Order Code RL33456
Brazil-U.S. Relations
Updated October 6, 2008
Clare Ribando Seelke
Analyst in Latin American Affairs
Foreign Affairs, Defense, and Trade Division
Alessandra Durand
Research Associate
Foreign Affairs, Defense, and Trade Division
Brazil-U.S. Relations
Summary
On January 1, 2007, Luis Inácio “Lula” da Silva, of the leftist Workers’ Party
(PT), was inaugurated Specialist in Latin American Affairs
Peter J. Meyer
Analyst in Latin American Affairs
June 3, 2009
Congressional Research Service
7-5700
www.crs.gov
RL33456
CRS Report for Congress
Prepared for Members and Committees of Congress
Brazil-U.S. Relations
Summary
On January 1, 2007, Luis Inácio Lula da Silva, of the leftist Workers’ Party (PT), was inaugurated
for a second four-year term as President of Brazil. Lula was
re-elected in the second round of
voting with fairly broad popular support. His
immediate tasks were to boost Brazil’s lagging
economic growth and address the
issues of crime, violence, and poverty. Despite President Lula’s
personal popularity,
many predicted that intrainter-party rivalries within his governing coalition would make
make it hard for him to push his agenda through Brazil’s notoriously fractured legislature.
President Lula enjoys high approval ratings (80% in September 2008) and is
benefitting from a strong economy (GDP growth exceeded 5% in 2007). Ongoing
corruption investigations involving President Lula’s PT party have not diminished
the strength of his second term in office. Some have criticized President Lula,
however, for thus far being unwilling or unable to use his significant political capital
to gain legislative approval for a more robust political and economic reform agenda.
During the first Lula term, Brazil’s relations with the United States were
generally positive, although President Lula prioritized strengthening relations with
neighboring countries and expanding ties with nontraditional partners, including
India and China. Brazil-U.S. cooperation has increased during President Lula’s
second term, particularly on energy issues. Two presidential visits in March 2007
culminated in the signing of the U.S.-Brazil Memorandum of Understanding (MOU)
to promote greater ethanol production and use throughout Latin America. Some
predict that, given its recent deep-water petroleum discoveries, Brazil could
eventually become a major oil supplier to the United States.
th
During its second session, the 110 Congress has maintained an interest in
Brazil, particularly its role as an ethanol producer. On October 9, 2007, the House
passed H.Res. 651 (Engel), recognizing the expanding relationship that exists
between the United States and Brazil and the importance of the U.S.-Brazil biofuels
cooperation. Another bill, S. 1007 (Lugar), that would deepen Brazil-U.S. energy
cooperation and provide $60 million to support the U.S.-Brazil MOU on biofuels
was reported out of the Senate Committee on Foreign Relations on September 23,
2008. Two bills have been introduced — H.R. 6183 (Brown-Waite) and H.R. 6137
(Shadegg) — that would eliminate tariffs on imported ethanol. Another bill was
introduced, S. 3080 (Feinstein), that would require the President to periodically
adjust the ethanol tariff so that it remains the same as the blender’s tax credit. On
September 29, 2008, the House passed H.R. 7222 (Rangel), which would extend
current trade preferences for Brazil and other countries under the Generalized System
of Preferences (GSP) through December 31, 2009. The Senate passed H.R. 7222 on
October 2, 2008. On September 9, 2008, the House passed H.Res. 1254 (Engel),
supporting the new U.S.-Brazil Joint Action Plan Against Racial Discrimination.
This report, which will be updated periodically, analyzes Brazil’s political,
economic, and social conditions, and how those conditions affect its role in the
region and its relationship with the United States.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Political Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The First Lula Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
October 2006 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Second Lula Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Economic and Social Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Efforts to Boost Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Social Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Foreign and Trade Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Relations with the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Issues in U.S.- Brazil Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Counternarcotics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Counterterrorism and the Tri-Border Area . . . . . . . . . . . . . . . . . . . . . . . . . 11
Energy Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Ethanol and Other Biofuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Nuclear Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Doha Round of the World Trade Organization (WTO) Talks . . . . . . . 14
WTO Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Generalized System of Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Violent Crime and Human Rights Abuses by Police . . . . . . . . . . . . . . 16
Race and Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trafficking in Persons for Forced Labor . . . . . . . . . . . . . . . . . . . . . . . 18
HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Amazon Deforestation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Figures
Figure 1. Map of Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Brazil-U.S. Relations
Background
Brazil is a considered a significant political and economic power in Latin
America, and an emerging global leader. A former Portuguese colony that achieved
independence in 1822, Brazil occupies almost half of the continent of South America
and boasts immense biodiversity, including the vast Amazon rainforest, and
significant natural resources. Brazil is the fifth most populous country in the world.
Brazil’s 191 million citizens are primarily of European, African, or mixed African
and European descent.1 With an estimated gross domestic product (GDP) of $1.8
trillion in 2007, Brazil’s diversified economy is the tenth largest in the world, the
largest in Latin America, and one of the largest in the developing world, but per
capita gross national income is only $5,910, and the country has an unequal income
distribution.2 Brazil has long held potential to become a world power, but its rise to
prominence has been curtailed by political setbacks, including twenty-one years of
military rule (1964-1985), social problems, and uneven economic growth.
Between World War II and 1990, both democratic and military governments
sought to expand Brazil’s influence in the world by pursuing a state-led industrial
policy and an independent foreign policy. Since the 1990s, Brazilian foreign policy
has focused on strengthening ties with other South American countries, engaging in
multilateral diplomacy, and acting at times as a countervailing force to U.S. influence
in Latin America. In recent years, for example, Brazil led other South American
countries in blocking the creation of a U.S.-backed Free Trade Area of the Americas
(FTAA). Under President Luis Inácio “Lula” da Silva, Brazil has aimed, with
varying degrees of success, to raise its global profile. Brazil has become a leader of
developing countries in the Doha round of the World Trade Organization (WTO)
talks. It has sought to increase trade ties with other emerging economies, such as
China, India and South Africa. Brazil is commanding a multinational United Nations
Stabilization Mission in Haiti. Brazil has become a global leader in biofuels
production and may become an increasingly important petroleum exporter.
Currently, relations between the United States and Brazil may be characterized
as warm and friendly. The United States has increasingly regarded Brazil as a
significant regional power, especially in its role as a stabilizing force in Latin
America. Despite periodic disagreements on trade and political issues, Brazil and the
United States have worked closely on a wide range of bilateral and regional issues.
1
Brazil has never had a large indigenous population. Today Brazil’s indigenous population
consists of roughly 460,000 persons, many of whom reside in the Amazon. U.S. Department
of State, Country Reports on Human Rights Practices 2007: Brazil, March 2008.
2
“Brazil at a Glance,” World Bank, October 1, 2007.
CRS-2
U.S. officials have responded positively to Brazil’s recent efforts to reassert its
regional leadership, which has been challenged by the rise of oil-rich Hugo Chávez
in Venezuela.3 Early in 2007, two high-level meetings between Presidents Bush and
Lula strengthened U.S.-Brazilian relations. The latter meeting culminated in the
March 2007 signing of a U.S.-Brazil Memorandum of Understanding (MOU) to
promote bio-fuels development in the Western Hemisphere.4
This report analyzes Brazil’s political, economic, and social conditions, and how
those conditions affect its role in the region and its relationship with the United
States. It then discusses a number of key issues in Brazil-U.S. relations.
Political Situation
The Brazilian political system has several unique characteristics that distinguish
it from other countries in Latin America. The country’s federal structure,
comprising 26 states, a Federal District, and some 5,581 municipalities, evolved from
the decentralized colonial structure devised by the Portuguese in an attempt to control
Brazil’s sizable territory. Even during the centralizing government of Getúlio Vargas
and the Estado Novo, or New State (1937-1945), landowning remained the source
of local power in Brazil and states retained considerable autonomy. Brazil’s military
governments ruled from 1964-1985 and, while repressive, were not as brutal as those
in other South American countries. Although nominally allowing the judiciary and
Congress to function during its tenure, the Brazilian military stifled representative
democracy and civic action in Brazil, carefully preserving its influence during one
of the most protracted transitions to democracy to occur in Latin America. Brazil
was also one of the last countries in the region to abandon state-led economic policies
in favor of market reforms. Significant pro-market reforms did not occur until the
government of Fernando Henrique Cardoso (1994-2002).5
During the first decade after its return to democracy in 1985, Brazil experienced
economic recession and political uncertainty as numerous efforts to control runaway
inflation failed and two elected presidents did not complete their terms. One elected
president died before taking office; the other was impeached on corruption charges.
In 1994, Cardoso, a prominent sociologist of the center-left Brazilian Social
Democratic Party (PSDB), was elected by a wide margin over Luis Inácio “Lula” da
Silva of the Worker’s Party (PT), a former metalworker and union leader who had
led the PT since the early 1980s. Cardoso was elected largely on the basis of the
success of the anti-inflation “Real Plan” that he implemented as Finance Minister,
3
Monte Reel, “U.S. Seeks Partnership with Brazil on Ethanol; Countering Oil-rich
Venezuela is Part of Aim,” Washington Post, February 8, 2007.
