Why Brazil shouldn’t pick fights with France

. Sep 08, 2019
Why Brazil shouldn't pick fights with France Emmanuel Macron's poster torn by an angry citizen. Photo: Shutterstock

“Merchants don’t pick sides” is a common adage among Brazilian business owners, and a resourceful business strategy in a country that tends to be passionate about everything, from football to politics. Of course, international relations do not reflect the same logic as private companies, but when a country is trying to recover from its worst recession ever, it may be wise for them to choose their battles.

The recent quarrel between President Jair Bolsonaro and his French counterpart, Emmanuel Macron, puts the countries’ relationship at its lowest point in 50 years. What started as international concern towards the Amazon forest fires became an exchange of accusations and insults, with arguments varying from challenges to Brazilian sovereignty to quips about the physical appearance the French first lady, Brigitte Macron. 

As President Bolsonaro and his supporters stated, France’s reaction could have economic motives—namely, protectionism against Brazil’s agricultural products in the light of Mercosur-EU trade agreement. However, data from the Economy Ministry shows that Brazil’s relationship with France goes beyond the deal and has become more and more important. 

Investments are picking up 

In its quarterly Foreign Investment Report for selected countries, the Executive Department of Camex (the Brazilian Chamber of Commerce) shows some surprising statistics: France has surpassed the U.S. and China in foreign direct investments in the second quarter of 2019. 

“In terms of the value of confirmed investments, France was the country that stood out most in the second quarter, with USD 8.6 billion … followed by Italy with USD 4.2 billion, then Japan with USD 2 billion. China and the U.S. provided the smallest values, with USD 213 million and USD 131 million in investments, respectively,” says the bulletin.   

Precisely in this period, the numbers were boosted by the acquisition of the gas pipeline network TAG by the French group Engie and the Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ), but a look at past years’ numbers show that this trend has been going on for a while.

“Between 2010 and 2017, the U.S. and China alternated in the position of biggest investor [in Brazil], considering the sample of the five selected countries. As of 2018, there was a drastic fall in the values of Chinese and North American investments, and the concomitant growth of French and Italian investments,” says the bulletin. 

Trade and employment

When it comes to trade with France, the scales are not so favorable for Brazil. The trade balance between both countries has been negative for Brazil in the past 10 years and the total trade flow in was just over USD 6 billion, though France is Brazil’s 21st biggest customer and 10th biggest supplier. In comparison, the trade flow with China, Brazil’s main trade partner, reached USD 98.9 billion last year, with a surplus of USD 29.2 billion for Brazilians. 

On the other hand, France is the biggest foreign employer in the country, with 890 companies having a minimum share of 10 percent controlled by French capital. 

As we mentioned in our August 28 newsletter, groups such as L’Oréal, Casino, and Carrefour are responsible for 500,000 direct jobs in the country. In an interview with O Globo newspaper, Sandrine Ferdane, president of the France-Brazil Chamber of Commerce, said that France currently invests USD 29 billion in Brazil, more than the roughly USD 20 billion it invests in China—and mostly in long term investments.   

So far, it seems the trend of long term investments is set to continue, in spite of political turmoil. The next French company set to invest more in Brazil is oil giant Total, which has already applied to take part in the October 10 oil auction organized by National Oil Agency (ANP). [/restricted]

Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, she worked as an Editor for Trading News, the information division from the TradersClub investor community.

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at