0920 GMT June 23, 2018
Brazilian companies see Iran as a long-time partner with which they would like to embark on very effective and long-term joint ventures, said the Brazilian ambassador to Iran.
Speaking to Iran Daily, Rodrigo de Azeredo Santos also touched upon a wide array of topics, such as expanding cooperation between his country and Iran in oil and gas sector, the level of the two sides’ bilateral trade, the agreements signed or to be signed between the two states, level of bilateral relations and banking ties after the conclusion of the Joint Comprehensive Plan of Action (JCPOA).
Excerpts of the interview follow:
IRAN DAILY: What is your assessment of Iran’s economy?
RODRIGO DE AZEREDO SANTOS: I have been in Iran for five months. However, I had visited the country several times before moving to Tehran to assume my new position as Brazil’s ambassador. I am a career diplomat, but my background is in economics, trade and investment. During the past 15 years, I dedicated my time at the Brazilian Ministry of Foreign Affairs to promote my country’s trade, partnership and economic cooperation with other countries.
When I arrived in Tehran, I knew a lot about its economic potentials. Iran has great potentials in the energy – oil and gas – sector. At present, the Iranian government seeks to establish joint ventures with international companies by presenting them with new proposals and allowing them to come to the country.
Iran's new oil contracts – known as Iran Petroleum Contracts (IPC) – for oil and gas explorations are more attractive to foreign firms than the previous ones.
How can Iranian and Brazilian companies establish cooperation in oil and gas sector?
This can be done in two ways. The first one is through exporting, joint manufacturing and re-exporting [from Iran to neighboring and regional countries] of equipment. Brazil has developed a very high-tech industry for producing oil and gas equipment and machines as well as providing techno-engineering services in different sectors. More than 10 years ago, a legislation was introduced in Brazil to promote local content. The law requires the foreign and domestic companies that intend to carry out oil and gas exploration operations in Brazil to purchase, depending on the size of the project, 40 to 60 percent of the machines and services they would need for the projects from the Brazilian market.
Most oilfields in Brazil are offshore, therefore, deep-sea exploration constitutes a major portion of the operations carried out in the country to extract oil and gas. Thus, Brazil has developed a very advanced technology for this kind of exploration.
The second way, in which the Brazilian companies can cooperate with the Iranian firms, is by carrying out oil and gas explorations in the Caspian Sea. The huge lake is home to important oil reserves. For instance, Petrobras, a semipublic Brazilian multinational corporation, has the best technology for deep-sea exploration and extracting oil and gas from pre-salt layers in the sea basin. Talks have already been held between the Brazilian companies and the National Iranian Oil Company to this end.
Brazil intends to encourage domestic companies to establish production lines in Iran. They do not plan to just export their products to the country. They see Iran as a long-time partner with which they would like to embark on very effective and long-term joint ventures. Forming partnership with Iran, in addition to providing Brazilian companies with the opportunity to be present in the country’s 80-million-strong market, gives them easy access to the markets of the regional states. Brazil’s focus is mainly on making investments in Iran to manufacture their products in the country, generate jobs for Iranians, transfer modern technologies to the Middle Eastern state and provide it with the opportunity to export the jointly manufactured products to the regional as well as neighboring countries.
What are other sectors and fields in which the two countries can foster collaboration?
They include production of agricultural machines and equipment. Brazil has also considerable expertise in the production of electric engines and generators which have a large number of industrial uses. A few weeks ago, a leading Brazilian company involved in the production of such engines travelled to Iran and held talks with a number of its local potential partners, discussing the possibility of setting up a unit in the country.
Production of hospital and medical equipment is another possible field for cooperation. Major Brazilian producers of medical equipment are very much interested in joint ventures with their Iranian counterparts.
Another field of cooperation could be the production of auto spare parts. Brazil is the world’s fifth biggest car and auto spare parts market. Most of the world’s leading auto producers, including the Korean, Japanese, German and American car manufacturers, have production lines in the country. There are also a large number of efficient producers of auto spare parts in Brazil. Iran has a growing automobile industry which can use Brazilian auto spare parts.
