The US$80 billion man.(Brazil's Luiz Fernando Furlan)(Interview)

Brazilian exports are expected to break records in 2004, which would be good news on top of good news. After hitting a $24 billion trade surplus in 2003, also a record and an 89% increase over the previous year the country's economy is revving up. Behind this positive financial performance is Luiz Fernando Furlan, minister of development, industry and trade under Brazilian President Luiz Inacio Lula da Silva. Furlan spoke with LATIN TRADE Editor Carlos Adese about the economy, free trade and new markets.

The ministry estimates a minimum export increase of 10% in 2004. Are you confident that Brazil will surpass this year's goal of US$80 billion in exports?

I am certain because we are in constant contact with the export sectors and the international climate favors Brazilian exports. In the area of commodities, prices have improved; there is demand for steel, aluminum, grains and meat. We are headed towards a record harvest, and in the mining sector we will have an additional $1 billion with the increase in volume and price. The transportation sector expects an increase this year of up to $2 billion in vehicles and airplanes.

Today Brazil accounts for close to 1% of global trade. What's the formula to reaching a $100 billion annual export goal annually by the end of Lula's term?

Our goal is very simple: stimulate corporations, promote exports, add value, diversify products and markets, and showcase Brazil externally. When you mention that Brazil manufactures high-tech aircraft, many people do not know that. We have automated banking that is on par with the world, and elections are done completely electronically. In the past, these systems were not seen as export products, and we are also investing in the export of services. If compared to emerging countries such as India, China and Russia, [these areas] put us at a fantastic head start.

But countries such as India and China are growing at an annual rate of 8% to 10%. Brazil had negative gross domestic product (GDPI growth in 2003.

That's true, and the biggest challenge is to not lose focus on the areas where we are better. A few years ago, we were better than South Korea and other countries in the Far East, and they moved more quickly.

What are your expectations for the next two years?

We are convinced that our exports will sustain growth of 10% to 15% during the four-year period under the Lula administration. That is why we expect to exceed the $100 billion goal. That represents an average growth in Brazil's GDP of 1.5% annually just with the increase in exports. The biggest challenge today is to revive the domestic market.

How do you reach development goals with one of the highest interest rates on the planet?

That is a matter we face constantly. We took another step ahead with the decrease of 10 percentage points in interest rates in, basically, 12 months. It's still at a high level but, at the same time, it is the lowest interest rate we've had in the past 10 years.

Many took your position on rates to be a criticism of the government's policies.

I wouldn't say it was a criticism but rather a reflection. The things I support I do so within the government's team and not through the media. It's part of my loyalty to President Lula to say what I believe in [and] do what I can to contribute with my experience from the [private] sector.

President Lula recently asked Brazilian executives for less whining and more exports. Are their complaints reasonable?

With regard to interest rates, their claims are reasonable. Improvement of logistics and a reduction of bureaucracy are reasonable. The majority of the private sector's criticisms are well received by the government since they are consistent with what we all want.

What can be done to reduce international investors' worries?

Keeping a permanent dialogue with investors, having clear and consistent rules, and presenting opportunities. Every day I meet foreign investors, and my perception is that they leave our meetings more motivated.

It's no secret that you're one of Lula's favorite ministers. Is there any chance you would run for political office in the future?

It's not in my plans. I opted to leave my original business track and dedicate four years to a project that I believe is the construction of a new Brazil. That choice, which I am calling a sabbatical after nearly 40 years in the private sector, I am dedicating to a completely different end. And I hope, after these four years, to return to the private sector. I am doing this because I believe in it.

Do you think it is still possible to establish the Free Trade Area of the Americas (FTAA)?

Yes, and I believe that the FTAA is a strategic project. It's just a matter of finding the right climate, and that could take longer than expected.

At the beginning of the year, you were a bit irritated with Argentina's decision to impose restrictions on the import of Brazilian textile products in the country.

We encouraged the private sector to enter into dialogue and, during negotiations, the Argentine government adopted a U.S.-style, coercive measure, which it never applied: "If you do not behave, we have the consequences ready here." Now the matter is resolved because the textile sectors on both sides reached an agreement, but those are methods that I would not use.

Is it necessary to compromise to reach an agreement, and on what points would Brazil yield?

Brazil has room to improve its playing field in many areas, but the expectations were always with regard to the biggest partner, which automatically is the biggest beneficiary. The one that holds 79% [of the market] will naturally have the biggest portion of the results.

So the United States, having the largest share, should get more?

It's not really getting more, but they must take the initiative in creating compromise. For years I have said that if I were in the position of the U.S. government, I would be waving carrots and not sticks. Many times, carrots are left for later. But more than 400 companies of the Fortune 500 are here, so we are already integrated in the private sector and [they] already benefit from the Brazilian market.

How can the impasse in the agricultural sector be resolved?

The impasse in this sector should be resolved through a positive agenda that includes other areas beyond those where there are traditionally complaints. Like in the case of ethanol: Today there is a vigorous movement in the United States to improve the environment and many countries in South America could contribute if there were a more flexible position with regard to access to this market.

Within that tug-of-war, do you fear Brazil risks being isolated in Mercosur while other countries create partnerships with the United States?

I think we cannot ignore that risk, but the reality is that the largest market in South America is Brazil and, consequently, Mercosur. At the same time, Brazil has more alternatives than just the FTAA. In the same way that the United States is signing bilateral accords, Mercosur is making moves with regard to Andean countries, South Africa, India, Europe, etc. Today, the U.S. market represents less than 25% of our trade.

So are India, China, South Africa and Russia big bets for Brazil's future?

They are good bets because they are emerging markets and the rate at which our relationships grow could be greater. We are talking about growth in 2003 with China at more than 70% and with the United States we grew at a moderate rate of 7% to 8%. Brazil is a country with diversified trade, but we know that there are a large number of unexplored and latent opportunities with the United States, and many of them depend on a little push from the governments and corporations of the United States and Brazil.

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