Ethanol exports could boost India-Brazil trade, says Brazil’s Vice Minister for Trade
India and Brazil signed 15 agreements during the visit of President Jair Bolsonaro. Both sides agreed to increase trade relations from the current USD 7 billion to USD 15 billion by 2022. The Investment Cooperation and Facilitation Treaty will provide the legal framework for future trade between India and Brazil.
CNBC-TV18 caught up with Marcos Troyjo, Brazil’s Vice Minister for trade & international affairs for an exclusive conversation.
Troyjo urged India to open up its market to Ethanol exports from Brazil, as this could reduce India’s dependence on fossil fuels and reduce sugarcane stock across the world.
During the visit Prime Minister Modi and President Bolsonaro also spoke about resolving the dispute over sugarcane pricing. Brazil’s top trade official also spoke about expanding the Mercosur Preferential Trade Agreement.
Below is the transcript of the interview
Q: India – Brazil trade stands at about USD 7 billion currently, have the two sides set any trade target during this visit?
A: There was a very interesting speech by Prime Minister Modi acknowledging that the potential that both Brazil and India should elevate bilateral trade relationships up to USD 15 billion by the end of 2022 and I think this is realistic objective because on the one hand India continues to grow very well, and the incremental GDP that India will experience in the next couple of years can be a very important magnet for Brazilian exports of food and agricultural commodities.
Apart from that, we also have to diversify the relationship in terms of the kind of trade flow that we have right now because it is very much focused especially on Brazilian side in low value added goods. I am sure one of the characteristics of the current international scenario is rerouting of global supply chains.
So, Brazilian firms and Indian firms must come together in helping to re-design how trade flows are happening around the world.
Q: Give us a sense of how important will the Investment Cooperation and the Facilitation Treaty be in increasing trade and what role will this play?
A: It is very important because investors need a framework in which to operate and this is particularly crucial for Brazil right now because we are embarking on a very ambitious privatisation and concession program. Indian companies have a lot of experience in that so if we have the infrastructure right also in terms of the legal framework that we need then this flow of investment is going to come up with more compliance, with more security. We know infrastructure investment is about the long term. So the long term investor is going to benefit a lot by the kind of legal structures that we have in place at present.
Q: Was there any discussion on certain product lines that may help achieve that trade target as well?
A: There is one product that is very important for Brazil and I think for India as well, which is ethanol because at the end of the day Brazil is one of the top producers, India is a top producer of sugar and if we can convert an important part of the engines of automobiles and buses and trucks to ethanol, then we will be able to transform ethanol into a global commodity. Then the players such as Brazil, India and the United States will benefit not only in terms of lower prices, but also will be taking a very important step in driving our energy matrix towards biofuels something that is good for their economies and good for environment as well.
Q: When we speak about ethanol in our larger trade partnership, what are the early deliverables we are looking at?
A: First, we want India to open its market. India has to reconsider an important part of what it is doing now with sugar. In the case of ethanol from Brazil, it does not come from corn, it comes from sugarcane. So, if India increases its purchase of ethanol, this will also help decrease a little bit the overall stock of sugar that we have around the world. So, this is going to be a win-win for everyone, sugar producers will have better prices for their products and those who using ethanol as a fuel will also benefit. Of course this creates another incremental benefit for India because India now is very dependent upon the imports of fossil fuels, so it is a win for everyone.
Q: Talking about sugarcane, the Brazilian government had recently taken India to the WTO over sugarcane pricing. This was discussed during the visit, and President Jair Bolsonaro and Prime Minister Modi discussed it as well, as there been any kind of solution to settle it out of WTO?
A: I think they taken steps forward to sorting it out. The Brazilian government of course has to engage with its own producers in terms of what the next steps are going to be. However, once again if we bring this to a higher level, to a high ground and we also take into consideration the many possibilities we have for trade including ethanol, I am sure this is going to have a very positive outcome.
Q: If I speak to you about greater market access for Indian products – agricultural products especially, has there been any kind of promise or assurance from the Brazil government on that?
A: The structural beauty of India and Brazil’s relation is that India is growing so much and now Brazil has resumed its growth path and then naturally agricultural opportunities arise not only because Brazil presents comparative advantages in that area especially in things that represent high volume of exports to India, but India itself in terms of the characteristics you have in terms of fruits, in terms of some vegetables, you will also find an important destination in Brazil.
It is true that Brazil now – when you pair up exports and imports, our surplus in agricultural products is huge but we can help balance that as well by buying more from India. So, this has to be a win-win situation.
Q: If we speak about the preferential trade agreement, the India-Mercosur agreement, there was a discussion to expand this trade partnership. The Brazilian government wanted to do that as well. What were the discussions on that, what is the status currently?
A: This government has really represented a watermarked difference from previous administrations. While, others used Mercosur as a fortress of protectionism but this government is using Mercosur to access global supply chains and to open up markets for Brazilian goods. We also want to open up our economy. Out of the world’s top 20 economies, Brazil is the one to have the least proportion of exports and imports as a flow of GDP. So, we have to open up more.
I think we can underline that argument by showing that for example, it was during President Jair Bolsonaro’s administration that Brazil was able to strike that which is the biggest trade deal in economic history the EU-Mercosur agreement. We are about to start negotiations with the United States, with Japan, we are in ongoing negotiations with Singapore, Canada and we want to do the same with India.
Q: How many product lines? Have the two sides decided on the number of product lines they would like to expand the agreement to?
A: We expect India to present us with a very concrete research. We surely want it to be as universal as possible. Just to use as a reference, the kind of scope that we have in the EU-Mercosur agreement, it encompasses more or less 90 percent of the economy of the two blocks, so we are looking to something of the same nature.
Q: Is it possible to put a number to it?
A: 90 percent is almost 10,000 products, we are talking about a big figure here. It is also important to realize that Mercosur is a customs union at present and therefore whenever we have to negotiate things that involve either tariffs or quota, we have to wear the Mercosur hat. We want to make sure that our other partners are also on board, so we have to negotiate and then consult with Argentina, Uruguay and Paraguay to get their feeling.
Our determination is uncompromised that we are going forward with India. We want to make sure that our other partners are there along with us.
Q: Any deadline?
A: As soon as possible. We want to make sure, it is funny because for many years when Mercosur was more of a protectionist tool than a vehicle for integration with the rest of the world, we had something that we called a strategic patience’s. Now I think it is very strategic to be impatient, particularly with those sectors that want to keep protectionism as a chief characteristics of the economies of Mercosur. So we wanted to do this as soon as possible and we want to make a lot of headway in 2020.
Q: Would you say that energy partnership would be the pillar of India-Brazil trade and the India-Brazil relationship as well?
A: It can definitely be and in many different dimensions because Brazil is bio-diversity super power and it is an energy super power as well. As a matter of fact it is an agricultural super power. I think these are the three areas in which in an uncontested fashion Brazil is a major player.
You can think of energy in terms of an ethanol market, you can think of energy as India infrastructure investment in Brazil. As we heard today, when you figure out the last five years apparently India was responsible for 20 percent of Brazil’s energy infrastructure. So, definitely energy is one area in which these partnership can really flourish.
Source: CNBC TV 18