Iran and Brazil can also foster collaboration in aviation sector. Brazil’s Embraer is the world’s third largest airplane manufacturer. The company manufactures aircraft for regional [two-three hour] flights. The Brazilian company has already signed an MoU with a number of Iranian firms. However, both sides are waiting for the US’ Office of Foreign Assets Control (OFAC) to grant the authorization for this cooperation to be initiated.
What about the present level of bilateral trade?
Bilateral trade between Iran and Brazil currently stands at around $2 billion. Brazil’s exports to Iran constitutes some 90 percent of the figure. Agricultural products account for the major part of the Brazil’s overseas sales to Iran. In addition, Brazil sells $400 million worth of meat to Iran per year.
Other export items are soybeans, corn, oil seeds and sugar, which, together with beef, constitute 70 percent of the Brazilian exports to Iran.
What are Iran’s exports to Brazil?
Brazil imports carpets, pistachios and fruits from Iran. However, we would like to purchase petrochemicals, fertilizers and even oil from Iran. We used to import crude from the country.
In addition, talks are underway by a consortium of the two sides’ private companies to make investments in the construction of a refinery in Brazil. Iran’s contribution to the building of this refinery would be in the form of exporting techno-engineering services and financing the joint venture.
We would also like to attract Iranian investments in agro sector. Iran already imports a large amount of agricultural products from Brazil per annum. By investing in the crop production in Brazil, instead of purchasing the products from the country, Iranians can own crops and export them from the Latin American state to any country they want.
Have the two countries reached any concrete trade or economic agreements?
Last month, the Iranian and Brazilian health ministers, Hassan Qazizadeh Hashemi and Ricardo Barros, signed an MoU to expand cooperation in the fields of controlling the population, enhancing health and production of pharmaceuticals, medical equipment and vaccines. Both sides are very much interested in the coproduction of vaccines. The two states have also signed two MoUs on manufacturing airplanes and buses.
Any improvement in the two sides’ trade and political ties following the implementation of the JCPOA?
Brazil and Iran had always had very good relations prior to the intensification of the sanctions. In 2010, Brazil was helping Iran in the nuclear negotiations. At that time, Brasilia did its best to help Iran resolve the nuclear issue through diplomacy and dialogue. Unfortunately, in the following years, more sanctions were imposed on Tehran. After the signing of the JCPOA, Brazilian companies showed more interest to be present in the Iranian market as with the perspective of the sanctions being lifted, Iran’s market had become much more attractive. Brazil’s agro exports to Iran, however, never dropped even during the period of tough sanctions. However, exporting industrial products to Iran was not possible at that time due to the banking restrictions. It takes time for the two countries to increase trade to an acceptable level.
What about the banking relations between the two sides?
There are many banks in Brazil that would like to have direct contact with Iranian banks. But the six big banks of the country fail to do so due to having credit lines with their American counterparts for financing Brazilian imports and exports. In November last year, the Brazilian government invited OFAC representatives to talk to the country’s banks about their banking relations with Iran. At that time, Brazilians were in favor of starting such a cooperation. The Americans also told us that, from their side, there were no banking sanctions on Iran anymore. They literally told us that they had imposed the sanctions because they thought that it was the [right] thing to do. They said, “Now that the JCPOA has been signed, we would feel obliged to tell our partners you can have banking relations with Iran.”
We asked them to tell this to Brazilian banks as well. The US, has, however, only lifted the secondary sanctions and not the primary ones. This prohibits the American banks from having relations with their Iranian counterparts. That is why the big Brazilian banks are still hesitant for initiating cooperation with their Iranian counterparts. They have links with the US banks.
To resolve this problem we keep Brazilian banks informed about the positive developments in Iran’s banking sector and have focused on establishing connections between medium-sized banks in Brazil and the Iranian banks – as they do not have the same dependence on the US banks that the big ones have. At the same time efforts are underway to let Iranian banks open their branches in Brazil and have direct links with their headquarters in Iran. Another measure is to increase the use of local currency in mutual trade.
How close are the two countries to reaching the annual trade target of $10 billion per year?
In case of signing some of the deals I mentioned earlier by the yearned, the target will be achieved within five years.