4
For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential
for U.S.-Brazil Energy Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
5
For a historical overview of Brazil’s political development, see Bolivar Lamounier,
“Brazil: Inequality Against Democracy,” in Larry Diamond, Jonathan Hughes, Juan J. Linz,
and Seymour Martin Lipset, eds., Democracy in Developing Countries: Latin America,
Boulder, CO: Lynne Reiner, 1999.
CRS-3
which resulted in a new currency (the real) pegged to the dollar in July of 1994.
During his first term, Cardoso achieved macroeconomic stability, opened the
Brazilian economy to trade and investment, and furthered privatization efforts.
Despite those achievements, the Cardoso government was unable to enact muchneeded political and social changes, such as social security, tax, or judicial reforms.
President Cardoso sought a second presidential term after a constitutional
reform was passed in 1997 to allow for reelection, and he defeated Lula da Silva in
the first round of voting in October 1998 with 53% of the vote. President Cardoso’s
popularity fell towards the end of his second term, however, as Brazil faced a series
of financial crises. Most analysts credit Cardoso with restoring macroeconomic
stability to Brazil’s economy and solidifying its role as leader of the Southern
Common Market (Mercosur)6, but fault him for failing to implement more aggressive
political reforms and social reforms.7
The First Lula Administration
In 2002, Lula da Silva ran in his fourth campaign for the presidency of Brazil.
Unlike in his previous failed campaigns, he moderated his leftist rhetoric and, while
still advocating greater attention to social issues, promised to maintain the fiscal and
monetary policies associated with Brazil’s standing International Monetary Fund
(IMF) agreements. The 2002 presidential election proved to be a referendum on
eight years of “neo-liberal” policies enacted by Cardoso. High unemployment rates
and economic stagnation led voters to support Lula, a critic of neoliberalism. Lula
was elected decisively in the second round of voting with a significant majority of the
vote compared to Cardoso’s designated successor, José Serra, the Minister of Health
and Senator from São Paulo.
During his first term, President Lula maintained the restrained economic
policies associated with his predecessor. In 2003, the Lula government enacted
social security and tax reforms, and in 2004, a law to allow more private investment
in public infrastructure projects. President Lula launched several social programs,
some of which have been more successful than others. The Bolsa Familia (Family
Stipend) program, which provides monthly stipends to 11.1 million poor families in
exchange for compulsory school attendance for all school-age children, has been
credited with reducing poverty, but some critics argue that it has made poor
households too dependent on government handouts.8 By 2005, legislative initiatives
had stalled, and President Lula was increasingly criticized for failing to develop
effective programs to address land distribution and crime. Critics argued that,
ironically, one of the Lula government’s only major achievements in the first term
6
Mercosur is a common market composed of Brazil, Argentina, Paraguay, and Uruguay that
was established in 1991. See CRS Report RL33620, Mercosur: Evolution and Implications
for U.S. Trade Policy, by J.F. Hornbeck.
7
Susan Kaufman Purcell and Riordan Roett, eds., Brazil Under Cardoso, Boulder, CO:
Lynne Reiner Publishers, 1997; Mauricio A. Font and Anthony Peter Spanakos, Reforming
Brazil, New York: Lexington Books, 2004.
8
Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation
Under Lula,” Journal of Latin American Studies, vol. 38, November 2006.
CRS-4
was to maintain the orthodox economic policies of the Cardoso administration. In
2006, some analysts began to dismiss President Lula’s efforts to expand Brazil’s
international profile as a leader among developing countries as “a relatively
inexpensive [tactic] to shore up domestic support”9 that had failed to yield many
concrete results. Criticism of Lula further escalated with the onset of several
corruption scandals involving top PT officials that occurred during the latter half of
Lula’s first term.10 A congressional inquiry in April 2006 cleared President Lula of
any direct responsibility for the scandals.
October 2006 Elections. President Lula captured 61% of the votes to the
PSDB’s Gerardo Alckmin’s 39% in the second round of presidential elections held
in late October 2006. President Lula won handily in the poorer north and
northeastern regions of the country, but failed to carry the more prosperous southern
and western states or São Paulo. Observers have assessed that Brazilians, though
divided by class and region, effectively voted in favor of continuing macroeconomic
stability under a second Lula Administration despite the corruption scandals that had
involved Lula’s party during the first term.
The PT did not fare as well as President Lula in the legislative elections,
suffering a loss of 9 seats in the Chamber of Deputies and losing 4 Senate seats.
Some assert that the election outcome shows that President Lula successfully
distanced himself from the PT and its corruption scandals, relying on his personal
popularity rather than his party affiliation to win. Others attribute his win to the
success of the Bolsa Familia program and the country’s macroeconomic stability,
which led voters in poorer income brackets to overwhelmingly support him.11
The Second Lula Administration
Despite enjoying high approval ratings (80% in September 2008) and benefitting
from an expanding economy, President Lula’s second administration has been
periodically hindered by corruption scandals and a lack of support from members of
his coalition. For example, legislative progress stalled throughout 2007 as the
president of the Brazilian Senate, Renan Calheiros, a key Lula ally, refused to resign
his position after being accused of corruption. In December 2007, senators voted to
acquit Calheiros of all wrongdoing even though a congressional ethics panel had
recommended that he be impeached. Lacking strong leadership to hold
governmental-allied senators in line, President Lula suffered a major setback as
senators voted not to extend the provisional tax on financial transactions (CPMF) in
9
Jeffrey Cason, “Hopes Dashed? Lula’s Brazil,” Current History, February 2006.
10
Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” Paper
Presented at the Latin American Studies Association Conference, March 2006.
11
Matt Moffett and Geraldo Samor, “In Brazil Campaign, A Barroom Brawl and a Class
War,” Wall Street Journal, October 27, 2006; Wendy Hunter and Timothy J. Power,
“Rewarding Lula: Executive Power, Social Policy, and the Brazilian Elections of 2006,”
Latin American Politics and Society, Spring 2007.
CRS-5
December. Without CPMF resources, President Lula will have to cut spending and
raise other taxes in order to make up for an estimated $21.7 billion budget shortfall.12
The October municipal elections have dominated the political scene in Brazil
for the last few months. Some claim that the outcome of the municipal ballot will
have a significant impact on the 2010 presidential election through a replication of
strategic political alliances; others maintain that its influence will not be decisive in
determining who will be the next president.13 Although polls predicted that PT
candidates would sweep a majority of the mayoral races held in large cities in the first
round of voting, many races, including the contest for the mayorship of São Paulo,
will be decided in a run-off election in late October.
Economic and Social Conditions
Throughout the last two decades, Brazil’s fiscal and monetary policies have
focused primarily on inflation control. When President Lula took office in 2003,
Brazil had an extremely high level of public debt, virtually necessitating that he adopt
austere economic policies. Despite his leftist political origins, President Lula has
maintained restrained economic policies, even surpassing the IMF’s fiscal and
monetary targets. As a result, Brazil has begun to experience some benefits,
including lower inflation and a lower credit risk rating. In December 2005, the Lula
government repaid its $15.5 billion debt to the IMF ahead of schedule. The
government’s overall foreign debt was reduced by 19.9% between 2003 and 2006.14
Fiscal discipline has also been accompanied by record exports that enabled Brazil to
post GDP growth of 5.4% in 2007 and record trade surpluses in each of the last four
years. But, Brazil still suffers from high real interest rates, which have dampened
investment and economic growth. In addition, rising inflation rates, largely attributed
to high food prices and swelling domestic demand, are of increasing concern to
Brazilian consumers.
Brazil is a major exporter of agricultural and industrial products and plays a
significant role in the world trading system. Since 2002, Brazil has been the world’s
third largest exporter of agricultural products after the United States and the
European Union. In 2007, Brazil was the world’s leading exporter of coffee, orange
juice, sugar, chicken, beef, soy, and tobacco. Demand for Brazilian commodity
exports in Asia is strong, as is global demand for Brazil’s manufactured goods and
services. Brazil is the world’s second largest producer of ethanol (after the United
States) and its state-run oil company, Petrobras, a leader in deep-water oil drilling,
12
“CPMF Failure May be Beginning of “Second Term Curse” for Lula,” Latin American
Regional Report, December 2007.
13
“O Verdadeiro Peso das Eleições Municipais,” Epoca, January 21, 2008; “Country
Report: Brazil,” Economist Intelligence Unit, July 2008.
14
“Brazil Foreign Debt at $168.9 Billion End-2006,” Latin America News Digest, January
26, 2007.
