Government - Brazil and Switzerland

Swiss-Brazilian economic relations: potential and challenges

Over the past months, it has become clear that Brazil will be a major global player in the future. The country has shown that it can achieve the economic potential that has been attributed to it for so long. This process started well before the spectacular discovery of deep-sea oil (pre-salt) off the coast of Rio de Janeiro state. Since the beginning of the new millennium, a rigorous macro-economic policy has led to a sound fiscal and monetary situation and relatively high GDP growth rates. Accordingly, Brazil has succeeded in pulling through the most severe financial and international economic crisis of the last decades relatively unscathed; though other factors such as the limited international exposure of Brazil's banks or its sustained domestic consumption also helped to attenuate the effects of the global downturn. Brazil's ability to withstand the crisis prompted the last of the three major rating agencies to award it the much sought after "investment grade" rating.

In multilateral institutions, Brazil has also been taking a more determined stance for some time. As G20 leader, it has played an important role in the WTO's Doha negotiating round, for instance. Over the next few years, moreover, Brazil will be under the world's public spotlights on two occasions as host of the 2014 World Cup and of the 2016 Rio de Janeiro Olympics. The investments in infrastructure related to these events will further contribute to the economy's competitiveness.

The Swiss economy was able to benefit from the good performance of its most important trading partner in Latin America. From 2000 through 2008, our bilateral trade with Brazil increased by approximately 60% and our exports to Brazil almost doubled. Switzerland's direct investments in Brazil rose even faster to reach almost CHF 35 billion (2007), accounting for a remarkable 4.7% of all Swiss FDI. Swiss firms directly employ 105,655 persons in Brazil. Many of our companies have been doing business in Brazil for decades, and Brazilian people see them as local rather than foreign firms. Although Brazil's direct investment in Switzerland is still at a low level, we are confident that an increasing number of Brazilian companies will discover the advantages of being based in Switzerland in the future. In October 2009, for example, Brazil's Vale opened a new business center employing over 80 persons in St-Prex, near Lake Geneva.

In recent years, the Swiss-Brazilian Chamber of Commerce (Swisscam) and its member companies have also contributed significantly to the success of our bilateral economic relations and deserve special recognition. In addition, Switzerland has a Swiss Business Hub in Sao Paulo - the only one in the Americas except for Chicago - providing effective assistance for small and medium-sized Swiss companies aiming to enter the Brazilian market.

We are convinced that the potential of this 190 million people market with its growing middle class has not yet been exhausted. Therefore, in December 2006, the Swiss Federal Council adopted a specific foreign economic strategy for Brazil. Its purpose is to facilitate market access for Swiss products and services and improve the legal framework for Swiss companies investing in Brazil. The main interests on the Swiss side are the conclusion of bilateral agreements in the areas of investment protection and avoidance of double taxation, and in the longer run, initiating negotiations for a free trade agreement between EFTA and MERCOSUR.

Three years after the adoption of this strategy for Brazil, we have seen progress in several ways. One of the highlights was the creation of a bilateral Joint Commission on Trade and Economic Relations, which met twice since being officially launched by Swiss Federal Councilor Doris Leuthard and Brazilian Foreign Minister Celso Amorim, in October 2007. In the framework of this commission, representatives from different companies and trade associations had an opportunity to take up specific issues with the competent authorities. Accordingly, it was possible to discuss problems such as intellectual property and technical barriers to trade. In addition, a bilateral agreement on scientific and technological cooperation was signed in September this year.

We are aware that an emerging market like Brazil will continue to raise major issues for our companies. Yet, for an open and export-oriented economy like Switzerland, it is important to tackle these challenges in order to fully benefit from the opportunities of the Brazilian market. The effective implementation of the economic strategy for Brazil will assist Swiss business in this endeavour.