Is Brazil a Geoeconomic Node?

Geography, Public Policy,

and the Failure of Economic Integration in South America

Sören Scholvin1
[Link]
Andrés Malamud2
[Link]

1Universityof Hanover, Institute of Economic and Cultural Geography, Hanover,

Germany
2Universidade de Lisboa, Instituto de Ciências Sociais, Lisboa, Portugal

Brazil has been labeled an anchor country, a leading area, and a

regional power. Yet, even before the crisis triggered by Operation ‘Car
Wash’ began, several scholars had called into question Brazil’s driving
role in regional integration, stressing political challenges and
economic weaknesses that hindered closer relationships among
the South American countries. More optimistic research tends to
concentrate on initiatives and visions of Brazil’s regional leadership,
with lesser focus on obstacles and implementation. We develop the
concept of ‘geoeconomic nodality’ to assess Brazi’s impact on South
America and shed light on the structural sources of economic
fragmentation, namely geographical conditions and their interaction
with public policies. A geoeconomic node is the core of economic
networks in a geographically delimited system. The flows of
the system’s units are focused on the node, enabling it to
transfer impulses for development – and reflecting what the concepts
on anchor countries, leading areas, and regional powers suggest. Our
findings show that long distances, physical barriers, the maritime
orientation of core zones of population and economic activity,
and the poor state of transcontinental infrastructure reduce Brazil’s
geoeconomic nodality. Resource nationalism, volatile public
policies, and fluctuating exchange rates contribute to this structural mix,
so that the prospects to overcome the obstacles imposed by geography
appear dim.
Keywords: Geoeconomics; regional integration; regional power; Brazil;
South America.

[Link] 10.1590/1981-3821202000020004
For data replication, see: [Link]
Correspondence: Andrés Malamud. E-mail: amalamud@[Link]
This publication is registered under a CC-BY Licence.

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 Is Brazil a Geoeconomic Node? Geography,
Public Policy, and the Failure of Economic
Integration in South America

T he World Bank (2009) suggests that developing countries attach

themselves to nearby emerging economies – ‘leading areas’ in its
terminology – so as to benefit from momentum for development. The concept of
‘anchor countries’ has been coined to identify these emerging economies – for
example Brazil, India, and South Africa – as regional growth engines (STAMM,
2004). Nolte (2010) argues that ‘regional powers’ shape regions of
(sub)continental scope. States so defined are economic cores tied to their regional
peripheries through production and trade, both dominating their neighboring
countries but also fostering their development (KAPPEL, 2012).
Despite their minor differences, these concepts are based on the assumption
that some countries are decisive for the economic prospects of entire
(sub)continents. Such an assumption has been widely applied to Brazil’s role in
South America. This country, the argument goes, has become capable
of “contributing to the development of others, mainly in its own region” (RAMANZINI
JR. and MARIANO, 2018, p. 235, our translation). Pinheiro and Gaio (2014)
suggest that Brazil has acted as regional leader because of its commitment to
development in South America. Lima and Hirst argue that under President Lula da
Silva, Brazil “laid great emphasis on the expansion of business relations” (LIMA
and HIRST, 2006, pp. 30-31) with its neighboring countries – seeking to promote a
developmentalist agenda for the region. During the Lula era, Brazil tried “to bridge
political and ideological cleavages by guiding the states of the region towards
the shared goal of a South American space” (FLEMES, 2010, p. 109), taking the lead
in collaboration on economic and security issues.
However, these scholars provide little evidence that the rhetoric on
regional cooperation and integration is matched by a concrete economic impact.
Their research generates important insights on agency, but it mostly neglects
structure, particularly regarding connectivity among the South American
countries. At first glance, it seems that Brazil is a typical leading area,
anchor country, and regional power: it is the top trading partner of Argentina,
Bolivia, Paraguay, and Uruguay (Figures 01 and 02); it has been the leading
promoter of the Initiative for the Integration of the Regional Infrastructure of
South America (IIRSA); and its National Development Bank (BNDES) has

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supported the internationalization of Brazilian firms throughout the region.

Brazil’s political ambitions reach beyond the Southern Cone, as exemplified by
its role in the establishment of the Union of South American Nations (UNASUR) in
2008.
Yet, some scholars have voiced skepticism regarding Brazil’s influence and
impact on South America (BURGES, 2005; DOCTOR, 2013; MALAMUD, 2011, 2005;
MALAMUD and GARDINI, 2012; SPEKTOR, 2010). We contribute to this debate by
offering a perspective from political geography. This allows us to assess de facto
interaction (instead of mere declarations and initiatives). It also sheds light on a
usually overlooked factor: the impact of geographical conditions upon the
relationships between Brazil and its neighboring countries, especially regarding
what we call ‘geoeconomic nodality’.
A geoeconomic node is the core of economic networks in a geographically
delimited system. The flows of all units that are part of the system are focused on
the node, enabling it to transfer momentum for development. Geoeconomic
nodality is a sine-qua-non condition for anchor countries, leading areas, and
regional powers to exist at all, and for regional integration to progress.
The concept of geoeconomic nodality leads to an assessment of structure,
not agency. We are not saying that studies that deal with agency – revealing, for
example, how different interest groups shape Brazil’s approach toward the region
(CASON and POWER, 2009) or how Brazil strategically defects from leading
integration (KRAPOHL, 2019) – are without merit. On the contrary, we
acknowledge that agency influences some geographical conditions in the long run.
It is important for public policies, which our analysis covers too. However, an
analysis of geoeconomic nodality should shed light on aspects neglected by
mainstream research, thus complementing the state of the art.
The time-sensitive data of our analysis concentrates on the period from
2008 to 2017, which arguably displays the arc of Brazil’s regional influence
from zenith to nadir. By chance – or not – it also coincides with the life span of
UNASUR, from its foundation to its abandonment by most member states.
This article consists of five sections. First, we summarize the literature on
emerging economies and regional development, with particular regard to Brazil,
and introduce the defining features of geoeconomic nodality. Second, we examine

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Public Policy, and the Failure of Economic
Integration in South America

regional patterns of trade and investment so as to capture Brazil’s nodality. Third,

we analyze the impact of location and physical barriers on the relations between
Brazil and the rest of South America. Fourth, we assess the state of the
region’s infrastructure for energy and transport. Fifth, we explain how public
policies have influenced Brazil’s prospects as a geoeconomic node, and then offer
conclusions.

