Brazilian cowboys guide cattle in the southern state of Rio Grande do Sul. Iran is now Brazil's biggest export market for its beef. AP Photo/Alexandre MeneghiniALEXANDRE MENEGHINI/The Associated Press
When Iran last month finally eclipsed Russia to become the biggest buyer of beef from Brazil, the world's top exporter of the meat, many outside the market were caught by surprise.
Brazil's controversial relationship with the Iranian regime, especially under former President Luiz Inacio Lula da Silva, has long angered Washington.
However, commercial ties between the two countries have remained less well known.
Brazilian exports to Iran surged more than sevenfold between 2000 and 2010, hitting $2.12-biilion (U.S.) last year, as slowing growth across the developed world forced the Latin American country to look farther afield for trading partners.
Elsewhere in the Middle East, trade is expanding just as fast. Arab countries have also proved an invaluable source of income, with Brazilian exports to the Arab League reaching $12.6-billion last year, up 34 per cent from 2009.
In spite of disruptions caused by the political upheavals of the recent Arab uprisings, the trading relationship between Latin America and the Middle East is expected to get ever stronger and more diversified over the coming years.
"Did the Arab Spring cause any damage to business? The only outstanding issue is the Libyan blockade. Although Libya is not a big trading partner, it is still an important buyer of foodstuffs," says Michel Alaby, director of the Arab-Brazilian Chamber of Commerce (CCAB).
"However, in all the other countries, such as Tunisia, Egypt, Bahrain, Yemen, this didn't happen. In fact, quite the opposite is true – exports just keep growing," he says.
Trade between the two regions is largely focused on Latin America's commodity exports. In the case of Iran, Brazilian exports to the Middle Eastern country totalled $1.6-billion between January and August this year, with beef accounting for about 32 per cent of shipments, followed by sugar and grain.
In return, however, Brazil imported only $22.5-million of goods from Iran during the same period – almost 90 per cent of which was polythene.
In fact, Brazil's top exports to Middle Eastern countries are all commodities. Sugar is the country's biggest export to Egypt, Tunisia, the United Arab Emirates and Yemen, while it is iron ore in the case of Saudi Arabia, Bahrain and Oman. In return, Brazil mostly just buys oil.
Similarly, Argentina and Uruguay have become important sources of wheat for the Middle East, with sovereign wealth funds playing an important role.
Qatar and Abu Dhabi have been the most active in the region over recent months, as the barren Gulf area looks to the fertile lands of Latin America to feed its growing populations.
This year, for example, Al Gharrafa Investment, a unit of Qatar's sovereign wealth fund, increased its stake in Adecoagro, a farmland venture based in Argentina, Brazil and Uruguay.
Chile has also become an important agricultural powerhouse for the region and, like many other countries in Latin America, in turn invests in the production of fertilizer in the UAE. In March, Chile also signed a free-trade agreement with Turkey as a way of opening the door for Chilean agricultural exporters to the Middle East.
"It's a concentration of a small number of products really, but they are products that are very well-established in the Arab market," Mr. Alaby says.
The challenge, he says, is for Latin American countries such as Brazil to sell more "value-added" and industrial products to the region. For example, in November, the CCAB will accompany a delegation of Brazilian companies to the "Big 5" Dubai building show in the hope of taking a bigger share of the Gulf's construction boom.
However, there are signs that a new, more complex, trading relationship is beginning to emerge.
Embraer, the Brazilian aircraft manufacturer, has established a strong presence in the region, largely by selling executive jets to the Gulf's rich.
"Food, mining, and then engineering and technology, such as aircraft from companies such as Embraer, will be the main exports in the coming years," says Daniel Melhem, president of the Gulf Latin America Leaders Council.
"The other thing that Middle Eastern investors are looking for are brands," he says, adding that so-called merchant families, which already own the franchises of businesses such as Starbucks, are turning their attention to restaurant and clothing chains in Latin America.
Brazilian steakhouses, known in Portuguese as churrascarias, have become particularly popular, as has the Argentine clothing chain, La Martina, which has stores in Dubai, Kuwait and Lebanon.
Willingness to do business with even the most unsavoury of regimes, as demonstrated by Brazil's controversial relationship with Iran, has fostered stronger trade links.
But both regions also share similar business etiquettes, says Mr. Alaby, which could help Latin America develop a more profound role in the Middle East over the coming decades.
In particular, Brazil's own turbulent history of hyperinflation and currency crises has prepared the country well to deal with the rapidly changing circumstances and demands of the new Middle East.
"Brazilians are flexible when they negotiate, which means that Brazil can conquer more space [in the market]than other countries," Mr. Alaby says.
"In general terms, Brazilian business people don't impose their product, as happens in other countries, but they adapt to demands, which is very positive and gives the country a big head start."
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