MAY 15, 2013

WI NN IE W ON G

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008 In his inauguration speech on January 1, 2003 for his first term in office, Brazil’s President Luis Inácio ―Lula‖ da Silva emphasized ―mudança‖ or change, which had served as his campaign slogan and is what he perceived had been the driving message of voters at the polls1. Among the many dimensions of Brazilian policy which he referenced as in need of change in order to propel Brazil to its next stage of development, President Lula included the need to ―reaffirm the profound ties that bind [Brazil] to the entire African continent and [Brazil’s] willingness to actively contribute in developing [Africa’s] enormous potential.‖2 Brazil’s connection with the African continent is by no means a recent development. As a consequence of the Transatlantic slave trade, Africans have held a presence in Brazil since the late 16 th Century. Following Brazil’s independence from Portugal in 1822 and the former’s abolition of slavery in 1888, a natural distance developed between Brazil and Lusophone (Portuguese-speaking) Africaa for the next century. Only in the 1970s, after the African colonies had declared their own independence from Portugal, did Brazil begin to slowly reestablish ties with the region. Genuine ―mudança‖ in Brazil-Africa relations did not take place, however, until the 2000s when the Lula administration pursued active reengagement with the continent and featured Africa as one of the major points of Brazil’s international agenda. Relations between Brazil and Lusophone Africa deepened through diplomatic exchanges and technical assistance, along with an increase in international trade. But while on a state level, there has been a concerted effort to reinvigorate ties with Africa and on a macroeconomic level the two regions have become more interdependent, it remained to be seen whether the private sector would follow a similar path. In mid-2008, Brazil’s economy appeared to be on an unstoppable upward trajectory. After decades of volatility, Brazil’s economy was finally experiencing steady, robust growth. On the back of booming commodity prices and increasingly competitive industrial sectors, Brazil’s average annual GDP growth of 3.4 percent3 since 2000 has been outpacing the world average. In recognition of Brazil’s recent economic successes, the country’s debt was elevated to investment grade status for the first time in April 2008 when Standard & Poor’s Rating Services upgraded Brazil’s sovereign rating from BB+ to BBB-. On May 20, 2008, Brazil’s Bovespa stock index reached a new historic high, at 73,516 points4, following a steady climb for most of the 21st century (see Exhibit 1).

a Lusophone or Portuguese-speaking Africa refers to Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé and Príncipe.

To improve its relations with Lusophone countries around the world, the government of Equatorial Guinea announced in 1997 its decision to establish Portuguese as its third official language. However, in most academic discussions, including the purposes of this case, Equatorial Guinea is not considered one of the Lusophone African nations. ________________________________________________________________________________________________________________

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Meanwhile, the economies of Sub-Saharan Africa were in the midst of the best period of sustained economic growth since independence, with an average annual real GDP growth rate of 5.9 percent between 2000 and 2007; Lusophone Africa has been growing at an even more impressive 7.3 percent5. This dramatic growth, along with improved political and macroeconomic conditions in the region, has captivated the interest of international investors, including the other BRICb nations and China in particular; between 2000 and 2007, foreign direct investment (FDI) to the Sub-Saharan region grew more than fourfold from $6.8 billion to $30.0 billion6. The most compelling sectors have certainly been the extractive industries, with petroleum in particular, but natural resources are just one part of the African growth story. In addition to the extractive industries, the construction and energy sectors have also been identified by Lula’s Minister of Foreign Affairs, Celso Luiz Nunes Amorim, as showing significant promise for Brazilian investors7. Yet, there exist tremendous untapped opportunities within these very same industries in Brazil so the need to look abroad for returns is questionable. While President Lula believes that Brazil and the Lusophone African nations are natural partners and has been vigorously pushing for strengthened commercial ties between the regions, perhaps investment opportunities with lower risk yet similarly attractive returns can be better actualized within Brazil’s itself. The language, cultural and institutional ties between the two regions may facilitate any potential partnerships, but Lusophone Africa continues to be a challenging environment for doing business. Are the Lula administration’s rhetoric and policies reinforcing the inextricable link between Brazil and Lusophone Africa convincing enough and the latter’s growth potential sufficiently compelling to veer a private Brazilian firm’s expansion strategy away from home and towards the African region? Or do Brazil’s organic opportunities ultimately present a stronger investment thesis? Are Brazil’s private sector resources better invested across the Atlantic or within Brazil’s own borders?

Lusophone Africa Portuguese-speaking Africa is comprised of five nations: Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé and Príncipe (see Exhibit 2). Varying widely in size, geography and level of socioeconomic development (see Exhibit 3), the countries may seem at present-day to have little in common beyond a shared language. The countries’ connections with Brazil may appear even more tenuous given how much further along Brazil has come in terms of institution and capacity building since declaring independence from Portugal, in comparison with its African counterparts. However, all of the Lusophone nations are unified by a shared colonial history dating back to the 16th century and joined by a deep, common heritage as a legacy of the Transatlantic slave trade. Brazil currently has the second largest black population in the world, after Nigeria, and as of the 2000 census, a significant 44.7 percent8 of the Brazilian population identified themselves as black or mixed racec. All of the Lusophone countries also continue to face similar challenges common amongst developing nations, including prevailing poverty, lagging infrastructure, and income inequality, albeit at different levels of magnitude. Angola. Situated on the western coast of the African continent, the Republic of Angola is, by far, the largest and most resource-rich of the Lusophone African countries. Angola is home to oil deposits, b The term "BRIC" was coined by Goldman Sachs' Jim O'Neill in 2001 to represent the four largest emerging market economies at

the time and refer to Brazil, Russia, India and China. c Pardo or ―mixed race‖ is the term used by the Brazilian Institute of Geography and Statistics to refer to individuals partially of

African or American Indian descent.

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

diamonds, iron and quartz, as well as abundant water resources for hydroelectric power and irrigation. The crux of colonial trade, however, was dominated by a different type of natural resource. Almost immediately upon their arrival in 14839, the Portuguese began engaging in the slave trade. With Portuguese imperialist ambitions directed towards Brazil rather than Africa, Angola served as little more than a provider of slaves for the sugar cane plantations of Brazil10. Up until the abolition of slavery in 1878, at least 2 million Africans were estimated to have been displaced to the New World, with a similar number having died in transit11. Unlike the slave trade conducted between West Africa and Brazil, the Angolan trade was direct and independent from Portugal, bolstering bilateral ties and interdependency between the two colonies. Angola, in effect, became an appendix of Brazil in the eighteenth century to the extent that in 1822, Angola moved to be annexed as a province of the newly independent Brazil. However, post-independence negotiations conditioned Portuguese recognition of Brazilian independence upon complete cessation of political ties between Brazil and Angola. With the end of the slave trade, the Portuguese turned to the exploitation of Angola’s other natural resources. Diamonds were first discovered in Angola in 1912 12 and with the establishment of the Companhia de Diamantes de Angola five years later, diamonds became the leading export for the next three decades until the coffee boom following the Second World War. Throughout the colonial period, Angola had been self-sufficient in food production and exported its maize surplus, reaching more than 400,000 million tons in its peak year13. But only after the end of the slave trade was a focus placed on widespread plantation agriculture. Coffee production quickly rose from 14,000 tons in 194014 to around 200,000 tons in the early 1970s15, making Angola the world’s fourth largest producer after Brazil, Colombia and Côte d’Ivoire16. In 1955, the first commercial discovery of oil resources was made and by 1973, oil had displaced coffee as Angola’s leading export, accounting for more than 30 percent of total export revenues17. With the exception of the offshore petroleum sector, all economic activities were heavily disrupted with the advent of war. Armed struggle against Portugal began in 1961 until Angola declared its independence in 1975. However, fighting did not subside as civil war subsequently erupted between the two rival independence movements: the MPLA, which controlled coastal cities and the government in the capital of Luanda, and UNITA, which controlled the countryside. Only in 2002 was a ceasefire finally reached, by which time, the country was left devastated after 41 years of warfare. During the civil war, more than 1 million people had lost their lives, 3 million had fled from violence in their rural homes to cities and another 400,000 had crossed over to neighboring countries18. An estimated $60 billion of damage had been incurred by the country's infrastructure, with the violence having destroyed or severely damaged 98% of bridges, 80% of factories, 60% of hospitals, 80% of schools and all of the country's main roads19. Cape Verde. The Republic of Cape Verde is an archipelago comprised of ten islands (only nine of which are inhabited), situated 300 miles off of the coast of Western Africa. Uninhabited at the time, the island group was first sighted by Portuguese merchants in 1455 and in 1460, the first settlement was founded20. Despite its name which may allude to a lush landscape, Cape Verde is more akin to a Western extension of the Sahara Desert. The land is deeply eroded, appearing like a barren, lunar landscape and the islands are plagued by cycles of long-term droughts. With the consequently limited scope of plantation agriculture, Cape Verde established its colonial importance for Portugal, instead, as its command center for West African maritime trade for goods, including ivory, gold, spices, dyes and, notoriously, slaves. 3

