Dubai is a major city in the world economy recovering from the COVID-19 virus and fights a major war in Ukraine. The UAE and Latin America are two regions looking at possibilities of collaborating to strengthen trade connections.
The Russian attack on Ukraine has raised the oil price to over $100 per barrel, which has benefited the next exporters, including South American countries and the UAE.
Analysts anticipate the rise in commodity prices to increase the budgets of Gulf economies, with the majority of the new revenue placed into sovereign wealth funds or held as reserves.
Even though countries like Brazil and Venezuela are home to some of the world’s biggest oil reserves, they haven’t ever been among the top performers at making the oil. For example, the years of poor management by the government and corruption-ridden monopolies have led to Venezuela’s production decreasing to around 800,000 BPD (barrels each day) from 3.2 million barrels per day in the 1990s.
UAE is, the third-largest producer of OPEC’s oil is keeping up with the times by embracing the latest technologies, including blockchain technology and AI, to maximize the value of every barrel. As a result, the oil companies of Latin America’s nations could benefit from the UAE’s technology implementation to enhance their operations.
“There are many opportunities in the gas and oil industries for UAE to enter the Latin American region and help businesses in the oil and gas industries to be more efficient and productive in both exploration and production phases,” stated Marcos Casarin, Head of Latin America Macro Research at Oxford Economics.
Casarin said that companies of both countries could collaborate in tandem to transform the extracted oil into gasoline and diesel. “There are numerous capital items that are needed to ensure that the gas and oil are refined and reaches the fuel tanks of cars, as well as to the producers of plastics and petrochemicals.”
Dubai’s Top Trade Partners in LATIN AMERICA (H1 2021)
- Brazil: $890 million
- Mexico 590 million dollars
- Peru 574 million dollars
- Guyana 348 million in Guyana
- Suriname $299 million
It’s not just oil.
Although oil is a clear industry with various synergies from the perspective of the UAE, food is more crucial. UAE imports around 80-90 percent of its food items have stated that trade with Latin America reached $1.9 billion in 2020. In the current situation, which has seen supply bottlenecks and rising costs of labor have resulted in an increase in the cost of food, it is in the best interest of the UAE to diversify its sources of imports.
“South America has the largest farm in the world and I believe that in a time of increasing costs for food, there’s an immense opportunity to collaborate,” said Casarin. “There’s the potential for cooperation between the two regions, for example, for access to the latest equipment, but in the same way, it’s possible to allow the UAE to have access to better suppliers.”
Brazil, the largest South American nation and a major exporter of meat and soybean products is expected to benefit from trade partnerships. Trade between Brazil and the UAE increased to $431 million by the end of the 1st quarter of 2021. As a result, UAE being UAE becoming the fourth major destination for Brazilian exports in Arab states.
Mexico also has enormous potential that is not fully explored. For example, it is a huge manufacturing hub for both the US and Canada and enjoys the benefits of its tax-free zone with the two nations under the USMCA agreement. The Latin American country also has the highest quantity of free trade agreements worldwide and is open to commerce and trade.
Sector of Services
Any trade agreements that are formed between UAE, as well as Latin America will probably not be in the service sector. The UAE is home to companies such as Careem and Noon, which could be a bit hesitant when joining these industries, and it’s usually because of ideological reasons.
“Local governments aren’t willing to open these industries to foreign competition. So I would not consider them the first winners of collaboration across the region,” declared Casarin. “Overall I believe that greater integration of trade is likely to become certain in the coming years.”
Forum LATAM
Two presidents, a prime minister, and 13 Ministers of Latin America and the Caribbean region are confirmed to take part in the fourth edition of the Global Business Forum Latin America scheduled for March 23-24, in Expo 2020 Dubai.
The forum is organized by the Dubai Chamber of Commerce in collaboration with the Expo. The two-day conference that will be held under the theme of “Towards a Resilient Future” will look at synergies among the two regions and explore possibilities for cooperation in new ways.
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