On January 26, 2020, Brazilian President Jair Bolsonaro was the chief guest during India’s 71st Republic Day Parade. Later that week a strategic partnership was formed between the countries as India signed a bilateral investment treaty (BIT) with Brazil to further develop relations between the two states on both a cultural and commercial level. Recently, India has terminated or elected not to renew its BITs with at least 83 other countries and has overhauled its model BIT framework to better assert India’s authority in world affairs and protect itself from claims arising under them. India has reworked its BITs with various countries, not only to showcase Prime Minister Narendra Modi’s “fast-track diplomacy,” but also to reconfigure India’s investment scheme after losing the infamous White Industries case. Although India has gone through these changes to secure better agreements for itself, the India-Brazil BIT leans heavily towards the Brazilian model BIT and focuses more on the State’s right to regulate and arbitrate. The India-Brazil BIT is noted to primarily revolve around dispute prevention rather than resolution and only protects against direct expropriation. With many confused how the compromise ended this way, the BIT is likely only a steppingstone for India’s foreign trade ambitions.
The question then arises, why Brazil and why now? Both India and Brazil belong to the BRICS forum along with Russia, China, and South Africa. These emerging national economies came together in 2011 to encourage political, cultural, and commercial cooperation. In addition, the IBSA (India, Brazil, South Africa) forum functions as another similar cross-continental tying of relations between the India and Brazil. Despite all the collaborative efforts, according to a 2013 BBC World Service Poll, only 26% of Brazilians view India’s influence positively and only 20% of Indians view Brazil positively with 18% viewing Brazil negatively. These sentiments have hopefully improved in the past seven years and will continue to improve through the impact of the recent BIT.
While BITs like these are important for obvious economic reasons, BITs also create cross-cultural understanding and ties through investment relationships. However, after the India-Brazil BIT was created, many noticed the favored conditions towards Brazil and wondered what India could gain by tying its own hands in relation to the breadth of possible arbitration. There could be many reasons or no reason at all, however some have attributed this BIT to India’s desire to compete with China. With China dominating international trade and India attempting to redefine its position within the world economy, Brazil may end up being that arena.
Prime Minister Modi and President Bolsonaro have similar ideologies and policies, which means that the doors for trade and investment may open wider than most would think. The two leaders focused the India-Brazil BIT on key sectors of their respective economies: oil, gas, and mining. In addition, the leaders set a target of $15 billion USD by 2022, which would likely rank India within the top 5 trading partners for Brazil. Many have also adopted this view not only because of the standing conflicts between India and China regarding border issues and China’s continued support of Pakistan, but also because of India’s recent stance with the United States against China regarding the ongoing Covid-19 global pandemic. With the world at a standstill during these times of uncertainty, many noticed strained India-China relations and see India taking slow and steady steps to better position itself once the global market returns.
The India-Brazil BIT is a step in the right direction for both countries to improve cultural and economic relations. The BIT also recognizes a growing reoccurrence of state sovereignty being applied to international arbitration and will hopefully encourage further investments and improvements to the global economy.
By David Matthews, Junior Staffer
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