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has recently announced the discovery of what may be the world’s largest oil field find
in 25 years.15
Brazil also has a relatively balanced trade regime. Its main trading partners in
2007 were the European Union (25% of exports and 22% of imports), Asia (20% of
exports, 29% of imports, with China alone accounting for 7% of exports and 9% of
imports), Latin America (26% of exports, 18% of imports), the United States (16%
of exports, 16% of imports), Africa (5% of exports, 9% of imports), and the Middle
East (4% of exports and 3% of imports). In 2007, the value of Brazil’s exports
reached some $159 billion and the country’s trade surplus was $45 billion.16
Efforts to Boost Economic Growth
One of President Lula’s goals for his second term has been to boost Brazil’s
lagging economic growth. Between 2000 and 2006, Brazil’s annual growth rates
averaged roughly 2.7%. In 2006, Brazil posted GDP growth of about 2.8%, the
second lowest recorded in Latin America. In 2007, President Lula launched a
Program to Accelerate Growth (PAC) aimed at boosting Brazil’s growth rates to 5%
per year through increased public and private investment in infrastructure. The PAC
provides tax breaks and incentives to spur investment and includes measures to
improve and simplify Brazil’s regulatory framework. While some have praised the
PAC’s focus on boosting government investment in much-needed infrastructure
projects, others have criticized it for failing to curb excessive public spending or to
promote labor reform. GDP growth in Brazil reached 5.4% in 2007.17
Some predict that the Brazilian economy will continue expanding over the next
few years, but several factors could constrain the country’s long-term growth
potential. Those include a significant public debt burden, excessive government
spending, inflation, high tax and interest rates, and low investment and savings rates.
President Lula has thus far not elected to use his political capital to enact muchneeded structural reforms to deal with those and other issues, such as the country’s
unwieldy pension system. A 2006 report by the Organization for Economic Cooperation and Development (OECD) asserted that reforming Brazil’s overly generous
public pension system was crucial in order for the country to experience sustained
economic growth.18 Some observers hope that the Brazilian Congress will take up
pending economic reform proposals after the October municipal elections are held.
One pending legislative initiative would reform and simplify Brazil’s tax system;
another would create a Brazilian Sovereign Fund to promote domestic and overseas
investments.
15
“Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
16
Trade data available from World Trade Atlas, Global Trade Atlas. See also: “Prospects
2008: Brazil May Reach Investment Grade,” Oxford Analytica, December 10, 2007.
17
18
“Brazil: Country Profile 2008,” Economist Intelligence Unit.
Fabio Giambiagi and Luiz de Mello, “Social Security Reform in Brazil: Achievements and
Remaining Challenges,” Organization for Economic Co-operation and Development
(OECD), Economics Department Working Paper No. 534, December 6, 2006.
CRS-7
Social Indicators
Despite its well-developed economy and large resource base, Brazil has had
problems solving deep-seated social problems like poverty and income inequality.
Brazil has had one of the most unequal income distributions in Latin America, a
region with the highest income inequality in the world. A 2004 World Bank study
reported that some 50 million Brazilians live in poverty.19 The U.N. Development
Program has identified 600 Brazilian municipalities, many in the north and
northeastern part of the country, in which poverty levels are similar to those present
in poor African countries. One major cause of poverty and inequality in Brazil has
been the extreme concentration of land ownership among the country’s elites. A 2004
study found that 1% of the Brazilian population controlled 45% of the farmland.20
The Brazilian government has also acknowledged that there is a racial component to
poverty in Brazil. People of African descent in Brazil, also known as AfroBrazilians, represent roughly 45% of the country’s population, but constitute 64% of
the poor and 69% of the extreme poor.21 Other factors that inhibit social mobility in
Brazil include a lack of access to quality education and job training opportunities for
the country’s poor.
Brazil’s endemic poverty and inequality have, until recently, not been
significantly affected by the government’s social programs. A March 2005 OECD
study found that, even though Brazil has spent the same level or more of public
spending on social programs as other countries with similar income levels, it has not
achieved the same social indicators as those countries.22 There has been more recent
evidence, however, that the Lula government’s Bolsa Familia (Family Stipend)
program, combined with relative macroeconomic stability and growth over the past
few years, has reduced poverty rates, particularly in the north and northeast regions
of the country.23 According to the Getulio Vargas Foundation, the level of poverty in
Brazil during Lula’s first term in government fell by 27.7%. Since 2002, the
proportion of the Brazilian population who define themselves as middle-class has
risen from 44% to 52%.24
19
David De Ferranti et al., Inequality in Latin America: Breaking with History?
Washington, DC: The World Bank, 2004.
20
“Special Report: Land Report Dilemma,” Latin America Regional Report, December 21,
2004.
21
Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa
Econômica Aplicada (IPEA), 2001.
22
“Economic Survey of Brazil 2005,” Organization for Economic Cooperation and
Development, March 2005.
23
Hall, “From Fome Zero to Bolsa Familia,” November 2006; “Human Development
Report 2007/8,” United Nations Development Program, November 2007.
24
Nilson Brandão Junior and Marianna Aragão, “Miséria no Brasil Cai 27,7% no 1º
Mandato de Lula,” O Estado de S.Paulo, September 20, 2007; “Brazil: Half the Nation, a
Hundred Million Citizens Strong,” Economist, September 13, 2008.
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Foreign and Trade Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a
regional power in Latin America, a leader among developing countries in economic
cooperation and collective security efforts, and an emerging world power. Brazilian
foreign policy has been based on the principles of multilateralism, peaceful dispute
settlement, and nonintervention in the affairs of other countries.25 Brazil engages in
multilateral diplomacy through the U.N. and the Organization of America States
(OAS). It is currently commanding a multinational U.N. stabilization force of some
9,000 personnel in Haiti. Brazilian foreign policy has tended to emphasize regional
integration, first through the Common Market of the South (Mercosur) and now the
South American Community of Nations. Brazil’s role as a leader in South America
has been challenged by Hugo Chávez in Venezuela, who has used his country’s vast
oil wealth to gain influence in the region, particularly in Bolivia and Ecuador.
Whereas Lula emphasized forging relations with other emerging economies during
his first term, he appears to have adopted a more pragmatic foreign policy for his
second, including a focus on improving Brazil-U.S. relations.
Since the mid-1990s, Brazil has had much more success in developing political
cohesion than true economic integration amongst its neighbors in the Southern Cone.
Mercosur was established in 1991 by Brazil, Argentina, Paraguay, and Uruguay. In
1996, Chile and Bolivia became “associate members”; Peru followed in 2003 (not
implemented) and Venezuela and Mexico in 2004.26 Associate members have no
voting rights and need not observe the common external tariff. In October 2004,
after years of talks, Mercosur and the Andean Community of Nations signed a trade
pact, giving all Andean countries — Bolivia, Colombia, Ecuador, Peru, and
Venezuela — the equivalent of associate membership. This breakthrough led to the
creation of the South American Community of Nations two months later in a pact
that included 12 countries (those in Mercosur, the Andean Community, along with
Chile, Guyana, and Suriname). In December 2005, Mercosur agreed to the accession
of Venezuela as a full member, which some say could add a decidedly anti-American
factor to the pact. The Brazilian and Paraguayan Congresses have yet to approve
Venezuela’s accession. In December 2006, Bolivia expressed its intention to join
Mercosur as a full member, but critics say that its accession would politicize the
union unnecessarily.
Recent events have not boded well for the future of Mercosur. In 2006, the
Mercosur’s internal dispute resolution process proved unable to resolve a dispute
between Argentina and Uruguay over whether to allow European companies to
construct two paper mills along the river that demarcates their border. At the same
time, Uruguay diversified its trade with the United States and even threatened to
withdraw from Mercosur, arguing that it seems to serve only the needs of Argentina
25
Georges D. Landau, “The Decisionmaking Process in Foreign Policy: The Case of Brazil,”
Center for Strategic and International Studies: Washington, DC: March 2003.
26
For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and
Implications for U.S. Trade Policy, by J.F. Hornbeck.
CRS-9
and Brazil. Trade asymmetries among the members have been left unaddressed at
recent Mercosur summits, as has the need to draft a common customs code.27
In addition to trying to expand its regional profile through established political
and economic channels, Brazilian government and business officials have worked
together to expand the country’s commercial interests in the region. Some of those
efforts have been more successful than others. One initiative has involved the use
of so-called “ethanol diplomacy.” Brazil has sought to reassert regional leadership
vis-à-vis oil-rich Venezuela by signing bio-fuels partnership agreements with
countries that would otherwise be dependent on expensive oil imports.28 A not-sosuccessful endeavor has involved trying to use Petrobras’ investments in Bolivia to
influence the populist government of Evo Morales. Even though Petrobras had made
extensive investments in Bolivia, the Lula government was caught off guard by
Morales’s May 2006 nationalization of his country’s natural gas industry. President
Lula has since acceded to several of Morales’s demands — including cutting tariffs
for Bolivian exports to Brazil and stepping up investments in Bolivia — in order to
secure access to Bolivian gas.29
Brazil’s political, business, and military ventures are complemented by the
country’s trade policy. In Brazil, the Ministry of Foreign Relations continues to
dominate trade policy, causing the country’s commercial interests to be (at times)
subsumed by a larger foreign policy goal, namely, enhancing Brazil’s influence in
Latin America and the world.30 For example, while concluding meaningful trade
agreements with developed economies (such as the United States and the European
Union) would probably be beneficial to Brazil’s long-term economic self-interest, the
Brazilian government has instead prioritized its leadership role within Mercosur and
expanded trade ties with countries in Africa, Asia and the Middle East.
Some analysts assert that these “south-south” initiatives have enhanced Brazil’s
international profile, but others have noted that they have yielded few concrete results
for the country, and that they have come at the expense of Brazil-U.S. relations.
Roberto Abdenur, the former Brazilian Ambassador to Washington, criticized the
“south-south” approach of the Brazilian Foreign Ministry for indoctrinating Brazilian
diplomats with “anti-imperialist” and “anti-American” attitudes.31
27
28
“More Polite Rhetoric in the Mercosur,” Latinnews Daily, December 19, 2007.
“Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007.
29
“Bolivia’s Populism Steps on Brazil,” Christian Science Monitor, May 8, 2006; “Brazil
May Pay a Price for Generous Deal on Gas,” Financial Times, February 22, 2007; “Brazil
Seeks to Lure Bolivia Away from Venezuela,” Reuters, December 13, 2007.
30
See CRS Report RL33258, Brazilian Trade Policy and the United States, by J.F.
Hornbeck.
31
Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007.
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Relations with the United States
Currently, relations between the United States and Brazil may be characterized
as warm and friendly. The United States has increasingly regarded Brazil as a
significant power, especially in its role as a stabilizing force in Latin America. U.S.
officials tend to describe Brazil as a friendly country, similar to Chile, governed by
a moderate leftist government. They assert that the United States seeks to increase
cooperation with moderate leftist governments in Latin America in order to ease
mounting tensions among the countries in South America, and to deal with populist
governments in the region. Brazil under President Lula has helped diffuse potential
political crises in Venezuela, Ecuador, and Bolivia, and supported Colombia’s
ongoing struggle against terrorist organizations and drug traffickers. Brazil is also
commanding the U.N. stabilization force in Haiti.
Although Brazil and the United States share common goals for regional
stability, Brazil’s independent approach to foreign policy has led to periodic disputes
with the United States on trade and political issues, including how (and whether) to
create a Free Trade Area of the Americas (FTAA) and Brazil’s vocal opposition to
the war in Iraq. Despite these disagreements, Brazil and the United States have
worked closely on a wide range of bilateral and regional issues. Brazil-U.S.
cooperation has increased in the past year or so, as reflected in the continuing highlevel contacts between the two governments, particularly on energy issues. Currently
at least ten bilateral mechanisms are in place through which U.S. and Brazilian
government and business leaders interface on issues of shared concern.
Brazil is considered a middle-income country and does not receive large
amounts of U.S. foreign assistance. In FY2007, Brazil received $16 million in U.S.
aid. In FY2008, Brazil received an estimated $14.8 million. The FY2009 request for
Brazil was for $8.6 million, substantially lower than in previous years. A continuing
resolution (H.R. 2638/P.L. 110-329) will provide funding for U.S. aid programs in
Brazil at FY2008 levels through March 6, 2009. U.S. assistance priorities in Brazil
include supporting environmental programs and the strengthening of local capacity
to address threats to the Amazon, deterring and preventing illicit activities, and
reducing the transmission of communicable diseases.
Selected Issues in U.S.- Brazil Relations
The Bush Administration has come to view Brazil as a strong partner whose
cooperation must be sought in order to solve regional and global problems. Current
issues of concern to both Brazil and the United States include counternarcotics and
terrorism, energy security, trade, environmental issues, human rights, and HIV/AIDS.
Counternarcotics
Brazil is not a significant drug producing country, but is a major conduit for the
transit of cocaine, marijuana, and some heroin from neighboring Andean countries
destined primarily for Europe, the United States, and local markets. It is the second
largest consumer (after the United States) of cocaine in the Western Hemisphere.
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The Bush Administration includes Brazil on a list of major drug-producing or drugtransit countries.32 In FY2007, Brazil received $4.0 million in U.S. counternarcotics
assistance through the Andean Counterdrug Program (ACP). For FY2008, Brazil
received close to $1 million in ACP assistance, mainly for interdiction and law
enforcement activities. In FY2009, the Administration requested $1 million in ACP
funding for Brazil.
In recent years, Brazil has cooperated extensively with neighboring countries in
counternarcotics activities and implemented a law permitting the shooting down of
civilian aircraft (with adequate safeguards) suspected of being engaged in the
trafficking of illicit narcotics. Brazil has also constructed a $1.4 billion sensor and
radar project called the Amazon Vigilance System (SIVAM from its acronym in
Portuguese) in an attempt to control illicit activity in its Amazon region. A new antimoney laundering law was drafted in 2005, but still has not been considered by the
Brazilian Congress. In 2007, Brazil’s federal police, which generally are responsible
for about 75% of total Brazilian drug seizures and detentions, captured 13.1 metric
tons of cocaine, 488 kilograms of crack cocaine, and 16 kilograms of heroin.33 In
2007, Brazilian police arrested a major Colombian-born drug trafficker and leader
of the Norte del Valle cartel. He was extradited to the United States in August 2008
to face charges of drug trafficking, money laundering, and murder.34
Counterterrorism and the Tri-Border Area35
In its April 2008 State Department Country Reports on Terrorism, the State
Department highlights threats in the Tri-Border Area (TBA) of Brazil, Paraguay, and
Argentina, a region with a large Muslim population. The TBA has long been used
for arms and drug trafficking, contraband smuggling, document and currency fraud,
money laundering, and the manufacturing of pirated goods. According to the report,
the United States remains concerned that Hezbollah and Hamas are receiving
financial, logistical, and moral support from Muslims in the TBA, although the report
also stated that there were no corroborated reports that these or any other Islamic
groups had an operational presence in the area. The section on Brazil states that the
government has “diligently worked with their U.S. counterparts” and has become
“increasingly capable of monitoring domestic financial operations.” On the other
hand, it notes that two key legislative initiatives that have been pending since 2005,
an anti-money laundering law and an antiterrorism law, have yet to be introduced in
the Brazilian Congress.
32
Memorandum for the Secretary of State, “Major Illicit Drug-Producing and Drug-Transit
Countries for FY2009,” September 15, 2008, Presidential Determination No. 2008-28.
33
U.S. Department of State, International Narcotics Control Strategy Report, February
2008.
34
Marion Barbel, “Brazil Extradites Colombian Drug Trafficker to the United States,”
Global Insight Daily Analysis, August 25, 2008.
35
For more information, see CRS Report RS21048, Latin America: Terrorism Issues, by
Mark P. Sullivan.
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Energy Security
In the few years, there has been significant congressional interest in issues
related to Western Hemisphere energy security. Brazil is widely regarded as a country
that has successfully reduced its reliance on foreign oil by using alternative energies.
At the same time, Brazil has attained the ability to produce large amounts of
enriched uranium as part of its nuclear energy program. And, more recently, Brazil’s
state-run oil company, Petrobras, a leader in deep-water oil drilling, has discovered
what may be the world’s largest oil field find in 25 years.36
Oil. On September 2, 2008, President Lula celebrated the first oil output to be
extracted from the new offshore fields. The discovery of the Tupi field in November
8, 2007, located in the Santos Basin 350 miles off the coast of Rio de Janeiro, has the
potential to turn Brazil into a major oil and gas producer and an oil exporter. The
field alone may hold up to 50 billion barrels of oil, worth an estimated US$6 trillion
at current prices. The government is considering new measures that may pave the
way for a heavy state hand in the country’s energy markets, such as the creation of
a new 100% state-owned company to manage the exploration blocks, which has
raised concerns among some foreign investors.37
Ethanol and Other Biofuels.38 Brazil stands out as an example of a country
that has become a net exporter of energy, partially by increasing its use and
production of ethanol. On March 9, 2007, the United States and Brazil, the world’s
two largest ethanol producing countries, signed a Memorandum of Understanding to
promote greater cooperation on ethanol and biofuels in the Western Hemisphere. The
agreement involves: (1) technology-sharing between the United States and Brazil; (2)
feasability studies and technical assistance to build domestic biofuels industries in
third countries; and, (3) multilateral efforts to advance the global development of
biofuels. The first countries to receive U.S.-Brazilian assistance are: the Dominican
Republic, El Salvador, Haiti, and St. Kitts and Nevis.39 On October 9, 2007, the
House passed H.Res. 651 (Engel), recognizing the warm friendship and expanding
relationship that exists between the United States and Brazil and the importance of
the U.S.-Brazil biofuels cooperation. Another bill, S. 1007 (Lugar), that would
deepen Brazil-U.S. energy cooperation and provide $60 million to support the U.S.Brazil MOU on biofuels was reported out of the Senate Foreign Relations Committee
on September 23, 2008.
Since March 2007, the United States and Brazil have moved forward on all three
facets of the agreement. On the bilateral front, several high-level visits have taken
36
“Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
37
“Brazil’s Golden Times Start to Roll,” LatinNews Daily, September 3, 2008;
“Hydrocarbons Potential Poses Major Challenges,” Oxford Analytica, November, 20, 2007.
38
For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential
for U.S.-Brazil Energy Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
39
“Memorandum of Understanding Between the United States and Brazil to Advance
Cooperation on Biofuels,” U.S. Department of State, Office of the Spokesman, March 9,
2007.
CRS-13
place aimed at boosting bilateral cooperation on biofuels. U.S. and Brazilian
consultants carried out feasibility studies that identified short-term technical
assistance opportunities in Haiti, the Dominican Republic, and El Salvador. The
government of St. Kitts and Nevis has agreed to implement the U.S.-BrazilOrganization of American States (OAS) recommendation that it should dedicate land
to bioenergy crops that will be used to produce electricity. On the multilateral front,
the United States and Brazil are working with other members of the International
Biofuels Forum (IBF) to make biofuels standards and codes more uniform. Despite
this progress, several potential obstacles to increased U.S.-Brazil cooperation on
biofuels exist, including current U.S. tariffs on most Brazilian ethanol imports.
