UAE promise investment in Brazil which will modernise favelas

The United Arab Emirates says it wants to pump more money into Brazil in the future, with investments focusing on the raw materials sector and infrastructure.

The total amount of investment proposed is quite remarkable: Around 100 billion reais (€16 billion; $17.4 billion) are to go to projects such as the restoration of grazing land, industrial development, the export of agricultural products, infrastructure projects and defense.

The investor is the sovereign wealth fund, Abu Dhabi Investment Group  (ADIG).

Possible modernization of favelas

Particular media attention has been paid to the idea of modernizing the lower-income metropolitan areas in the Baixada Fluminense region at the gates of Rio de Janeiro. Around 3 million people live there in slums, often under precarious conditions and poorly connected to the city center.

The talks between investors, the Brazilian government and the government of the state of Rio de Janeiro were about creating new housing possibilities in the favelas and connecting them better with the city center by means of subways and high-speed trains, Zayed bin Aweidha, the CEO of ADIG, told the O Estado newspaper. 

The Emirates’ idea has, however, a financial motivation as well: In the long term, the tickets bought by millions of passengers could generate revenue. “It is possible to restructure and connect up cities near Rio De Janeiro’s capital with roads, subways and high-speed trains,” Zayed bin Aweidha said. 

At the end of last year, there was even a personal meeting between him and Brazil’s President Lulu da Silva.

Enhancing UAE-Brazilian ties

The declarations of intention to invest fit in with a trend that has been emerging for several years.

“Around $2.5 billion have been invested in the Brazilian economy of late,” economic scientist Relipe Rodrigues from the think tank Fundacao Getulio Vargas (FGV) told DW. According to him, the investments were concentrated mainly on the research and energy transition sectors.

“Brazil is a country that is seen as central to the practical implementation of the energy transition. And we see a relationship between Brazil and the Arab countries that has matured,” he said. 

He said the two sides were now cooperating more because of this. According to him, Brazil had succeeded in keeping its old strategic partners and gaining new ones. He gave the examples of Brazil’s championing of the EU-Mercosur free trade deal on the one hand, and its recent extension of its economic ties with India on the other. 

Infrastructure and energy projects

At the end of last year, Brazil and the UAE signed two declarations of intent on the sidelines of the G20 summit in Rio de Janeiro that aim to put the investments on a joint basis.

According to the Brazilian government, the funds are to go toward strategic projects in Brazil — particularly in the areas of infrastructure and energy.

“There are big chances in Brazil,” Mahamad Mourad, the secretary-general of the Arab-Brazilian Chamber of Commerce (CCAB), told DW.

Important economic sectors, including infrastructure, licenses for ports and airports, renewable energies, the agriculture industry, real estate, defense and other areas, provide good opportunities for investment by the Abu Dhabi fund, Mourad said.

How realistic are the declarations?

The declared intention of modernizing the favelas, thus bringing them to a new level of development, awakens hopes. But there have been many such promises made in the past.

The hope that people in the slums would benefit from the new infrastructure put in place for the 2016 Olympic Games and the 2014 FIFA World Cup was mostly dashed. Memories are also still fresh of the corruption scandal involving the construction company Odebrecht, in which millions were paid in bribes in return for infrastructure construction projects. That has caused long-term damage to the public confidence in Brazil’s politicians.

But for large-scale projects to be realized, public support is also needed. Despite this, to this day, the scandal has not been drawn to a close by Brazilian justice authorities. The current government under President Lula da Silva has also shown little interest in doing so.

Bureaucratic and political obstacles

For the declarations of intent between the United Arab Emirates and Brazil to become reality, bureaucratic and political uncertainties must first be resolved, according to economic scientist Felipe Rodrigues. And, he said, Brazil has to think in the long term.

“Projects on this scale need security to go beyond the status of an announcement,” he said. “We are talking about projects that will take 15 to 20 years, or at the very least 10 years,” he said, adding that the biggest obstacles at present were of a bureaucratic nature.

The two sides are a step further advanced with joint mining projects. In January, the governments signed a declaration on cooperation in “projects of exploration, extraction, processing, refining and marketing of minerals as well as the transfer of Arab technology.”

That is a promising outlook for the two countries. 

“This agreement promotes innovation and competitiveness in the raw materials sector, especially for small and medium-sized companies, and thus paves the way for a more sustainable and globally integrated future,” said Brazilian Mining and Energy Minister Alexandre Siveira.

On paper, at least, the two sides seem to be drawing closer to each other. But now the partners must deliver on their promises.

This article was adapted from German.