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The structure of the world economy has been changing quickly during the last decade. The emerging global economy is much more fragmented than in the past and characterised by different global actors, each one with specific features and roles. In this setting, both Brazil and the European Union play role. This paper, without pretending to provide a full analysis of the European and Brazilian economies, offers a description of their main international economic features to understand their current and future role in the global order.

Section 1 looks at the macroeconomics: it first focuses on Brazil and assesses arguments that international exchange rate misalignments represent a real grievance for Brazilian policy-makers in their struggle to get the economy onto a satisfactory trajectory. The attention is then turned to Europe, and especially to the euro area, with a focus on the still-unresolved crisis and its position vis-à-vis the rest of the world. Section 2 analyses the place of the euro area in the international financial institution system. It assesses how far it may be both overrepresented in terms of the weight of the sum of its member states, while being underrepresented as such institutionally as a major monetary union. While this issue may be seen as relevant only for Europe, the analysis shows that it has significant implications for emerging economies, Brazil included. The conclusions explore macro-policy options for improving the EU-Brazil partnership and suggest that a new initiative launched by them would be economically desirable.

This working paper was prepared in the context of the CEPS-FRIDE project on the EU-Brazil Strategic Partnership, funded by Gulbenkian Foundation. Daniel Gros is Director of CEPS. Cinzia Alcidi is Head of the Economic Policy unit at CEPS and LUISS Research Fellow, and Alessandro Giovannini is an Associate Research Assistant at CEPS.