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Up until Portugal’s abolition of slavery in its African colonies in 1869, Cape Verdeans served as both slaves and slavers. Portugal heavily exploited the island as a cheap labor source but did little in providing institutional support. From 1747 to 1970, the islands suffered at least 58 years of famine and over 250,000 related deaths across 12 drought periods21. However, as believed by many historians, only once during this time period did Portugal attempt to administer a timely and comprehensive famine relief effort22. Portugal also did little in building infrastructure to mitigate the extremely challenging living conditions on the island. At independence in 1975, Cape Verde had two schools, two hospitals, thirteen doctors and no courts of law23. The islands had no funds in the Treasury and a mere 20 percent of the population had access to drinkable water 24. The country was declared ―unviable‖ by the then U.S. Secretary of State25. Faced with persistently bleak economic prospects, many Cape Verdeans turned to emigration. The first wave of mass migration took place between 1900 and 1920 when approximately 20,000 people or nearly 15 percent of the islands’ population left for the U.S.26 Following a series of subsequent waves, the total number of Cape Verdeans working abroad today is higher than the population on the islands; in 2005 alone, 35.8 percent of the population emigrated, with skilled emigration even higher at 69.1 percent27. Accordingly, remittances remain a significant contributor to the nation’s economy, representing an average of 13 percent28 of GDP from 2000 to 2007. In recognition of the islands’ paltry economic resources, the international aid community has donated generously to the Cape Verdean economy, contributing an average of 15.5 percent29 of GDP between 2000 and 2007. Government’s prudent use of funds from the official development assistance and remittances for development of physical and key economic infrastructure has dramatically transformed the Cape Verdean economy. Though with a de minimis primary sector and an economy mostly limited to servicebased industries, Cape Verde has defied all odds and has risen to become a Middle-Income Country, as designated by the UN, as of January 2008. Tourism, in particular, has experienced tremendous success, with travel exports having grown more than 30 percent annually for the past decade30; as of 2007, tourism represented 21.9 percent of GDP31. Guinea-Bissau. The Republic of Guinea-Bissau is a small West African nation, roughly the size of Switzerland, and its location placed it along the route of the trans-Saharan overland and maritime trades, thriving by the early 1400s. Ships sent by Portuguese nobility, who were interested in taking over a part of this trade, landed in what was then known as ―Guinea‖ in 1446 and by 1470 32 the first settlement had been established. By the sixteenth century, trade which had once been centered on gold had made way for the growing slave trade; by the eighteenth century, Guinea had developed into a major slave trading center for much of upper West Africa. Though small-scale illicit trading still continued up until the 1920s33, when Portugal abolished slavery in 1822, Guinea’s economy accordingly shifted its focus to the production and export of agricultural products. Peanuts emerged as the primary export by the 1840s and remained the most important cash crop until the 1930s, when they were replaced by cashew nuts. By the early 1970s, Guinea had become the world’s leading producer of cashews 34. Portugal chose not to leave Guinea with any chance of self-sufficiency, devoting almost no public resources to Guinea’s development and infrastructure35. There was also no intention of allowing the colony to independently conduct trade as it had done prior to the arrival of Portuguese colonizers and as was still allowed to take place in Angola during the colonial period. Portugal maintained a quasimonopoly on Guinea’s external trade and by the 1940s, it controlled 93 percent of Guinea’s exports and was the source of 72 percent of its imports36. Growing discontent with Portuguese rule led to the rise of national movements and to the start of armed rebellion in the 1950s; following more than a decade of guerilla warfare, Guinea Bissau declared its independence in 1974. 4

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

At independence, Guinea Bissau was one of the poorest and least developed countries in the world, with centuries of underinvestment exacerbated by the damage incurred during the nationalist war. The primarily agrarian economy saw total land area under cultivation shrink from 400,000 ha in 1953 to merely 125,000 ha in 1972 and throughout the 1980s, Guinea-Bissau received more than 10,000 tons of food aid annually37. The post-independence departure of Portuguese settlers also saw the loss of skilled labor. Suffering from widespread poverty and limited life expectancy, Guinea Bissau continues to rank the lowest in the Human Development Index out of the Lusophone African countries (see Exhibit 3) and is among the bottom 5% of all countries surveyed. Most recently, Guinea Bissau has further deteriorated and has become a key transit point between Latin America and Europe in the international cocaine trade. Between 2005 and 2007, at least 33 tons of cocaine were seized in West Africa on route to Europe whereas previously, even one ton was rarely seized from the entire African continent38. With unpaid employee salaries, few police cars and no functioning prisons in the country, the local police system is entirely inadequate to govern this problem. Guinea-Bissau is highly at risk of becoming a narco-state39. Mozambique. The Republic of Mozambique is a moderately-sized Southeastern African country situated on the Indian Ocean and its location placed it in a strategic position for conducting trade to and from the East. When Portuguese explorer Vasco da Gama set foot in Mozambique in 149840, he disregarded the Arab merchant settlements which had already been established there for centuries and claimed the territory for his home country; by 1507, Portuguese settlers had started to arrive to take over the Muslim trade routes. Portuguese merchants heavily exploited Mozambique’s natural resources, dominated by gold from 1498 to 1693, ivory from 1693 to 1785 and finally individuals as part of the slave trade from 1785 to 187041. With a sole focus on extracting the colony’s wealth, Portuguese rule resulted in Mozambique’s significant underdevelopment and diverted indigenous manpower from local agriculture to mining and the slave trade. Underdevelopment was further reinforced by the devastation of war in the 20th century. After a 10-year armed struggle against Portugal, Mozambique achieved its independence in 1975. Violence, however, continued to ravage the country for another 15 years as civil war broke out between the ruling FRELIMO party and the opposing RENAMO. By the signing of the peace agreement in 1992, the country’s physical infrastructure and economic activity had been largely destroyed, leaving Mozambique as one of the poorest nations in the world. Mozambique’s economic turning point was marked by the government’s approval of the Mozal project in 1997, the country’s first major foreign investment project and the largest to date. The $1.3 billion project was for the construction of a smelting facility to produce aluminum for export and was led by a foreign consortium comprised of BHP Billiton (UK), Mitsubishi (Japan) and IDC (South Africa). Aluminum production began in June 2000 and by December, the plant had reached full production capacity of 250,000 tons per annum. In 2001, the consortium decided to invest a further $900 million to double production capacity and Mozal remains, by far, the largest company in Mozambique in terms of turnover42. Mozal’s success was a pivotal milestone for the Mozambique economy because it paved the way for a subsequent series of foreign-funded ―mega-projects‖ to drive industrial development. A total of 186 FDI projects worth $7.5 billion, with a potential to generate up to 20,000 jobs, were approved in 200743, making it one of the best years since independence for FDI. Nevertheless, Mozambique remains one of the least developed nations in the world and generates the lowest GDP per capita among the Lusophone countries (see Exhibit 3). 5

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

São Tomé and Príncipe (STP). The Democratic Republic of São Tomé and Príncipe is the secondsmallest African nation in size and population, comprised of two main islands situated 180 miles off of the coast of Gabon. Uninhabited at the time, the islands were first sighted by Portuguese merchants in 1478 and in 1486, the first settlement was founded 44. With a wet, tropical climate and extremely fertile soil, which easily took to whichever type of introduced crop, São Tomé and Príncipe naturally developed into a predominantly agrarian society. By the mid-1500’s, the islands had become the world’s leading producer of sugar45. Following the decline of the sugar industry due to lack of investment from Portugal and competition from a higher quality Brazilian product, other crops grew to dominate production, including coffee, and more importantly, cocoa. Between 1900 and 1910, São Tomé and Príncipe emerged as the world’s leading cocoa producer, accounting for approximately 15 percent of world production. Outdated cultivation practices, soil depletion and insufficient investment have led production volumes to fall significantly from its peak in the early 1900s, but cocoa continues to represent virtually all of São Tomé and Príncipe’s exports as of 200846. Intense crop substitution has led the islands to be entirely dependent on imports for local food consumption and extremely vulnerable to fluctuations in world cocoa prices. Unlike the mainland colonies, São Tomé and Príncipe achieved independence from Portugal in 1975 without any warfare or even an organized nationalist movement. Independence came about primarily as a consequence of the 1974 military coup in Portugal, which led the way for retreat from all of the country’s colonies. Following independence, São Tomé and Príncipe was rendered largely forgotten by the international community due to its remote location and small land mass up until results of seismic exploration in 1998 indicated that the Saotomense territorial waters had substantial recoverable oil reserves47. To settle subsequent disputes over maritime boundaries, Nigeria and São Tomé and Príncipe signed a Treaty in 2001 to establish a Joint Development Zone (JDZ)48 under a 60-40 split of benefits and obligations. An adjacent exclusive economic zone was also created and is fully owned by STP. Petroleum windfalls would contribute significantly to the economy but as of 2007, commercially viable reserves have still yet to be discovered and São Tomé and Príncipe continues to generate the lowest GDP in Africa.

Brazil’s Historical Debt On many occasions, President Lula has referenced the historical debt owed by Brazil to the African continent on account of the country’s reliance on the slave trade during the colonial period. African slaves first arrived in Brazil in 153849 as a source of labor for the country’s sugar cane plantations. In fact, the demand for sugar served as the main driver of the slave trade throughout the colonies and up until 1820, 90 percent of slaves were brought across the Atlantic to work on sugar plantations50. After 1820, the largest market for slave labor was driven instead by the growth of the coffee industry in Southeastern Brazil. Based on known records kept from 1519 to 1857, Brazil stands out as the single largest destination of slaves and received approximately 40 percent of Africans displaced by the trade51. Estimates of total individuals transported to Brazil as slaves range from 3.5 to 3.65 million. Four out of five slaves arriving in Brazil originated from Central West Africa,52 comprised of present-day Congo, DRC and Angola.

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Following the end of the slave trade in Brazil in 1888, trade ties were severed between Brazil and Lusophone Africa. Even as an independent state, a close residual relationship with Portugal prevented the Brazilian government from maintaining a connection with the region. This institutional distance was formalized by the signing of the 1953 Luso-Brazilian Treaty of Friendship and Consultation, under which Brazil was obliged to consult Portugal prior to acting on any foreign policy matters of common interest; in effect, Brazil was agreeing to completely sever ties with Portugal’s remaining colonies. The collapse of Portuguese colonialism in the 1970s opened up opportunities for renewed ties between Brazil and Lusophone Africa but reactions to Brazil’s role during the independence struggles have been uneven. Brazil has been criticized for its support of Portugal in its colonial wars against Guinea-Bissau, Mozambique and Angola53 and in his first press conference as the head of Mozambique’s provisional government, Prime Minister Chissano condemned Brazil for its stance during the war54, placing into question future relations between the two countries. Relations with Guinea-Bissau, on the other hand, had a positive start as Brazil promptly assented to the newly independent country’s request for support in its bid for UN membership. Similarly with Angola, Brazil made a bold statement as the first country to recognize it as an independent state in 1975, an action which has placed Brazil in favor with Angola’s MPLA party.