Conceptual framework
The term anchor country encompasses emerging economies that
play a central role in the development of regions of (sub)continental scale. The
criterion that determines whether a state is an anchor country is its share of
the regional economic output. Anchor countries are supposed to be
economically more diversified and to possess a share of industrial production
above the average of the Global South. As a consequence, they are more
competitive than other developing countries and serve as regional growth
engines: prosperity in anchor countries is expected to lead to regional prosperity;
recession in anchor countries to regional recession (STAMM, 2004).
The World Bank (2009) has advanced a similar understanding in its
World Development Report. It labels countries that are economically more
developed than their surroundings as leading areas – Brazil and South Africa, for
example. The key argument is that leading areas offer a high density of economic
activity, and developing countries have to reduce distance and division vis -à-
vis leading areas so as to benefit from this density. Spatial disparities will
eventually decrease due to economic impulses generated by leading areas. Remote
areas cannot be successful in isolation: their development requires links to
the greater national and (sub)continental economy.
Research on regional powers starts with the idea that these states are
influential (ØSTERUD, 1992). To qualify as a regional power, a state must be
closely linked to its region in cultural, economic, and political ways (NOLTE, 2010).
Hence, regional connectivity, which is a mere assumption in the anchor-country
concept, becomes a condition for regional powers. Sometimes, this defining feature
has been reduced to a criterion “for distinguishing and classifying different types of

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regional powers” (FLEMES and NOLTE, 2010, p. 07). Yet, if a regional power is not
closely linked to its neighbors, why should one expect it to have an impact on
them?
We show that regional connectivity is one of Brazil’s key shortcomings.
Brazil does not serve as a geoeconomic node of South America because it hardly
connects with many of its neighboring countries. Research on the political
economy of regional powers stresses the relevance of such connectivity.
Kappel (2012) argues that regional powers achieve dominance over other states
through unbalanced trade relations, the provision of capital, goods, and
services. Regional powers are industrial cores. Sophisticated production is
concentrated there, whereas more basic and standardized production is relocated
to the regional peripheries. Regional powers are thus tied to their spheres of
influence in value chains that allow for regionally dispersed and integrated
production.
So how do the three concepts – anchor countries, leading areas, and
regional powers – apply to Brazil? Basic trade data, IIRSA, and political
commitment suggest that Brazil has played an important role in South America.
The country accounts for about 50 percent of the regional economic output.
Others – mainly Argentina in the automotive sector – are bound to the Brazilian
economy in value chains. Their prosperity depends on Brazil’s. The mid-2000s
were marked by considerable efforts toward institution building within the
Common Market of the South (Mercosur), especially to allow for developmental
cooperation (RAMANZINI JR. and MARIANO, 2018; RIGGIROZZI and TUSSIE, 2012).
Saraiva (2010) argues that economic and political integration in South America has
been critical to Brazil for decades, as it guarantees foreign political autonomy vis-
à-vis the United States and creates a fundament for Brazil’s global
aspirations. At least prior to the end of Dilma Rousseff’s presidency, Brazil did
indeed pursue a proactive regional agenda, as summarized by Lima (2014).
Against the backdrop of these developments, Milani, Pinheiro and Lima
(2017) advance the concept of ‘graduation’, arguing that the rise of states such as

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Brazil comes along with a shift from an orientation to the Global North to deeper
regional integration that follows a long-term vision1.
We contend that the features above are insufficient to ascribe an
outstanding relevance to Brazil as the three aforementioned concepts do. Much
research on Brazil’s role in South America is limited to declarations on interstate
cooperation and integration initiatives. An analysis of whether such rhetoric
translates into reality is often lacking. This shortcoming is exemplified by Palestini
and Agostinis (2015), who claim that the South American states have successfully
cooperated on transport infrastructure, but they fall short of showing impacts on
regionalization. They mostly summarize how much has been spent on how many
projects within the portfolio of UNASUR’s Council on Infrastructure and Planning
(COSIPLAN) that subsumed IIRSA in 2011.
Admittedly, a considerable number of projects have been implemented.
This does not say much about effective integration, however. None of
COSIPLAN/IIRSA’s axes, which crisscross South America and frame the
individual projects, is a neatly integrated corridor comparable to the First
Transcontinental Railroad in the US or Russia’s Trans-Siberian Railroad. Each axis
consists of local projects: the bituminization of a road along a few dozen
kilometers, the construction of a regional airport or the upgrading of a border
post. Eighty-three percent of IIRSA’s projects are single-country projects.
Bilateral projects reach 16 percent, and only one percent is multilateral
(COSIPLAN, 2017). The Inter-American Development Bank (IADB, 2008) concludes
that the dominance of single-country projects has kept IIRSA from fulfilling its
mandate to foster regional integration.
Against the backdrop of regional cooperation being more rhetoric than
reality, regional integration had come to a dead end even before Brazil’s present
economic and political crisis began2. Burges (2005) refers to the low level of

______________________________________________________________________________________________
1Milani,
Pinheiro and Lima (2017) also refer to the global scale, where graduated powers become
rule makers. We limit our analysis to the regional level.
2Here and further below, we refer to the sharp decline of Brazil ’s GDP growth rate, with

the economy contracting in 2015 and 2016. The related political crisis brought about the
impeachment of President Rousseff, the interim Temer presidency, and the tense 2018 election,
which led to the controversial Bolsonaro presidency.

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intraregional trade and argues that South America lacks a business sector like the
European one that could be the driver of deeper integration. Taking up Mattli’s
idea that regional integration depends on leading powers that not only coordinate
policies but also “ease distributional tension by acting as […] ‘paymasters’”
(MATTLI, 1999, p. 04), Malamud (2011, 2005) highlights that Brazil does
not contribute disproportionately to regional integration. Doctor (2013) shows
that economic asymmetries and institutional deficits hamper deepening
integration in Mercosur. Malamud and Gardini (2012) suggest that regionalism has
peaked and delivers diminishing returns. Spektor (2010) argues that already
during the proactive Lula era, Brazil preferred regional cooperation to remain
fragile and minimalist.
These problems have been reinforced by the more recent economic
downturn and political instability. Suffering from severe budget constraints, Brazil
could hardly make the necessary financial contribution to regional integration
today, regardless of the fact that doing so is not on the agenda of President Jair
Bolsonaro, who appears to have little interest in Mercosur – except for its role as
an instrument for a trade agreement with the European Union.
All of the above are economic and political challenges to Brazil’s role as an
anchor country, leading area, and regional power. Debates on Brazil’s role in South
America would also benefit from recognizing the relevance of geography –
especially because an analysis of geographical constraints highlights the
tremendous gap between the rhetoric and reality of regional integration and
development (MALAMUD, 2018). Geographical factors interact with public policies
(both being conditions or independent variables) to determine the economic
impact of Brazil on the region (which is the outcome or dependent variable). In
order to uncover this causal relationship, this article focuses on Brazil’s prospects
as a geoeconomic node.
Among the publications we have reviewed, only Viola and Lima (2017)
mention geographical conditions. They point out that physical barriers such as
the Andes and poor transport infrastructure obstruct regional value chains in
South America, whereas the ease of maritime transport favors them in Southeast
Asia. Unfortunately, the two authors do not go into details. As a side note, the
gravity model – widely used by economists who study regional integration such as

