The Winners – How are the current foreign trade policies between Brazil and Egypt?
Ruy Pacheco de Azevedo Amaral – The relations between Brazil and Egypt are longstanding and date back to D. Pedro II’s visits to Egypt in 1871 and 1876. At that time, the first Brazilian consulates in Egypt were opened, the Brazilian church in Alexandria (“Egreja São Pedro”) was built, and the “Fondations Brésiliennes de Bienfaisance en Orient” were established. The latter are maintained to this day by the Debbane Foundation, whose president was recently decorated by the Brazilian Government with the Order of Rio Branco. Although the Brazilian diplomatic representation in Cairo has been opened since 1924, our trade relations have only gained prominence in the last 20 years. Egypt is currently an important trade partner for Brazil and the main destination of our exports to Africa, comprising 26% of all our sales to the continent. It was also the main destination of our exports to the Arab world last year, surpassing Saudi Arabia, which had has been, for several years, the main Arab importer of Brazilian products. Our exports to Egypt amounted to US$ 2.4 billion in 2017 and US$ 2.134 billion in 2018, generating a US$ 1.86 billion surplus for Brazil. Even though our total sales
decreased 11.74% last year, due to a decrease in sugar and corn exports, it is worth noticing that our exports, which were traditionally concentrated in commodities such as beef, poultry, sugar and corn, have now been diversified.
Manufactured products, previously irrelevant to our exports basket, grew to represent 13% of our exports in 2018. That is certainly a consequence of the Mercosur-Egypt Free Trade Agreement, signed in 2010, and in force since the end of 2017. This agreement includes gradual tax deductions in different categories. Currently nearly 30% of products produced in both regions are tax-free and by 2027, it is expected that 99% of the trade agenda between Egypt and Mercosur will be tax exempt. It is an ambitious agreement that also foresees the possibility of future agreements for access to services and investments. Brazilian investments in Egypt, which did not exist at the start of this millennium, have significantly
increased over the last years. In 2008, Marco Polo and the Egyptian group Ghabbour settled a joint venture to establish a factory in Egypt, with a production capacity of 3,000 buses a year. InterCement, part of Camargo Correa Group, acquired CIMPOR – Cement of Portugal – and took over Amreya Cement Co, a cement company located in Borg El Arab, 70 km east of Alexandria. The company has a production capacity of 5 million tons a year and supplies around 6% of the local demand. This investment represents more than half a billion dollars in assets. On the Egyptian side, it is worth mentioning the Elsewedy Group’s investments in Brazil. Founded in 1938, Elsewedy is one of the most important industrial conglomerates of Egypt and Africa.
TW – Describe the Egyptian trade relations worldwide, including imports and exports and its the strategic business partners.
RPAA – In 2017 and 2018, Egypt exported mainly to the European Union (35% of total amount); Arabcountries (23.3%) and Asian countries (10.3%), mainly China and India. The leading exporters to Egypt are: China – 8.6% of total (US$5.406 billion); Saudi Arabia – 5.7%; United Arab Emirates – 5.2%; Russia – 5%; the United States and Germany – 4.7% each. Brazil is the 10th on the list of exporters to Egypt, with 2.8% of total amount (US$ 2.1 billion). Egypt is in trade deficit with most of its partners, which is partly offset by services such as tourism, which experienced a steady growth in 2017 and 2018, revenues from the Suez Canal and the remittances from the Egyptian diaspora (9.4 million Egyptians live abroad). The Egyptian government has implemented a strategy to incentive exports, which was facilitated by the free floating of the Egyptian pound in 2016. In 2017 and 2018, Egyptian exports increased by 19%, reaching US$
25.8 billion, whereas imports increased 6.94%, reaching US$ 63.1 billion. Although still high, the trade deficit has decreased, having stabilized at US$ 37.3 billion.
TW – In your life story, which countries/cities were you posted as a diplomat before Egypt?
RPAA – As a Brazilian diplomat, I served in Lisbon (1991-1994), Mexico (1994-1998), Paris (2004-2008) and London (2008-2010). Between 2011 and 2015, I lived in Madrid as the Deputy-Secretary-General of the Organization of Iberia American States, for which I was elected in September 2010. Since February 2015, I am the Ambassador of Brazil to the Arab Republic of Egypt and the State of Eritrea.
TW – What would be highlighted among all the meaningful experiences you have had in your career?
RPAA – The diplomatic career has provided me with extraordinary opportunities, both in Brazil and abroad. In Brazil, I highlight the period from 1998 to 2004, when I worked as International Advisor of the President of the Foreign Affairs Committee and the President of the Senate, Senator José Sarney. As for abroad, I highlight the years I worked in Lisbon (1991-1994), when the Community of Portuguese Speaking Countries was being conceived, as well as my experience in Paris (2004-2008) as the head of the Cultural Section at the Embassy, during which the largest project of cultural promotion undertaken by Brazil: “2005, the Year of Brazil in France”, was planned and implemented. The diplomatic career has also reserved me very hard, but also rewarding, tasks, like the one in Beqaa Valley, Lebanon, in 2006, during the Israeli bombing attacks. At that time, I was in charge of coordinating a complex humanitarian operation set by the Brazilian government to withdraw the Brazilian citizens who wished to leave the region safely.
