Discovery of Latin America
[b]Latin America is an attractive business partner, being a huge and dynamic developing market [/b]The population of the region encounters 600m people. Belarusian diplomacy — which focuses primarily on foreign economic ties — focuses actively on this region, liaising closely with such countries as Brazil, Venezuela and Cuba. These are viewed as a starting point for ‘conquering’ Latin America economically. Last year, Belarus made $2.8bn from its trade with Latin America. A decade ago, the region only accounted for one percent of Belarusian exports but that figure has since tripled. This is not bad considering that ties had often to be established from scratch. However, there are far more ambitious goals in sight...
The population of the region encounters 600m people. Belarusian diplomacy — which focuses primarily on foreign economic ties — focuses actively on this region, liaising closely with such countries as Brazil, Venezuela and Cuba. These are viewed as a starting point for ‘conquering’ Latin America economically. Last year, Belarus made $2.8bn from its trade with Latin America. A decade ago, the region only accounted for one percent of Belarusian exports but that figure has since tripled. This is not bad considering that ties had often to be established from scratch. However, there are far more ambitious goals in sight...
In just a few years, Venezuela has transformed itself from an ordinary Latin American state into a major partner for Belarus. Alexander Lukashenko and Hugo Chбvez meet several times a year.
Until 2007, Belarusian exports to Venezuela consisted almost solely of potash fertilisers but now 2.5 percent of our turnover comes from trade with this country — more than with neighbouring Latvia, or with UK and Italy.
Last year, Belarusian exports to Venezuela reached $302m, with imports valued at almost $650m. This drastic increase (almost from scratch) in the level of imports is due to our beginning to purchase Venezuelan oil. The oil contracts have enabled Belarus to reduce its dependence on Russian hydrocarbons and should be considered a major achievement of Belarusian-Venezuelan economic relations.
From May to late 2010, Belarus bought 1.8m tonnes of oil from Venezuela, paying $647 per tonne for a total of $1.17bn. Last October, Mr. Chбvez visited Minsk and, in the presence of our two presidents, the Belarusian Oil Company and Petrуleos de Venezuela signed a contract for 2011-2013 under which up to 10m tonnes of oil will be supplied to Belarus annually.
At the same time, a memorandum of understanding was signed between Belorusneft and Venezuelan Oil Company on the attachment of two new deposits to Petrolera BeloVenezolana (a joint oil company operating in Venezuela). The will allow Belarus to import over 1m tonnes of oil a year.
Political scientist Yuri Shevtsov believes that Belarus now relies little on Russia for its oil supplies. In his view, the contract with Venezuela has enabled Minsk to adjust its relationship with Moscow in this area. “Our joint oil consumption amounts to approximately 21m tonnes a year. We have a contract with Venezuela for 10m and this volume of oil fully satisfies Belarus’ domestic needs, even exceeds it,” stressed Mr. Shevtsov. “We use about 8m tonnes for domestic needs, and process the remainder to produce oil-based products for export.”
Trade drives progress In addition to energy trading, Belarus views traditional trade and industrial collaboration with Venezuela as profitable avenues of cooperation. Venezuela has a solvent economy, receiving 80 percent of its foreign currency revenue from oil sales. Interestingly, despite their complicated political relations, the USA remains Venezuela’s major trading partner, accounting for about a third of its revenues. However, Venezuela has an underdeveloped manufacturing industry and Belarusian products enjoy popularity there. Venezuela needs machine assembly plants and First Deputy Prime Minister, Vladimir Semashko, has said that Belarus will open several plants in Venezuela in the autumn. “We hope to open an assembly facility for MTZ tractors and MAZ vehicles on October 31st, 2011,” he notes. These plants will assemble 10,000 tractors and 5,000 cars annually. It is expected that loading machinery will also be assembled there in the future.
The possibility of selling shares to Venezuela in Belarusian machine assembly plants is now being consi-dered with the aim of further embedding Belarusian machinery in the Venezuelan market. Mr. Lukashenko has stated that he is already negotiating with Mr. Chбvez on his purchase of a majority stake in Minsk Automobile Works. “Mr. Chбvez proposes to buy a number of shares, paying good money. I told him: ‘With pleasure. But you should become MAZ’s stronghold in Latin America’,” explained the Belarusian President.
These talks have emerged against rumours of interest from Russian investors in MAZ and uncertainty with regard to the company’s value. The economic law is simple: the more buyers, the higher the price.
In addition to machine assembly facilities, a brick plant will be built in Venezuela in the autumn, which will produce 100m bricks a year. This will be a great help in large-scale construction projects which Belarusians are working on now in Venezuela. Our builders plan to construct 15,000 flats in various Venezuelan cities; the first of them will be ready in the coming months.
For Belarus, increasing exports of its goods and services is a top priority. By 2014, it aims to achieve a zero foreign trade balance. Last year, Belarus’ negative balance of trade in goods and services amounted to a record $7.5bn. This means that the country failed to earn enough foreign currency, which could lead to economic problems.
Another reason for machine builders to increase their sales to Venezuela is that orders from the Belarusian state will be cut in and it would be unreasonable to rely on them as in the past. This was announced by Mr. Semashko who explained that there will be fewer state orders for Gomselmash tractors (about 1,500 in 2011) in the future. The domestic market is already saturated and manufacturers need to enter foreign markets in order to keep functioning.
Warm climate for co-operation
Cuba and Venezuela are Belarus’ main political partners in Latin America. This was reaffirmed during a recent visit to Minsk by the Foreign Minister of Cuba, Bruno Rodriguez Parrilla. During Alexander Lukashenko’s recent trip to Caracas, Hugo Chбvez proposed tri-lateral projects between Belarus, Venezuela and Cuba. “I think it’s high time to revisit these projects. Belarus is ready to contribute significantly to their realisation,” Mr. Lukashenko told his guest from Havana. He has visited the Island of Freedom twice during his career — in 2000 and 2006; this proves our interest in developing this political relationship.