The United States currently allows duty-free access on sugar-based ethanol
imports from many countries through the Caribbean Basin Initiative, Central
American Free Trade Agreement, and the Andean Trade Preferences Act, among
others.40 Some Brazilian ethanol is processed at plants in the Caribbean for duty-free
entry into the United States, but exports arriving directly from Brazil are currently
subject to a 54-cent-per-gallon tax, plus a 2.5% tariff.
In the 110th Congress, legislation has been introduced that would eliminate
additional tariffs on foreign ethanol: H.R. 6137 (Shadegg). Another bill, H.R. 6183
(Brown-Waite), would amend the harmonized tariff schedule of the United States to
provide duty-free treatment of ethanol used as fuel. Still another bill has been
introduced, S. 3080 (Feinstein), that would require the President to periodically
adjust the ethanol tariff so that it remains the same as the blender’s tax credit.41
Nuclear Energy. Between the mid-1970s and the mid-1980s, Brazil sought
to develop nuclear weapons as it competed with Argentina for political and military
dominance of the Southern Cone. In 1991, Brazil and Argentina reached an
agreement to use nuclear energy for peaceful purposes only. Brazil joined the
Nuclear Nonproliferation Treaty (NPT) in 1998 and since then has participated in
several multilateral nonproliferation regimes, including the Missile Technology
Control Regime and the Nuclear Suppliers Group (NSG). It is also a party to the
Treaty of Tlatelolco, which establishes Latin America as a nuclear-weapon-free zone.
Despite its nonproliferation credentials, some international observers were
concerned when Brazil commissioned a uranium enrichment plant in 2004 to be
located at the Resende nuclear facility outside Rio de Janeiro. Uranium enrichment
can be used for peaceful purposes (such as fuel for nuclear power plants) or for
military purposes (nuclear weapons). The Brazilian government asserts that it needs
to enrich uranium in order to produce its own fuel for power reactors, thereby
increasing its energy independence. In 2005, Brazilian officials refused to give
International Atomic Energy Agency (IAEA) inspectors full access to the centrifuge
plant, citing security concerns and proprietary aspects of the country’s nuclear
technology. Negotiations between Brazil and the IAEA ended in October 2005 when
40
For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean
Basin Initiative, by Brent D. Yacobucci.
41
For more information, see CRS Report RL32290, Fuel Ethanol: Background and Public
Policy Issues, by Brent D. Yacobucci.
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the Bush Administration lent its support to Brazil by asserting that limited
inspections should be enough for Brazil to comply with its international obligations.42
President Lula has stated that Brazil is going to spend about $540 million over the
next eight years in order to build a third nuclear power plant and a nuclear-powered
submarine. In February 2008, Brazil and Argentina agreed to establish a bi-national
commission to explore future nuclear cooperation between the two countries,
including the possible development of a joint nuclear reactor.43
Trade Issues
Trade issues are central to the bilateral relationship between Brazil and the
United States, with both countries being heavily involved in subregional, regional,
and global trade talks. Brazil has sought to strengthen Mercosur and to establish free
trade agreements with most of the countries in South America, while also pursuing
efforts to negotiate a Mercosur-European Union free trade agreement. The United
States has been actively involved in the Doha negotiations and, until late 2005,
pressed for action on the region-wide Free Trade Agreement of the Americas
(FTAA). Since negotiations for the FTAA have been largely abandoned, the United
States has continued to sign bilateral and subregional agreements with countries
throughout Latin America.
Doha Round of the World Trade Organization (WTO) Talks.44 Brazil
has had a leading role in the Doha round of the World Trade Organization (WTO)
talks. In 2003, Brazil led the G-20 group of developing countries’ efforts to insist
that developed countries agree to reduce and eventually eliminate agricultural
subsidies as part of any settlement. In late July 2004, WTO members agreed on the
framework for a possible Doha round agreement, but formal talks were suspended
indefinitely in July 2006 after key negotiating groups failed to break a deadlock on
the issue of agricultural tariffs and subsidies. In June 2007, negotiators from India
and Brazil walked out of a round of informal talks with representatives from the
United States and the European Union (EU), refusing to open their markets further
unless U.S. and EU subsidies were substantially reduced. Trade ministers again failed
to reach a breakthrough at an eight day negotiating ministerial held in July 2008.45
WTO Disputes. Brazil won a WTO dispute settlement case against U.S.
cotton subsidies in September 2004, which the United States appealed, but Brazil’s
position was reaffirmed by the WTO appellate body in March 2005. In keeping with
42
“New Round of Nuclear Enrichment Scare Stories,” Latin American Weekly Report,
February 12, 2006; Bernard Aronson, “Brazil’s Chance to Lead on Nuclear Containment,”
Wall Street Journal, March 18, 2005; Sharon Squassoni and David Fite, “Brazil as Litmus
Test: Resende and Restrictions on Uranium Enrichment,” Arms Control Today, October
2005.
43
Jessica Lasky-Fink, “Brazil, Argentina Pursue Nuclear Cooperation,” Arms Control
Today, April 1, 2008.
44
For more information on the Doha Round, see CRS Report RL32060, World Trade
Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson.
45
“Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008.
CRS-15
the requirement that the United States modify its policies or negotiate a mutually
satisfactory settlement with Brazil, the Bush Administration in early July 2005 asked
Congress to modify the cotton subsidy program and Brazil agreed to temporarily
suspend retaliatory action. In December 2007, a WTO dispute panel ruled in support
of Brazil’s claim that the United States is not moving quickly enough to comply with
the 2005 ruling that it should remove some of its cotton subsidies.46
In a separate decision, in December 2007 the WTO decided to investigate Brazil
and Canada’s claims that U.S. agriculture support programs have exceeded allowed
levels.47 Brazil has asserted that the United States has exceeded its annual
commitment levels for the total aggregate measure of support (AMS) in each of the
years 1999, 2000, 2001, 2002, 2004, and 2005. It also has complained that the U.S.
export credit guarantee program operates as a WTO-legal export subsidy. Canada
is pursuing a similar case against the United States.
Generalized System of Preferences.48 The Generalized System of
Preferences (GSP) provides duty-free tariff treatment to certain products imported
from developing countries. The U.S. program (as established by Title V of the Trade
Act of 1974) was extended until December 31, 2008, in section 8002 of P.L. 109-432
for all GSP beneficiary countries not covered by the African Growth and Opportunity
Acceleration Act (AGOA) of 2004 (P.L. 108-274, extended GSP benefits for AGOA
beneficiary countries through September 30, 2015). In the 109th Congress, renewal
of the preference was somewhat controversial, owing, in part, to concerns of some
that some of the more advanced developing countries (such as Brazil and India) were
contributing to the impasse in the Doha round of WTO talks. Compromise language
worked out between the House and Senate extended GSP for two years for all
countries, while directing the President “should” revoke “competitive need limitation
(CNL)” waivers for products from certain countries, based on the criteria specified.
In June 2007, the Bush Administration decided to revoke the CNL waivers on
Brazilian brake parts and ferrozirconium.49 On September 29, 2008, the House passed
H.R. 7222 (Rangel), which would extend current trade preferences for Brazil and
other countries under the Generalized System of Preferences (GSP) through
December 31, 2009. The Senate passed H.R. 7222 on October 2, 2008.
Intellectual Property Rights. In the last few years, Brazil has taken steps
to improve its record on protecting intellectual property rights (IPR). The Brazilian
government has created a national action plan to address piracy and intellectual
property crimes, which has included increased police actions. Brazil and the United
46
“WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19,
2007. For more information, see CRS Report RL32571, Background on the U.S.-Brazil
WTO Cotton Subsidy Dispute, by Randy Schnepf.
47
See CRS Report RS22728, Brazil’s WTO Case Against U.S. Agricultural Support: A Brief
Overview, by Randy Schnepf.
48
This section was drawn from CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones.
49
“USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S.
Trade, June 29, 2007.
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States continue to work together to address intellectual property issues, primarily
through the U.S.-Brazil Bilateral Consultative Mechanism and the U.S.-Brazil
Commercial Dialogue. In recognition of this progress, the United States Trade
Representative lowered Brazil from the Priority Watch List of countries with
significant IPR violations to the Watch List in 2007. Brazil remained on the Watch
List in 2008. In order to build on progress that has been made, USTR recommends
that Brazil should consider strengthening its IPR enforcement legislation, more
vigorously addressing book and Internet piracy, and signing the World Intellectual
Property Organization Internet Treaties.50 The U.S. government has also expressed
concerns about Brazil’s periodic threats to issue compulsory licenses for patented
pharmaceutical products. In May 2007, Brazil broke a patent on a drug used to treat
HIV/AIDs that is produced by Merck & Co. in order to import a cheaper version of
that drug from India.51
Human Rights
The U.S. State Department’s Country Report on Human Rights on Brazil
covering 2007 states that while “the federal government generally respected the
human rights of its citizens ... there continued to be numerous, serious abuses, and
the record of several state [and municipal] governments was poor.” Three human
rights issues of particular concern include crime and human rights abuses by police,
race and discrimination, and trafficking in persons.
