Mercosur-Gulf Treaty Should Draw Investment and Tourists to Brazil

The free trade agreement that the Mercosur is negotiating with the countries of the Gulf Cooperation Council (GCC), to be finalized by June, should expand the investment and trade flow, resulting in more development for both blocs.

This is the opinion of the undersecretary general for Economic Affairs at the GCC, Mohamed Obaid Al-Mazrooei, who participated last week in the Mercosur Summit.

"When there is more investment and trade there will be more development, and that is good for the people of both regions," he said at the Copacabana Palace hotel, in Rio de Janeiro. The GCC includes Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Kuwait and Oman. The members of the Mercosur, in turn, are Argentina, Brazil, Paraguay, Uruguay and Venezuela.

To Al-Mazrooei, the treaty, apart from providing free access to both markets, should provide greater security to investors. "It is going to create an umbrella under which businessmen may exchange investment," he said.

To him, each party is going to have competitive advantages in the other bloc, which may even cause the entry into a space formerly occupied by traditional suppliers, like Europe, in the case of the Gulf.

The treaty is also going to help increase the cultural exchange and knowledge between both blocs and may also help increase tourism. Al-Mazrooei, aged 47, was born in Dubai, in the Emirates, and graduated in Business Administration. He is post-graduated in Economics and has already been undersecretary at the Ministry of Finance of his native country. Read below the main stretches of the interview:

What were your opinions about the negotiations that took place in Brazil?

First of all, one of the strategies of the GCC is to expand and strengthen relations with other groups of countries around the world. To the GCC, the Mercosur is a very important bloc that has significant weight in the world and both regions have much in common, similar interests, and they want to develop these ties. I feel that the best way to do that is by establishing a free trade agreement.

The World Trade Organization (WTO) is asking for liberalization of markets, with the reduction and elimination of tariffs between blocs, to increase international trade, generating more investment. For development you need two things: investment and trade. When there is more investment and trade there will be more development, and that is good for the people of both regions.

In second place, we had excellent negotiations, there were five meetings, one in Rio, and we have almost completed the agreement. There are still a few small things to do on our side and also on the side of the Mercosur.

Few things?

Yes, few things. We hope to sign the treaty in June and, if that happens, it will be the first.

Does the GCC not have similar agreements with other groups?

No, but we are negotiating with the European Union (EU) and talks have been progressing well, but for a long time: 10 years. In the Arab community, we have already signed an agreement with Lebanon under the concept of the Greater Arab Free Trade Area. We are also negotiating with China, Pakistan, India, Japan, Korea, Turkey and with the European Free Trade Area (EFTA, which includes Switzerland, Liechtenstein, Norway and Iceland).

And the agreement with the Mercosur is really going to promote relations with the GCC, it is going to expand ties, to generate an umbrella under which businessmen may exchange investment.

You said that there are small things yet to be discussed. What are they?

They are in all three areas: some in the area of investment – some small definitions -, in the area of goods and in services.

What are the areas in which there is sensitivity?

In the area of investment I cannot foresee any problem. The area of goods will be OK. Maybe the area of services will have some, as the engagements that the GCC has with the WTO in this area are significantly restricted, but that does not mean that there is no disposition to open the sector.

In the area of goods, what are the most sensitive products?

In the GCC countries we have some industries that are being born and received significant investment, I am not sure exactly how many products are sensitive, but there are not many, maybe two or three in a universe of one thousand.

What share of bilateral trade will be covered by the agreement? Over 90%?

Yes, I would say more than 90%.

Is it possible to estimate how much trade and investment between both regions may grow?

I believe that the agreement will help very much, it will increase investment and trade. We already import very much from the Mercosur and the treaty is going to further increase exports to the GCC, and it should do the same to sales from the GCC to the Mercosur.

Will products be more competitive?

Yes, because they will have free market access and this will encourage more businessmen to export and import.

In what sectors may we have joint investment?

I believe that the Mercosur has competitive advantages in some areas and this will be explored by businessmen of the Gulf. And there are also competitive advantages in the GCC, like, for example, in heavy industry, where businessmen from the Mercosur may invest.

In the Mercosur, especially Brazil, what areas may attract investment from the Gulf?

Mining, food industry. Businessmen are smart enough to add up the opportunities as soon as we place them face-to-face to discuss them.

Is the agreement also going to increase mutual knowledge?

It is also going to help each party to learn more about the culture of the other group and this will, for example, increase tourism. For example, in Brazil there are different kinds of climates: mild, hot and cold, there are beaches, nature and infrastructure of hotel services, highways, airports, etc., which will really attract tourists.

Do you believe that with this agreement, the Mercosur may replace Gulf suppliers of specific products, like Europe, for example?

Well, as I said, there is a comparative advantage here that is going to attract business, as there will be quality and price. I believe that that is going to happen. For example, the frozen chicken sold by Sadia is very well known in the Gulf, as you have a competitive advantage. There are also other sectors, like fruit, mining, and even the aeronautical industry.

In your address at the Mercosur meeting, did you speak about the possibility of a trade delegation?

Yes, that is one of the ideas we considered, another is a conference between businessmen from both sides, which could take place once here and once in the Gulf. This would generate knowledge, would show the resources of the Mercosur and the comparative advantages, business, products…

Is it going to take place after the signing of the agreement?

I do not believe that that should be connected to the signing of the agreement, but the agreement is going to establish the foundations to encourage businessmen. But we may promote the conference before the signing. We have an example with India. We do not have an agreement, we have only just started negotiating, and have already had three or four conferences.

Might the treaty simplify the entry of products into other countries in both regions?

Exactly. Dubai, for example, is known as an example of a reexport center. Therefore imports of products from the Mercosur should grow very much, not for local consumption, but for reexport to the neighboring countries, like Iran, Pakistan, East Africa and Western Asia. And vice-versa, products exported to the Mercosur may be reexported to neighboring nations.

What did you think of the Mercosur Summit?

My impression was very positive. There were constructive, transparent and candid negotiations. I really admire these presidents and leaders, they really care about the needs of their people and are working for their interests. They really want to do things, and are not just concentrated on trade, on the economy. No, they spoke about social matters, education, health, they are really working hard.

Anba – www.anba.com.br

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