TW – During your assignment, could you highlight facts and peculiarities inherent to Egypt, as well as what has impressed you the most about the country?
RPAA – Egypt is a very impressive country in all aspects, especially due to its ancient history and culture. The Egyptian historical heritage – Pharaonic, Coptic and Arab – is fabulous and remains exceptionally well preserved. For instance, the second most important Christian library in the world, after the Vatican’s, is located in Sinai at the Saint Catherine’s Monastery. Nevertheless, during my time here, I have been particularly impressed by the resolve to implement economic reforms carried out by the Egyptian government since 2016, in the framework of the agreements reached with the International Monetary Fund (IMF) and the World Bank Group (WB). These include: the implementation of VAT – Value Added Tax; (b) a new law for the public service aiming to increase its efficiency and decrease the its gargantuan size (7 million employees), with a payroll that represented 26% of the public budget ( to 19% nowadays); (c) the gradual cut of subsidies to energy, from 6% to 2% of the GDP currently, and to be totally eliminated soon; and (d) the implementation
of a free floating system for the Egyptian pound that, despite causing a sharp devaluation, was successful in eradicating the black market. The results are extremely positive considering the Egyptian macroeconomic figures. The IMF and the World Bank have frequently mentioned Egypt as a case of success. According to the IMF, the economy, which had grown by 5.3% in the last fiscal year, is expected to grow 5.6% in the current fiscal year that ends on June 30. It represents
the highest growth rate in the Arab World. The reserves, which amounted to between US$ 15 and 16 billion in 2016, are now at US$ 44 billion. Inflation has decreased from 33% in March 2017 to 13.8% in March 2019, and the unemployment rate dropped from 12.2% to 8.9%. The external accounts have improved substantially. Foreign debt has increased, but still remains at comfortable levels: around 36.1% of the GDP. The current accounts deficit, which was US$ 12.4 billion in the 2016/2017 fiscal year, dropped to US$ 5.2 billion last year. Even though there are still many challenges to overcome, the process the country has gone through to recover from the deep economic crisis that marked the revolutionary period (from 2011 to 2013) and the following years, has also been an impressive demonstration of resilience.
TW – In terms of business, could you identify the main areas of interest for trade relations between Arabs and Brazilians?
RPAA – The Brazilian exports to Egypt are still concentrated in commodities, especially food products. Although Brazil is still the main sugar cane supplier to Egypt, our exports of this product decreased by 59% in 2018 in comparison to 2017, when sugar was at the top of our exports list (US$561.3 million). The decrease was due not only to a good harvest in Egypt but also to the drop in sugar prices in the international market. In this very period, there was a 31% decrease in corn imports from Brazil. Egypt is still the third market for Brazilian beef worldwide (representing around 10% of total amount), following Hong Kong and China. In 2018, the iron ore exports superseded important agricultural products, with an increase of 74.3% (US$ 443.78 million), becoming the second item in our exports list (21% of total amount). The Brazilian exports of iron and steel tubes experienced a 800% growth, representing 5.8%. On the Egyptian side, fertilizers still represent the first item exported by Egypt to Brazil (72% of total amount). The trade is still unbalanced, with high and successive surpluses in favor of Brazil. Yet Egyptian exports to Brazil have experienced a significant growth: 64.7% in 2017, 73% in 2018 and 100% in the first four months of 2019, when compared to the previous year. Egyptian exporters
have been able to find specific market niches, knowing how to take better advantage. Egypt is now the second most important olive supplier to Brazil. The Brazilian Embassy in Cairo has a Trade Section led by a competent and diligent diplomat, Secretary Fernanda Mansur Tansini (firstname.lastname@example.org), assisted by two Egyptian staff: Ms. Maria Adel Fekry and Mr. Ayman Abdel Wahed. Since December 2018, the Embassy also has an Attaché for Agricultural Affairs,
Mr. Cesar Simas Telles (email@example.com). They are available to Brazilian and Egyptian business communities and are enthusiastic about promoting bilateral trade relations.
TW – Which are the prospects for trade relations between Brazil and Egypt in the next years?
RPAA – The prospects are very positive as the Mercosur-Egypt Free Trade Agreement tax reductions progress and awareness of its trade facilities grows among the exporters of both regions. The Egyptian government has made efforts to increase foreign investment in the country, including the opportunities that emerge with the great infrastructure projects in Egypt. Egypt has enabled a significant capital inflow, especially after the passing of the new Law for Investments in 2017, that cut red-tape and brought forth incentives, tax-exemptions and guarantees to the investors. As a result, foreign and domestic investment rose by 47% (2017/2018) and Foreign Direct Investment (FDI) increased by 15%. In 2017, Egypt was the main FDI recipient in Africa, with US$ 9.5 billion. I understand that, in the years to come, Brazil will be able to maintain its important trade relations with Egypt, as well as to identify comparative advantages to reach more diversified partnerships with the Egyptians.