Post-Colonial Relations For the next quarter of a century, the depth of relations between the two regions was inconsistent, with engagement driven not by diplomacy but rather by economic interests. Since the mid-1960s, Brazil had pursued an economic strategy of increased internationalization and had been in search of new markets for its manufactured products, beyond the increasingly protective North American and European nations. With the rise of newly independent states and the consequent disruption to trade with their former colonizers, Africa presented more market opportunities for Brazil than the Middle East or Asia. Brazilian exports to Angola and Mozambique increased from negligible amounts at the beginning of the 1970s to $119 million and $72 million, respectively, by 198055. The surge in global oil prices in the same decade additionally led Brazil to diversify its economic partners and focus on developing better trade relations with oil-exporting nations, including Nigeria and Angola. Between 1975 and 1978, oil accounted for about 70 per cent of Brazil's imports from Africa 56 and in 1979, Petrobras, Brazil’s primarily state-owned oil and gas operator, made its first investment in Angola. Internal political and economic crises in the 1980s and 1990s led Brazil to reduce its expansionary efforts abroad and to redefine its core interests. Particularly under the administration of Fernando Henrique Cardoso (1995-2002), relations with countries on the African continent were viewed as secondary to continuing ties with traditional North American and European powers. A new era of distancing from Africa thus began, reversing developments that had taken place in the previous decade. Brazilian diplomats posted in Africa had increased from 25 in 1973 to 34 by 1989. Under Cardoso’s rule, the number of diplomats dipped back down to 2457.

Active Reengagement: the Lula Years (2003-2008) When Lula ascended to the Brazilian presidency in 2003, he had a grand vision of expanding Brazil’s international profile from a rising ―middle power‖ to an established global leader, with the ultimate goal

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

of obtaining a seat on the UN Security Council. The Lula administration set out to diversify its partnerships beyond traditional world powers in the Northern Hemisphere and became much more assertive in establishing bilateral relations with developing nations in the Global South, which have emerged as increasingly influential players in the international political economy. This strategy is frequently referred to as South-South cooperation and is seen as a powerful instrument for decreasing economic dependence on developed nations and for shifting the international balance of power in favor of the up-and-coming countries. Though Lula’s active external engagement was not exclusive to Lusophone Africa, the region remained one of the main foci of his administration’s international agenda, in a clear departure from Cardoso’s policies. In a speech made during a state dinner in Maputo, Mozambique, as part of his first African tour in November 200358, President Lula remarked that while his first foreign policy objective as president had been to bring the countries of South America under Mercosur d, he knew that his next step was to address the African continent and find ways to pay back Brazil’s historical debt, particularly with respect to the Portuguese-speaking countries. Reengagement began with a strengthening of diplomatic ties. Within its first four-year term, the Lula administration inaugurated 13 diplomatic representations and reopened six African embassies,e which had been closed under the government of Lula’s predecessor, Fernando Henrique Cardoso. Brazil’s presence on the African continent was elevated from 18 to 30 embassies while the number of African ambassadors accredited to Brazil reciprocally rose from 16 to 2559. By the end of his first four years in office, Lula had also made five trips to the African continent, visiting 17 countries (see Exhibit 4), including all five of the Lusophone African nations. His predecessors, in comparison, had collectively visited only 7 African countries across a 20-year period.

TECHNICAL ASSISTANCE In mid-2006, Celso Luiz Nunes Amorim, Lula’s Minister of Foreign Affairs and one of the architects of Brazil’s new global strategy, made an unprecedented statement that technical cooperation was an instrument of national foreign policy 60. Accordingly, the Brazilian Cooperation Agency (Agência Brasileira de Cooperação or ABC), underwent major reforms to act on that statement and significantly increased the number of technical cooperation activities (see Exhibit 5). The ABC had originally been established in 1987 to coordinate the technical cooperation projects received by Brazil from foreign donors but it has since transformed into the agency responsible for organizing assistance provided to other developing nations. Because the problems faced by Brazil in past decades overlap with many of the developmental challenges confronting present-day Lusophone Africa, the African nations are logical candidates for the knowledge transfer recipient of lessons learned from Brazil’s recent developmental successes. From a demand perspective, technical assistance from Brazil may also be preferred by the African nations over assistance from traditional Northern donors, on account of this better fit. Between 2003 and 2007, ABC’s investments in cooperation projects with Africa have nearly tripled from $524,000 to $1.4 million 61. In particular, nearly 74 percent of all resource allocations for technical cooperation projects in Africa have been made to the Lusophone countries, which have been identified as the ―first line of Brazilian cooperation on the continent.‖ 62 Knowledge transfer in tropical agriculture and vocational training has received the most focus. d Mercosur is an economic agreement between Argentina, Brazil, Paraguay, Uruguay, and Venezuela intended to promote free

trade. e Addis Ababa, Ethiopia; Dar es Salaam, Tanzania; Yaoundé, Cameroon; Kinshasa, Democratic Republic of the Congo; Lomé, Togo; Lusaka, Zambia.

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

EMBRAPA: At the opening session of the first Africa-South America (ASA) Summit in Abuja, Nigeria in November 2006, President Lula remarked that the Atlantic Ocean was no more than ―a river‖ between the two continents and that it was time to construct a bridge across this void 63. In fact, Brazil and Africa had been part of the same landmass over 200 million years ago and today the Lusophone countries from the two continents are still located at similar latitudes. Accordingly, the two regions share similar soil compositions and climatic conditions, facilitating the transfer and application of Brazil’s agricultural know-how to Sub-Saharan Africa, with many of the latter’s nations having requested Brazil’s support in agricultural development. The Brazilian Agricultural Research Corporation (Empresa Brasileira de Pesquisa Agropecuária or Embrapa) was founded in 1973 with the mission to promote sustainable development of Brazil’s agribusiness sector. Currently the world's leading tropical-research institution, Embrapa transformed the Cerrado or the Brazilian savannah, a 200 million hectare tropical area in the center of the country, from an area deemed unfit for farming in the 1960s to Brazil’s agricultural powerhouse. As of 2008, Brazil was the world’s third largest food exporter 64 (behind the EU and the U.S.) and the leading producer of a number of agricultural products, including coffee, oranges and sugar cane (see Exhibit 6). On the back of its tremendous success, Brazil is now looking to export its know-how in tropical agriculture. In 2006, Embrapa opened an office in Accra, Ghana with the intent of increasing agricultural productivity in African nations, whose agricultural sectors have been marked by declining crop yields, land degradation and poor infrastructure. Agro-forestry, livestock and agro-energy technologies developed by Embrapa’s 2,300 researchers and 38 research centers are being tested and adapted for use in the program’s 23 African partner nations65 (see Exhibit 7). SENAI: The National Service for Industrial Apprenticeship (Serviço Nacional de Aprendizagem Industrial or SENAI) was created in 1942 to support industrial development in Brazil and has since grown in global recognition for the quality of the vocational training it provides. Areas of training expertise range widely from smaller scale trades like leather and footwear, cooling and air conditioning, and gems and jewelry to large scale industrial know-how, including mining, telecommunications, and oil and gas. SENAI has also achieved tremendous scale and in 2007 alone, it provided close to 2 million man hours of training to nearly 20,000 companies and an additional 185 million student hours of professional training to individuals66. On the back of its domestic success, SENAI has worked with the ABC to set up 10 vocational training centers globally: of the five locations in Sub-Saharan Africa, all have been placed in the Lusophone countries. In the case of Angola, the Brazil-Angola Vocational Training Center supported the country’s reconstruction as 41 years of warfare came to a close. Between 1999 and 2006, the center trained more than 3,000 Angolans in fields such as diesel mechanics, civil construction, apparel making, and IT. Training methods and best practices were then transferred to the National Employment and Training Institute of Angola (Instituto Nacional de Emprego e Formação Profissional de Angola), which continues to provide training. Vocational centers have been similarly established in the other four Lusophone countries on a smaller scale, with the intent of cultivating a critical mass of skilled labor to contribute to the development of the social and physical infrastructure of the respective economies.

ECONOMIC TRADE The Lula administration also put into place a number of financial initiatives to promote deeper economic relations between Brazil and the Lusophone African nations. Over the course of Lula’s first term between 2003 and 2007, Brazilian exports to Lusophone Africa quintupled while Brazil’s imports 9

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

from the region grew even more dramatically by more than 80 times (see Exhibit 8), albeit from a much lower base. Since 1991, the Brazilian Ministry of Development, Industry and Foreign Trade (Ministério do Desenvolvimento, Indústria e Comércio Exterior) has had in place an Export Stimulus Program (PROEX) intended to promote the search for new markets for Brazil’s domestic products. In 2007 alone, $194.4 million of funding was provided in support of $2.3 billion of exports to Africa 67. To additionally support infrastructure-building in the Lusophone African countries while promoting Brazilian exports, the Brazilian National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social or BNDES) provides lines of credit for purchases of Brazilian goods and for local development projects. Due to lack of sufficient collateral in the other Lusophone economies, as of 2008, Brazil has only authorized credit lines for Angola, which uses its oil reserves to backstop its borrowings. However, discussions are ongoing for extension of credit lines to São Tomé and Príncipe for the purchase of aircraft and to Mozambique for agricultural equipment. In 2005, BNDES earmarked a 3-year $580 million line of credit to Angola 68 for the purchase of buses and police cars, as well as for the completion of the hydroelectric dam in Capanda, a project which had begun in 1984 but had been stalled by the civil war. The dam had been the first Angolan project awarded to Brazilian construction conglomerate, Odebrecht. The dam’s achievement of fully operational capabilities in July 200769 marked a significant milestone for Angola’s post-war reconstruction. BNDES followed up in 2006 with an additional $1.5 billion credit line to Angola for the purchase of infrastructure equipment, including sugarcane-based ethanol processing plants, an area of Brazilian expertise. By June 2008, half of the funds had been contracted, $300 million of which had been disbursed70. BNDES is also in the final stages of analyzing a potential $70 million project for the construction of a sugar mill in Angola.

The New African Frontier Since establishing independence from their respective colonial empires, the newly formed countries of Sub-Saharan Africa had been notoriously marked by famine, disease epidemics, civil warfare, corruption, underdevelopment and decline. As of 2004, Sub-Saharan Africa accounted for 34 of the 49 Least Developed Countriesf designated by the UN, with the list including all five of the Lusophone African nations. Through the end of the 20th century, Sub-Saharan Africa captured a great deal of attention from the international aid community but received minimal interest from foreign institutional investors. However, in the past decade, international perception of Sub-Saharan Africa has slowly shifted from it serving as the last battleground in the fight against abject poverty to the latest frontier in global capitalism. The headline story has been the region’s robust economic growth. After decades of stagnation and economic volatility, GDP growth in Sub-Saharan Africa has consistently outpaced average world growth since the beginning of the 21st century, with growth amongst the Lusophone economies surging even higher (see Exhibit 9). Much of the growth can be attributed to the commodities boom (see Exhibit 10),

f Definition of Least Developed Country based on three criteria: low income (less than $900 estimated GDP per capita, three year

average), weak human resources (a composite index based on health, nutrition and education indicators) and high economic vulnerability (a composite index based on indicators of instability of agricultural production and exports, inadequate diversification and economic smallness).

