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Being one of the major emerging economies of the world within the BRICS Group, Brazil is an up-and-coming super power. The Brazilian economy is forecasted to expand by another 4.5% in 2011, following on from last year’s 8% growth in GDP. The government is heavily investing especially in infrastructure and industry to sustain this trend, which makes Brazil an attractive market and investment destination for European companies. A well-established Brazilian industry provides further opportunities for companies which want to excel in strategic alliances, joint investments and technology transfer. With the 5th Brazil-EU Summit that takes place in Brussels on the 4th of October, Brazilian and European leaders will be well positioned to renew a traditional and mature relationship that grows stronger every day. From education to energy, or from science and technology to industrial issues, cooperation between Brazil and the EU spans a wide and diversified range of topics. The multiplication of missions, meetings and contacts between Brazil and EU representatives, in different configurations and settings, has injected additional impetus into the Brazil-EU Relationship.

EU-Brazil trade is booming

The increasingly close cooperation between Brazil and the EU finds solid support in the healthy expanding flows of trade and investment between both sides. Taken together, the EU remains Brazil’s main trading partner. In 2010, Brazilian exports to the EU totalled US$ 43,1 billion, an increase of 26.7% from 2009. In the same year, Brazil imported US$ 39,1 billion of EU goods, a growth of 33.8% when compared to 2009. In the current year, bilateral trade flows have been equally dynamic. Brazilian exports to the EU grew by 31.4% in the first six months of 2011, reaching a record US$ 25,5 billion for this period. Imports from the EU added to an unprecedented US$ 21,4 billion in the same period, an increase of 22.2%. FDI flows to reach a record level. Whereas European companies have been traditional investors in the Brazilian economy, a significant trend that has taken shape in recent years is the transformation of Brazil into an important source of direct investments in the EU. According to preliminary data, Brazilian companies invested € 3,77 billion in the EU area, in spite of the financial crisis of 2010. Total stocks of Brazilian investments in the EU reached € 56,30 billion in 2009 (the most recent data available). These numbers rank Brazil as the sixth biggest investor in the EU and the first among developing countries. Between 2006 and 2009, stocks of Brazilian FDI in the EU increased 280%, the highest rate among the main investors in the continent. In 2010, EU companies invested € 6,21 billion in Brazil. In a period when outward EU FDI contracted in general, Brazil was the second most important destination for European FDI. The stocks of EU FDI in Brazil totalled € 132,21 billion in 2009, keeping the country as the fourth main destination of European FDI. In the first semester of 2011, overall flows of FDI to Brazil reached US$ 32,5 billion – an all time record – and, for the whole year, it is expected to reach US$ 55 billion.

Major investments on the horizon: infrastructure, government programmes, oil and gas

Although European investments already have a strong presence in many different sectors of the Brazilian economy, future prospects look very positive. The Brazilian economy has been growing fast (7.5% in 2010 and a forecast above 4.0% in 2011), due to both domestic demand and export performance. All indications point to the sustainability of this trend in the years ahead. In addition to the overall performance of the economy, some specific factors will further enhance the attractiveness of Brazil as an investment destination. Brazil will organize the World Cup in 2014 and the Olympic Games in Rio de Janeiro in 2016. These two major events will require robust investments, in particular in the field of infrastructure, including telecommunications, energy and transportation.

Similarly important investment opportunities can be expected from the implementation of the second phase of the “Growth Acceleration Program”, launched by the Brazilian Federal Government in March 2010. The Program provides for investments estimated at US$ 542,6 billion for the period from 2011 to 2014. The sectors covered by this program are deemed instrumental for ensuring fast and sustainable growth. They include transportation, energy, sanitation, housing and water resources.

Another area that is worthy of special attention from foreign investors is oil and gas. The findings in the pre-salt layer have spurred new investments in the Brazilian oil and gas industry. The combination of vast and unexplored potential resources of oil and natural gas, and a favourable regulatory structure, currently makes Brazil one of the world’s most attractive oil producers. It is estimated that US$ 320 billion in investments will be made in the oil and gas industry in Brazil by 2020.

EU–Brazil trade negotiations: slow but robust progress

Bilateral trade and investments will also be positively affected by the conclusion of the free trade negotiations between Mercosur and the EU. The future agreement will reshape the institutional framework of Brazil-EU relationship in the trade sector. Since the negotiating process was relaunched in May 2010, six technical meetings have taken place in a very constructive and pragmatic spirit. Up to now, negotiations have concentrated on the normative side of the future agreement and, in parallel, work has been carried out by the parties in preparation for an exchange of offers in market access. Although the challenges that lie ahead are significant, there is renewed confidence that a balanced and mutually beneficial agreement is within the reach.

As I have tried to illustrate by this article, the relationship between Brazil and the EU continues to show its strength. The task of the next Brazil-EU Summit will be to build on what has already been achieved and to reinforce it even further. I am really looking forward to see its results.

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