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Brazil set to capitalize on Saudi-UAE competition as investments take shape
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Samuel Wendel
Senior Market Research Analyst, Al-Monitor
Aug. 31, 2023
Much has been made in 2023 about China’s growing clout in the Middle East and Turkey’s efforts to revive ties with former Gulf rivals, but don’t let that overshadow another player revving up regional relationships this year: Brazil. South America’s largest economy — and the 11th largest by GDP globally — has been actively engaging with the UAE and Saudi Arabia under newly reelected President Luiz Inácio Lula da Silva, known as Lula. That’s already produced numerous high-level state visits and deals worth billions this year. Alongside a broader strategic realignment — with Egypt, Saudi Arabia, the UAE and Iran recently invited to join BRICS alongside Brazil — this trend is being fueled by growing Gulf competition. That's setting the stage for these relationships to evolve further as more investments take shape, particularly around renewables and energy transition.
- Trade between Brazil and the Middle East has grown in recent decades, but still remains fairly modest. Total trade between Brazil and the Arab world surpassed $30 billion in 2022, a record total, according to the Arab-Brazilian Chamber of Commerce, but was dwarfed by the $150 billion in bilateral trade between China and Brazil in 2022.
- Brazilian exports to Arab countries, which center on food products, hit $17.7 billion in 2022, up 23%, with the South American country ranking as the region’s largest halal meat and poultry supplier.
- Brazil-Middle East ties are amassing new significance in 2023 after Lula assumed office in January following his election victory over incumbent Jair Bolsonaro, who pursued isolationist policies. Although Bolsonaro also made regional inroads — Saudi Arabia’s Public Investment Fund (PIF) announced it would invest $10 billion into Brazil following Bolsonaro’s 2019 visit to the kingdom — Lula’s reelection is fueling new enthusiasm, as the Brazilian leader proactively engaged with Arab nations during previous terms.
- Lula quickly sought to reassert Brazil internationally, with the Middle East already featuring in his global outreach. That was headlined by choosing the UAE as his first regional state visit in April 2023. That signaled a renewed focus on the region as the Brazilian leader courts foreign investment and seeks a leading role tackling climate issues — something his predecessor actively avoided.
- The UAE visit delivered a noteworthy deal: Abu Dhabi wealth fund Mubadala committed to invest about $2.5 billion to build a clean fuel plant in Brazil. The countries also agreed to deepen their strategic partnership across numerous areas and discussed an exploratory dialogue with Mercosur — the trade bloc comprising Argentina, Brazil, Paraguay and Uruguay.
- A Mercosur-Egypt trade agreement entered force in 2017 and the bloc pursued a deal with the GCC in the past, but the UAE is now pushing its own bilateral agreements, recently inking Comprehensive Economic Partnership Agreements (CEPAs) with India, Turkey and Indonesia.
- In conjunction with Lula’s visit, Brazil’s minister of foreign affairs published an op-ed touting the UAE as the biggest Middle Eastern investor in Brazil, with over $10 billion invested across infrastructure, mining, real state, entertainment and education.
- In May, Brazil’s congress ratified a cooperation and investment facilitation agreement with the UAE, while diplomatic engagements have continued following Lula’s visit. In June, UAE Minister of State for International Cooperation Reem Al Hashimy visited Brazil to further discuss collaboration and negotiations on a CEPA between the UAE and Mercosur. The visit also produced an agreement between the Brazilian Navy and Emirati defense firm EDGE to develop anti-ship missiles.
- In August, the UAE’s foreign trade minister visited Brazil and attended the launch of Lula’s Growth Acceleration Programme, a roughly $350 billion national investment initiative aimed at energy, logistics and urban infrastructure projects.
- Meanwhile, Brazil and Saudi Arabia are also exploring deeper ties. During an August tour of Latin America, Saudi Arabia’s Minister of Investment Khalid Al-Falih visited Sao Paulo and held a business forum, which produced 25 MoUs covering petrochemicals, healthcare, defense, food and beyond.
- These high-level visits have also coincided with other dealmaking. In July, PIF subsidiary SALIC acquired a 10.7% stake in BRF, Brazil’s biggest poultry producer, for about $340 million. Shortly afterwards, BRF formalized a previously announced joint venture with Halal Products Development Company, a PIF subsidiary, Reuters reported.
- Also in July, Saudi Arabia struck a major mining industry deal when Manara Minerals — a JV between the PIF and Saudi mining company Ma’aden — agreed to buy a 10% stake in the base metals unit of Vale, Brazil's largest mining company. The stake, which gives Saudi Arabia access to a crucial supplier of metals needed to decarbonize, is worth about $2.6 billion and reportedly saw Manara beat out rival bidders including the Qatar Investment Authority.
- Vale is also active in the Middle East: the mining giant signed agreements in May 2023 advancing its plans to develop industrial complexes dubbed “mega hubs” in Saudi Arabia, the UAE and Oman to produce hot briquetted iron and steel products.
- In May 2023, Abu Dhabi state oil company ADNOC and US asset manager Apollo put forth an acquisition bid for Braskem, a Brazilian petrochemicals maker 36% owned by Petrobras. The offer could be worth up to $7.6 billion, Bloomberg reported, although Petrobras reportedly has no plans to sell.
- Amid this activity, exports from Brazil to Arab countries rose 8% during the first seven months of 2023 compared to the same period last year, totaling $10.6 billion, according to the Arab-Brazilian Chamber of Commerce, while Brazil’s imports from the region fell 30% to $6.1 billion.
- Plus, potential in Brazil’s regional relationships were further underlined in August 2023, when Saudi Arabia, Iran, Egypt, the UAE, Ethiopia and Argentina were invited to join the BRICS group of major developing countries, adding more heft to its efforts to serve as a counterweight to the G7.
Scenario 1: The UAE secures a free trade agreement
The UAE pushes ahead with its own CEPA deal with Mercosur, producing more high-level meetings to negotiate an agreement in coming months as Brazil deepens relationships with new BRICs members.
Yet, Mercosur features internal tensions that could undercut progress and some industries in Brazil may resist such a deal. A bilateral deal between the UAE and Brazil could also be an option.
Scenario 2: Saudi Arabian investment in Brazil surges past the UAE
The South American nation becomes a focal point of the UAE-Saudi rivalry, with the PIF training its financial firepower on Lula’s Growth Acceleration Programme, amplifying the kingdom’s past commitments.
That said, Gulf players currently have many suitors competing for their investment dollars globally, which will see interest in Brazil balanced with pursuing other opportunities, including those closer to home — like Turkey.
Brazil will be a big player at the UAE’s COP28 in December as Lula makes up for time lost during Bolsonaro’s administration. That should see key pledges with Gulf countries that help energize Brazil’s ambitions to become a green powerhouse. More broadly, Brazil is well-positioned to be among the winners in the UAE-Saudi rivalry. Alongside ongoing food security investments, Gulf money will likely target Brazilian ports, logistics and other infrastructure projects in the near future, while more coproduction agreements in defense loom too. Against that backdrop, trade between Brazil and the Middle East looks set to continue growing, even though flows will still remain fairly modest overall when compared to top trading partners. Still, these relationships can be a win-win, ensuring that ties between Brazil and Gulf countries will remain a priority in the near future.
Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.
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