Last Updated: Friday - 09/24/2010

Tensions between Canada and Brazil

The recent scuffle between Brazil and Canada over tainted beef should be seen as part of an ongoing tension between the two countries.

Canada sees Brazil as a lucrative destination for its goods. Brazil is home to 35 per cent of Latin America's population and represents 45 per cent of its gross domestic product.

Brazil is Canada's largest export market in South America (exceeding $1 billion) for such products as wheat, whiskey, newsprint, potash and telecommunication systems.

Although Brazil is a developing country, there is money. The richest 20 per cent of the population enjoys 65 per cent of the total income. The per capita income of the richest 10 per cent is 30 times greater than that of the poorest 40 per cent.

To take the harsh edge off raw trade, CIDA has doubled its bilateral aid budget to Brazil in the last three years. But in spite of high-level Team Canada visits to Brazil, bilateral relations are fraught with mistrust and mutual misgivings.

Brazil sees Canada as a close U.S. ally, too eager to promote FTAA, a hemispheric free trade agreement on the model of NAFTA. Brazil's priority is to first strengthen Mercosul and to expand the South American Free Trade Area (SAFTA).

Brazil's regional interest is seen as a stumbling block by the U.S. to fast track FTAA implementation.

While the NAFTA trio wants to speed up the process, Brazil seeks to slow it down to strengthen Mercosul and consequently its position at the negotiating table.

Much is at stake. Brazil is suspicious of Canada's close economic dependency on the U.S. (60 per cent of our export market) and fears that closer economic integration with North America will translate into a loss of political sovereignty.

It is still fresh in the national memory that in 1964 the U.S. instigated a coup that toppled the democratically elected government of Brazil and replaced it with a brutal military junta.

When Canada joined the OAS in 1990 it was hoped it could play a constraining influence on the imperialistic tendencies of the U.S. It now appears Canada is more comfortable aligning itself with U.S. interests.

Brazil prides itself on not being dependent on any single market with only 19 per cent of its exports going to the U.S.

Another source of pride is Empresa Brasiliera de Aeronautica, which is in fierce competition with Canada's Bombardier for a share in the regional jet market. Both governments have entered the fray by providing substantial subsidies to the respective companies. Canada charged Brazil with violations to the GATT and Brazil made a similar counterclaim. The case is before the WTO, the most powerful unelected institution in the world.

The Canadian decision to ban Brazil beef has aggravated the already precarious relations. Trade Minister Pierre Pettigrew claims the beef ban was not a political decision, but a precautionary measure related to health. The Brazilians believe it was a nasty move in a trade war. The sale of tobacco to China for instance suggests that health is not an overriding concern when there is money to be made. The ensuing battle over beef became a question of national pride and Brazil did not want to be bullied by Canada and NAFTA.

Canada is hosting the Summit of the Americas conference in Quebec City on April 22. The FTAA is on top of the agenda.

Thus it appears to have been almost a foregone conclusion that the ban on beef would be lifted and that the NAFTA inspection team was only a diplomatic formality.

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