Violent Crime and Human Rights Abuses by Police. Most observers
agree that the related problems of urban crime, drugs, and violence, on the one hand,
and corruption and brutality in law enforcement and prisons, on the other, are
threatening citizens’ security in Brazil. Crime is most rampant in the urban shanty
towns (favelas) in Rio de Janeiro and São Paulo. In addition to rising crime rates,
human rights groups have identified extrajudicial killings by police and prison
authorities as Brazil’s most pressing human rights problem.52 Upon completing a
November 2007 visit to Brazil, a U.N. Special Rapporteur concluded that police in
Brazil are allowed to “kill with impunity in the name of security.”53 Prison conditions
range from “poor to extremely harsh and life threatening,” and the countrywide
prison system, which housed more than 400,000 inmates in 2007, had almost double
the system’s design capacity.54
50
USTR, Special 301 Report, April 2008.
51
“Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007.
52
Brazilian authorities report that, partially in response to violent gang attacks, São Paulo
state police killed 533 alleged criminals in 2006 compared to 300 in 2005. See “Police
Killings of Suspects Up in Brazil,” Associated Press, February 1, 2007. President Lula has
taken some steps to combat police brutality in Brazil.
53
“Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit
to Brazil,” States News Service, November 15, 2007.
54
U.S. Department of State, Country Reports on Human Rights Practices 2007: Brazil,
March 2008.
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The current weaknesses in Brazil’s criminal justice system became dramatically
apparent in 2006, when gangs launched violent attacks that destabilized the cities of
São Paulo and Rio de Janeiro. In May 2006, street combat and rioting organized by
a prison-based gang network, the First Capital Command (PCC), paralyzed the city
of São Paulo for several days.55 Officially, the violent gang attacks, which were
followed by police reprisals, resulted in at least 186 deaths. Brazilian police have
been criticized for the brutal manner in which they responded to the gang violence.56
Violence in Rio de Janeiro has traditionally been linked to turf wars being
waged between rival drug gangs for control of the city’s drug industry or to clashes
between drug gangs and police officials. In late December 2006, drug gangs torched
buses and attacked police stations in Rio de Janeiro, leaving some 25 dead. Recent
clashes have also involved vigilante militias, composed of off-duty police and prison
guards, which are now charging citizens to “protect” them from the drug gangs. Rio
officials have identified the militias as criminal groups but have thus far been unable
to contain them.57
Many analysts have asserted that Brazilian politicians at all levels of
government have failed to devote the resources and political will necessary to
confront the country’s serious public security problems. In particular, they maintain
that there has been a lack of coordination between federal, state, and local officials,
and that political calculations have often prevented state governments, which have
been largely ineffective in responding to the recent violence, from seeking muchneeded assistance from the federal government. President Lula did not launch any
major anti-crime initiatives during his first term, but announced a $3 billion anticrime initiative in August 2007 that combines police reform, prison construction, and
other public security measures with significant investments in prevention, and
rehabilitation programs.58
Race and Discrimination.59 People of African descent in Brazil, also known
as Afro-Brazilians, represent 45% of the country’s population, but constitute 64% of
55
Formed in 1993 to protest the country’s poor prison conditions, the PCC now has at least
6,000 dues-paying members and reportedly exerts control over more than 140,000 prisoners
in the São Paulo prison system. Stephen Hanson, “Brazil’s Powerful Prison Gang,” Council
on Foreign Relations, September 26, 2006.
56
“Brazil: Battle of São Paulo Leaves a Disquieting Balance,” Latin American Weekly
Report, May 23, 2006; “Police are Criticized in Wave of Gang Violence in Brazil,” New
York Times, May 30, 2006; “Attacks in São Paulo Prompt Fears of Renewed Gang
Offensive,” EFE, February 7. 2007.
57
“Troops Alone Will Not Solve State of Violence,” Latin American Brazil and Southern
Cone Report, January 2007; “Brazilian Slums Face a New Problem: Vigilante Militias,”
Christian Science Monitor, February 8, 2007.
58
“Brazil: Public Security Program Finally Launched,” Latin American Weekly Report,
August 23, 2007.
59
For more information, see CRS Report RL32713, Afro-Latinos in Latin America and
Considerations for U.S. Policy, by Clare Ribando Seelke.
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the poor and 69% of the extreme poor.60 During the Cardoso administration, the
Brazilian government began to collect better official statistics on Afro-Brazilians.
These statistics found significant education, health, and wage disparities between
Afro-Brazilians and Brazil’s general population.
Brazil now has the most extensive anti-discrimination legislation geared towards
Afro-descendants of any country in Latin America. In 2001, Brazil became the first
Latin American country to endorse quotas in order to increase minority representation
in government service. Since 2002, several state universities in Brazil have enacted
quotas setting aside admission slots for black students. Although most Brazilians
favor government programs to combat social exclusion, they disagree as to whether
the beneficiaries of affirmative action programs should be selected on the basis of
race or income.61 In 2003, Brazil became the first country in the world to establish
a Special Secretariat with a ministerial rank to manage Racial Equity Promotion
Policies. Afro-Brazilian activists, while acknowledging recent government efforts
on behalf of Afro-descendants, have noted that most universities have preferred not
to implement quota systems, and that the Special Secretariat lacks the funding, staff,
and clout necessary to advance its initiatives.62
Despite these limitations, Brazil has taken a leadership role in advancing issues
of race and discrimination within the Organization of American States, where it is
leading the drafting of an Inter-American Convention for the Prevention of Racism
and All Forms of Discrimination and Intolerance. In March 2008, Brazil and the
Untied States signed an agreement known as the United States-Brazil Joint Action
Plan Against Racial Discrimination to bilaterally promote racial equality in areas
such as education, health, housing, and labor.63 On September 9, 2008, the House
passed H.Res. 1254 (Engel), expressing congressional support for the U.S.-Brazil
anti-discrimination plan.
Trafficking in Persons for Forced Labor.64 Brazil is a source, transit, and
destination country for people, especially women and children, trafficked for forced
labor or sexual exploitation. In the State Department’s Trafficking in Persons (TIP)
report, June 2006, Brazil was listed as a Tier 2 Watch List country. In the report, the
Brazilian government was cited for making only limited progress in bringing
traffickers to justice and for failing to apply effective penalties for those who exploit
forced labor. In the 2007 and 2008 TIP reports, Brazil was placed on Tier 2,
60
Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa
Econômica Aplicada (IPEA), 2001
61
Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1,
2004.
62
Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue
Policy Reform,” Citizen Action in the Americas, No. 17, April 2005.
63
64
“Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008.
For more information, see CRS Report RL33200, Trafficking in Persons in Latin America
and the Caribbean, by Clare Ribando Seelke.
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reflecting some progress, but significant challenges remain, particularly in addressing
trafficking for forced labor.65
In Brazil, between 25,000 and 100,000 men have reportedly been recruited to
labor in slave-like conditions, many in the country’s agribusiness industry. Roughly
half of the close to 6,000 people freed from slave labor in 2007 were found working
in sugarcane properties. Some have alleged that there are some 1,000 charcoalmaking camps in the Brazilian Amazon that are using slave labor to produce pig iron,
a key ingredient of steel, that is then purchased by major companies in the United
States. Child prostitution, child sex tourism, and the trafficking of foreign workers
into forced factory labor are also significant problems in Brazil.66
HIV/AIDS
Internationally recognized as having one of the world’s most successful
HIV/AIDS program, Brazil has made the fight against the spread of HIV/AIDS a
national priority. Initially focused on disease prevention, Brazil’s HIV/AIDS
program expanded to providing antiretroviral (ART) drugs on a limited basis by
1991, and later guaranteeing universal access by 1996. Currently some 172,000
Brazilians have access to free generic versions of ART drugs, some of which are
locally produced and financed by the Brazilian government. The incidence of
HIV/AIDS in Brazil has stabilized since 1997, and universal free access to ART has
increased average survival times from 18 months for those diagnosed in 1995, to 58
months for those diagnosed in 1996.67 HIV prevalence has been stable at 0.5% for
the general population in Brazil since 2000, so most government prevention efforts
are now targeted at high-risk groups where prevalence rates are still above 5%.
Brazil’s decision to develop generic ART drugs to treat HIV/AIDS under the
compulsory licensing provision of its patent law led to a subsequent 80% drop in the
cost of treatment there. That decision brought Brazil into conflict with the United
65
Since 2001, the U.S. State Department has evaluated foreign governments’ efforts to
combat trafficking in persons in its annual Trafficking in Persons (TIP) reports, which are
issued each June. Countries are grouped into four categories according to the U.S.
assessment of efforts they are making to combat trafficking. Tier 1 is made up of countries
deemed by the State Department to have a serious trafficking problem but fully complying
with the minimum standards for the elimination of trafficking. Those standards are defined
in the Victims of Trafficking and Violence Protection Act of 2000 (P.L. 106-386) as
amended. Tier 2 is composed of governments not fully complying with those standards but
which are seen as making significant efforts to comply. Tier 2 Watch List, first added as a
category in the 2004 report, is made up of countries that are on the border between Tier 2
and Tier 3. Tier 3 includes those countries whose governments the State Department deems
as not fully complying with TVPA’s anti-TIP standards and not making significant efforts
to do so. Tier 3 countries have been made subject to U.S. sanctions since 2003.