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Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

but the promising petroleum and mining sectors are only part of the Sub-Saharan growth story. On account of increased political and economic stability, the region currently presents a healthier business environment than in any other time in history. Armed conflict in the Sub-Saharan has been on the decline, dropping from a post-independence peak of 16 recorded conflicts in 1998 to a low of 7 in 2005 71. Within the Lusophone region, Mozambique has not experienced warfare since the resolution of its 15-year civil war in 1992 and after 41 years of violence, Angola is finally at peace, with presidential elections scheduled for September 2008 and May 2009. Guinea Bissau and São Tomé and Príncipe have similarly resolved domestic tensions following brief military coups in 1999 and 2003, respectively. Meanwhile, Cape Verde has remained one of the most politically stable countries in Sub-Saharan Africa since independence. Macroeconomic trends have also seen significant improvement. More disciplined management of fiscal expenditures has led to a general decline of government budget deficits (see Exhibit 11) and in the case of oil-exporting countries, such as Angola, governments are now running budget surpluses. External debt has also come down significantly within the Lusophone region, dropping from an average of 164.4 percent of GDP in 2002 to 84.0 percent in 2007, albeit largely driven by international debt relief. Lastly, although still relatively high by international standards, inflation is now being kept under much better control (see Exhibit 12), including in Angola, which despite surging oil prices, has seen inflation drop from more than 4,000 percent in 1996 to just 12 percent in 200772. To foster a more investor-friendly environment, Angola enacted its Basic Law for Private Investment in 2003, providing for equal treatment of foreign investors, simplification of the investment application process and guarantees of the repatriation of profits for officially approved foreign investment. Similar investment legislation has been in place in the other Lusophone countries since the 1990s. In recent years, both Cape Verde and Mozambique have also put in place tax incentives for foreign investments, including tax holidays for the first five years. Nevertheless, the Lusophone African countries continue to present a lot of challenges for operators looking to bring their businesses to the region (see Exhibit 13). All of the countries continue to lie within the bottom quartile of countries surveyed in the World Bank’s Ease of Doing Business index, which takes into account factors such as investor protection, enforcement of contracts and employing workers, particularly skilled labor. The region continues to suffer from poor connectivity both within the respective countries and with other states, due to poor transportation infrastructure, unreliable power networks characterized by low electrification rates and high tariffs, and low telephone, mobile and Internet penetration. Interestingly, the first two characteristics, which serve as deterrents for doing business in the region, are the same factors which create attractive development opportunities in the respective countries’ construction and energy sectors (as described in the next section). Within Lusophone Africa, there is limited scope for raising funds for productive investment. Banks are among the smallest in the world and not only does the limited scale act as a deterrent to undertaking large investments, but the absence of scale economies also result in higher overhead costs, which get passed through to the borrower. Moreover, due to weak contractual frameworks, limited protection of property rights, and economic and political volatility, interest rates are higher than in other parts of the world. In terms of capital markets, only Cape Verde and Mozambique have stock exchanges, though as of 2007, only 3 stocks were listed in the former; despite a 2006 announcement by the Angolan government that it was in the process of opening an exchange, one has yet to materialize.

11

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Lastly, the lack of credible institutions remains a pressing concern. In countries such as Angola and Mozambique, corruption pervades all levels of society, with particularly low transparency and weak governance within the extractive industries. Even in São Tomé and Príncipe, where commercial oil has yet to be discovered, its licensing auctions and concessions negotiations have been shrouded in rumors of unfair practices73. Anti-corruption and law enforcement systems are severely underdeveloped and in the case of Guinea-Bissau, these institutional inadequacies may be leading to the emergence of a narco-state. Of the Lusophone African countries, only Cape Verde is well perceived in terms of controlling corruption and is actually performing even better than Brazil along this dimension.

Foreign Direct Investment Opportunities in Lusophone Africa Within Lusophone Africa, a number of industries had been identified by Minister Amorim as presenting the most promising potential for Brazilian foreign direct investment: oil and gas, mining, construction and energy. The capital intensive nature of each of these sectors will require significant investment and resources from potential partners, which effectively limits the pool of candidates to just the largest industrial players in Brazil. Beyond their demonstrated successes within the Brazilian home market, a few of the companies have also maintained a presence in Africa for decades. Petrobras has been investing in Angola’s oil and gas sector since 1979 while conglomerates Odebrecht and Andrade Gutierrez have been operating within the country’s construction sector since 1984. Significant opportunities now exist for these incumbent players to increase their presence in the region, as well as for new players to enter into the market.

EXTRACTIVE INDUSTRIES: Natural resources undoubtedly serve as one of the most significant drivers of foreign interest and investment in Sub-Saharan Africa. With the exception of Cape Verde, all of the Lusophone countries, have discovered either petroleum reserves and /or mineral deposits (see Exhibits 14, 15 and 16). In both, the oil and gas and mining industries, Brazil has significant expertise and is commercially producing all of the minerals which are currently being mined in the Lusophone African countries. Angola: Angola has vast mineral resources, the full extent of which is still unknown as basic geological surveys have been conducted in only about 40 percent of the country’s territory. Restoration of land security following the cessation of war now allows for further exploration, but Angola continues to prioritize its petroleum and diamond sectors. Undeveloped mineral resources included copper, gold, gypsum, iron ore, lead, lignite, manganese, mica, nickel, peat, phosphate rock, silver, and zinc 74. Angola’s economy is notoriously dominated by its offshore oil sector, which presently accounts for 60 percent of GDP and 95 percent of exports. While all other industries had deteriorated over the course of 41 years of warfare, the petroleum sector was shielded from harm on account of its offshore position. Reserves have been further bolstered by a series of major discoveries since 1996 and recoverable reserves are estimated to be up to 9 billion barrels as of 2007; in January 2007, Angola became a member of OPEC. As of mid-2008, Petrobras is serving as a non-operating partner in three oil blocks and as an operator of another three blocks. While exploration and production continues to be dominated by four of the five leading oil companies—Chevron (US), ExxonMobil (US), BP (UK) and Total (France)--the government is encouraging new entrants to develop more marginal fields. The diamond industry is Angola’s second largest export commodity after oil. Since UNITA rebel forces relinquished control of the north-eastern diamond zones following the end of the war, new exploration has boosted output dramatically, with the country’s alluvial (river-borne) and kimberlite deposits estimated at 400m carats and 50m carats, respectively. In 2007, Angola produced 9.7 million 12

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

carats of diamonds, worth $1.1bn, making it the world's fifth-largest diamond producer by value and the third-largest in Africa after Botswana and South Africa. ENDIAMA, the government-owned diamond company, is the exclusive concessionary of diamond mining rights and serves as a partner to international operators in all diamond ventures. Guinea-Bissau: Oil had been discovered offshore, near the frontier with Senegal, as early as 195875, but it was not until the early 1980s that Guinea-Bissau received funding to conduct further seismic surveys. A maritime border dispute with Senegal was resolved in 1993, though it appears the new frontier may have deprived Guinea-Bissau of the area with the most promising potential. Nevertheless, petroleum exploration continues under concessions whereby the foreign operators fund all exploration costs up until commercial development is authorized, at which point the state oil company, Petrolífera da Guiné Bissau (PetroGuin), bears some of the cost. Though proven reserves have yet to be confirmed, some oil industry experts believe that Guinea-Bissau has the capacity to produce 30,000-60,000 barrels/day76, which is less than 1/30th of Angola’s current production capacity but would still bring significant windfall to Guinea-Bissau’s challenged economy. Bauxite deposits had also been discovered in the 1950s but exploitation is still yet to take place. Reserves are estimated to exceed 166 million tons, with a total life of 25 years. Mozambique: Mozambique’s mining and petroleum sectors are significantly underdeveloped on account of the country’s 15-year civil war, during which the economy was effectively closed to local government and foreign direct investment. Despite the country’s large reserves of nonrenewable natural resources, including natural gas and coal, the respective sectors operate well below potential in terms of production and exports (see Exhibits 15 and 16). As of 2006, the mining and petroleum sectors collectively contributed just 1.6 percent to GDP77. Mozambique’s largely unexplored natural resources are attracting substantial foreign direct investments, which should help develop the respective industries. The largest coal reserves in the country are found in Moatize, with at least 6 billion tons of coal deposits. Lack of transport links to the region has severely limited output to date. After more than 10 years of unsuccessful attempts at attracting a company to develop the mine, in 2006, the Mozambique government accepted a $122.8 bid from leading Brazilian mining corporation, Companhia Vale do Rio Doce (Vale). By the time production comes online in 2009, Mozambique is expected to become the second-largest coal producer in Africa. Mozambique’s first natural gas field has been in operation since 2004 and the majority of the gas is being exported to South Africa via a pipeline constructed by South African operator, Sasol, the dominant player in the sector. In 2007, the pipeline exported 122 million gigajoules of gas, and following the completion of an expansion project, capacity is expected to increase to 183 million gigajoules by 2010. For new entrants into the market, gaining access to the pipeline is critical. São Tomé and Príncipe: While no mineral wealth has been discovered in São Tomé and Príncipe, the country has established two large offshore areas for petroleum exploration: the joint exploration area established in 2001 with Nigeria, and an exclusive economic zone, which is fully owned by STP. The first licensing round in April 2003 resulted in the awarding of just one contract for $49.2 million while a subsequent round in December 2004 proved more successful, with STP’s share totaling $113.2 million for five contracts78. While reserves are estimated to be as high as 1.0–1.5 billion oil equivalent barrels79, proven commercially viable reserves have yet to be discovered 80 in either the joint area or the exclusive economic zone and oil production is not expected before 2011. As of 2007, the exclusive zone was still

13

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

not available for bidding but future licensing rounds will present further opportunity for foreign investment.