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Bown et al. (2017) and Frankel, Stein and Wei (1995) – is based on distance as an
independent variable. According to this model, the intensity of bilateral
trade is expected to correspond to the size of the gross domestic product of the
countries in consideration and distance between them. However, such research
often applies a simplistic understanding of distance, measuring it in Euclidean
terms – how many kilometers country A and B are apart. We conceptualize
distance in a more complex and thus more realistic way. For example, Colombia is
not economically close to Brazil, although they share a common border. Euclidean
distance between Brasília and La Paz may be relatively low, but the two cities are
further apart than, for instance, Seoul and Singapore are.
Our analytical framework derives from the lifework of the political
geographer Saul Cohen. Cohen’s (1963) analyses begin with an investigation of
location and physical barriers. For instance, he points out that after the Adams–
Onís Treaty signed by Spain and the US in 1819, Florida remained a peripheral
part of the US for several decades, marked by swamps hindering any kind of
development. The peninsula blocked rather than enabled the US expansion into the
Caribbean. Cohen (1963) also examines core areas of population and economic
activity as well as the connections between them, contextualizing these
phenomena with regard to location and physical barriers: Florida turned into a
stepping stone for the US into the Caribbean when infrastructure was built there
and population density increased.
In this sense, Cohen’s research revolves around “the interaction
between, on the one hand, geographical settings […] and, on the other,
political processes” (2009, p. 12). He sees the “differentiated political space”
as a result of the interplay “between the physical and the cultural [meaning
man-made] environment” (COHEN, 1957, p. 05). Further to that, Florida’s
role in the US expansion into the Caribbean exemplifies that political
space is “shaped by two forces – the centrifugal and the centripetal” (COHEN,
2009, p. 34), with the former driving separation between territories and the latter
promoting territorial unity. Centrifugal and centripetal forces comprise both
naturally given and man-made geography. In other words, states shape their own

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material surroundings to a certain extent – for instance by building infrastructure

to overcome physical barriers.
Cohen’s position holds geography as a holistic science that covers all
factors that matter, including many that political scientists associate with
constructivist and institutionalist theories of international relations. Ours,
meanwhile, is an approach that narrows the analytical scope down to material
conditions that exist in geographic space. Rephrasing the conditions central to
Cohen, our analysis focuses on four determinants of geoeconomic nodality: 01.
location, distance, and physical barriers, as fundamental factors that provide a
first indication of the extent to which a region can be tied to a geoeconomic
node; 02. the distribution of the population and economic activity, which
impinges on the cohesion of a region and thus on geoeconomic nodality;
03. infrastructure for energy and transport, which constitutes the key man-
made, centripetal force that helps to overcome distance and physical
barriers; and 04. public policies, which condition the impact of the
aforementioned determinants by boosting or hampering geoeconomic nodality.
Brazil’s prospects as a geoeconomic node are also influenced by
economics, most importantly foreign trade structures. The South American
countries are mainly exporters of raw materials. Europe, the Far East,
and North America – but not South America – are attractive markets for
them (SCHOLVIN and MALAMUD, 2014). Brazil’s economy has seen a revival
of the primary sector because of increasing exports of commodities to China
(JENKIS, 2012). Nevertheless, Brazil’s industrial and services sectors grew
until the current crisis. Its economy is diversified, providing opportunities
for intraregional trade. Realizing such opportunities depends on overcoming
geographical obstacles and adequate public policies being in place.

Brazil’s geoeconomic nodality

Economic ties
A pre-crisis survey of Brazil’s largest transnational companies revealed
that each of the most internationalized among them – for instance Banco do Brasil,
Odebrecht, and Vale – were present in five to eight South American countries.
These enterprises were (and still are) also active in numerous Asian, European

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Public Policy, and the Failure of Economic
Integration in South America

and, to a lesser extent, African countries. Moderately internationalized,

large companies appear to focus on South America: eight of the thirteen
foreign countries where Petrobras operated in 2011 were South
American; even eight out of nine in the case of the construction company Tigre. If
one counts the mere physical presence abroad, and thus disregards the
profitability and volume of business activities, South America accounted for 31
percent of the foreign activities of Brazil’s largest companies prior to the crisis –
significantly more than Europe (21 percent) and Asia (17 percent) (FUNDAÇÃO
DOM CABRAL, 2011).
Because of its rapid economic development until 2014, Brazil held the
capacity – and partly applied it – to advance large-scale, strategic projects in South
America, for example transport infrastructure built by Andrade Gutierrez or
Odebrecht. Brazilian construction companies received considerable subsidies
from the BNDES for such projects. At least 35 percent of these credits had to be
spent on inputs from Brazil. Mercosur’s structural cohesion fund FOCEM was
another means through which Brazil supported infrastructure projects in South
America, at least in economically better times (PINHEIRO and GAIO, 2014).
However, in addition to the aforementioned shortcomings of IIRSA’s projects, not
everything financed by the BNDES contributes to regional integration: for example,
Odebrecht benefited from such credits provided for the expansion of the subway
network of Caracas.
Counter intuitively, the involvement of Brazilian firms abroad has
increased in the course of the last years. This does not apply to all Brazilian
companies, but there appear to be many that rely on foreign markets – in Europe,
the Far East, and the Americas – because these offer better prospects than Brazil’s
stagnating domestic market (O GLOBO, 2018a). This form of internationalization of
Brazilian firms, which does give a boost to their presence in the neighboring
countries, is market-seeking, however. Instead of establishing value chains that
would tie the South American economies together, Brazilian investors have set up
subsidiaries that source, produce and sell in separate national markets. A study by
the Economic Commission for Latin America and the Caribbean (ECLAC, 2006)
makes the same point: Brazilian enterprises have established branch plant

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operations throughout the region so as to circumvent market access restrictions

