Why Brazil is central to Saudi Arabia's billiondollar investment plan in Latin America
The Arab monarchy has increased its presence in Latin American and Caribbean countries to diversify its economy and move away from oil (by BRICS+ Chamber of Commerce & Industry, Brazil Chapter).
A new power has arrived in Latin America and the Caribbean: Saudi Arabia. Following the guidelines set by Saudi Crown Prince Mohammed bin Salman in the economic plan titled Vision 2030, the Arab monarchy is showing increasing interest in the region and has recently expanded its economic and diplomatic presence.
Saudi exports to Latin America, which reached $2.8 billion in 2019, reached just over $4.5 billion in 2023, an increase of 38.8%. Imports went from $3.8 billion in 2019 to almost $5 billion in 2023, an increase of 23.6%. The increase in trade has been accompanied by growing Saudi investments, made possible by the large capital the Arab country possesses thanks to its vast oil wealth, which allows it to be one of the world's largest exporters. Part of this money has started to flow into Latin America and the Caribbean.
The growing relationship between Saudi Arabia and the region largely involves Brazil. The two countries have strengthened their economic and political ties. Brazilian exports, the largest trading partner of Saudi Arabia in the region, reached the highest level in the last ten years in 2023. Investment Minister Khalid Al-Falih, during a visit to Brazil, expressed the desire for both countries to become one of each other's top five investors, in a cooperation driven "by the evolution of the Global South and the shared values" between the two countries.
President Luiz Inácio Lula da Silva, who traveled to Riyadh, the capital of Saudi Arabia, in November 2023, thinks it is a good idea. "We are not only interested in knowing how much Saudi funds can invest in Brazil but also how much Brazilian entrepreneurs can invest in Saudi Arabia," said Lula.
But it's not just Brazil. Guyana announced in November that Riyadh committed to investing $2.5 billion in the development of Caribbean countries in the coming years. Aramco, the Saudi state oil group, acquired one of the main fuel distributors in Chile, where it intends to expand its commercial activity.
According to researcher Najad Khouri, from the Middle East Studies and Research Group, a research center in Brazil, "these are the first steps of a natural relationship." It seems that the relationship is progressing. Minister Khalid Al-Falih made a trip to seven countries in the region in August 2023 to, as he said, "explore opportunities to strengthen and deepen investment partnerships."
Saudi Vision 2030
When he ascended to the Saudi throne in 2015, King Salman surprised many by appointing his seventh son, Mohammed bin Salman, who was only 32 years old at the time, as the strongman of the government, bypassing all his brothers in his father's preferences. Tim Callen, an expert at the Gulf Arab States Institute in Washington (USA), told the BBC that Bin Salman "came with a very ambitious plan to diversify the economy and reduce its dependency on oil, as well as to transform Saudi Arabia's very conservative society."
Economically, the main goal was to steer towards a future perceived as decarbonized and to generate jobs for the youth, a crucial segment of Saudi society. According to Callen, "even though Saudi Arabia may take decades to wean off oil — because it has so much [oil] that it can produce at very low costs — it has significant domestic energy needs and is looking to develop alternative and cleaner forms of energy."
One of the means to achieve the strategy dubbed Vision 2030 has been a powerful Saudi sovereign wealth fund, estimated to have resources of around $1 trillion. The prince and Minister Al-Falih, tasked with realizing the palace's directives, have outlined a new strategy to allocate part of the sovereign wealth fund's enormous investments to destinations other than the United States, Asia, and Europe, where Riyadh has been investing for years. Through its Future Investment Initiative, the fund has begun organizing what it calls Priority Summits, meetings to promote business and investments in Latin America and the Caribbean, with the first editions held in Rio de Janeiro and Miami (USA).
The Vision 2030 initiative also envisages social transformation and openness to the outside world. In this regard, Riyadh began allowing tourists into the country in 2019, whereas previously visits were only permitted for religious reasons. A year earlier, one of the most symbolic liberalizations took place in a country where a strict interpretation of Islam prevails: allowing women to drive, something that had been prohibited until then.
