Study: Brazil and Germany: A 21st-Century Relationship

21st Century economic development may hinge upon the ability of developed economies to combine their expertise with the dynamism of emerging markets. With this in mind, Brazil and Germany present many opportunities for fruitful bilateral trade and investment.

• Study: Brazilian and German Economic Relations (EN)
• Study: Brazilian and German Economic Relations (PT)

Over the last year, the Bertelsmann Stiftung’s Global Economic Dynamics project worked with a team of economists from Brazil’s Fundação Getúlio Vargas to investigate the current state of Brazilian – German economic relations, as well as potential opportunities moving forward.

The study Brazil and Germany: A 21st-Century Relationship Opportunities in Trade, Investment and Finance, authored by Andreas Esche, Samuel George, Dr. Thieß Petersen and Thomas Rausch from Bertelsmann Stiftung and Dr. Renato Flores, Dr. Antonio Carlos Porto Gonçalves, and Dr. Viviane Maria Bastos from Fundação Getúlio Vargas, is the result of the collaboration.

The study identifies significant areas of mutual interest between Germany and Brazil. In terms of comparative advantages, the Brazilian export portfolio features precisely those raw materials required by German manufacturers —and which are largely absent in the German market. Conversely, German producers specializing in high-tech and knowledge-based goods could find an expanding consumer base both in the growing Brazilian middle class and in business-to-business trade with Brazilian partners.

In terms of investment, Brazil would appear to be a prime destination for surplus German savings. For example, Brazil faces an infrastructure deficit while German firms have achieved particular sophistication in this field. For German firms, investment in this sector in Brazil can offer returns currently unavailable in Europe.

Nevertheless, the relationship has yet to reach its full potential. Brazil’s membership in the Mercosul trade bloc and Germany’s membership in the European Union have hampered the ability of both to make progress in establishing a bilateral trade agreement. Capital flows between the two countries—especially long-term foreign direct investments—remain underwhelming.

The study concludes with a series of recommendations aimed towards helping the relationship reach its weighty potential. The study’s authors recommend prioritizing bilateral direct investment because this would not require EU or Mercosur approval.