(or, in less frequent cases, to access resources for consumption in Brazil).
Efficiency and strategic asset seeking, which would result in sophisticated regional
value chains, remain marginal.
Brazil increasingly participates in global value chains as an exporter of
primary-sector goods, rather than fostering regional value chains that would drive
industrialization. According to figures provided by Viola and Lima (2017),
manufacturing accounts for not much more than 10 percent of the Brazilian GDP
(down from 16 to 18 per cent in the second half of the 2000s) and slightly less than
40 percent of all exports (down from a peak of almost 60 percent at the beginning
of this century). The two authors furthermore point out that Brazil is a closed
economy – measured by the share of exports in GDP and the share of foreign value-
added in gross exports. The latter stands at 11 percent, as compared to a
global average of 24 percent.
Brazil does serve as a considerable supplier to the region, which
becomes apparent in trade in automobiles and electronics – more than half
of Brazil’s corresponding exports go to South America (K AMIYA, 2014) 3.
Because of its closed economy, Brazil is not, however, a major importer in the
regional context. Production inputs are domestic or from overseas ( IAPADRE
AND TAJOLI, 2014). Chen and De Lombaerde (2014) also find that Brazil has
increased its exports to the region but not its imports therefrom. Regional value
chains as a driver of industrialization should follow a reverse pattern,
with the geoeconomic node being fed by production inputs – that is, intermediary
goods – from the region, further processing and then exporting them globally.
Such a hub – linked to the spokes via backward linkages – would be
necessary for South America to copy the Far Eastern model of development
through regional value chains, which is based on intensive trade in manufactured
intermediary goods. Chen and De Lombaerde (2011), among others, argue that

______________________________________________________________________________________________
3Asa side note, these exports are manufactured by foreign affiliates established in Brazil to assess
the South American markets, suggesting that Brazil serves as a gateway to the region in some
value chains.

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Brazil is at least a candidate in this regard, possibly serving as a dual hub together
with Argentina. Such a vision is, however, still far from reality.

The regional activities of Petrobras exemplify these limits to Brazil’s

role as a geoeconomic node. Petrobras is the major buyer of natural gas from
Bolivia. This is pure resource-seeking investment. Before Brazil’s current crisis, the
partly state-owned giant realized the main share of its international oil production
in South America: 75 out of 148 million barrels a day in 2013; up from 19 out of 53
million in 2000 but down from a peak of 123 out of 144 million in 2006.
Petrobras’s exploitation of natural gas, which is almost exclusively South America,
increased from 1.7 million cubic meters (cbm) a day in 2000 to 15.1 million in
2013 (Petrobras, 2013b). Since 2014, Petrobras has disinvested from
Argentina, Colombia, and Peru. This is not only the result of the financial crisis of
the Brazilian giant. As a former executive of Petrobras Argentina explained in a
personal conversation with us, the company had earlier decided to
concentrate on the Brazilian pre-salt resources – a decision whose magnitude
was reinforced by the corruption scandal, which practically cut Petrobras off from
international credit markets. Petrobras hence sold its assets abroad in order to be
able to invest in Brazil4.
Further to that, Brazil’s role as a geoeconomic node must be spatially
delineated in a precise way. The literature on Brazil as an anchor country, leading
area and regional powers refers to South America, as do Brazil’s official foreign
policy documents, so we follow suit. As Figure 01 and 02 show, Brazil is
an important trading partner of the countries of the Southern Cone, with the
exception of Chile. In particular Argentina and Paraguay trade intensively with
Brazil; so does Bolivia with regard to its exports. The ongoing crisis appears to
have only affected Argentinean and Bolivian exports to Brazil, but some
caution is needed because the absolute foreign trade of several regional
countries fluctuates considerably, complicating the interpretation of relative
figures. Table 01 reveals that Colombia, Ecuador, Guyana, and Venezuela
are economically much closer to the US. China is the most important trading
partner of Chile and Peru5.
______________________________________________________________________________________________
4Personal conversation with a former executive of Petrobras Argentina, Buenos Aires, 10 June
2016.
5The literature that applies the gravity model to intraregional trade, especially Bown et al. (2017),

contradicts this interpretation because trade among the South American countries is slightly more than
the model predicts. What matters to this article however is that our benchmark – the concepts of anchor
countries, leading areas, and regional powers – leads to different expectations. Revisiting these concepts
against the backdrop of the gravity model is an interesting endeavor for a different article.

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Table 01. Share of China and the US in the foreign trade of the regional countries
Share of China in Share of China in Share of the US in Share of the US in
total exports total imports total exports total imports
Argentina 7.5% 18.5% 7.9% 11.3%
Bolivia 5.1% 21.7% 7.8% 8.4%
Chile 27.5% 23.9% 14.5% 18.1%
Colombia 5.1% 19.3% 28.5% 26.3%
Ecuador 4.0% 15.4% 31.5% 22.8%
Guyana marginal 8.9% 16.5% 26.5%
Paraguay marginal 31.3% marginal 7.4%
Peru 26.5% 22.3% 15.2% 20.1%
Suriname marginal 7.6% marginal 30.6%
Uruguay 19.0% 20.0% 5.7% 10.9%
Venezuela 16.0% 14.2% 34.8% 24.8%
Source: Central Intelligence Agency (2018).
Note: Data is for 2017.

Figure 01. Share of exports to Brazil in the total exports of the regional countries

Source: IADB (2018).

Notes: Since rounded values are shown, 0 percent means that the respective share is
smaller than 0.5 percent. Guyana has been excluded for better visualization. Brazil reached a share
of 0.4 percent in Guyana’s exports in 2017. Data on Suriname is incomplete, but Brazil’s
share in Suriname’s exports stood at 0.2 and 0.7 percent in 2014 and 2015 respectively. The
IADB’s data on Venezuela’s foreign trade does not specify the shares of single countries therein.
______________________________________________________________________________________________

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Figure 03 shows that as a source of foreign direct investment, Brazil

plays a considerable role for Paraguay and Uruguay. Whereas its relevance
for Paraguay increased tremendously from 2010 until 2017, Brazil lost its
dominance as a source of FDI for Uruguay during the same time frame.
Brazilian FDI plays a marginal role in Argentina. It has lost much relevance in
Peru and gained some in Venezuela, probably because there are few companies
that would invest in the latter country at the moment. For the remaining regional
countries, Brazilian FDI is irrelevant.

Figure 02. Share of imports from Brazil in the total imports of the regional countries

Source: IADB (2018).

Notes: Brazil reached a share of 1.5 percent in Guyana’s imports in 2017. Brazil’s share in
Suriname’s imports declined from 3.2 percent in 2011 to 1.9 percent in 2015.

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Figure 03. Brazil’s share of the inward FDI stock of the regional countries

Source: Banco do Brasil (n.d.) and UN Conference on Trade and Development (2018).
Note: Data is insufficient for Guyana and Suriname.