66
Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg
Markets, December 2006; U.S. Department of State, Trafficking in Persons Report 2008,
June 4, 2008.
67
Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in
Resource-Limited Settings,” World Health Organization, February 2005.
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States and the international pharmaceutical industry. In May 2001, the United States
submitted a complaint to the WTO, which was later withdrawn, that Brazil’s
practices violated the Trade-Related Aspects of Intellectual Property Rights (TRIPS)
agreement and prevented companies from developing new products there. While the
pharmaceutical industry argued that TRIPS was an essential tool to protect
intellectual property rights, developing countries (like Brazil) countered that TRIPS
inhibited their ability to fight public health emergencies in a cost-effective manner.
In August 2003, a WTO decision temporarily waived part of the TRIPS rules to allow
the export of generic drugs to countries confronting a grave public health challenge
(such as HIV/AIDS, tuberculosis, or malaria). That temporary waiver became
permanent in late 2005.68
Brazil currently manufactures older ART drugs locally both for domestic
consumption and for export to several African countries but has to import newer
medicines. According to Brazil’s ministry of health, tough negotiations with
pharmaceutical companies have resulted in $1.1 billion savings for the country’s
HIV/AIDS program.
Amazon Deforestation
The Amazon Basin contains over half of the world’s remaining tropical
rainforests and is the most biodiverse tract of tropical rainforest in the world. Some
22% of the world’s known plant species exist in Brazil and 20% of the world’s fresh
water lies in the Amazon basin. The Amazon is also thought to be home to one third
of all species in the world. Further, the Amazon rainforest is a sink for global carbon
dioxide, and is considered by many to be an important asset in moderating climate
change.
Throughout the last forty years, the Brazilian Amazon has been increasingly
deforested for development including roads, settlements, logging, subsistence and
commercial agriculture, as well as cattle ranching. In 1960, the Amazon was largely
undeveloped, but today approximately 15%-20% of the rainforest has been
deforested. Deforestation threatens the biodiversity of the Amazon region and is a
concern for climate change. In the 1980s, some predicted that deforestation would
decline if the Brazilian government stopped providing tax incentives and credit
subsidies to settlers and agricultural producers. Those predictions have not borne
out, however, as the complex and often interrelated causes of deforestation have
multiplied rather than decreased.69 Between 1990 and 2000, Brazil lost an area of
rainforest twice the size of Portugal. Deforestation rates, which have been fueled by
68
69
Mary Anastasia O’Grady, Wall Street Journal, December 16, 2005.
Some have suggested that access to pristine tracts of rainforests through roads is the
primary driver of deforestation in the Amazon. Regional roads constructed by the
government, as well as local roads created by logging operations, provide access to forested
areas. Using these roads, farmers clear remaining forests and practice slash and burn
agriculture until the land loses much of its soil fertility and it becomes more profitable to
move to other forested tracts rather than resuscitate their existing lands. After agriculture,
pastures grasses are generally planted and cattle are raised. Eventually, cattle grazing and
cyclical burning will alter the ecosystem sufficiently that forests cannot regenerate.
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increases in cattle ranching, soybean farming, and road building, declined in 2005
and 2006. In the last 12 months through July, however, as much as 5,792 square
miles (15,000 square km), roughly half the size of Belgium, have been cut down —
the first rise in three years.70 Recent rises in deforestation rates combined with the
May 2008 resignation of Environment Minister Marina Silva, widely seen as a strong
defender of the Amazon, has raised environmental fears.71
The Brazilian government has begun taking steps to crack down on
deforestation through greater policy and expansion of protected areas. The Lula
government created some 7 million hectares of new conservation reserves in 2004
and 2005. It also arrested more than 100 people for illegal logging between June
2005 and January 2006 and seized thousands of cattle.72 In March 2006, President
Lula signed the Public Forest Management Law, which allows companies access to
3% of the Amazon on the condition that they carry out sustainable operations.
Although some environmental groups have praised this progress, others fear that it
may be too little too late. Skeptics assert that the declining deforestation rates
recorded for the past two years did not occur because of any government initiatives,
but because declining soybean prices coupled with the strengthening of Brazil’s
currency made it less profitable to clear the forests. They point out that deforestation
rates began rising again in 2007 as cattle ranchers, soy producers and illegal loggers
increasingly used forest fires and chainsaws to clear large tracts of the rainforest.73
In order to combat further deforestation, most observers agree that cooperative efforts
will have to be made between the Brazilian government, private companies,
landowners, and the international community (including the United States).74 To that
end, President Lula launched an international fund in August 2008 to finance
conservation and sustainable development projects. The government hopes to raise
$1 billion within one year, according to Brazil’s National Development Bank
(BNDES), which will manage the fund.
USAID environment programs directly support the U.S.-Brazil Common
Agenda for the Environment. USAID environment programs seek to promote proper
land-use trends over large geographic areas while encouraging environmentallyfriendly income generation activities for the rural poor. USAID provided $5.2 million
for environmental programs in Brazil in FY2007 and an estimated $9.5 million in
FY2008. In FY2006, USAID initiated the Amazon Basin Conservation Initiative, a
regional program to support community groups, governments, and public and private
70
Raymond Colitt, “Brazil Seizes Cattle to Stem Amazon Destruction,” Reuters News, June
24, 2008; Raymond Colitt, “Brazil Seeks to Reign in Foreign Influence in Amazon,” Reuters
News, July 16, 2008.
71
“Silva Resignation Raises Environmental Fears,” Oxford Analytica, May 19, 2008.
72
Cattle ranching is considered by some observers to be the number one culprit of
deforestation, occupying as much as 80 percent of deforested areas, according to the newly
appointed Environment Minister Carlos Minc.
73
“Brazil Gambles on Amazon Logging,” Chicago Tribune, January 15, 2007;
“Deforestation on the Rise Again in Amazon Region,” EFE News Service, October 16,
2007; “Deforestation: The Amazon Burns Once Again,” The Guardian, October 16, 2007.
74
Soares-Filho et al., “Modelling Conservation in the Amazon Basin,” Nature, March 2006.
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organizations working in Brazil and other countries in the Amazon Basin in their
efforts to conserve the Amazon’s globally important bio-diversity. The Consolidated
Appropriations Act for FY2008 (H.R. 2764/P.L. 110-161) stipulates that, in addition
to funding for country programs, no less than $15 million be made available in
FY2008 for the Amazon Basin Conservation Initiative.
Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS.has enjoyed high approval ratings and benefitted from a strong economy
throughout most of his second term. The global financial crisis, however, has slowed Brazil’s
economic growth and is threatening to erase the social gains made in recent years. President Lula
has implemented countercyclical policies to boost the economy and protect those most exposed to
the effects of the economic downturn. A number of analysts believe it is unlikely that the
Brazilian Congress will act on Lula’s stalled legislative agenda given the need to address the
effects of the financial crisis and the political parties’ increased focus on the October 2010
presidential election.
During the first Lula term, Brazil’s relations with the United States were generally positive,
although President Lula prioritized strengthening relations with neighboring countries and
expanding ties with nontraditional partners, including India and China. Brazil-U.S. cooperation
has increased during President Lula’s second term, particularly on energy issues. Two presidential
visits in March 2007 culminated in the signing of the Memorandum of Understanding (MOU)
Between the United States and Brazil to Advance Cooperation on Biofuels; the agreement was
expanded in November 2008. President Obama has made it clear that he would like to continue
strengthening U.S.-Brazilian relations. In March 2009, President Lula became the first Latin
American leader to meet with President Obama.
During the 110th Congress, the House passed H.Res. 651 (Engel), recognizing the expanding
relationship that exists between the United States and Brazil and the importance of U.S.-Brazil
biofuels cooperation, and H.Res. 1254 (Engel), supporting the U.S.-Brazil Joint Action Plan
Against Racial Discrimination. The 111th Congress has maintained interest in Brazil. Both the
House and the Senate passed resolutions (H.Res. 125 and S.Res. 37) in March 2009 calling on
Brazil to comply with the requirements of the Convention on the Civil Aspects of International
Child Abduction and to assist in the safe return of Sean Goldman to his father in the United
States. On March 12, 2009, a resolution was introduced in the Senate (S.Res. 74, Lugar), that
would recognize the importance of the U.S.-Brazil partnership and call on the U.S. Treasury
Secretary to pursue negotiations concerning a bilateral tax treaty. Additionally, the Western
Hemisphere Energy Compact (S. 587, Lugar)—which would provide $6 million to expand U.S.Brazil biofuels cooperation in FY2010—was introduced on March 12, 2009.
This report, which will be updated periodically, analyzes Brazil’s political, economic, and social
conditions, and how those conditions affect its role in the region and its relationship with the
United States.
