CAIRO: Minister of Trade and Industry Rachid Mohamed Rachid announced the mutual determination to establish a free trade agreement (FTA) between Egypt and the countries of South America’s Mercosur bloc: Brazil, Argentina, Uruguay and Paraguay.
The minister said during a press conference, “We expect to reach an agreement and sign the free trade agreement at the start of July … to start a new page in relations between Egypt and Brazil and the Mercosur countries.
Also in attendance was Brazil s Minister of Development, Industry and Foreign Trade Miguel Jorge, one of the key figures responsible for partnering with Rachid to advocate for an agreement.
In August 2008, as the extent of the global financial crisis began to reveal itself, Rachid made his first bilateral trip to Brazil. Since that time, the BRIC countries (Brazil, Russia, India and China), have emerged as some of the world’s most attractive trading partners, while the US and Europe, previously responsible for 85 percent of Egypt’s trade volume, now constitute only 64 percent.
Rachid has named Latin America as a prioritized target for increased trade in the coming years. “Latin America is one of the main priority markets for Egypt in the upcoming phase of economic development because there are several sectors in both trade and industry that could be lucrative for companies on both sides to get involved in.
Prior to the economic crisis and the subsequent reshuffling of global trade flows, Latin America remained too distant for profitable trade. Although Egypt’s shipping costs remain relatively high – prompting the government’s emphasis on infrastructural development – the increasingly competitive global trade environment necessitates the establishment of new economic alliances.
The FTA with Mercosur would be Egypt’s first with any entity in the Western hemisphere. If the agreement does materialize in July, it would be Mercosur’s first with an Arab country, although the bloc is currently in negotiations with the GCC and Jordan.
While Asia, namely the powerhouses of China and India, remains Egypt’s most promising arena for increasing trade, the relationship with Brazil receives attention, given Egypt’s desire to emulate that country’s model of economic success.
In addition Minister Jorge has a particular interest in establishing an FTA as Egypt imported $1.53 billion in Brazilian products last year. Egyptian exports to Brazil only amounted to $87.7 million for the same period.
The president of the Arab Brazilian Chamber of Commerce, Salim Taufic Schahin, reassured Egyptian businesspeople that, You cannot maintain a trade surplus for a long period of time. However he asserts that Egyptian producers must behave proactively to promote their products in Brazil, telling them to “go to Brazil more and look into the opportunities.
Schahin is accompanying the mission of Minster Jorge across the Middle East, which includes upcoming visits to Iran and Jordan.
Cotton, fertilizer and inorganic chemicals top the list of Egypt’s primary exports to Brazil, while Brazil’s famous meat represents the most popular import to Egypt. Aircraft parts, precious metals, tobacco and various agricultural products constitute the rest of Brazil’s large trade imbalance.
Brazilian investors flush with cash may find Egypt more enticing for investment than Egypt as a source of commodities. The General Authority for Investment (GAFI), was represented at the meeting between the Brazilian delegation and Egyptian officials.
Although cumulative Brazilian investments in Egypt since 1970 add up to only LE 21 million, or approximately $3.8 million, this number is expected to grow as the trade relationship strengthens.
Based on the complications inherent to a multilateral FTA, the negotiations with Argentina, Uruguay and Paraguay have taken time. But the presence of a large Arab community in South America will likely facilitate a swift deal.
In Brazil, Middle Eastern immigrants in the 1800’s quickly established themselves as successful businesspeople and Arabs now make up about 7 percent of the population.