Providing another indicator of the low level of regional integration,

exports to South America account for a very low share of the GDP of most South
American countries, as Figure 04 shows. Bolivia and Paraguay are exceptions
because of the former’s exports of natural gas and the latter’s exports of
agricultural goods to Argentina and Brazil. The share of regional exports
in GDP for both countries has dropped remarkably during the last decade. For all
other countries, the relevance of regional exports has declined from a low level in
the late 2000s to a very low level today. With regard to geoeconomic nodality, it is
particularly revealing that Brazil’s regional exports equaled only two percent of
GDP in recent years. It may be true that Brazil’s exports to South America are
marked by a very high share of manufactured products, which Pinheiro and
Gaio (2014) see as an indication of a potential to foster industrialization in
Brazil through intraregional trade. This potential however refers to a negligible
share of Brazil’s total economy.

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Figure 04. Share of regional exports in the GDP of the regional countries

Source: IADB (2018) and World Bank (2018).

Notes: Guyana’s regional exports amounted to between 0.1 percent of GDP (2009, minimum) and
5.2 percent (2014, maximum). Those of Suriname declined from 2.5 percent (2014, maximum) to
0.1 percent (2017, minimum).

Location and physical barriers

At first glance, Brazil benefits from a central location in South America. The
geographical center of the continent is located at 15° Southern latitude and 55°
Western longitude, close to Cuiabá. Brazil borders with all regional countries, with
the exceptions of Chile and Ecuador. Because of this centrality, trade is not
hampered by numerous border stops – the few existing ones do cause serious
delays (more on this later) – and there are almost no transit countries that
could interfere.

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Still, Brazil is a huge country, as the size comparison with Portugal on the
maps below shows. Recife is closer to Monrovia in Liberia (air distance: 3,100
kilometers) than to Quito in Ecuador (4,900 kilometers). Brazil’s core zone of
population and economic activity – the federal states of Rio de Janeiro and São
Paulo – is far away from the Andean countries, Guyana, Suriname, and Venezuela.
Road distance from São Paulo to Lima is almost 5,000 kilometers. A
rather theoretical road trip from São Paulo to Caracas would mean traveling
more than 6,000 kilometers. Even Buenos Aires is 2,250 kilometers away
from the Brazilian metropolis. As Map 01 shows, Brazil’s population and
economic activity is concentrated in proximity to the coast. About 80
percent of the population live less than 200 kilometers away from the
Atlantic Ocean 6. Agglomerations in the hinterland such as Brasília and Manaus
are exceptions. Since maritime transport is not hampered by physical barriers, it is
plausible to expect that economic activity in close proximity to the Brazilian coast
rather generates maritime than continental links.
Indeed, 48 to 53 percent of Brazil’s trade with South America was
transported by ocean-bound ships between the mid-2000s and 2017 (up from 37
to 40 percent in the late 1990s) if measured by monetary value; if measured by
weight, this figure increases to 63 to 69 percent (up from about 55 percent in the
late 1990s), with a drop to 55 to 60 percent in the first half of the 2010s 7. With
regard to maritime transport, distance is likely to have a negative impact
on regional ties. The main ports of Brazil (Santos) and Peru (Callao) are
almost 4,800 nautical miles apart, more than Santos and the harbor of Miami
in the US. Guayaquil – the most important harbor of Ecuador – is further
away from Santos than Le Havre in France. The only South American urban
agglomerations that are closer to Rio de Janeiro and São Paulo than to potential
non-South American trading partners are Buenos Aires and Montevideo.

______________________________________________________________________________________________
6Percentages calculated based on data retrieved from the Brazilian Institute of Geography and
Statistics ˂[Link]
7Percentages calculated based on data retrieved from Comex Stat ˂[Link]

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 Is Brazil a Geoeconomic Node? Geography,
Public Policy, and the Failure of Economic
Integration in South America

These locational disadvantages are reinforced by physical barriers,

which are depicted by Map 02. South America consists of three major
physio-geographical regions: the Andes, the highlands of Brazil and Guiana,
and lowlands that stretch from the Amazon basin to the Paraguay –Paraná
basin to the Patagonian plateau. Along the Amazon River and its tributaries,
annual floods hamper transport. They make rivers rise by up to nine meters.
Many jetties there cannot be used all year long. Bridges are frequently
washed away. Although the Amazon River is navigable from its mouth to Iquitos
in Peru (a distance of more than 1,200 kilometers), river transport is risky because
of shifting sandbanks. The hot and wet tropical climate accounts for a
dense, almost insurmountable vegetation. Transport corridors built through the
rainforest are rapidly overgrown by vegetation. Heavy rains amount to 2,500
millimeters a year. They make earth and gravel roads impassable and cause
significant damage to more robust infrastructure.
To the southeast of the Amazon basin, there is a plateau landscape at 300 to
500 meters above the sea level: the Brazilian highlands. It is broken up by low
mountain systems and deep valleys. The terrain becomes very rough in the federal
state of Goiás. Railroads and roads frequently traverse many kilometers to reach
destinations only short linear distances apart. For example, in the 1980s, a journey
from Rio de Janeiro to Belo Horizonte took an hour by airplane but 14 by rail. Air
distance between the two cities is 340 kilometers; the railroad tracks
extended 640. The scheduled passenger service between Rio de Janeiro and Belo
Horizonte was discontinued in 1990. Given that the Brazilian highlands are
tilted north- and westward, rivers rising near their east rim, practically at
sight of the Atlantic Ocean, flow inland for hundreds of kilometers before veering
north or south. Many of them contain waterfalls, making them useless as a means
of transport.

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 Sören Scholvin, Andrés Malamud

Map 01. Population density in South America

Source: Authors’ own compilation based on data obtained from several national statistical offices.

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 Is Brazil a Geoeconomic Node? Geography,
Public Policy, and the Failure of Economic
Integration in South America

Map 02. Physical barriers in South America

Source: Authors’ own compilation.

