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Brazil and Arabs Can’t Bridge the Petrochemical Trade Gulf

Braskem from Brazil Free trade agreement negotiations between the Mercosur and the Gulf Cooperation Council were the subject of talks that the Brazilian president Luiz Inácio Lula da Silva had in Riyadh this weekend with the Saudi king, Abdullah Abdulaziz Al Saud, and the secretary general of the bloc of Gulf countries, Abdulrahman Al Attiyah.

Despite the declarations of good intentions the process has been showing little progress, as there is an impasse concerning the liberalization of trade of petrochemical products. To Lula, it is possible to sign the parts of the agreement over which there is a consensus, and leave the more delicate issues for another time.

The negotiations were launched in 2005, but were interrupted two years ago because the Brazilian oil industry feared the competition of Gulf companies. Representatives of Braskem, Brazil's largest petrochemical company, owned by the Odebrecht group, said that if the import tariff, currently of 14%, was reduced to zero, then the sector would suffer serious consequences.

Brazil currently has two large companies in the field, Braskem and Quattor, the result of a joint venture between Petrobras and Unipar. Both aim to conquer important shares of the international market. To the executives at Braskem, this is the ideal model for the industry in the country.

According to the president's special advisor for international affairs, Marco Aurélio Garcia, Lula suggested to the Arab leaders that cooperation in the oil sector be promoted as one of the means for minimizing the problem, and invited the Saudi Oil minister, aos Ali Al-Naimi, to visit Brazil. Garcia said that one of the objectives of said trip might even be to assess the possibility of establishing partnerships between Petrobras and the state-owned Saudi Aramco.

Another idea, according to the special advisor, is to form working groups in order to discuss the resumption of negotiations between the Mercosur and the GCC. To the executives at Braskem, the best solution would be to encourage partnerships in the petrochemical sector, instead of eliminating the tariff.

When the process was initiated, the Brazilian diplomacy believed that it would be relatively fast, given that both blocs have few industries that compete among themselves, the oil production chain being the sector in which the Gulf nations are most competitive. The GCC is comprised of Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Kuwait and Oman.

During the second Summit of South American-Arab Countries (Aspa), held in late May, in Doha, representatives of the two blocs, currently presided over by Paraguay and Oman, issued a communiqué committing to speeding up the conclusion of negotiations, and to finding "creative solutions" for the impasse. This Sunday, Lula said that "a successful agreement would boost trade."

Anba

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