How would Brazil act if a U.S.-Iran conflict breaks out?

U.S.-Iran conflict Quds Day rally, Parade of military forces. Photo: Saeediex/Shutterstock

Good morning and happy New Year! Our newsletter services resume today in 2020! This week, we look at the possible ripple effects of tensions between the U.S. and Iran in Brazil. Plus, the main stories that happened during the holiday season. (This newsletter is for premium and standard subscribers only. Become one now!)


What happens to Brazil as tensions between the U.S. and Iran rise?

On Thursday, U.S. President Donald Trump ordered the military to assassinate Qassim Suleimani,

who was considered to be Iran&#8217;s second-most important leader. Mr. Suleimani answered directly to Iran&#8217;s Supreme Leader Ayatollah Ali Khamenei, and his death is a direct blow to the heart of the Iranian regime. Retaliation is expected, and tensions grew higher as Iran announced it would no longer abide by any limits on its enrichment of uranium, according to Iranian state TV.</p> <p>Iraqi lawmakers voted 170-0 on Sunday in favor of expelling American troops from their country. The move is a strategic victory for Tehran. According to the <a href="https://www.nytimes.com/2020/01/06/world/middleeast/iran-suleimani-trump.html#link-11b121b0"><em>New York Times</em></a>, &#8220;the attack was viewed in Iraq as a violation of the nation’s sovereignty, and the country’s Foreign Ministry said on Sunday that it had summoned the American ambassador in Baghdad.&#8221;</p> <p><strong>Who was Qassim Suleimani? </strong>Mr. Suleimani was the head of the Quds Force, the special operations branch of the Iranian Revolutionary Guard, and he commanded numerous extraterritorial operations against U.S. forces (as well as against U.S. allies) in the Middle East. He—and Iran-backed militia groups in Iraq—was blamed for recent attacks on the U.S. Embassy in Baghdad. While Mr. Trump is already being accused of &#8220;wagging the dog&#8221; to divert attention from his impeachment process, killing Mr. Suleimani was Mr. Trump essentially drawing a red line, as Eurasia Group&#8217;s Ian Bremmer puts it.</p> <p><strong>Impacts on Brazil.</strong> The first, most-obvious impact of tensions in the Middle East for Brazil is a hike in oil prices. Futures for Brent crude, the global benchmark, gained 2.4 percent to reach BRL 70.24 per barrel. It is the first time prices hit that amount in over six months.&nbsp;</p> <p>After meeting with Petrobras CEO Roberto Castello Branco, President Jair Bolsonaro said the government expects oil to get five percent more expensive in the coming days. Mr. Bolsonaro is already taking some political heat from the far-right, as he didn&#8217;t veto some &#8220;pro-defendant&#8221; provisions in a newly sanctioned piece of anti-crime legislation (more below) nor the BRL 2 billion public campaign fund for the 2020 elections. An oil spike is the last thing he needs. Even if the government has no fault in it, a spike in fuel prices could cost him popularity.</p> <p>The crisis in the Middle East also enhances risks for the global economy—and a country such as Brazil is particularly vulnerable to such shocks.</p> <h4>In the case of a conflict opposing the U.S. and Iran, how would Brazil position itself?</h4> <p>Richard N. Haass, president of the Council of Foreign Relations, alerted that &#8220;any war with Iran will not look like the 1990 Gulf War or the 2003 Iraq Wars.&#8221; He continues: &#8220;It will be fought throughout the region with a wide range of tools versus a wide range of civilian, economic, and military targets. The region (and possibly the world) will be the battlefield.&#8221;</p> <p>On Twitter, political scientist Guilherme Casarões, a professor at think tank Fundação Getulio Vargas, pondered how Brazil would position itself in the case of a U.S.-Iran armed conflict. Here are his main takes:</p> <p><strong>History.</strong> Finding peaceful solutions to conflicts and respecting international law have historically been the pillars of Brazil&#8217;s foreign policy. As a general rule, Brazil has opposed armed actions, except in cases of self-defense or when approved by multilateral bodies. With the exception of both World Wars, Brazil has not been a part of armed conflicts since it became a republic. It has, however, had an important role in <a href="https://brazilian.report/power/2019/11/25/brazil-involvement-un-peacekeeping-efforts-numbers/">providing peacekeeping forces to the United Nations</a>.</p> <p>Even back when Brazil had umbilical relations with the U.S. comparable to what we see today, these guidelines were respected. In 1950, the country was called upon to send troops to the Korean War. In 1965, the U.S. wanted Brazil to head an intervention in the Dominican Republic (then-President Castello Branco would send 1,200 troops only after the Organization of American States approved the still-controversial move). And in the early 1990s, Brazil was asked to send troops to the Gulf War. Brazil said no, while even Argentina sent two military ships to the region.</p> <p><strong>Brazil-Iran relations.</strong> Brazil has upheld diplomatic and trade relations with Iran since 1903, gaining steam in the 1990s. The Islamic republic was a sizeable provider of oil to the country, and, in 1992, Brazil even pondered selling nuclear reactors to Tehran. In 2010, former President Lula brokered a nuclear deal with Iran, which was not accepted by the U.S.</p> <p>Today, Iran is the biggest destination of Brazilian corn and the fifth-most important importer of beef and soybeans.&nbsp;</p> <p>Jair Bolsonaro, however, has defended total alignment with the U.S., and accepted an American request to host a conference on peace in the Middle East, which observers have called an &#8220;anti-Iran event.&#8221; Recently given <a href="https://brazilian.report/power/2019/11/08/brazil-endorses-cuba-embargo-cozying-up-us-donald-trump/">Major Non-NATO Ally status</a> by the Trump White House, Brazil is expected to be a loyal partner when it comes to China, Venezuela, and, consequently, Iran.