Ambassador of Brazil - RBC: “As you know, we do not follow the sanctions regime”

The Ambassador of Brazil to RUSSIA, Rodrigo de Lima Baena Soares, in an interview with RBC, spoke about the impact of sanctions on trade, the possibility of switching payments to national currencies and the BRICS summit under the Russian chairmanship of Rodrigo de Lima Baena Soares

About sanctions and their impact on bilateral relations

Western sanctions against Russia are not a problem in bilateral trade; Brazil adheres only to the restrictions imposed by the UN Security Council, Brazilian Ambassador to Russia Rodrigo de Lima Baena Soares said in an interview with RBC. According to him, the sanctions created some problems in the field of payments, logistics and insurance, but Russian and Brazilian companies were able to solve them, although they incurred additional costs.

“As you know, we do not follow the sanctions regime imposed by some countries against Russia. We comply with sanctions imposed by the UN Security Council, and this is not the case. We have normal trade relations with Russia, we are expanding bilateral trade. So for us the issue of sanctions is not a problem because we do not comply with them,” Soares explained. “Of course, this sanctions regime imposed against Russia has created a number of problems not only for Brazil, but also for many countries and raised the question of payment, logistics and insurance systems. Insurance today is much more expensive than it used to be. Accordingly, the products will become more expensive. Russian and Brazilian companies managed to overcome these difficulties and these challenges. The most important example is that we have increased bilateral trade. I don’t see any serious restrictions on our trade, since it has reached a record level between our countries,” the RBC interlocutor emphasized.

In 2022, according to Brazilian statistics provided to the UN (the Russian Federal Customs Service does not disclose figures), trade turnover between Brazil and Russia amounted to $10.6 billion. Brazil’s imports from Russia are more than $8.6 billion, Brazil’s exports to Russia are almost $2 billion. In 2021, trade turnover amounted to $7.8 billion. According to data for 2021, about 70% of the structure of Russian exports to Brazil were fertilizers.

Speaking about the price ceiling set by the EU and the US at $60 per barrel of Russian oil , the ambassador recalled that Brazil buys mainly diesel fuel and only a small amount of crude oil from Russia, since it itself is one of its largest producers, producing 3.3 million barrels. per day. “Our problem is the lack of oil refineries. Therefore, we have to import gasoline and diesel fuel from third countries. Russia  is a reliable partner. This trade is carried out by private companies in Russia and Brazil. We manage to purchase diesel without any serious obstacles,” the diplomat said.

Rodrigo de Lima Baena Soares (Photo: Mikhail Grebenshchikov / RBC)

Soares also clarified that mutual settlements between the countries are carried out in US dollars, including transactions on oil and petroleum products, while the parties are discussing the issue of mutual settlements in national currencies. He recalled that Brazilian President Lula da Silva put forward this topic in January 2023, shortly after he was sworn in. The country is considering using this approach in trade with its main partner in South America, Argentina. “Using national currencies in trade is, of course, not an easy task. It requires extensive technical dialogue, it is quite a complex issue, but we are ready to continue to talk with Russian officials, discuss this issue and see if we can move forward on this and how we can trade in national currencies,” Soares explained.

On the prospects for expanding trade turnover

The Ambassador of Brazil believes that there is every opportunity to increase Russian-Brazilian trade turnover; businessmen should discuss this issue more. “We can provide Russia with a lot of equipment and technology that was previously imported, for example, from European countries or the usa. We could increase the level of cooperation between countries in this area and not be limited to agriculture, although it is very important for both Brazil and Russia. But we must try to get a more complete and diversified product portfolio,” the ambassador said. He added that Brazil is capable of increasing the EXPORT of industrial goods to Russia in many areas, especially in the field of mechanical engineering, equipment, and agricultural services, and these issues are being discussed with Russian representatives. “We need to be creative to take advantage of the opportunities we have. Now some countries, including European ones, do not trade with Russia due to sanctions imposed against Russia. Thus, an important window of opportunity has opened for us,” Soares emphasized.

Brazil imports mainly fertilizers and diesel from Russia, which are vital for the agricultural industry, he continued. Exports to Russia mainly include agricultural products, soybeans, coffee , tobacco, MEAT and nuts, and Russia is the world's leading importer of Brazil nuts. Soares noted that 90% of Brazil's fertilizer needs are met through imports, with 23% of this volume coming from Russia. According to him, Brazil does not encounter problems when purchasing Russian fertilizers - they are supplied by Uralkali, Eurochem, Acron and PhosAgro. Some of them are also investing in logistics development in Brazil.

