Former colonial master Portugal is losing ground to rivals old and new along roaring Portuguese-speaking trade routes – and there’s a new player on the block. Finbarr Bermingham reports.
At its height in 1821, the Portuguese empire stretched from the fast-flowing Amazon in the west to the shallow waters of the Timor Sea in the east. Portugal’s territories in-between included modern-day Angola, Mozambique, Macau and Brazil (it’s a little-known fact that during the Napoleonic Wars, the Portuguese capital was transferred to Rio de Janeiro for fear of the seat of the empire being sacked).
The ceding of Macau in 1999 signalled the empire’s death knell. By this stage, some of Portugal’s former colonies were threatening to overtake it economically and establishing themselves as trade hubs of growing importance. In 2002, the weakening master registered growth of just 0.7%, compared with 14.5% in Angola (which was just emerging from a brutal civil war), 8.9% in Macau, 8.8% in Mozambique and 2.7% in Brazil. Most notably, Brazil and Angola have become powerful commodity exporters, with Mozambique said to be on its way to joining them.
Much has been made of Portugal’s EU and IMF bailouts, but less of the changing dynamics of trade between Lusophone countries, perhaps best exemplified by prime minister Pedro Passos Coelho’s trip to Angola in 2011 – cap in hand – to encourage Angolan investment in Portugal’s punitive privatisation programme. Angolan state-owned vehicles such as Sonangol and Santoro Finance have taken substantial stakes in Portugal’s largest energy provider, Galp, and third-largest bank, Banco Português de Investimento (BPI), while wealthy individuals and government cronies have been hoovering up Iberian real estate.
Reverse colonisation isn’t necessarily a new thing: people have been coining the phrase since Indian conglomerate Tata purchased British Steel in 2007 for £4.3bn. But analysts agree that Angola’s interests in Portugal mark the first time it has involved an African country.
Outstripping the master
Portugal still maintains strong business ties within Angola. Since the financial crisis, hundreds of thousands of white-collar workers have made the journey south in search of work. “Portuguese companies benefit from the opportunities too,” says Bank Millennium’s head of trade finance Diogo Lacerda. “We have strong cultural ties. You see a lot of Angolans supporting Portuguese football clubs and even our national football team. That helps when you go there. Angolans speak Portuguese that’s more similar to people in Portugal than those in Brazil – they’re culturally closer to us.”
And yet, Angola’s relationship with Portugal is extremely fraught. The Portuguese judiciary has been investigating very senior members of the Angolan elite, including the attorney general and vice-president, over possible cases of money laundering. Nothing has been proven, but it has led to an enormous chill in bilateral relations.
Dr Joseph Marques, a Lusophone-watcher from the Brazil Institute, explains: “The Angolan president recently gave a speech suggesting that the proposed strategic partnership with Portugal would be abandoned or put on hold as a result of the investigation. Work was being done to establish the partnership at a big bilateral meeting in February, but that will probably be postponed now.”
Portugal’s losses are surely to the gain of other players in the market; perhaps most obviously, Brazil. Brazil has more people of African descent than any other non-African nation and more embassies on the continent than the UK. Africa receives more than half of all the aid disbursed by the Brazilian Co-operation Agency – the state development agency. Given the linguistic ties and shared history, it’s natural that Lusophone Africa would be the primary landing point for Brazilian investment.
In July 2013, Odebrecht – the Brazilian construction behemoth – was awarded the contract to expand Angola’s Cambambe hydropower plant. US$300mn of debt was provided by HSBC, Société Générale and BHF Bank, with Miga providing a guarantee. In 2011, Brazilian mining giant Vale agreed to pump US$6bn into the Moatize coal project in Mozambique. The agreement included the construction of a US$4.4bn coal terminal at Nacala port and a 912km railway line connecting the port to the mine.
When Angola produced its first consignment of LNG last June, Sonangol swiftly loaded up the 160,000 cubic feet Sambizanga tanker and packed it off to Brazil. And while Portugal may claim to have stronger cultural ties with Angola than Brazil, the shared geology of the two southern hemisphere countries runs deeper still and could help foster greater economic ties.