</p> <p>Keeping Iran at arm&#8217;s length has had a practical positive effect for Mr. Bolsonaro, lowering tensions with countries such as Saudi Arabia—Iran&#8217;s nemesis in the Middle East—which had grown weary of Mr. Bolsonaro&#8217;s promises to move Brazil&#8217;s embassy in Israel to Jerusalem.</p> <p><strong>What will Brazil do? </strong>If a U.S.-Iran conflict were to become a reality, Mr. Bolsonaro will be faced with the same conundrum as some of his predecessors: what is more important, being friends with the U.S., or respecting Brazil&#8217;s diplomatic traditions? Mr. Bolsonaro seems to be more inclined to the former.</p> <p>But in fairness, this is anything but a simple choice. The presidents who resisted the U.S. suffered retaliation from Washington D.C. In the 1950s, former U.S. President Dwight Eisenhower postponed important loans to Brazil. In the 1990s, George H. W. Bush hard-balled Brazil in areas such as patents and IT.</p> <hr class="wp-block-separator"/> <h2>What you might have missed during the holidays</h2> <p><strong>Terrorist act 1. </strong>On Christmas Eve, the headquarters of edgy comedy group Porta dos Fundos was targeted by an attack using Molotov cocktails. The act was reportedly motivated by the group&#8217;s Netflix Christmas special, &#8220;The First Temptation of Christ,&#8221; in which Jesus is portrayed as a gay man. The attack was claimed by a group linked to the Brazilian Integralist Front (FIB)—a modern-day offshoot of the 1930s fascist group the Brazilian Integralist Action.&nbsp;</p> <p><strong>Terrorist act 2. </strong>Businessman Eduardo Fauzi has been identified as one of the suspects. He is the president of FIB&#8217;s Rio de Janeiro chapter and was a high-profile leader of the massive 2013 street protests. Mr. Fauzi is considered a fugitive and is believed to be in Russia. The FIB expelled the suspect from its ranks, creating internal divisions between those who support the move and those who defend Mr. Fauzi. Members of Porta dos Fundos say President Bolsonaro&#8217;s aggressive rhetoric is to blame, remembering that other Christmas specials—which also infuriated religious groups—hadn&#8217;t motivated violent acts.</p> <p><strong>Anti-crime bill.</strong> Right after Christmas, President Bolsonaro signed Justice Minister Sergio Moro&#8217;s so-called &#8220;anti-crime bill&#8221; into law. Though making 25 vetoes, the president kept most of what had been approved by Congress, including the creation of the figure of the &#8220;guarantees judge,&#8221; which will be responsible for &#8220;assuring the legality of criminal investigations and the respect of individual rights.&#8221; It remains unclear exactly how this new member of the court will be incorporated into Brazil&#8217;s legal system. Among Mr. Bolsonaro&#8217;s most notable vetoes is the article dealing with homicide with restricted-use weapons and that which increased penalties for cybercrimes.</p> <p><strong>Christmas sales: good or bad?</strong> The performance of the retail sector during the holiday season has been contested. On one side, an association of shopping center merchants has said sales went up 9.5 percent compared to Christmas 2018, and 7.5 percent over the entire year. But another association of retailers had a different view, saying that 70 percent of stores were unable to improve their numbers in 2019. The matter could end up in court. Today, FX Retail Analytics, specialized in monitoring the retail sector, published numbers that should fuel the dispute, pointing out a 1.5-percent drop in shopping mall attendances in December 2019, compared to the previous year.</p> <p><strong>Violence.</strong> Brazilians seem to be changing the way they see the war on crime, as 57 percent of people believe the government should invest in social programs to curb violence rates, according to pollster Datafolha. The trend is observed even among voters of President Jair Bolsonaro, who defends outmatching the violence displayed by criminals. The poll also shows that 72 percent of Brazilians are afraid of walking on the street after dark.</p> <p><strong>Venezuela 1.</strong> The Venezuelan government has formally requested the extradition of five former members of the country&#8217;s Armed Forces who are currently in Brazil. They are considered suspects of a December attack on a military outpost in southern Venezuela. On December 29, the Brazilian government said it was processing asylum requests of five Venezuelan soldiers who deserted.</p> <p><strong>Venezuela 2.</strong> The country&#8217;s authoritarian president Nicolás Maduro announced ally Luis Parra as the new President of the Venezuelan National Assembly. The opposition, led by Juan Guaidó—who last year unsuccessfully proclaimed himself the legitimate Venezuelan president—is claiming a parliamentary coup. He claims the vote didn&#8217;t have a sufficient quorum to go ahead, as congresspeople not aligned to Mr. Maduro weren&#8217;t allowed to vote.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>The best investment option in 2019 was the Ibovespa. The benchmark index of the São Paulo stock market went from around 91,000 points to close the year at over 115,000 points—a hike of 31 percent. Two things explain this success: lower benchmark interest rates, and the slow recovery of the Brazilian economy. In 2019, the Ibovespa had its best year since 2016, and brought more returns than gold (28 percent) or savings accounts (4 percent).</p> <hr class="wp-block-separator"/> <h2>Misinformation rankings</h2> <p>As a reflection of political polarization, President Jair Bolsonaro and former President Luiz Inácio Lula da Silva were the top two public figures cited in misinformation pieces exposed by fact-checking agency Aos Fatos (a partner organization of <strong>The Brazilian Report</strong>) in partnership with Facebook.&nbsp;</p> <div class="flourish-embed" data-src="visualisation/1192432"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p>

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