Why is Saudi Arabia Interested in Latin America and the Caribbean?
Najad Khouri, from the Middle East Studies and Research Group, says that "Latin America and the Caribbean are interesting destinations for Saudi investments because they generally have stable countries where there are no wars or revolutions." "Latin America and the Caribbean need investments, and Saudi Arabia has a lot of money to invest," he asserts. The region also possesses some of the elements that are hardest to find in the desert Arabian country, such as certain metals that are emerging as strategic in the future — for example, lithium, nickel, or copper. The expectation is that these resources will drive the global economy when oil no longer does so — and South America holds significant deposits.
Although their wealth in oil makes it difficult for fossil fuels to cease being Saudi Arabia's primary business in the short term, they have already begun positioning themselves for a future that appears to be based on electricity.
One of the kingdom's recent bets is Ceer, Saudi Arabia's first electric car manufacturer, which is expected to demand some of the South American minerals. Today, the fertile region of Latin America exports a large quantity of food and agricultural products to Saudi Arabia, where the arid geography of the Arabian Peninsula makes agriculture very difficult and expensive. Latin America is also one of the regions through which the most freshwater flows on the planet.
The attention to Latin America and the Caribbean is not solely driven by economic reasons. Most governments in Latin America and the Caribbean also belong to countries not aligned with the so-called Western bloc. Riyadh can rely on not facing criticism for its human rights record — and this won't be an obstacle to its business. The kingdom has faced criticism for years from Western human rights organizations and women's groups, who have denounced the discrimination they face in the country. The murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018, for which Prince Bin Salman was directly accused, severely damaged the international image of the Arab monarchy. Since then, its government has been dedicated to efforts to clean it up through intensive commercial and diplomatic activities.
The countries in the region represent a significant number of votes in the United Nations and various multilateral forums, indicating that this support can be a valuable tool in Prince Bin Salman's attempt at international rehabilitation. There are examples. Caribbean Community (Caricom) states, which benefited from Saudi development funds, supported Saudi Arabia's bid to host the World Expo 2030, a contest ultimately won by South Korea and Italy. "One of the prince's goals is to achieve a more central and leadership position in what has been called the Global South," says Callen. And an activity that stirs passions in millions of Latin Americans also plays a role in this: football. The Arab country has injected enormous sums into its national league, attracting major international football stars like Portugal's Cristiano Ronaldo and South Americans like Neymar to Saudi clubs.
The Role of Brazil
The rapprochement between Riyadh and BrasÃlia has intensified in recent times. Both countries have held several bilateral meetings, and Brazil accepted Saudi Arabia's invitation to join OPEC+ (a group of oil producers and exporters that regularly meets to decide how much crude oil to sell on the world market), albeit initially as an observer. In turn, Brazil succeeded in getting Riyadh to join the BRICS group — formerly comprised of Brazil, Russia, India, China, and South Africa, and which announced an expansion in 2023.
However, according to Mohamad Orra Mourad, Vice President of the Arab-Brazilian Chamber of Commerce, it is more about "a commercial relationship than political, and this is because there are now good opportunities for both parties."
In the commercial sphere, Brazil is the largest exporter to Saudi Arabia of halal food, produced according to the precepts of the Quran, the holy book of Muslims. Other notable exports include sugar, corn, and animal-derived foods. Mourad says there is "growing Saudi interest in Brazil's capacity to produce renewable energy" and room to increase cooperation in more technological sectors such as wind turbine manufacturing or the defense industry in general. Brazilian mining giant Vale recently sold one of its business units to Saudi capital for $2.5 billion, and Embraer signed an agreement with Saudi Arabia's National Industrial Development and Logistics Program, which could lead to the assembly of their aircraft in the Arab country.
According to Najad Khouri, "the relationship between Saudi Arabia and Latin America and the Caribbean is just beginning and represents a good opportunity for both." However, to achieve this, they must overcome "obstacles and limits" such as the geographical and cultural distance that separates these two very distant areas.