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 Sören Scholvin, Andrés Malamud

In the east, the Brazilian highlands ascend steep escarpments, which link
up with the coast. There are only two places where they rise in a single slope and
thus somewhat ease movement from the coast to the hinterland: between
Paranaguá and Curitiba, and between Santos and São Paulo. Those who have
traveled from Santos to São Paulo by road will admit that even this well-developed
route appears quite adventuresome. The Rodovia dos Imigrantes, inaugurated in
1974, contains 07 bridges, 11 tunnels, and 44 viaducts. Along with the older
Rodovia Anchieta, which also connects Santos to São Paulo, it is considered a
masterpiece of civil engineering. In other words, connecting the coastal strip to the
hinterland is difficult and expensive. The lack of railroads drives up the cost of
transport (WORLD BANK, 2012); so does the fact that there are few alternative
ports to Paranaguá and Santos. As a consequence, the queue of trucks waiting to
enter Santos sometimes stretches to 40 kilometers, as reported by The Economist
(2013).
Further south, the Paraguay–Paraná basin and the Patagonian plateau
offer a relative ease of movement that facilitates economic interaction. The river
network of the former has been a key axis of expansion into the interior of the
continent since colonial times (BROWN, 1979). The Andes, meanwhile, constitute
the utmost barrier. They are relatively wide in their central and north reaches (up
to 700 kilometers from east to west), and contain several north-to-south ridges as
well as extensive plateaus and valleys. The ridges block cross-continental
movement of people and goods. The plateaus and valleys host isolated cities such
as Bogotá and La Paz. By average, the Southern Andes are lower. Valleys are
narrower. The east-to-west extension is about 200 kilometers. Even the Southern
Andes are a tremendous obstacle to transport. The route to the main crossover
between Argentina and Chile is a slow, gentle incline on the Argentinean side.
On the Chilean side, the slope has a far higher grade so that the road consists of a
long series of switchbacks to make the descent. Sometimes the path must be closed
in winter, when snow blocks its ends and the threat of rockfall is considerable.

Transcontinental infrastructure
At the beginning of this century, a report by the IADB (2000) showed that
trade in South America remained low because of insufficient transport

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Public Policy, and the Failure of Economic
Integration in South America

infrastructure. According to an ECLAC study published three years later (SÁNCHEZ

and TOMASSIAN, 2003), inefficiencies in the transport sector accounted for an
extra cost of US$ 170 per truck going from Argentina to Brazil, or vice versa. Using
routes other than the main arteries added up to 40 percent to transport costs
due to the poor quality of these roads. Border stops slowed down transport, taking
30 to 36 hours for trucks going from Brazil to Argentina. Not much has improved
as of today. The Economist (2018) recently reported that Latin America and the
Caribbean suffer from massive infrastructure deficiencies. Private and public
investment in infrastructure stands at 2.5 percent of GDP on average – about
a third of the corresponding spending in the Asia–Pacific region. According to
Perrotti and Sánchez (2011), an average investment of 6.2 percent of GDP a year is
necessary between 2012 and 2020.
Road density in South America is low, boosting the disadvantage
that results from Brazil’s enormous territorial extension. There are 19 kilometers
of road per 100 square kilometers of land in Brazil, 07 in Bolivia, 08 in Paraguay,
and 10 in Peru. The corresponding value for the US, which contains vast
sparsely populated areas like Brazil, is 67. Europe’s largest economies reach
values of about 180 (WORLD BANK, 2013). The paved road network, depicted by
Map 03, is relatively dense in Brazil’s northeast, south and southeast, but it
virtually vanishes west of a line from Belém to Campo Grande. West of a line from
Manaus to Porto Velho, even sufficiently maintained earth and gravel roads
become rare. Only two corridors, partly in miserable condition, cross the Andes:
the Inter-Oceanic Highway goes from south Peru via Rio Branco and Cuiabá to
southeast Brazil; the Pan-American Highway stretches from the Colombian–
Panamanian border via Quito and Lima to Santiago de Chile, where it splits into
one branch that ends in Southern Chile, and another one that goes to Buenos Aires
and from there along the Atlantic Coast to the southern edge of the continent8.

______________________________________________________________________________________________
8Theterm highway may be misleading for readers used to transport infrastructure in the Global
North. In South America, so called highways outside major cities are paved (or unpaved) two-lane
roads, whose condition ranges from sufficient to miserable.

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 Sören Scholvin, Andrés Malamud

Map 03. Road infrastructure in South America

Source: Authors’ own compilation.

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 Is Brazil a Geoeconomic Node? Geography,
Public Policy, and the Failure of Economic
Integration in South America

Transport by rail is even more difficult because railroad gauges vary. The
reason for this is that railroads were initially built for bringing primary-sector
goods to the coast. They were not meant to serve as a means of transnational or
even transcontinental transport. In the La Plata region, tracks were built with
different gauges from the mid-nineteenth century onward so that they could not be
used by invading armies. Even the few existing railroad corridors do not allow for
efficient transport. The one from Buenos Aires to São Paulo is 300 kilometers
longer than the route by road and contains different gauges. The tracks on the
Brazilian side date back to the early twentieth century. On the Argentinean side,
there is only one bridge across the Paraná River. About a decade ago, transport
from Buenos Aires to São Paulo by rail took twice as long as transport by road
(LACERDA, 2009). Since then, nothing has changed, as best demonstrated by the
failure of Brazil’s concession system to attract any investor for building new
railroads or rehabilitating existing ones (QUINTELLA, 2016).
China’s interest in South American markets has induced a need to better
connect to the Pacific Ocean. The People’s Republic has announced its support for a
yet-to-be-rehabilitated railroad corridor from Chilean and Peruvian ports to
Southern Brazil – the Twin Ocean Railroad. The most likely route runs
through Bolivia. An alternative corridor passes through Argentina and
Paraguay. Considerable financial support has been promised by China (PORTAL
PORTUARIO, 2016a, 2016b), but few details have been disclosed and feasibility
studies have not been carried out yet (PORTAL PORTUARIO, 2018b). What matters
to our analysis is that Chinese-built corridors remain a vision – just like the
offer of the Spanish government to finance the Twin Ocean Railroad and a similar
proposal by a German–Swiss consortium of private enterprises (PORTAL
PORTUARIO, 2018a, 2018c).
The South American ministers responsible for energy, telecommunication,
and transport had already agreed in 2000 to coordinate their policies and to foster
physical integration9. They identified twelve transcontinental development axes
and founded IIRSA as a loose intergovernmental initiative, a technical
______________________________________________________________________________________________
9We speak of physical integration – instead of regional integration – so as to stress that these efforts
are limited to building transport infrastructure.

