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Mixing tequila and caipirinha : If only Latin America’s two giants co-operated more


Jun 6th 2015 | From the print edition

YOU can tell that a relationship is dire when one of the parties trumpets that it is being “reinvented” while the other urges that the couple shouldn’t “turn their backs on each other”

The first declaration came from Enrique Peña Nieto, Mexico’s president. 

The second was made by Dilma Rousseff, his Brazilian counterpart, who was paying her first state visit to Mexico on May 25th-27th. 

The two promised a new start. They pledged to boost trade and signed agreements to facilitate investment and expand air links. And they toasted each other with Mexican tequila and Brazilian cachaça, the cane liquor used in caipirinhas.

Brazil and Mexico are the two giants of Latin America. 

Between them they account for more than half of the region’s population, GDP and exports. And yet they have largely ignored each other. True, bilateral trade has doubled over the past ten years, but only to $9.2 billion a year; neither is among the other’s top seven trading partners. 

When in 2012 Brazil found itself with a negative trade balance in cars under a free-trade pact, it tore this up and replaced it with a quota system.

Investment is an exception to the general coolness. 

Brazil is now second only to the United States as a destination for Mexican foreign investment. “There’s no big Mexican firm that isn’t in Brazil,” says José Antonio Meade, Mexico’s foreign minister. 

Mexico’s investment of $23 billion dwarfs Brazilian investment in Mexico (of $2 billion), though that is now growing.

The presidents agreed to start talks in July on revamping their modest (non-car) trade agreement. The plan is to increase from 800 to 6,000 the number of items covered by the accord, broadening it to agriculture, services and government procurement. Ms Rousseff said she hopes bilateral trade will double again by 2025.

It is easy to be cynical about the visit. Both presidents head unpopular governments wounded by scandal.

 Some of their predecessors made similar promises of a new closeness that proved empty. 

In practice their countries often act as adversaries. Both fielded candidates to lead the World Trade Organisation (Brazil won). Brazil failed to back a strong Mexican for the top job at the IMF. 

They do not coordinate at the G20 group of leading powers; nor on climate change, about which both worry.

All this is because more has divided the two countries than united them. They are separated by language and distance (a non-stop flight between Mexico City and São Paulo takes almost ten hours). 

Above all, they have different views of the world and their places in it.

By joining the North American Free-Trade Agreement with the United States and Canada, which took effect in 1994, Mexico accepted that its economic destiny lies mainly to the north, not the south. It has embraced free markets and globalisation. It paid little attention to South America, at least until it joined Chile, Colombia and Peru in the free-trading Pacific Alliance in 2012. 

In international politics, Mexico remains a timid power: Brazil has almost three times as many diplomats.

Brazil has spent the past 20 years trying to build a South American bloc whose core is Mercosur, a protectionist would-be customs union. 

Its economic instincts are dirigiste and its foreign policy prizes “autonomy” (meaning from the United States). 

Recently, it has made the BRIC grouping that joins it with Russia, India and China a priority. “It’s part of Brazil’s foreign policy to exercise leadership in Latin America by exorcising Mexico because of its ties to the United States,” says Andrés Rozental of the Mexican Council on Foreign Relations, a think-tank.

But Ms Rousseff, grappling with a recession, faces demands from Brazilian business to seek new markets. She has quietly put more stress on increasing trade. In response to the Pacific Alliance, she is seeking to speed up agreements under which Brazil’s trade with Peru and Colombia will become tariff-free (it already is with Chile). She is due to visit Washington this month in an effort to improve fractious relations and talk business with the United States.

She spoke of a new “tequila-caipirinha axis” between Brazil and Mexico. 

Latin America would benefit were this to come into being, and not just economically. 

If its two big powers worked together, the region would be closer to co-operating on such problems as the flouting of democratic norms in Venezuela.

Yet Ms Rousseff’s overture to Mexico looks to be part of a tactical shift, not a fundamental change, in foreign policy. And Mr Peña shows no real sign of abandoning Mexico’s long habit of punching below its weight in the world.

 Tequila and caipirinha are both intoxicating but most people prefer not to blend them.

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