ENERGY Of Lusophone Africa’s infrastructure shortcomings, the deficiencies of the energy sector are the most severe. Excluding South Africa, generation capacity in all of sub-Saharan African is just 28 GW 81, roughly the same as Argentina’s, though covering an area of more than 8 times the size and with more than 20 times the population. Electrification rates are also significantly lower than in other low-income countries and of the areas with electricity access, service is often costly and unreliable. In comparison, electricity generation has experienced significant progress in Brazil in the last few decades, particularly in the field of renewable energies. By 2007, installed capacity had reached 98 GW, with renewable energy comprising 45 percent of total, significantly higher than the world average of 14 percent82. Angola: Despite installed hydroelectric capacity and thermal capacity of 205 MW and 412 MW, respectively, at the time of the 2002 ceasefire, the war-related damage incurred by the power plants and the poor condition of transmission and distribution lines rendered available generating capacity at just 67% and 53%, respectively, of total83. A heavy governmental push to rehabilitate the network has since expanded capacity to 1,160 MW as of 2007, comprised of 77% hydroelectric power and 33% dieselgenerated84. Despite the rapid progress, capacity still falls significantly short of Angola’s rich hydroelectric potential estimated at 18,000 MW. Moreover, the country’s electricity grid remains weak and poorly integrated, with heavy energy losses. Less than 20% of Angola's population has access to electricity and distribution is highly uneven, as 75% of national output is consumed in Luanda alone. Yet, only around one-quarter of the city's residents can rely on a regular power supply. On account of frequent power outages, 68% of businesses are forced to rely on their own generators for power, the highest recorded rate in Africa. In April 2007, the Angolan government announced plans to invest $2 billion in electricity infrastructure but significantly more resources will be needed to bring the system up to speed. Cape Verde: Though available in most parts of the islands, electricity in Cape Verde is currently among the top three most expensive in Africa 85, leading 60% of businesses to cite access to electricity as their main obstacle to investment86. Due to the lack of inter-island connectivity, electricity grids on the individual islands are entirely isolated from one another and each requires a separate power generation plant. Interconnection of the grids under a centralized generation source would create economies of scale and lower production costs. Moreover, the lack of its own fossil fuels source and increasing prices on the international market leave Cape Verde vulnerable to rising energy costs. The Government’s stated objective is to increase the share of renewable energy to 50% by 2025 87 through the development of wind, solar, kinetic or thermal technologies and the concurrent modernization of the electricity distribution system to absorb the new energy source. Guinea-Bissau: The country’s electrification rate is a mere 12%, with the cost of power at least five times higher than in neighboring Senegal88. Despite installed capacity of 25 MW as of 2000, deterioration of the electricity transmission and distribution network has translated into huge losses of electrical energy, limiting current generation capacity to 5.5 MW on average and an even lower 1.5 MW in the capital city of Bissau89. The state power utility, EAGB, is poorly managed and though the government has committed to bringing in private sector operators as management contractors, little progress has been made. The extensive network of small rivers in the southwest of the country presents high potential for hydroelectric generation and in December 2006, the Chinese government agreed to finance the construction of the Saltinho Rapids hydroelectric dam, with an expected output of 20 MW. Opportunities exist for other foreign operators to enter and install further hydroelectric capacity. 14

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Mozambique: Despite Mozambique’s abundant coal and natural gas reserves and significant hydroelectricity capacity, its people continue to struggle with non-electrification because most of the country’s energy resources are exported rather than retained for domestic consumption. While the Cahora Bassa dam and hydroelectric power station on the Zambezi River, Zimbabwe’s primary source of power generation, generated an impressive 14.7 terawatt hours of electricity in 2006, a mere 8% of the country’s population had access to electricity that same year. Two-thirds of the generated power had been sold instead to the South African state electricity company, Eskom. To address the country’s appalling electrification gap, the state electricity company, Electricidade de Moçambique (EDM), aims to have 74 of the country’s 128 districts connected to the national grid by the end of 2008. In light of Mozambique’s access to hydro, coal and natural gas resources, there remains tremendous opportunity for the entrance of foreign operators to oversee and invest in a variety of generation capacity expansion projects based on the different power sources. São Tomé and Príncipe: Since independence, the supply of electricity and water in São Tomé and Príncipe has been controlled by the Empresa de Agua e Electricidade (EMAE), which in the 1980s became a byword for inefficiency90. As of 2004, an estimated 60%91 of households had access to electricity but supply is erratic, with the poor state of the national grid and illegal connections resulting in 40% of output being lost in transmission92. In 2005, Portuguese firm, Synergy Investment, took over management of EMAE and entered into a 35-year concession for the islands’ Contador hydroelectric plant, responsible for 20% of generated power. The remainder of the islands’ electricity is currently produced thermally. Though Synergy has committed to modernizing the plant and to doubling its production capacity, there remains significant scope for the entrance of another foreign player to grow capacity through further investment in hydroelectric and potential development of wind power.

CONSTRUCTION Due to a combination of war-related destruction and sustained underdevelopment by legacy governments, infrastructure in the five Lusophone countries is generally in poor condition. Even setting aside construction for residential, commercial or industrial use, and simply focusing on large-scale public infrastructure, there are significant opportunities for foreign private sector participation. Angola: Angola’s transport infrastructure suffered tremendous decline as a result of more than 40 years of warfare. While in 1994 the road network still totaled 75,000 km, by 2001, it had shrunk to 51,429 km93; by the end of the war in 2002, little of the paved network remained outside of the main cities. Efforts are being made to clear the remainder of the estimated 7 million landmines leftover from the war and to rebuild roads and bridges such that freight traffic will be redirected back from air to road. In April 2007, the government announced a $2 billion work plan to construct 5,300 km of roads by the end of 2008, rising to 14,000 km and 120 new bridges, by the end of 2011. Much work remains to be done, however, in a country of Angola’s size. Though characterized by inefficiency and high costs, the port of Luanda continues to receive most of the country’s imports, handling 5.6m tons of cargo in 2007, up from 3.19 million tons in 2004. Heavy congestion due to years of underinvestment and the sharp rise in traffic in recent years has led to an average three-month delay in importing goods. The port is currently undergoing a $130 million rehabilitation, and in late 2008, work is due to start on a new commercial port in Baia do Dande, 50 km north of Luanda, which will have more than twice Luanda's existing capacity. As Angola’s trade volumes continue to grow, there will be a need for ongoing maintenance of existing facilities, as well as the possibility of building additional ports to satisfy traffic demand.

15

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Cape Verde: Cape Verde spends approximately 15 percent of annual GDP on infrastructure, significantly higher than the spend of most African countries. As such, unlike the other Lusophone African countries, which have a dire need for infrastructure improvement, Cape Verde already has relatively high road density, with close to three-quarters of the network paved. However, Cape Verde’s policy of extending the network to even low-density areas may have raised maintenance costs to an unsustainable level such that nearly 70 percent of the roads have since been allowed to deteriorate to a poor state. Scope for entry of foreign construction companies would come not from new builds but from maintenance. Guinea-Bissau: Already starting off at a weak base, much of the country’s infrastructure had been destroyed during the 1998-99 civil war. Although roughly half of all tonnage is moved by road, only 10% of roads are paved, links to the south are extremely poor and many routes are impassable during the rainy season. The World Bank and Chinese government made financial contributions to the rehabilitation of the road network in 2006 and 2007, respectively, but there remains significant scope and need for investment in Guinea-Bissau’s road infrastructure. Mozambique: At the end of Mozambique’s 30-year war period in 1992, only 10 percent of the country’s roads were reported to be in good condition. Primarily funded by donors, rehabilitation of the national road network has been a priority since the early 1990s. Yet, less than a third of the country’s roads are paved and on average, only 41 percent of the population has access to a road, with the percentage dipping as low as 11 percent in rural zones. Mozambique’s only privately operated toll road, the Maputo-Witbank highway, opened in 2000 and provides a direct route to South Africa’s industrial heartland near Johannesburg. Construction of other private road facilities in the area will additionally facilitate crossborder traffic while allowing for private sector operators to gain from their investments. São Tomé and Príncipe: Shipping routes are of particular importance to an island nation. However, maritime traffic to and from São Tomé and Príncipe has been hindered by the lack of a deepwater port as the shallow water conditions at the main port of São Tomé city are unsatisfactory for modern shipping. In June 2007, the government signed a Memorandum of Understanding with a French transport company, Terminal Link, to construct a deepwater port on São Tomé island, at an estimated cost of US$400m94. Even as the new port comes online, São Tomé and Príncipe would benefit from further investment in the country’s port system in order to capitalize on its strategic location in the Gulf of Guinea, in serving as a transshipment point for container ships going to and from Central and West Africa. In addition, the islands’ road network is very limited, with just three highways, and is not wellpreserved, with the post-independence government lacking the institutions and resources to perform ongoing maintenance. Between 1999 and 2003, only 14% of the resources estimated for road maintenance was provided and decades of neglect have left close to 26% of paved roads in a poor state 95. With no development projects in the pipeline, there remains tremendous scope for construction investment in the future.

The Brazilian Multinational Corporation In his address to the Portuguese Industrial Association in 2003, President Lula remarked that "It is time for Brazilian businessmen to abandon their fear of becoming multinational businessmen," in reference to the historic reluctance of Brazilian firms to invest and expand overseas and the common belief amongst Brazilian corporations that investing abroad is unnecessary and / or unfeasible 96.

16

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

In the past, there had been a tendency for FDI to flow out of the country only when conditions in the home market were poor97, which may explain the timing of the arrival of the first Brazilian corporations in Lusophone Africa. In search of alternative sources of oil in the wake of the 1973 and 1979 global oil crises, Petrobras made its first investment in Angola in 1979. Construction conglomerates, Odebrecht and Andrade Gutierrez, were similarly reacting to crisis back home when they entered the Angolan market in 1984. Following the ―glorious years‖ of the megaproject (1940-1970), during which Brazil had committed to elevating its infrastructure to international standards, public works projects had dried up within the country. Accordingly, Odebrecht and Andrade Gutierrez saw international expansion ―simply as a means of survival.‖98 Perhaps an anomaly, Brazil’s FDI outflows exceeded inflows for the first time in history in 2006. By 2007, the trend had reversed once again (see Exhibit 17). FDI outflows as a percentage of gross fixed capital formation was still only 3 percent, compared with 7.7 and 15.4 percent for the BRIC countries (excluding Brazil) and Asian emerging economies, respectively 99. Moreover, while FDI inflows to Brazil represented 1.75 percent of world totals in 2007, outflows represented merely 0.3 percent.

