Malta and Brazil: a promising future?

TheJournal.mt reached out to Steve Cachia, a Maltese national who lived in Brazil for over twenty years as he outlines the potential for trade between the two countries.

Steve Cachia is a market analyst and business development consultant with over 30 years experience in Brazilian agribusiness. He is a frequent speaker in global conferences and has travelled all across Brazil and Mercosur countries. His market analysis and opinion on Brazilian and South American agribusiness is regularly referred to as a source of information by the international press including Wall Street Journal, Reuters, Bloomberg and the Financial Times.

Formal relations between Malta and Brazil go back to 1975, however with Malta joining the European Union in 2004, the need to strengthen diplomatic relations between the two countries became more evident. But due to logistic and geopolitical issues as well as the structure of the Maltese and Brazilian economies, trade interest continued to be sporadic from both sides. Steve Cachia believes that the increasing importance of the BRIC countries (Brazil, Russia, India and China) in the global economy, the EU – Mercosur Free Trade Agreement (FTA) and Malta’s economic roadmap means that there is scope for a new chapter in Malta–Brazil relations and alternative business opportunities.

In 2016, a memorandum of understanding was signed between Malta and Brazil on a governmental level, aimed at enhancing political, economic and cultural cooperation between the two countries. Brazil, with a population of around 212 million, the 5th largest nation and one of the 10 largest economies in the world, is among the world’s 25 most important exporters and importers. With enormous economic potential, the country is embarking on a process of expanding its international presence, and Malta can benefit from this new state of affairs.

After twenty years of negotiations, the EU and Mercosur (Southern Common Market) reached a new free trade agreement in 2019. Although still not ratified, this will be the largest ever created by the EU and will open up a huge market covering a population of over 780 million. Steve Cachia believes that once the phasing out process of tariffs in these highly protected economies of Mercosur (Brazil, Argentina, Uruguay and Paraguay) is in place, a whole range of goods and services from the EU should become more competitive in countries in South America.

“Although Malta is 26,949 times smaller than Brazil, a digital economy together with more efficient logistics and less market protection mean we can now have a level playing field to compete in and pursue new business opportunities and areas of mutual interest, independent of size, location and financial resources.”

Steve Cachia

By far the largest economy in South America, with a GDP of nearly 2 trillion dollars, Brazil has strong multilateral diplomatic relations throughout South America, with special ties with its neighbouring countries that form part of the Mercosur, to which it sends around 10% of all exports. Steve Cachia tells us that diplomatic relations in the region can sometimes be polemical due to political and ideological goals of the respective countries, but what has prevailed in recent years is the drive for economic prosperity. He adds:

“In that way, trade has been stronger in the industrialised states in the south of Brazil, especially due to logistics reasons. Being a global agricultural powerhouse, Brazil has a leading role in the Mercosur and therefore for a small country like Malta, with limited human and financial resources, Brazil can serve as a port of entry to the rest of the South American market.”

And what opportunities are there for Maltese businesses in the region?

Brazilian agribusiness represents nearly one third of GDP. The country is already the world’s number 1 exporter of soybeans, coffee, sugar, orange juice, beef and poultry and a prominent exporter of corn, petroleum oils, iron ore and wood-based products. Expectations are that with the new EU – Mercosur free trade agreement ratified, Brazil will increase exports to the EU by nearly $100 billion in the next 15 years. On the other hand, Brazil will also have to open up its economy for goods and services from the EU. Steve Cachia believes all this should present new and excellent opportunities for our services industry and also for goods manufactured in Malta.

Brazil’s drive to increase global export market share will lead Brazilian companies to set up partnerships, representative offices and agents in the EU. Also, due to large scale exports of commodities, there will be a need for transhipment, storage and distribution centres. Something similar is already being executed with the Canary Islands, where Brazil has already signed an MOU with Las Palmas Port, to serve as a transhipment point for Brazilian exports to northern Europe and North Africa. Malta’s strategic location, Cachia says, could also be of interest to Brazilian companies eyeing the Mediterranean region, as a trade, logistics and business development hub.

Malta’s strategic location could also be of interest to Brazilian companies eyeing the Mediterranean region, as a trade, logistics and business development hub.

Tourism related business, whether leisure, education, health or sports is also an important sector that can be tapped. One success story is the English Language Schools sector. Until a couple of years ago, Malta hardly received any English language students from Brazil, but 2019 statistics show that Brazilians ranked 5th in the top source markets, and was responsible for 6% of market share in this sector. Cachia thinks this success can be replicated in the higher education sector, and suggests that leisure tourism is also another sector where growth can happen fast. Unofficial figures indicate that in normal years, around 9 million Brazilians travel abroad and are considered the 10th highest spending tourists around. Tapping even a small percentage of this market can make an important difference in our tourism numbers.

In conclusion, Steve Cachia tells us that there are many other sectors and niche markets of our economy that can benefit from better relations with Brazil:

“From the iGaming industry, to pharmaceuticals, financial services, aviation, maritime and digital economy, a holistic business development and trade promotion strategy can ensure that Malta successfully taps a promising Brazilian market and at the same time even help make inroads to better trade relations with other South American countries.”

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