As regards Belarusian-Cuban co-operation, Belarus is probably the only post-Soviet state to have preserved the same level of warmth that characterised Cuba-USSR co-operation. This is despite the distance and other obstacles such as sanctions from the West (from which our two states suffer).
When Havana delegation visited Minsk on 22nd February, they first laid wreaths at the Victory Monument. This was a very touching moment. The special status of our ties is underscored by the absence of visa requirements for Belarusians wishing to go to the Island of Freedom. Our countrymen are already actively developing this popular tourist destination. Diplomatic relations between our states were established in 1992. Since then, our major task has been to convert the friendly interpersonal relations between our people into economic collaboration. So far, in this respect, Cuba lags behind ‘little Venice’ (Venezuela’s name, translated). The transition from pure diplomacy to foreign economic activity is not easy. Last year, Minsk and Havana exchanged just $7.5m of goods and services. Ways of improving that situation were discussed during Bruno Rodriguez Parrilla’s visit.
The President pointed out that there had been plans for many joint projects; however, they were interrupted by the global economic crisis. According to Mr. Lukashenko, our major task now is to complete those projects. “I think we should be braver in realising these projects,” he said. The President noted Belarus’ readiness to help Cuba to modernise technologically and to re-equip its enterprises, while establishing a joint venture to produce tractors and cars. A project was announced involving our Tractor Works, which will start next year.
Belarus’ Foreign Minister Sergei Martynov notes, “Much Belarus-made machinery operates in Cuba now, including tractors and buses. There is an economic opportunity in the joint projects to service this machinery on site and, probably, to promote Belarusian machinery and technologies in the region generally, via the Cuban connection.”
The President also said sugar production might be a promising area of co-operation. Belarus plans to purchase large volumes of Cuban raw cane sugar to process it into sugar. Of course, the Island of Freedom produces more than sugar cane. Its medicine is world-renowned and has even inspired the development of pharmaceuticals and biotechnologies. Minsk is interested in sharing its experience with Havana in this high-tech area.
In the near future, our two countries plan to set up joint production of next-generation anti-tumour medications. This was announced recently by Sergey Usanov, academic secretary of the Department of Chemistry and Earth Sciences at Belarus’ National Academy of Sciences. “This is a new generation of anti-tumour drugs, characterised by their direct influence on cancer cells and lower toxicological effect,” he said. It is expected that drugs for the treatment of breast cancer will be produced first; in future, medicines to cure lung cancer and other oncological diseases will be produced. Such projects will no doubt revive our bilateral economic relations.
Brazilian soap opera. Series one
Venezuela is a promising market, which is likely to be lucrative, but it is not the leading economy of Latin America. Fidel Castro is an authoritative Latin American leader, but, for obvious reasons, the Island of Freedom cannot be the most influential state in the region, where Brazil is the largest and strongest state. Moreover, it is highly developed econo-mically: it has the 8th highest GDP in the world. We are now witnessing a new stage in Belarusian-Brazilian relations.
Owing to its size, Brazil has always been a leading trading partner of Belarus in Latin America. In 2008, our exports to Brazil exceeded $1bn although, during the global crisis of 2009, Belarus’ revenue from trade with Brazil fell to $570m. An increase in trade (which in 2010 exceeded $863m) brings hope that the pre-crisis figures will soon be restored.
In recent years, political scientists and economists grouped Brazil, Russia, India and China under the acronym, BRIC; in their view, these large and dynamically developing countries can challenge the economic domination of developed states, which has lasted many years. Belarus has good relations with three of these four countries. It’s now aiming to make a breakthrough with Brazil. With this in mind, a Belarusian Embassy is being opened in the capital (until recently, only a Consulate General operated in Rio de Janeiro). This was agreed a year ago, during the President’s first visit to Brazil and his meeting with Luiz Inбcio Lula (who was the Brazilian Head of State at that time). Leonid Krupets was appointed the first Belarusian Ambassador to Brazil. On presenting the diplomat, Foreign Minister Sergei Martynov noted that when Mr. Krupets chaired Minsk Regional Executive Committee he visited this Latin American country and had experience in negotiating. Mr. Krupets described his task, “Everything will be aimed at earning foreign currency for our country, including selling products and launching joint ventures.”
Belarus primarily exports potash fertilisers (which account for 20-30 percent of the Brazilian market) and Bobruisk-made tyres to Brazil. In November, Belshina officially opened its registered office in the city of Vitуria (the state of Espнrito Santo) with the purpose of increasing exports. Since 2002, the company has exported mainly super-large tyres to Brazil but, after the visit of the presidential delegation, large-scale sales of passenger car tyres began. “We have huge plans,” noted Konstantin Kozlov, the leading foreign economic activity specialist at Belshina’s Exports Department. “The market is large and demand outstrips supply. Our products are quite competitive. We are the only foreign company supplying tyres to businesses and providing ‘shoes’ for new tractors.”
It would also seem to be profitable to sell Belarusian machinery to this huge market. In spring, the first batch of Belarusian tractors will arrive in Brazil. These will first be tested on Goiбs fields (whose Governor Mr. Lukashenko met during his visit). Some time later, BelAZ, Minsk Wheeled Tractor Plant, Minsk Tractor Works and Minsk Bearing Plant will all be established at local mines and pits.
New markets are being opened with great speed. If everything goes as planned, the results of this economic expansion will vastly improve Belarus’ balance of trade figures in coming years.
By Igor Kolchenko