The Brazilian Opportunity Cost Brazilian firms looking to expand abroad in June 2008 would have to accept the high opportunity cost of foregone investments within the Brazilian home market. At the time, Brazil was the 10th largest economy in the world in terms of GDP, having averaged annual growth of 3.4% since 2000 and was expecting a further 4.75100 percent of growth for fiscal year 2008. Macroeconomic prudence imposed by the Cardoso administration (1995-2002) has led Brazil to greatly distance itself from its image in the late 1980s and early 1990s as a country characterized by meteoric inflation rates, economic uncertainty, and fiscal irresponsibility. As of 2007, inflation has fallen to 4.5 percent, down from a high of 2,477 percent in 1993101. Net public debt as a percentage of GDP had decreased from 59.6% in 2002 to 42.2% in 2008, while government budget deficit had declined to 2.1% of GDP from 4.2%. As electricity consumption continues to increase and the government is committed to growing capacity to meet demand, the energy sector is bound to see robust growth. Meanwhile, recent milestones in the extractive and construction industries have increased the attractiveness of the sectors’ opportunities.

EXTRACTIVE INDUSTRIES Faced with the failure to find substantial onshore reserves since Brazil’s first commercial oil discovery in 1941, Petrobras created The Oil Research and Development Center (O Centro de Aperfeiçoamento e Pesquisas de Petróleo or Cenap) in 1957 and began investing heavily in developing technologies for offshore drilling. By 1986, Petrobras had broken the world record for deep sea drilling, drilling at 1,200 meters below sea level, followed in 1988 by the record for deep sea oil extraction, at 492 meters below sea level102. Today, Petrobras is an undisputed world leader in deep offshore exploration and production technologies. In November 2007, Petrobras announced what might turn out to be the largest deepwater oilfield discovery in history in the Tupi pre-salt field in Brazil’s Santos Basin, off the coast of Rio de Janeiro. Potential reserves in the field are estimated at 5-7 billion barrels, placing Tupi on par with Norway’s proven oil reserves, though officials believe that total offshore reserves can reach up to 50 billion barrels103. A find this substantial could propel Brazil to the ranks of the OPEC producers but realizing Tupi’s full potential can prove to be very technologically challenging. Not only are the fields positioned over 185 miles away from the coast, but they are also located four miles below sea level, beneath a three17

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

mile layer of salt deposits, which must be penetrated in order for wells to be drilled. Successful exploitation of the discovery will require the development of innovative technology as well as sufficient financing and skilled personnel to support it.

CONSTRUCTION In January 2007, the Brazilian government launched the Growth Acceleration Program (Programa de Aceleração do Crescimento or PAC) to promote economic growth. Five main objectives were set for the 2007-2010 period, the first of which was investment in Brazilian infrastructure. In its first year, an overwhelming 54.6% of the R$14.7 billion (US$8.3 billion) budget was allocated to the Ministry of Transport, an indication of the importance that was being placed on infrastructure building in the country. This commitment is a reversal of the trend of the past two decades which had seen public spending on infrastructure rapidly decline: in 2001, levels of infrastructure investment corresponded to half of what they had been in 1981, largely driven by contraction of public sector spending 104. Throughout the 1990s, budgetary shortfalls often led to disruption in payments to contractors in the country’s road sector and by 2005, less than a quarter of national roads were officially deemed in good condition.105 In October 2007, Brazil was named as the host nation of the 2014 World Cup, presenting the country with a tremendous opportunity to follow in the footsteps of other emerging economies (China to host Olympics in 2008; India to host the Commonwealth Games in 2010) in showcasing their recent economic successes through an international sporting event. With the realization that the biggest challenge to holding a world-class tournament would be to bring the country’s infrastructure up to international standards, the Brazilian government has set aside R$24 billion (US$13.5 billion) to cover future investments related to stadium building, urban transport and airport and port infrastructure. Each of the host cities will also require upgrades along a number of dimensions, including urban mobility, hotel capacity, energy, security, telecommunications and sanitation.

ENERGY Despite abundant natural resources for electricity generation, energy security continues to be a pressing issue in Brazil and the sector presents tremendous opportunity for growth. Brazil is the world’s second largest producer of hydropower, after Canada and in the 1990s, more than 90% of the country’s electricity was dependent on hydroelectric generation 106. Yet as of 2002, only about 25 percent 107 of the country’s total hydropower potential had been captured and in 2001, a severe drought led to a substantial electricity shortage, which eventually led to power rationing. In response, BNDES launched the Programme of Incentives for Alternative Electricity Sources (Programa De Incentivo Às Fontes Alternativas De Energia Elétrica or PROINFA) in 2002. R$6 billion (US$3.4 billion) were set aside to support the incentive program, intended to encourage operators to focus on renewable energy sources to introduce an additional 3,300MW of capacity by 2008, to be equally divided among wind, biomass (ethanol) and hydropower. By mid-2007, renewable energy sources represented 45% of total power produced, significantly higher than the world average of 14%108. One highly promising but also highly controversial project is the Belo Monte hydroelectric dam in the northern part of Brazil, which would bring online an expected capacity of 11,233 MW, third in size only to China’s Three Gorges Dam and Brazil’s own Itaipu. Initial feasibility studies started back in 1975 but progress has been stalled due to significant concern over the negative impact that the dam would have on the surrounding environmental and indigenous peoples living in the area. In December 2007, work began on the Environmental Impact Assessment, with the expectation that a license may be granted in the next few years. 18

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 1 Brazilian IBOVESPA Index Performance

May 20

Source: Bloomberg.

19

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 2 Map of Lusophone Africa and Brazil

Source: Adapted from www.sjsu.edu/wll/pics/Map_LusophoneWorld.png

20

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 3 Socioeconomic Profiles of Lusophone Africa and Brazil

Data Capital City Currency Exchange Rate (USD/Foreign) Independence Surface Area (km 2) Agricultural Land (% of land area) Population (millions) Population Growth GDP Per Capita (US$) Urban Population Adult Literacy Rate Access to Water (% of population) Human Development Index (out of 177)

São Tomé and

as of

Brazil

Angola

2008 2008 06/30/08 -

Brasília real 1.60 1822

Luanda kwanza 74.78 1975

8,514,877 31% 189.6 0.9% 8,704.0 86.0% 88.6% 97.0% 70

1,246,700 46% 16.8 2.9% 5,008.4 57.0% 67.4% 50.0% 162

2008 2008 2008 2008 2008 2008 2003 2008 2005

Príncipe

Cape Verde Guinea-Bissau Mozambique Praia Bissau escudo W. African CFA 68.98 408.23 1975 1974 4,033 23% 0.5 0.9% 3,093.4 60.0% 76.6% 87.0% 102

36,125 58% 1.7 2.1% 540.4 30.0% 42.4% 62.0% 175

Maputo metical 23,840.00 1975

São Tomé dobra 14,164.00 1975

799,380 62% 21.0 2.4% 478.1 37.0% 47.8% 47.0% 172

964 57% 0.2 1.6% 1,076.6 61.0% 84.9% 89.0% 123

Source: World Bank, World Development Indicators; International Monetary Fund; CIA Factbook; United Nations Development Programme

21

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 4 Presidential Visits to Africa (1979-Q2 2008)

João Batista Figueiredo (1979-1985)

Luis Inácio “Lula” da Silva (2003-Q2 2008)

November 1983

First Term

Algeria Cape Verde Guinea Nigeria Senegal

November 2003

Angola Mozambique Namibia São Tomé and Príncipe South Africa

May 1986 Cape Verde January 1989 Angola Fernando Collor (1990-1992)

December 2003

Egypt Libya Cape Verde

José Sarney (1985-1990)

Itamar Franco (1992-1994)

-

Fernando Henrique Cardoso (1995-2002) November 1996 July 2000

July 2004

Gabon São Tomé and Príncipe April 2005

Angola South Africa Mozambique February 2006

November 2006

Cameroon Ghana Guinea-Bissau Nigeria Senegal Algeria Benin Botswana Nigeria South Africa Nigeria

Second Term October 2007

April 2008

Angola Burkina Faso Republic of Congo South Africa Ghana Mozambique

Source: Itamaraty: Ministério das Relações Exteriores (Brazilian Ministry of External Relations); Vizentini, Paulo Gilberto Fagundes. Relações Internacionais do Brasil : de Vargas a Lula. São Paulo, SP, Brasil: Editora Fundação Perseu Abramo, 2003.

22

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 5 Brazilian Technical Cooperation Activities 300 256

Number of Projects

250

200

181 153

150

100 69 50

23

19

2003

2004

0 2005

2006

2007

2008

Source: Agência Brasileira de Cooperação (Brazilian Cooperation Agency)

23

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 6 Brazil Agricultural Production (% of world total)

Tobacco Pineapples Dry Beans

Papayas

1990 2000

Soybeans

2008

Oranges Coffee Sugar cane 0%

10%

20%

30%

40%

(Amounts in million tons) 2008

2000

1990

World Dry Beans Coffee Oranges Pineapples Sugar cane Papayas Soybeans Tobacco

Rank

Amount

CAGR

Amount

CAGR

Amount

1 1 1 1 1 2 2 2

3.5 2.8 18.5 2.6 645.3 1.9 59.8 0.9

1.6% 4.9% (1.7%) 3.2% 8.8% 3.5% 7.8% 4.9%

3.0 1.9 21.3 2.0 327.7 1.4 32.7 0.6

3.1% 2.7% 2.0% 6.1% 2.2% 10.2% 5.1% 2.6%

2.2 1.5 17.5 1.1 262.7 0.5 19.9 0.4

Source: FAOSTAT, Food and Agricultural Organization of the United Nations

24

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 7 Embrapa Africa

Source: ―Embrapa Africa: A Brazilian Strategy to Support Agricultural Development in Africa‖, Empresa Brasileira de Pesquisa Agropecuária (Embrapa), February 19, 2010

25

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 8 Brazilian-Lusophone African Trade (US$, millions) $1,400

Brazilian Exports $1,200

São Tomé and Príncipe

$1,000

Mozambique $800 Guinea-Bissau $600 Cape Verde $400 Angola

$200 $0 2001

2002

2003

2004

2005

2006

2007

$1,000

Brazilian Imports $800

São Tomé and Príncipe Mozambique

$600

Guinea-Bissau $400 Cape Verde Angola

$200

$0 2001

2002

2003

2004

2005

2006

2007

Source: Ministério do Desenvolvimento, Indústria e Comércio Exterior (Ministry of Development, Industry and Foreign Trade)

26

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 9 GDP Performance GDP Growth (%) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2000

2001 World

2002 Brazil

2003

2004

2005

Sub-Saharan Africa

2006

2007

Lusopophone Africa

Data Nominal GDP (US$, billions)

São Tomé and

as of

Brazil

Angola

2005 2006 2007

881.8 1,089.2 1,366.2

30.6 45.2 61.3

Cape Verde Guinea-Bissau Mozambique 1.0 1.2 1.4

0.3 0.3 0.4

6.6 7.2 8.1

Príncipe 0.1 0.1 0.1

Source: World Economic Outlook Database April 2013, International Monetary Fund

27

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 10 Brent Crude Oil Price Performance

Source: Bloomberg.

