New geopolitics challenges Brazilian agriculture and brings uncertainties and opportunities

The intensification of the rivalry between China and the United States, combined with ongoing conflicts in Central Europe and the Middle East, puts global stability at risk and directly impacts Brazilian agribusiness, which is subject to dynamics that can generate opportunities and challenges. Alliances and trade agreements can open markets, but political instability or trade disputes can result in barriers that harm agricultural exports.

This is the scenario analyzed by experts who participated in the debate “Impacts of the new geopolitics of agribusiness”, held on Tuesday (19) in the Insper auditorium. The event brought together Christopher Garman, director for the Americas of the Eurasia Group consultancy; Otaviano Canuto, from the New South Center think tank and former executive director of the World Bank; Caio Carvalho, president of the Brazilian Agribusiness Association (Abag); Marcos Jank, senior professor and coordinator of Insper Agro Global; and Julia Dias Leite, president of the Brazilian Center for International Relations (Cebri). The event was promoted by Insper Agro Global in partnership with Cebri and the junior company AgroInsper.

One of the points discussed by the participants was the consequences of a possible victory by Donald Trump in the 2024 US presidential elections. For Christopher Garman, from Eurasia, the repercussions of the Republican candidate's return to the White House would be enormous. Bilateral relations with China would tend to become more tense, given Trump's protectionist positions. Brazil, according to Garman, would not be a priority target of Trump's policy, which would focus more on China, Europe and Mexico (the latter, especially on issues related to immigration). This could open up space for Brazil to expand its share of the agricultural market, as occurred in the first Trump administration, although new geopolitical challenges may now arise.

Marcos Jank of Insper noted that the United States and Brazil have very similar histories in agriculture and agribusiness. Both are world leaders in the commodities market, being the largest producers in several areas. “Brazil will soon surpass the United States in commodity exports, including products such as soybeans and cotton, traditionally associated with the cotton belt and corn belt regions, which now, the way things are going, will be transferred to Mato Grosso,” Jank said. “However, we must recognize that the two countries are competitors. And under the Trump administration, Brazil will not have an easy time.”

Caio Carvalho, from ABAG, drew attention to India’s global emergence. According to him, although India is part of the BRICS and, theoretically, has a friendly relationship with Brazil, this dynamic can be compared to a “bear hug”. “We need to open our eyes. Although India has recently supported Brazil on the issue of ethanol, it is essential to recognize that the Asian country has the second highest level of subsidies in the world, behind only China. This is a new variable that needs to be taken into account”, he stated.

Geopolitical fragmentation

Jank cited multilateral institutions that emerged after World War II. “Neither the UN, nor the WTO, nor even the WHO are functioning as they should. These post-war institutions are in decline, unable to solve current problems. Given this scenario, do the new arrangements that have emerged in recent years, such as BRICS, offer any hope? How can Brazil navigate these new geopolitical arrangements in the post-UN world?” he asked.

Garman noted that his Eurasia chief, political scientist Ian Bremmer, often says that the world has moved from a governance centered on the G-7 countries to the G-20 and now to what he calls the “G-0.” According to Garman, the proliferation of multilateral institutions and forums reflects a deep geopolitical fragmentation, which has been exacerbated by competition between the United States and China. “For countries like Brazil, it is crucial to seek tactical alliances in different areas, such as agriculture and biofuels, and to take advantage of the multiple forums available to their own interests. The geopolitical realignment is offering greater freedom of choice to countries in the global South, and it is essential to use this opportunity strategically.”

Canuto recalled the Doha Round, the multilateral trade negotiations initiated under the auspices of the WTO in Doha, Qatar, in 2001. The goal was to promote the liberalization of international trade and global development, focusing on topics such as agriculture, market access, intellectual property and services. Due to a lack of consensus among the participating countries, however, the Doha Round collapsed in 2015. “This failure was a clear indication of the difficulty in achieving significant results in trade through consensual negotiations. At that time, it became clear that the way forward would be through plurilateral agreements,” said Canuto.

According to the former World Bank director, Brazil is one of the most commercially closed countries in the world, in terms of tariffs and non-tariff barriers. “My colleagues at the World Bank and I have conducted several empirical studies that show this. Basically, Brazil lacks the willingness to integrate, to initiate processes of more substantial adherence to globalization,” said Canuto. “It is a shame that, now, with everything that is happening in the world, this will become an excuse for those who want to keep Brazil closed, with industry disappearing. Agriculture can escape this, but the rest cannot.”

Garman commented on the recent protests by agricultural producers in Europe, who are confronting the results of past policies. “There is a wave of dissatisfaction across Europe, exacerbated not only by the inflationary shock post-pandemic, but also by the energy shock following the Ukraine crisis. The level of popular dissatisfaction is high, and there is a chronic lack of trust in central political institutions. It is crucial to draw attention to this cauldron of dissatisfaction, as it also hinders the ability to open markets,” he noted.

Conflicts in Ukraine and the Middle East

In his analysis of the Ukraine-Russia war and the tensions in the Middle East, Garman said that both geopolitical conflicts present “tail risks” — events that could have far-reaching consequences, although the likelihood of their occurrence is low. In Ukraine, he said, the big concern until last year was that a successful counteroffensive could threaten Russia’s position in Crimea. If Russian President Vladimir Putin felt he could lose Crimea, he could react by dragging NATO into the war, escalating the conflict.

“Today, the risk is different. The military advantage now lies with the Russians, who have neither a shortage of ammunition nor personnel, while the Ukrainians are suffering from shortages of both,” Garman said. “The risk is that a successful Russian counteroffensive would drive [Ukrainian President] Volodymyr Zelensky desperate, leading him to take more dramatic action. This could lead to an escalation of the military crisis that could impact grain production. However, we believe the Russians will not go so far as to cause such disruption to agricultural and fertilizer production.”

The situation of the conflict in the Middle East is also worrying, according to Garman. “There is certainly a risk of escalation. There is a consensus in Israel that security must be guaranteed after the Hamas attack, and there is a political conviction that the attacks on the Gaza Strip will not end any time soon. After that, the focus will turn to the north, to Hezbollah and Lebanon.” Despite the unstable scenario, Garman believes that the main actors involved in the region — Iran, Israel, Saudi Arabia and the United States — have no interest in entering into a larger conflict that could have a more significant impact on the global price of oil.

When closing the debates, Jank recalled that Brazil managed to increase its exports eightfold between 2000 and 2022, going from 20 billion dollars to 167 billion dollars, despite the failure of the Doha Round and the absence of any significant trade bloc or agreement during the period. “The question now is whether the next 20 years will be as favorable as the last 20 years were for Brazil. During this period, we gained great competitiveness and the world market was receptive to our exports. Now, we will face additional challenges that will make the scenario a little more complex,” he said.

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