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forum for cooperation on regional infrastructure that is meant to

concentrate on coordinating investment in projects that physically interlink the
South American countries. By 2017, the IIRSA portfolio reached US$ 199 billion
and a total of 562 projects, including 153 fully implemented projects for US$ 48
billion. The development axes Mercosur–Chile and Peru–Brazil–Bolivia are by far
the largest with a respective investment share of 24 and 17 percent (COSIPLAN,
2017).
In addition to the aforementioned dominance of single-country projects,
the IADB (2008) criticizes that IIRSA has not contributed to lowering regulatory
hurdles to cross-border interaction. Political decision makers have remained
largely absent from the initiative. In spite of IIRSA’s mandate, new financing
instruments suited to the particularities of integration projects have not been
developed. Financing and implementation remain responsibilities of the member
state that hosts the respective infrastructure. States that face severe budget
constraints (such as Argentina and Brazil at present) or are close to collapse (like
Venezuela) cannot maintain the commitments they have made under better
economic conditions.
What is more, Palestini and Agostinis (2015) observe that Brazil’s initial
commitment to the rehabilitation of transport infrastructure in South America
reflected the efforts of the Fernando Henrique Cardoso presidency to physically
integrate the entire Brazilian territory in the context of the Avança Brasil agenda.
Putting corresponding projects in a continental instead of national frame eased
access to financial support from organizations such as ECLAC and the IADB. In
other words, the national focus of IIRSA perfectly matches Brazilian interests,
which have little to do with regional integration.
One may suggest that trade in services constitutes an alternative to trade
in goods for South America – not only because trade in services is not hampered by
insufficient rail and road networks, but also because more and more services have
become tradable, offering considerable opportunities for emerging economies to
provide them to their respective regions, as Turok and Visagie (2019) explain with
regard to South Africa. Viola and Lima (2017) consider services exports an
opportunity for value chains in Mercosur because they are marked by high value-
added content. Unfortunately, besides that fact that Brazil’s share in world services

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Public Policy, and the Failure of Economic
Integration in South America

trade is marginal, the Brazilian services sector suffers from poor quality and high
costs (Arbache, 2016).
Comparing visions and reality of regional cooperation on energy confirms
that integration – and thus Brazil’s geoeconomic nodality – is mostly rhetoric,
except for a few successful projects such as the Itaipú hydroelectric dam. Two
years after the Gasoducto del Sur – a giant network of natural gas pipelines
across the continent – had first been promoted by Hugo Chávez, Petrobras’s
president, José Sergio Gabrielli, said it would take 25 to 30 years for a project of
this dimension to become operational. The Gasoducto del Sur was later shelved
because of Brazil’s massive domestic pre-salt discoveries. Brazil’s pipeline network
has only recently been interconnected nationwide. The focus lies on the
exploitation of untapped resources in the Amazon Basin and Atlantic Ocean, not
on intraregional trade (ENERGY INFORMATION ADMINISTRATION, 2013). The
Bolivia–Brazil pipeline GASBOL connects Santa Cruz with Porto Alegre and São
Paulo, reaching a capacity of 31.1 million cbm a day (ENERGY INFORMATION
ADMINISTRATION, 2012). Other than that, there are only minor cross-border
pipelines, which link Argentina, Bolivia, Chile, and Uruguay, as well as Colombia
and Venezuela.
With regard to trade in electricity, the potential of further integration looks
equally dim. Experts of the Latin American Energy Organization (OLADE, 2003)
argued at the beginning of this century that Argentina and Brazil possess a realistic
transfer potential of 5,000 megawatts, which equals only 3.3 percent of Brazil’s
installed capacity. Argentina and Chile were expected to reach transfers of not
more than 500 megawatts; so were Brazil and Uruguay. Colombia and
Ecuador as well as Ecuador and Peru, were predicted to transfer 250
megawatts bilaterally 10. In more recent publications, OLADE (2013, 2012)
develops scenarios of regional cooperation and highlights according
benefits, but these documents fall short of indicating steps already taken or
likely to be taken so as to realize these wishful aspirations. As Scholvin and Betz

______________________________________________________________________________________________
10These calculations exclude the output of bi- and multinational hydropower stations.

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(2019) summarize, various bi- and multilateral hydropower stations have

been considered by the regional states, usually for decades and without being
implemented.

Public policies
At least until the impeachment of President Rousseff, Brazil supported the
expansion of domestic enterprises into the neighboring countries. The BNDES
played the key role in this regard. When Lula came into office, development-
oriented economists affiliated with the Workers’ Party (PT) took the lead of the
bank. The BNDES more than doubled its investment portfolio ( SANTANA,
2011). It sought to strengthen Brazilian enterprises; first of all by
supporting the concentration of capital in the hands of a few, creating ‘sectoral
champions’ that were supposed to be internationally competitive (COUTO, 2008).
Zibechi (2012) argues that South America – especially Bolivia, Paraguay, and
Uruguay – were transformed into economies subordinated to Brazil, into stepping
stones for the globalization of these sectoral champions.
Another key means of the BNDES to boost the regional standing of
Brazilian companies is the scheme ‘BNDES Finem’ (BNDES, 2013a). This
scheme consists of credit lines directed at specific sectors, including energy and
transport. Credits for projects carried out abroad by Brazilian enterprises,
covering up to 60 percent of the total costs, are granted under the condition that
the respective projects contribute to the economic and social development of
Brazil. Since 2003, the BNDES has also participated in projects abroad as
a shareholder. Brazilian exports are eased by the scheme ‘BNDES Exim’
(BNDES, 2013b). The BNDES has given Brazilian exporters proceeds for
high value-added industrial sales in Latin America up front since 2011.
The bank has also provided open credit lines to states that are certain to
spend these credits on Brazilian products. Argentina, for example, received credits
of US$ 1.2 billion from 2005 to 2009, which then went into the pockets of
Brazilian construction firms (HOCHSTETLER and MONTERO, 2013). There is
not a preference for regional over global expansion, however. The BNDES
serves as an agency of the globalization of Brazilian enterprises, not of regional
integration (RAMSEY and ALMEIDA, 2010).

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Integration in South America

The bank’s role now appears to be in a process of redefinition. The BNDES

has not only become involved in criminal proceedings related to corruption
scandals. Its monetary capacities have also declined significantly because it was
ordered to pay back loans to the state during Michel Temer’s presidency. Due to
new policies, credits provided by the BNDES are now more expensive than private
sector credits (TEIXEIRA, 2018). Bolsonaro initially appointed Joaquim Levy as
president of the BNDES and Paulo Guedes as minister of the economy. Guedes and
Levy are Chicago-trained neoliberal economists, opposed to the proactive
economic and developmental policies that marked the BNDES in the era of the PT
presidencies. It hence appears highly unlikely that the BNDES will continue to
promote integration in South America.