28

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 11 Fiscal Balances (Fiscal Balances as % of GDP)

30% 20% 10%

1997-2002 2003

0% Angola

(10%)

Cape Verde

Guinea-Bissau

Mozambique

São Tomé and Príncipe

(20%)

2004 2005 2006

(30%) (40%) Source: World Economic Outlook Database April 2013, International Monetary Fund

29

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 12 Inflation 180.0% 160.0% 140.0% 120.0% 100.0% 80.0% 60.0%

40.0% 20.0% 0.0% (20.0%)

1980

1983

1986

Cape Verde

1989

1992

Guinea-Bissau

5000.0%

1995

1998

2001

Mozambique

2004 São Tomé and Príncipe

Angola

4000.0% 3000.0% 2000.0% 1000.0% 0.0%

1980

1983

1986

1989

1992

1995

1998

2001

Source: World Economic Outlook Database April 2013, International Monetary Fund

30

2004

2007

2007

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 13 Comparative Business Environments

WTO Accession Ease of Doing Business (out of 178) Protecting Investors (out of 178) Enforcing Contracts (out of 178) Employing Workers (out of 178) Corruptions Perception (out of 180) Informal Payments to Public Officials (% of Firms) Domestic credit to private sector (% of GDP) Value Lost Due to Electrical Outages (% of Sales) Telephone lines (per 100 people) Mobile phone subscriptions (per 100 people) Internet users (per 100 people)

Data

G-7

as of

Average

Brazil

Angola

2008 2008 2008 2008 2008 2006 2008 2006 2008 2008 2008

-

1995 122 64 106 119 80 NA 53.1% 1.6% 22 79 34

1996 167 51 176 172 158 46.8% 12.6% 3.7% 1 38 5

19 33 40 55 22 NA 146.9% NA 51 105 71

São Tomé and Príncipe

Cape Verde Guinea-Bissau Mozambique N/A 132 122 56 143 47 5.6% 59.9% 8.9% 15 57 20

1995 176 122 137 174 158 63.1% 4.9% 5.3% NA 34 2

1995 134 33 138 162 126 14.8% 18.3% 2.4% NA 20 2

N/A 163 122 115 176 121 NA 28.3% NA 5 32 16

Source: World Trade Organization; Doing Business 2008, World Bank and International Finance Corporation; Transparency International

31

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 14 Oil and Gas Sectors Crude Oil Proved Reserves

Petroleum Production

(billion barrels) Top 5, Sub-Saharan Nigeria Angola Sudan Gabon Republic of the Congo Total Sub-Saharan World Brazil

(thousand barrels / day)

Amount % of World World Rank 36 9 5 2 2

2.7% 0.7% 0.4% 0.2% 0.1%

10 18 23 32 33

57 1,332 12

4.3% 0.9%

16

Top 5, Sub-Saharan Nigeria Angola Sudan Equatorial Guinea Gabon Total Sub-Saharan World Brazil

(thousand barrels / day)

Amount % of World World Rank 2,169 2,014 480 359 248

2.5% 2.4% 0.6% 0.4% 0.3%

14 15 31 34 38

6,013 85,476 2,431

7.0% 2.8%

12

Top 5, Sub-Saharan Cote d'Ivoire South Africa Angola Equatorial Guinea Cameroon Total Sub-Saharan World Brazil

Amount % of World World Rank 50 49 31 26 17

0.2% 0.2% 0.1% 0.1% 0.1%

56 57 65 69 75

246 20,743 164

1.2% 0.8%

31

Proved Reserves of Natural Gas

Dry Natural Gas Production

Dry Natural Gas Exports

(Trillion Cubic Feet)

(Billion Cubic Feet)

(Billion Cubic Feet)

Top 5, Sub-Saharan Nigeria Angola Cameroon Mozambique Republic of the Congo Total Sub-Saharan World Brazil

Amount % of World World Rank 184 10 5 5 3

3.0% 0.2% 0.1% 0.1% 0.1%

7 40 47 48 54

220 6,212 12

3.5% 0.2%

36

Top 5, Sub-Saharan Nigeria Equatorial Guinea Mozambique Cote d'Ivoire South Africa Total Sub-Saharan World Brazil

Source: U.S. Energy Information Administration. Data as of 2008.

32

Petroleum Exports

Amount % of World World Rank 1,159 210 104 57 48

1.1% 0.2% 0.1% 0.1% 0.0%

23 45 51 58 61

1,640 107,670 446

1.5% 0.4%

36

Top 3, Sub-Saharan Nigeria Equatorial Guinea Mozambique

Total Sub-Saharan World Brazil

Amount % of World World Rank 726 158 97

2.1% 0.5% 0.3%

11 27 31

981 34,343 0

2.9% 0.0%

-

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 15 Coal Sector Recoverable Coal

Coal Production

Coal Exports

(Million Short Tons)

(Thousand Short Tons)

(Thousand Short Tons)

Top 5, Sub-Saharan South Africa Zimbabwe Mozambique1 Tanzania Nigeria Total Sub-Saharan World Brazil

Amount % of World World Rank

Top 5, Sub-Saharan

33,241 553

3.5% 0.1%

9 34

South Africa Zimbabwe

234 220 209

0.0% 0.0% 0.0%

46 48 49

34,852 948,000 5,025

3.7% 0.5%

15

Amount % of World World Rank

Top 5, Sub-Saharan

Amount % of World World Rank

278,017 2,983

3.7% 0.0%

8 42

South Africa Swaziland

63,814 524

6.0% 0.0%

7 31

Botswana Swaziland Niger

1,003 524 202

0.0% 0.0% 0.0%

47 54 57

Zimbabwe Mozambique Malawi

219 31 10

0.0% 0.0% 0.0%

35 54 57

Total Sub-Saharan World Brazil

283,084 7,414,697 7,288

3.8% 0.1%

33

64,598 1,067,214 84

6.1% 0.0%

43

Total Sub-Saharan World Brazil

Source: U.S. Energy Information Administration. Data as of 2008. 1 Mozambique’s recorded coal reserves as of 2008 exclude additional quantities from Moatize.

33

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 16 Production of Mineral Commodities

Petroleum Natural Gas Angola Guinea-Bissau Mozambique



Brazil



Iron

Bauxite

Coal

Copper 

















Limestone Manganese Marble

Nickel





Brazil





Gold

Granite





  











Phosphate

Quartz



Angola Guinea-Bissau Mozambique

Salt

Titanium

 

 





Source: U.S. Department of the Interior U.S. Geological Survey. Data as of 2008.

34

Diamonds Gemstones















Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Exhibit 17 Brazilian Foreign Direct Investment Flows (US$ in millions) 40,000 30,000

20,000 10,000 0 1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

(10,000) Inflows

Outflows

Source: UNCTADSTAT, United Nations Conference on Trade and Investment

35

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Endnotes 1

Silva, Luiz In{cio Lula, “Discurso de Posse do Presidente Luiz In{cio Lula da Silva,” Brazil, January 1, 2003.

2

Ibid.

3

International Monetary Fund, World Economic Outlook Database April 2013.

―Bovespa bate novo recorde a 73.516 pontos, com alta de 0,11%,‖ May 20, 2008, Valor Econômico, www.valor.com.br/arquivo/582563/bovespa-bate-novo-recorde-73516-pontos-com-alta-de-011, accessed April 15, 2013. 4

5

International Monetary Fund, World Economic Outlook Database April 2013.

6

UNCTADSTAT, United Nations Conference on Trade and Investment

7

Celso Luiz Nunes Amorim, interview by Revista CNI.

“Censo Demogr{fico 2000: Características da População e dos Domicílios: Resultados do universo,” Instituto Brasileiro de Geografia e Estatística (2000), www.ibge.gov.br/home/estatistica/populacao/censo2000/, accessed April 15, 2013. 8

Keith Somerville, Angola: Politics, Economics, and Society (London: F. Pinter Publishers; Boulder, CO.: L. Rienner Publishers, 1986), p.7. 9

Gerald J. Bender, Angola Under the Portuguese: The Myth and the Reality (London: Heinemann Educational, 1978), p.22-23. 10

11

Somerville, p. 1 3.

12

Ibid., p. 171.

13

World Bank, Angola: Oil, Broad-based Growth, and Equity, (Washington, DC: World Bank, 2007), p. 104.

14

World Bank, Angola, p. 11.

Tony Hodges, Angola: Anatomy of An Oil State (Lysaker, Norway: Fridtjof Nansen Institute; Oxford: James Currey; Bloomington: Indiana University Press, 2004), p.102. 15

16

Ibid.

17

World Bank, Angola, p. 12.

18

World Bank, Angola, p. 13.

19 20

EIU, ―Country Profile Angola 2008‖ (London: Economist Intelligence Unit, 2008), p. 23. Richard A. Lobban, Jr., Cape Verde: Crioulo Colony to Independent Nation (Boulder: Westview Press, 1995), p. 16.

K. David Patterson, “Epidemics, Famines, and Population in the Cape Verde Islands, 1580-1900,” The International Journal of African Historical Studies, Vol. 21, No. 2 (1988): p. 303-305. 21

22

23

Ibid., p. 292. ―Cape Verde: A Success Story,‖ African Development Bank (November 2012), p. 14.

Patrick Chabal et al., A History of Postcolonial Lusophone Africa (Bloomington, IN: Indiana University Press, 2002), p. 288. 24

25

36

African Development Bank, ―Cape Verde,‖ p. 1.

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Jørgen Carling and Lisa Akesson, “Mobility at the Heart of a Nation: Patterns and Meanings of Cape Verdean Migration,” International Migration Vol. 47, No. 3 (2009): p. 127. 26

27

World Bank, Migration and Remittances Factbook 2008 (Washington, DC: World Bank, 2008), p. 77

28

World Development Indicators, World Bank.

