Skip to main content

Private jets are seen at the Embraer headquarters in Sao Jose dos Campos, Brazil.

NACHO DOCE/REUTERS

Feuds between Canada and Brazil about jets and beef may be over.

But Canada's aspirations of forging deeper economic ties with the emerging South American powerhouse remain largely unrealized, and may be further out of reach in the wake of allegations that Canada's electronics surveillance agency has been spying on Brazil's Ministry of Mines and Energy. Denouncing what they branded "industrial espionage," Brazilian officials said they would closely scrutinize the activities of Canadian mining companies and other investors in Brazil.

Canada, which is eager to diversify its trade beyond the U.S., has targeted Brazil as the "nexus" of its strategy for deepening ties in Latin America.

Story continues below advertisement

And yet Canada lags the United States and most Group of Eight countries in expanding trade to emerging markets, including the so-called BRIC countries – Brazil, Russia, Indian and China. Canada does as much trade with the United States in about three days as it does in a year with Brazil, the world's sixth-largest economy.

"Trade has been growing, but it hasn't been growing at rates that some people had hoped," acknowledged Carlo Dade, director for the Centre for Trade and Investment Policy at the Canada West Foundation. "Brazil has other interests and other markets. We have other interests, other markets."

Canada and Brazil are not joined in a free-trade deal. And a plan to create a Canada-Brazil CEO council – a means of fostering closer economic ties – has so far failed to get off the ground.

Part of the problem is that Canada and Brazil are economic rivals in several key export industries, including agriculture, energy, mining and aerospace.

"Brazil sees no reason for a having a free-trade deal with Canada," Mr. Dade said. "They are having no trouble investing here and the market is not that big. We would like to see [a free-trade agreement], but they have other priorities."

Canadian mining companies active in Brazil include Yamana Gold Inc., Kinross Gold Corp., Luna Gold Corp., Aura Minerals and Eldorado Gold Corp.

In 2012, Canadian exports to Brazil totalled $2.5-billion, or roughly what they were in 2008. Brazil's exports to Canada reached $3.9-billion last year, up from $2.6-billion in 2008.

Story continues below advertisement

The two-way trade figures likely understate the true volumes because many products are trans-shipped through third countries, pointed out Dan Ciuriak, former deputy chief economist at the Department Foreign Affairs and International Trade.

Brazil also has an edge in foreign direct investment, with $15.8-billion invested in Canada, highlighted by Vale Ltd.'s 2006 purchase of Inco. Vale took some heat in 2009 for breaking its commitment not to lay off workers for at least three years. Canadian companies have $9.8-billion worth of investments in Brazil.

Brazil has embraced a "Greater Brazil" model of industrial development to accelerate economic growth and fill gaps where the private sector isn't yet active. "They are more willing to use private sector industry and businesses as a tool for national ends than we are in Canada," Mr. Dade said. "That causes some friction."

Mr. Ciuriak said Brazil's industrial policies are largely outward rather than inward-looking. "It's not old industry protectionism, but it is interventionist." Brazil, he said, can't afford to be overly protectionist because it needs to import so many of the components used by its nascent industries, such as aerospace.

Brazil and Canada were locked in a bitter decade-long trade dispute at the World Trade Organization over subsidies to Embraer and Bombardier Inc., as both companies were breaking into the regional jet market in the 1990s.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter