Brazil and Germany reshape alliance to double bilateral trade in five years

Trade relations between Brazil and Germany are moving toward a new stage, with the potential to double bilateral trade over the next five years and expand Brazil’s importance in Germany’s energy transition. Beyond that, the resumption of negotiations to avoid double taxation is among the main pillars of this new agenda, agreed in April. The outcome is being closely watched by Brazilian industry, since ending double taxation would favor German investment in strategic high-technology areas.

The agenda discussed by the two governments also opens the way for Germany to accelerate decarbonization through Brazilian production of biofuels and green hydrogen. Brazil, for its part, sees an opportunity to gain ground in the reorganization of global supply chains through technology partnerships with the Germans. “Brazil today is a strategic partner of Germany, the only one in Latin America to hold that status,” said Bruno Vath Zarpellon, executive director for business development at the Brazil-Germany Chamber of São Paulo, or AHK.

The renewed rapprochement comes at a time of major changes in the geopolitical map. Both countries are interested in diversifying their trade partners, said Roberto Jaguaribe, a former Brazilian ambassador to Germany, China and the United Kingdom. “Brazil has globally attractive features that matter for the economy of the future, such as renewable energy sources available at competitive costs. Added to that is Europe’s energy shortfall and its high costs.”

Recent events illustrate Germany’s need to broaden its commercial ties. Russia’s invasion of Ukraine pushed up energy prices and left Europe without control over part of its supply. More recently, the war involving Iran, which led to the closure of the Strait of Hormuz, sharply affected fuel supply across the European continent.

“Germany has only about six weeks of aviation fuel stocks left, and the summer holiday season is approaching. Brazil has enormous potential to become one of the largest producers of SAF, because of its ability to turn commodities into high-value-added products,” Zarpellon said.

Constanza Negri, manager for trade and international integration at Brazil’s National Confederation of Industry, noted that energy costs are one of Europe’s major challenges. “Brazil can be part of the solution in biofuels and green hydrogen, and could become a partner in some of the solutions Germany is currently seeking,” she said.

Germany, the eighth-largest investor in Brazil with a stock of $44.1 billion, according to the National Confederation of Industry, could increase its direct investment by 47% under an agreement to avoid double taxation, according to a study by Tendências Consultoria. The deal would also intensify trade, with German exports to Brazil rising 14% and Brazilian exports to Germany increasing 19%.

In 2025, Germany consolidated its position as Brazil’s fourth-largest trading partner worldwide and the leading European supplier to the Brazilian market. Total trade reached $20.9 billion, including $14.4 billion in Brazilian imports and $6.5 billion in Brazilian sales to Germany. Within the European Union, Germany ranks as the third-largest destination for Brazilian exports.

The relationship is not only deficit-ridden for Brazil, but also reflects an asymmetry in the value profile of traded goods. Brazilian exports are still dominated by primary products such as coffee, soybeans and ore, while Germany sells Brazil higher-value-added goods. Lia Valls, an associate researcher at FGV’s Brazilian Institute of Economics, said new German investments in Brazil could gradually change that composition, as could the Mercosur-European Union agreement over the medium and long term.

Jaguaribe also stressed the need to create partnerships in sectors with strong complementarities. “Industry is part of Germany’s DNA. The idea of deindustrializing is unacceptable to the German voter, but the idea of having a more active and competitive global presence through strategic partnerships is viable. That is where I see clear opportunities,” he said.

By Mônica Magnavita for Valor Econômico

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