29

Ibid.

30

―Cape Verde: Selected Issues,‖ International Monetary Fund (Washington DC: IMF, June 9, 2008), p. 4

31

African Development Bank, ―Cape Verde‖ p. 11.

Joshua Forrest, Guinea-Bissau: Power, Conflict, and Renewal in a West African Nation (Boulder, CO: Westview Press, 1992), p. 13. 32

33

Ibid., p.14.

Christopher Cramer, “Can Africa Industrialize by Processing Primary: Commodities? The Case of Mozambican Cashew Nuts,” World Development Vol. 27, No. 7 (1999), p. 1252. 34

35

Rosemary E. Galli and Jocelyn Jones, Guinea-Bissau: Politics, Economics, and Society (London: F. Pinter, 1987), p. 26-

28. 36

Ibid., p. 38.

EIU, ―Country Profile São Tomé and Príncipe, Guinea-Bissau, Cape Verde 1996-7‖ (London: Economist Intelligence Unit, 1997), p. 52. 37

―Guinea-Bissau: New Hub for Cocaine Trafficking‖, United Nations Office on Drugs and Crime, Issue 5 (May 2008), p. 5. 38

39

―Guinea-Bissau: Fears of an Emerging Narcostate,‖ IRIN, February 27, 2007.

Luis B. Serapiao and Mohamed A. El-Khawas, Mozambique in the Twentieth Century: From Colonialism to Independence (Washington, D.C.: University Press of America, 1979), p. 20. 40

41

Barry Munslow, Mozambique: The Revolution and Its Origins (London; New York: Longman, 1983), p. 24.

United Nations Conference on Trade and Development, Mozambique: Investment Policy Review (Geneva: UNCTAD, April 2012), p. 21. 42

43

―Mozambique: African Economic Outlook,‖ African Development Bank and OECD (2008), p. 464.

Tony Hodges and Malyn Newitt, São Tomé and Príncipe: From Plantation Colony to Microstate (Boulder, CO: Westview Press, 1988), p. 18. 44

45

Ibid, p. 20.

Food and Agriculture Organization of the United Nations, “Exports – Commodities by Country,” accessed April 15, 2013. 46

47

EIU, ―Country Profile: São Tomé and Príncipe 2008‖ (London: Economist Intelligence Unit, 2008), p. 23.

Alonso Segura, “Management of Oil Wealth Under the Permanent Income Hypothesis: The Case of Sao Tome and Principe,” IMF WP/06/183 (2006): p. 5. 48

Paul Fagundes Visentini, “Prestige Diplomacy, Southern Solidarity or “Soft Imperialism”? Lula’s Brazil-Africa Relations (2003 Onwards),” Leiden: Africa Studies Centre (April 16, 2009): p.2. 49

37

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Robert William Fogel and Stanley L. Engerman, Without Consent or Contract. Technical Papers: The Rise and Fall of American Slavery (New York: Norton, 1992): p. 18-21. 50

51

Ibid., p. 45.

David Eltis, “The Volume and Structure of the Transatlantic Slave Trade: A Reassessment,” The William and Mary Quarterly, Third Series, Vol. 58, No. 1 (January 2001): p. 38-39. 52

53

Daily Times (Lagos), April 16, 1976.

Wayne A. Selcher, “Brazilian Relations with Portuguese Africa in the Context of the Elusive "Luso-Brazilian Community",” Journal of Interamerican Studies and World Affairs, Vol. 18, No. 1 (Feb., 1976): p. 55. 54

Tom Forrest, “Brazil and Africa: Geopolitics, Trade, and Technology in the South Atlantic,” African Affairs, Vol. 81, No. 322 (January 1982): p. 6. 55

56

Ibid., p. 8.

57

Visentini, p.3.

Luiz In{cio Lula Silva, “Discurso do Presidente da República, Luiz Inácio Lula da Silva, no jantar oferecido pelo senhor Presidente de Moçambique, Joaquim Chissano,” Maputo, Mozambique, November 30, 2003. 58

Cl{udio Oliveira Ribeiro, “Brazil’s New African Policy: The Experience of the Lula Government (2003–6),” World Affairs, Vol 13, No. 1 (Spring 2009): p. 84-5. 59

Guilherme de Oliveira Schmitz, João Brigido Bezerra Lima and Rodrigo Pires de Campos, “Cooperação Brasileira Para O Desenvolvimento Internacional: Primeiro Levantamento De Recursos Investidos Pelo Governo Federal,” Boletim de Economia e Política Internacional, No. 3 (July – September 2010): p. 39. 60

Brazilian Cooperation Agency, ―Brazilian Technical Cooperation: Agriculture, Food Security and Social Policies,‖ Rome, Italy, June 24, 2011. 61

Agência Brasileira De Cooperação, ―A Cooperação Técnica Do Brasil Para A África,‖ www.abc.gov.br, accessed April 15, 2013. 62

“Lula Pede Que Laços Com a África Sejam Aprofundados,” Terra, November http://noticias.terra.com.br/brasil/noticias/0,,OI1276542-EI306,00-Lula+pede+que+lacos+com+a+ Africa+sejam+aprofundados.html, accessed April 15, 2013. 63

64

30,

2006,

International Trade Statistics 2009, World Trade Organization, p.54.

Paulo Roberto Galerani and Claudio Bragantini, “Transfer of Tropical Agricultural Technologies from Brazil to African Countries,” African Crop Science Conference Proceedings, Vol. 8 (2007): p.1392. 65

66

Serviço Nacional de Aprendizagem Industrial – Departamento Nacional, Relatório 2007, (SENAI: Brasília, 2008), p 61-64.

―Programa Integração com a África: Relatório de Acompanhamento de Execução da Agenda de Ação,‖ Política de Desenvolvimento Produtivo 67

68

Comunicado Conjunto dos Presidentes da República Federativa do Brasil e da República de Angola, Ministério das Relações Exteriores, May 3, 2005. ―Angola’s Capanda hydroelectric dam opens this week,‖ www.macauhub.com.mo/en/2007/07/09/3331/, accessed April 15, 2013. 69

Macauhub,

July

―BNDES libera US$ 1,5 bilhão para Angola,‖ Valor Econômico, June www.valor.com.br/arquivo/584721/bndes-libera-us-15-bilhao-para-angola, accessed April 15, 2013. 70

71

38

Uppsala University, Uppsala Conflict Data Program.

9,

2007,

10,

2008,

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

72

International Monetary Fund, World Economic Outlook database April 2013.

73

EIU, ―Country Profile: São Tomé and Príncipe 2007‖ (London: Economist Intelligence Unit, 2007), P. 24.

74

―2008 Minerals Yearbook Angola,‖ U.S. Department of the Interior U.S. Geological Survey (September 2010)

75

Economist Intelligence Unit (São Tomé and Príncipe 1996-97), p. 55.

76

EIU, ―Country Profile Guinea-Bissau 2008‖ (London: Economist Intelligence Unit, 2008), p. 28.

77

EIU, ―Country Profile Mozambique 2008‖ (London: Economist Intelligence Unit, 2008), p. 39

78

African Development Bank (Sao Tome and Principe), p.6.

79

Ibid.

Gerhart Seibert, “São Tomé and Príncipe: 12 Oil Minister Since 1999, But Not A Single Drop of Oil Yet,” IPRIS Lusophone Countries Bulletin, no. 5 (March 2010), p. 16. 80

International Monetary Fund, Regional Economic Outlook: Sub-Saharan Africa (Washington DC: International Monetary Fund, April 2008), p. 74. 81

82

EIU, ―Country Profile Brazil 2008‖ (London: Economist Intelligence Unit, 2008), p. 14-15.

83

EIU, ―Country Profile Angola 2003‖ (London: Economist Intelligence Unit, 2003), p. 26.

84

EIU, ―Country Profile Angola 2008‖ (London: Economist Intelligence Unit, 2008), p. 15.

85

Cape Verde: The Road Ahead, African Development Bank (November 2012), p. 41.

86 87

―Republic of Cape Verde: Country Strategy Paper 2009-2012,‖ African Development Bank (September 2009), p. 13. Ibid., p. 14.

African Development Bank, ―Guinea-Bissau Results-Based Country Strategy Paper 2005-2009,‖ (November 2005), p. 7 . 88

89

Ibid., p.3.

90

Economist Intelligence Unit (São Tomé and Príncipe 1996-97), p. 25.

91

Economist Intelligence Unit (São Tomé and Príncipe 2008),p. 14.

92

Ibid.

93

EIU (Angola 2008), p. 13.

94

Ibid., p. 13.

95

African Development Bank (Sao Tome and Principe), p. 7.

96

―Outward FDI from Brazil: poised to take off?,‖ UNCTAD (December 7, 2004)

Roberto Magno Iglesias and Pedro da Motta Veiga, ―Promoção de Exportações via Internacionalização das Firmas de Capital Brasileiro,‖ (Rio de Janeiro: BNDES, 2002) . 97

André Almeida, Internacionalização de Empresas Brasileiras: Perspectivas e Riscos (Rio de Janeiro: Elsevier: Editora Campus, 2007), p. 7. 98

99 100 101

UNCTADSTAT, United Nations Conference on Trade and Investment International Monetary Fund, World Economic Outlook database April 2008. World Economic Outlook Database April 2013, International Monetary Fund. 39

Brazilian Foreign Direct Investment in Lusophone Africa: Q2 2008

Armando Costa, "A Trajetoria de Internacionalização de Petrobras na Industria de Petroleo e Derivados," História Econômica & História de Empresas Vol. XII, n.1 (2009): p.14. 102

103

"Preparing to spend a 'millionaire ticket' from offshore," Economist (September 3, 2009)

―How to Revitalize Infrastructure Investments in Brazil: Public Policies for Better Private Participation, Volume 1,‖ (Washington DC: World Bank, January 10, 2007). p. 17. 104

―Morrison, Mary; Fay, Marianne, ―Infrastructure in Latin America: Recent Developments and Key Challenges,‖ Volume 1, World Bank (August 31, 2005).p. vii. 105

Brazil: A Country Profile on Sustainable Energy Development (Vienna: International Atomic Energy Agency, 2006), p. 50. 106

107

Ibid., p. 51.

108

EIU, ―Country Profile Brazil 2008‖ (London: Economist Intelligence Unit, 2008), p. 14.

40