February 26, 2013

Russia Intends to Invest in Brazilian Infrastructure Improvements

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

In a series of wide ranging meetings last week in Brazil, the Russian Minister of Agriculture, Nikolay Fedorov, met with his Brazilian counterparts to discuss imports of Russian wheat into Brazil, Brazilian soybean meal and meat exports to Russia, and the Russian intension to invest in infrastructure improvements at Brazilian ports. Currently, 90% of the Brazilian exports to Russia are agricultural products and 60% of the Russian exports to Brazil are fertilizers.

The first order of business at the meetings was to agree on phytosanitary standards regarding the importation of Russian wheat into Brazil and Brazilian soybean meal into Russia. The two countries agreed on details of how the wheat would be fumigated before leaving Russian ports in order to eliminate any possibility of insect infestation. Upon arriving at Brazilian ports, the wheat would be cleaned and checked again for any pests or fungal infections.

The volume of Russian wheat imported into Brazil would probably be small at first, less than 500,000 tons, but the Russian minister feels that eventually Russia would be selling a million tons of wheat or more per year to Brazil.

Phytosanitary standards regarding the importation of Brazilian soybean meal into Russia were also discussed. No agreement was achieved concerning soybean meal, but Russia is eager to import the meal and an agreement is expected to be forthcoming in the near future.

In addition to grain imports, the meeting also dealt with Brazilian meat exports to Russia which have hit a snag in recent years. In a surprising decision two years ago, the Russian government suddenly placed an embargo on the importation of meat from the states of Parana, Rio Grande do Sul, and Mato Grosso. Their stated reason for the embargo was that the processing facilities in these states did not meet the Russian standards, but Brazilian officials have consistently disagreed with that assessment. Ironically, some of the very same facilities had just been approved by the USDA for exports to the U.S. when the Russian decision was announced.

Minister Fedorov stated that it was never an embargo, but simply a temporary suspension of imports from selected regions of Brazil and that the same action had been taken in other countries as well. He feels the temporary suspension will be resolved in the near future. At the time of the suspension, Russia was the largest importer of Brazilian pork.

Concerning Russian investments in Brazilian infrastructure, the minister stated that that Russia has significant plans to invest in numerous projects that will help build bilateral relations between the two countries. The Russian Prime Minister, Dmitir Medvedev, is scheduled to discuss these investments with the Brazilian President on his upcoming visit to Brazil.

Russian investments would coincide with President Russeff's desire to modernize Brazil's infrastructure and reduce the cost of moving Brazilian commodities into the world markets.