval rate of interim President Michel Temer is as high as that of Dilma Rousseff. The interim government has seven ministers accused of corruption and one accused of murder. Eduardo Cunha, who presided over the Chamber of Deputies’ impeachment proceedings, is involved in a corruption scandal and resigned from his position. Rousseff received harsh criticism when she predicted a public account deficit of 92 billion reais. Temer, however, sent a proposal that predicts a deficit around 170.5 billion reais. Brazilian foreign policy probably will focus on negotiations with the United States and Europe. China will remain a major trade and investment partner for Brazil, even considering the Chinese economy’s new normal. Bilateral relations can be affected only where there are direct conflicts of interest with Western powers. Temer’s government will not give the same strategic dimension to the BRICS as former President Lula. However, he will seek to preserve Brazil’s position in the New Development Bank. Despite this, there won’t be as much political will to support the BRICS in international forums. Temer’s foreign policy will not be bold or creative. He will evaluate Brazil’s position according to the agenda laid out by the main powers, assessing costs and benefi ts. In other words, Brazil will be more reactive than active.