Rodrigo de Lima Baena Soares (Photo: Mikhail Grebenshchikov / RBC)

“We have more Russian companies in Brazil than Brazilian companies in Russia. Previously, there were more Brazilian companies in Russia. It’s a matter of time,” Soares explained. He added that the embassy sees the interest of Brazilian companies in the Russian market in many areas, including agriculture and the banking system. “We have a lot of opportunities now. I think it's time for Brazilian companies to look at Russia very fairly and favorably. This is our idea,” he emphasized.

About the drivers of growth of the Brazilian economy and similarities and differences with Russia

Brazil's economy is developing, the ambassador said, and economic growth is expected to be about 3% this year. “We are on track to improve our economic situation. We have had some crises in recent years, but we are now in the process of restoring the momentum of our economy. Our international trade is growing. We are an agricultural power. You know, we are the largest exporter of nine types of agricultural products in the world. This is a fairly complex industry. Things are also going well in the service sector. Of course, we have many problems due to the international situation, the disruption of many supply chains in the world, but we are ready to solve these problems,” he said.

In 2014–2019, Brazilian GDP decreased by 0.3% on average annually, and in the pandemic year of 2020 it decreased by 3.3%. However, real GDP then jumped 5% in 2021 and grew another 2.9% in 2022. According to World Bank analysts, the reasons for this were a strong fiscal impulse, a successful vaccination campaign against covid-19 , and favorable conditions in commodity markets. GDP at current prices for 2022 was $1.92 trillion.

In October, the World Bank noted that Brazil's GDP should grow by 2.6% in 2023. However, “structural challenges” for the Brazilian economy remain: productivity in the manufacturing sector remains stagnant, and the country’s poverty rate is 24%. Brazil's economy will grow significantly slower in the coming years than the economies of CHINA , India and Turkey, the World Bank believes.

Comparing the economic models of Brazil and Russia, the ambassador reiterated that his country is one of the world's largest producers and exporters of agricultural products and food products. “We are proud to note that Brazil can feed 10% of the world's population. As for Russia, over the past 20 years it has managed to impressively increase its productivity and agricultural production. The policy of self-sufficiency has yielded very good results. I can give you an example with meat. Previously, we exported more meat to Russia than now. This is due to the fact that Russia has managed to increase meat production and exports. Russia has even become our competitor in third markets. Now we cannot think of agriculture only as a traditional raw materials sector. At least in the case of Brazil. There are many new technologies and innovations in this sector. Over the past ten years, we have been able to increase our productivity by 400%, and the increase in land use has been approximately 30-40%,” he noted. The industrial sector is developed in the southeastern part of Brazil. “We export industrial goods to many important countries: Europe, the USA. 40-50% of our exports to these countries are manufactured goods,” he explained.

Rodrigo de Lima Baena Soares (Photo: Mikhail Grebenshchikov / RBC)

About the “reality” of BRICS

Commenting on President Lula's statement at the August BRICS summit about the possible creation of a single unification currency, Soares explained that, in the president's opinion, it could increase trade between countries within the BRICS. “Of course, this will require a lot of research, this is a rather complex issue. But at the end of the day, we should try to find more opportunities to use currencies other than the DOLLAR in our trading,” he added. The ambassador also rejected the arguments of skeptics who believe that BRICS does not actually exist, since the association does not have an institutional structure, a common budget or even a secretariat. “We have a very good example - the New Development Bank (NDB), headquartered in Shanghai and headed by our former president Dilma Rousseff. This is a very important institution for the development of the BRICS member countries. I can give you the example of Brazil. We managed to borrow about $6 billion from the NDB for infrastructure projects for the construction of ports, roads, electricity and water resources. This speaks for itself. These are not just political conversations, we have a specific institution that helps our countries improve their level of development,” he emphasized.

Rodrigo de Lima Baena Soares (Photo: Mikhail Grebenshchikov / RBC)

Speaking about the prospects for holding a BRICS summit in Kazan in October 2024 (next year Russia chairs the association), the ambassador noted that he had heard that the summit would be dedicated to the idea of ​​a multipolar world. “Russia, as chairman, plans to hold about 200 meetings in various fields: economics , science, technology, innovation, culture, sports . We have great confidence in the Russian chairmanship. I think it will be very productive and results-oriented,” he added. Soares called the expansion of BRICS an important outcome of the last summit. “I think six new members will give our group more energy and new dynamics. They are important countries in their regions. Now we have Argentina, which is our main partner in Latin America, important energy powers such as Saudi Arabia , Iran, the United Arab Emirates. We share the idea of ​​creating a more multipolar world, as well as reform of international institutions such as the UN Security Council, the World Bank and the IMF . We have a consensus on the need to advocate for more inclusive, more representative and more effective international institutions,” he concluded.