Even before the impeachment of President Rousseff, regional integration

advanced much more slowly than envisaged. The BNDES published studies
on monetary integration of Argentina and Brazil at the beginning of
this century (Giambiagi, 2001). No progress has been made since then. The
topic has simply vanished from the debate. A major obstacle to Brazilian
investment in South America is double taxation – that is, the levying of a tax by two
jurisdictions on the same asset, financial transaction, or income. Argentina, Chile,
Ecuador, Peru, and Venezuela have signed agreements with Brazil to avoid double
taxation. No such agreements exist between Brazil, on the one side, and Bolivia,
Colombia, Guyana, Paraguay, Suriname, and Uruguay, on the other. Mercosur has
also failed to lower tariffs on intermediary goods. These have increased
since the early 2000s (VIOLA and LIMA, 2017). Regulatory standards and rules of
origin are further challenges in the regional community (INTERNATIONAL
MONETARY FUND, 2017).
Brazilian investment in its neighboring countries is additionally hampered
by insecure currency exchange rates. Between 2008 and 2013, the exchange rate of
the Brazilian Real to the Argentinian Peso fluctuated between 1:1.39 and
1:2.66. At the time of this writing, it stood at 1:11.40. One Brazilian Real was
worth 0.89 Venezuelan Bolívares in January 2009 but 3.19 in February 2013.
Today, Venezuela suffers from hyperinflation11.
______________________________________________________________________________________________
11The exchange rates have been calculated online at: ˂[Link]˃.

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What is more, some regional states pursue policies that are

counterproductive to regional cooperation. In 2010, 68 percent of Bolivia ’s
natural gas output, representing 80 percent of its natural gas exports, went to
Brazil (ENERGY INFORMATION ADMINISTRATION, 2012). The Bolivian
government then forced Petrobras to renegotiate its long-term contract in the
course of the re-nationalization of the hydrocarbon sector, making the Brazilians
pay higher royalties. Given the apparent insecurity involved in trade
with Bolivia, a pre-crisis business plan by Petrobras (2011) specifies that
imports of Bolivian natural gas will remain constant at 30 million cbm a day until
2020. Conventional production in Brazil is to increase from 55 to 102 million
cbm, which does not cover pre-salt sources, whose share in domestic
production is to increase from 07 to 31 percent (PETROBRAS, 2013a).
If there were no political uncertainties, Brazil would purchase energy
resources in Bolivia, Venezuela, and probably also Argentina instead of developing
its own. Argentina used to be an even less secure provider than Bolivia, as
demonstrated by the decision of Nestor Kirchner’s government to abruptly
limit exports of natural gas to Chile in 2004, breaking previously signed
contracts. The insecurity of natural gas imports experienced by Brazil and Chile is
due to the general political orientation of Argentina (until the 2015 election) and
Bolivia, whose governments have strongly interfered with the economy. Brazil’s PT
also adhered to state interventionism, albeit to lesser extent than practiced
Argentina, Bolivia, and Venezuela. We cannot enter into a debate on neoliberal
versus state-driven development here, but the previous lines suggest that certain
forms of state interventionism, arguably carried out for the sake of national
development, work against Brazil’s geoeconomic nodality.

Conclusion
This article dealt with Brazil’s role in South America, which we
analyzed in the light of the concept of geoeconomic nodality. This
perspective advances the state of research because it shows whether
rhetoric on regional cooperation and integration translates into reality. Our

______________________________________________________________________________________________

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 Is Brazil a Geoeconomic Node? Geography,
Public Policy, and the Failure of Economic
Integration in South America

approach is also innovative insofar as it draws attention to neglected causal

factors: geographical conditions that interact with public policies. We contend that
such causal factors are an important piece of the puzzle that is Brazil ’s role
in South America.
The distinctiveness of our approach becomes particularly clear
when compared to Milani, Pinheiro and Lima’s (2017) insightful article.
They find that cohesion among domestic elites has often been insufficient for Brazil
to become a regional leader or paymaster, a graduated power in their terminology.
In contrast, our analysis demonstrated that there are structural constraints to
Brazil’s graduation or regional hegemony – if one considers connectivity and
influence in the economic sphere as vital elements of hegemony. We argue,
therefore, that Brazil’s ‘graduation dilemma’ also rests on structure – that is,
geoeconomic nodality – and not merely on agency.
Brazil’s interaction with its region is much less expressive than
what one expects from an anchor country, leading area, or regional power.
Certainly, the internationalization of Brazilian firms appears to be concentrated on
South America. Brazilian construction companies have been involved in important
infrastructure projects, benefiting from financial support granted by the BNDES.
Still, Brazilian investment in the region is market and resource-seeking. Except for
a few cases such as Argentina’s automotive sector, it hardly generates value chains,
which could trigger development in the neighboring countries. While Brazil is an
important trading partner of the Southern Cone (except for Chile), trade with the
Andean and Caribbean countries is very limited. Brazil’s role as a source of FDI
remains negligible, with the exception of Paraguay and Uruguay. Regional exports
account for a very low share of the regional GDP. Therefore, we would not even
claim that Brazil is the geoeconomic node of the Southern Cone, albeit its relevance
there is higher than in South America as a whole.
The concept of geoeconomic nodality rests on four factors (location and
physical barriers, the distribution of the population and economic activity,
infrastructure for energy and transport, and public policies). First,
distances in South America are tremendous. Two major physical barriers,
the Andean Mountain Range and the Amazon Rainforest, separate Brazil

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from many of its neighbors. The Brazilian highlands and the landscape
configuration of the coast implies that the Brazilian economy is marked by a
maritime orientation. Second, the Brazilian population concentrates close to the
Atlantic Ocean, compounding the impact of large distances to the neighboring
countries. Third, although transport corridors could help to overcome physical
barriers, South America suffers from a lack of railroads and roads that bind the
regional countries together. IIRSA serves as a means to advance projects of
national scope rather than fostering physical integration across borders. Energy-
related infrastructure does not allow for close cross-border ties either. Fourth,
public policies interact with natural and man-made geography. This includes the
support schemes by the BNDES for Brazil’s regional expansion – introduced
during the Cardoso presidency, expanded in the PT era and now largely
discontinued. Resource nationalism, double taxation, and fluctuating exchange
rates work against Brazilian–South American interaction.
We admit that assessments of regional integration in South America – or,
more generally, in the Global South – must avoid Euro-centric biases. Because of
the different trajectory of economic relations, and the smaller and less developed
markets in the Global South, such a comparison would miss the point. Even
prosperous emerging economies, such as Brazil until 2014, lack the financial
means that initially allowed Germany and France to drive European
integration as paymasters (MATTLI, 1999). At this stage, regional integration
beyond Europe and North America should focus on developing physical conditions
– in particular infrastructure for energy and transport – that improve connectivity
and foster regional interdependence. Our analysis demonstrated that there are
major obstacles in this regard in South America. Yet, considering budgets
constraints due to recurrent economic crises and chronic political instability, as
well as the re-orientation of Brazil’s economic and foreign policies under
Bolsonaro, it is unlikely that regional economic integration will receive any
meaningful boost in the coming years.
Revised by Christine Puleo
Submitted on April 30, 2019
Accepted on September 29, 2019

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Public Policy, and the Failure of Economic
Integration in South America

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