In 2014, Angola is set to drill below a layer of salt beneath the seabed in almost half of its offshore oil-wells, mirroring a technique used by Brazil to access the western hemisphere’s largest discovery of oil in 30 years. These ‘pre-salt’ reserves are a hangover of the tectonic separation of the African and South American land masses 120 million years ago. Brazil’s experience in tapping these deposits will surely be of interest to Sonangol.
“There’s a certain sense of pride that Brazil has outstripped its colonial master,” Christina Stolte, a researcher at the German Institute of Global and Area Studies (GIGA) tells GTR. “Angola is more reluctant of working with Portugal. Brazil is relatively easy about its relationship with Portugal, but it doesn’t need to rely on Portugal as a mediator with Lusophone Africa as in former times. Brazil’s image in Africa is much better than Portugal’s.”
Elephant in the room
As with every conversation on Africa nowadays though, the giant elephant in the room here is China. Few countries have been able to compete with China’s policy of ‘chequebook diplomacy’ on the continent. Despite the initiative undertaken in Beijing in 2013 to rebalance the economy from investment-led to consumption-led, Chinese institutions have continued their march into Africa apace, Lusophone countries included.
After emerging from a civil war that spanned three decades, Angola’s infrastructure was in dire need of revamping. China Exim’s 17-year US$2bn loan to the government in 2004 was granted on the condition that the construction contracts went to Chinese companies. As part of the loan agreement, Angola provides China with quarterly shipments of oil.
The loan was priced at Libor plus 1.5%, cheaper than Angola had been attaining energy-backed loans from the west, and with an in-built grace period of five years, it carried a much more attractive tenor. By 2010, China Exim’s credit lines to Angola had reached US$10.5bn and currently, 39% of Angola’s crude oil exports currently go to China (after Saudi Arabia, Angola is China’s second-largest supplier of oil).
The pattern is similar in other parts of Lusophone Africa, perhaps most notably Mozambique which, after the discovery of sizeable natural gas reserves, has become of special interest to China. In November, China Exim agreed to lend Mozambique US$416.5mn for the rehabilitation of the road between the port of Beira and Macipanda, on the Zimbabwean border. With an interest rate of just 1% and a tenor of 20 years (with a seven-year grace period), it’s the kind of ‘soft’ lending that has defined China’s recent economic history in Africa.
The special administrative region of Macau adds another layer of complexity to China’s relationship with the Lusophone bloc. In 2003, China established the fetchingly-titled Forum for Economic and Trade Co-operation Between China and Portuguese-speaking Countries, which meets every three years in Macau. “At the time it started, trade between China and the other eight states was US$5bn and rumour has it that they should close 2013 out with US$100bn… it’s been a big jump,” says Marques at the Brazil Institute.
In fact, it looks like that figure will have been quite comfortably surpassed, given that multilateral trade had topped US$98.5bn by September. China’s ambitions are simple: it wants access to the quarter billion-strong Portuguese-speaking consumer markets, its projects and commodities. China has also been made a consultative observer of the Community of Portuguese Language Countries (CPLP), an intergovernmental organisation that meets biannually to advance political, diplomatic and economic ties between Lusophone countries.
Joseph Marques is currently conducting extensive research into the potential of the CPLP and finds it curious that Brazil isn’t taking more of an interest. “It has this organisation in its pocket,” he tells GTR. “But it’s never really done much with it. Brazil has been enamoured with the BRICs and perhaps neglected this existing forum, which does some good work but needs stronger leadership. It’s interesting to follow the CPLP to see how relations between Brazil and Portugal evolve and also to follow China. China is very important in Angola and Portugal and is growing in Brazil.”
Could it be that as Portugal’s reputational woes has opened the door for Brazil in Africa, Brazil’s preoccupation with frying bigger fish could force other CPLP members further into Chinese hands? At the last edition of the Macau forum, China agreed to grant loans of US$250mn to Angola, Cape Verde, East Timor, Guinea-Bissau and Mozambique along with US$1.6bn in agricultural support and medical resources. Rather than Portugal, it would seem that Brazil’s main rival for trading primacy in its own international fraternity is a country of completely different derivation.