Vietnam, Brazil deepen trade ties during PM Chinh’s visit, eye FTA with Mercosur

Vietnam and Brazil agreed to ramp up bilateral trade during Vietnamese Prime Minister Pham Minh Chinh’s visit to the South American country, with negotiations for a trade deal between the former and the Mercosur bloc likely to start soon.

Trade in focus

During talks between Brazilian President Inacio Lula da Silva in Brasilia on Monday, Chinh asked the Brazilian side to soon grant Vietnam the market economy designation and back the early start of negotiations on a free trade agreement (FTA) with the Mercosur.

Mercosur comprises Argentina, Paraguay, Uruguay, and Brazil, which is currently chairing the bloc. Several countries including Canada and Singapore are also negotiating trade deals with Mercosur.

During a meeting with Brazilian businesses on September 24 with Chinh in attendance, Vietnamese Minister of Industry and Trade Nguyen Hong Dien expected talks on the deal to begin next month, aiming to boost Vietnamese exports to Latin America.

Dien said Brazil could serve as a gateway for Vietnam to South American markets with nearly 300 million consumers. Meanwhile, through Vietnam, Brazil can access the ASEAN market, which has a combined population of more than 650 million.

The Vietnamese minister said the two countries have great potential, as the two-way trade of $6.8 billion posted in 2022 remained modest, accounting for less than 1% of Vietnam’s external trade.

Speaking at the business forum, Chinh said Brazilian firms could send more cotton, soybean, and maize to Vietnam, and import more electronic devices, agricultural products, garments, and footwear.

With more potential to exploit, Chinh and Lula da Silva set a goal for bilateral trade to reach $10 billion by 2025 and $15 billion by 2030.

Mercosur is Vietnam’s 13th largest trade partner with two-way trade increasing nearly five-fold from $2.45 billion in 2011 to $12 billion in 2022. Vietnam shipped $3.3 billion worth of goods to Mercosur and imported $8.7 billion from the market. Mercosur-Vietnam trade flows accounted for nearly a quarter of trade between Mercosur and ASEAN.

“Vietnam’s dynamism makes it possible to establish itself as a gateway for Brazilian products to ASEAN,” Ruvislei González Saez, senior researcher at the Cuban Center for International Policy Research (CIPI), told The Investor.

The Cuban researcher, however, cautioned that an FTA with Mercosur may result in a bigger deficit for Vietnam. Vietnam now runs a large trade deficit with Brazil and Argentina only.

Hi-tech exports to Vietnam

During their Monday talks, the two sides agreed to expand cooperation in culture, agriculture, education, and defense.

The two leaders witnessed the signing of four documents covering education, defense, agriculture, and diplomacy.

Lula da Silva said Brazil wants to export competitive items to Vietnam such as aircraft, machinery and high-tech equipment.

On the first day of his stay in Brazil, Chinh toured the headquarters and production facilities of Embraer S.A, the world’s third largest commercial aircraft manufacturer after Boeing and Airbus. Chinh asked Embraer to invest in the company’s business ecosystem in Vietnam, and provide aircraft maintenance and repair services.

On the occasion, Lula da Silva accepted an invitation extended by Vietnamese leaders to visit Vietnam soon.

Ruvislei González Saez observed that since Lula da Silva’s return to power, Vietnam-Brazil relations have regained momentum in terms of high-level interactions. Lula da Silva and Chinh met in Japan in May on the sidelines of a G20 expanded summit where they agreed that bilateral trade was much below its potential.

“Recent high-ranking meetings can translate into mutually beneficial cooperation for both nations and elevate bilateral ties in the near future. Their current comprehensive partnership relations have great potential to advance to a higher level in the future,” Ruvislei González commented.