Congressional Research Service
Brazil-U.S. Relations
Contents
Background ................................................................................................................................1
Political Situation........................................................................................................................2
The First Lula Administration ...............................................................................................3
October 2006 Elections .........................................................................................................3
The Second Lula Administration ...........................................................................................4
Economic and Social Conditions .................................................................................................5
Economic Challenges and Efforts to Boost Growth ...............................................................5
Social Indicators ...................................................................................................................6
Foreign and Trade Policy ............................................................................................................7
Relations with the United States ..................................................................................................9
Selected Issues in U.S.-Brazil Relations .................................................................................... 10
Counternarcotics ................................................................................................................. 10
Counterterrorism and the Tri-Border Area ........................................................................... 11
Energy Security .................................................................................................................. 11
Oil ................................................................................................................................ 12
Ethanol and Other Biofuels ........................................................................................... 12
Nuclear Energy ............................................................................................................. 13
Trade Issues ........................................................................................................................ 14
Doha Round of the World Trade Organization Talks ..................................................... 14
World Trade Organization Disputes ............................................................................... 14
Generalized System of Preferences ............................................................................... 15
Intellectual Property Rights ........................................................................................... 15
Human Rights ..................................................................................................................... 16
Violent Crime and Human Rights Abuses by Police....................................................... 16
Race and Discrimination .............................................................................................. 17
Trafficking in Persons for Forced Labor ....................................................................... 18
Goldman Custody Case....................................................................................................... 18
HIV/AIDS .......................................................................................................................... 20
Amazon Conservation......................................................................................................... 20
Domestic Efforts ........................................................................................................... 21
Carbon Offsets and Other International Initiatives ......................................................... 22
Figures
Figure 1. Map of Brazil ............................................................................................................. 23
Contacts
Author Contact Information ...................................................................................................... 24
Congressional Research Service
Brazil-U.S. Relations
Background
Brazil is considered a significant political and economic power in Latin America, and an
emerging global leader. A former Portuguese colony that achieved independence in 1822, Brazil
occupies almost half of the continent of South America and boasts immense biodiversity,
including the vast Amazon rainforest, and significant natural resources. Brazil is the fifth most
populous country in the world. Brazil’s 191 million citizens are primarily of European, African,
or mixed African and European descent.1 With a gross domestic income (GNI) of $1.8 trillion in
2007, Brazil’s diversified economy is the tenth largest in the world, the largest in Latin America,
and one of the largest in the developing world, but per capita GNI is only $5,910, and the country
has an unequal income distribution. 2 Brazil has long held potential to become a world power, but
its rise to prominence has been curtailed by political setbacks, including twenty-one years of
military rule (1964-1985), social problems, and uneven economic growth.
Between World War II and 1990, both democratic and military governments sought to expand
Brazil’s influence in the world by pursuing a state-led industrial policy and an independent
foreign policy. Since the 1990s, Brazilian foreign policy has focused on strengthening ties with
other South American countries, engaging in multilateral diplomacy, and acting at times as a
countervailing force to U.S. influence in Latin America. In recent years, for example, Brazil led
other South American countries in blocking the creation of a U.S.-backed Free Trade Area of the
Americas (FTAA). Under President Luis Inácio Lula da Silva, Brazil has aimed, with varying
degrees of success, to raise its global profile. Brazil has become a leader of developing countries
in the Doha round of the World Trade Organization (WTO) talks and has sought to increase trade
ties with other emerging economies, such as China, India and South Africa. Additionally, Brazil is
commanding a multinational United Nations Stabilization Mission in Haiti. Brazil has also
become a global leader in biofuels production and may become an increasingly important
petroleum exporter.
Currently, relations between the United States and Brazil may be characterized as friendly. The
United States has increasingly regarded Brazil as a significant regional power, especially in its
role as a stabilizing force in Latin America. Despite periodic disagreements on trade and political
issues, Brazil and the United States have worked closely on a wide range of bilateral and regional
issues. U.S. officials have responded positively to Brazil’s recent efforts to reassert its regional
leadership, which has been challenged by the rise of oil-rich Hugo Chávez in Venezuela.3 Early in
2007, two high-level meetings between Presidents Bush and Lula strengthened U.S.-Brazilian
relations. The latter meeting culminated in the March 2007 signing of a U.S.-Brazil Memorandum
of Understanding (MOU) to promote bio-fuels development in the Western Hemisphere.4 The
1
Brazil has never had a large indigenous population. Today Brazil’s indigenous population consists of roughly 460,000
persons, many of whom reside in the Amazon. U.S. Department of State, Country Reports on Human Rights Practices
2007: Brazil, March 2008.
2
World Bank, World Development Report 2009.
3
Monte Reel, “U.S. Seeks Partnership with Brazil on Ethanol; Countering Oil-rich Venezuela is Part of Aim,”
Washington Post, February 8, 2007.
4
For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential for U.S.-Brazil Energy
Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
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initiative was expanded in November 2008 to include additional countries in Africa, Central
America, and the Caribbean (See “Ethanol and Other Biofuels” section below).5
Political Situation
The Brazilian political system has several unique characteristics that distinguish it from other
countries in Latin America. The country’s federal structure, comprising 26 states, a Federal
District, and some 5,581 municipalities, evolved from the decentralized colonial structure devised
by the Portuguese in an attempt to control Brazil’s sizable territory. Even during the centralizing
government of Getúlio Vargas and the Estado Novo, or New State (1937-1945), landowning
remained the source of local power in Brazil and states retained considerable autonomy. Brazil’s
military governments ruled from 1964-1985 and, while repressive, were not as brutal as those in
other South American countries. Although nominally allowing the judiciary and Congress to
function during its tenure, the Brazilian military stifled representative democracy and civic action
in Brazil, carefully preserving its influence during one of the most protracted transitions to
democracy to occur in Latin America. Brazil was also one of the last countries in the region to
abandon state-led economic policies in favor of market reforms. Significant pro-market reforms
did not occur until the government of Fernando Henrique Cardoso (1994-2002).6
During the first decade after its return to democracy in 1985, Brazil experienced economic
recession and political uncertainty as numerous efforts to control runaway inflation failed and two
elected presidents did not complete their terms. One elected president died before taking office;
the other was impeached on corruption charges. In 1994, Cardoso, a prominent sociologist of the
center-left Brazilian Social Democratic Party (PSDB), was elected by a wide margin over Luis
Inácio Lula da Silva of the Worker’s Party (PT), a former metalworker and union leader who had
led the PT since the early 1980s. Cardoso was elected largely on the basis of the success of the
anti-inflation “Real Plan” that he implemented as Finance Minister, which resulted in a new
currency (the real) pegged to the dollar in July of 1994. During his first term, Cardoso achieved
macroeconomic stability, opened the Brazilian economy to trade and investment, and furthered
privatization efforts. Despite those achievements, the Cardoso government was unable to enact
much-needed political and social changes, such as social security, tax, or judicial reforms.
President Cardoso sought a second presidential term after a constitutional reform was passed in
1997 to allow for reelection, and he defeated Lula da Silva in the first round of voting in October
1998 with 53% of the vote. President Cardoso’s popularity fell towards the end of his second
term, however, as Brazil faced a series of financial crises. Most analysts credit Cardoso with
restoring macroeconomic stability to Brazil’s economy and solidifying its role as leader of the
5
“Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance
Energy Security and Promote Sustainable Development,” U.S. Department of State, Office of the Spokesman,
November 20, 2008.
6
For a historical overview of Brazil’s political development, see Bolivar Lamounier, “Brazil: Inequality Against
Democracy,” in Larry Diamond, Jonathan Hughes, Juan J. Linz, and Seymour Martin Lipset, eds., Democracy in
Developing Countries: Latin America, Boulder, CO: Lynne Reiner, 1999.
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Southern Common Market (Mercosur)7, but fault him for failing to implement more aggressive
political and social reforms. 8
The First Lula Administration
In 2002, Lula da Silva ran in his fourth campaign for the presidency of Brazil. Unlike in his
previous failed campaigns, he moderated his leftist rhetoric and, while still advocating greater
attention to social issues, promised to maintain the fiscal and monetary policies associated with
Brazil’s standing International Monetary Fund (IMF) agreements. The 2002 presidential election
proved to be a referendum on eight years of “neo-liberal” policies enacted by Cardoso. High
unemployment rates and economic stagnation led voters to support Lula, a critic of neoliberalism.
Lula was elected decisively in the second round of voting with a significant majority of the vote
compared to Cardoso’s designated successor, José Serra, the Minister of Health and senator from
São Paulo.
During his first term, President Lula maintained the restrained economic policies associated with
his predecessor. In 2003, the Lula government enacted social security and tax reforms, and in
2004, a law to allow more private investment in public infrastructure projects. President Lula
launched several social programs, some of which have been more successful than others. The
Bolsa Familia (Family Stipend) program, which provides monthly stipends to 11.1 million poor
families in exchange for compulsory school attendance for all school-age children, has been
credited with reducing poverty, but some critics argue that it has made poor households too
dependent on government handouts.9 By 2005, legislative initiatives had stalled, and President
Lula was increasingly criticized for failing to develop effective programs to address land
distribution and crime. Critics argued that, ironically, one of the Lula government’s only major
achievements in the first term was to maintain the orthodox economic policies of the Cardoso
administration. In 2006, some analysts began to dismiss President Lula’s efforts to expand
Brazil’s international profile as a leader among developing countries as “a relatively inexpensive
[tactic] to shore up domestic support”10 that had failed to yield many concrete results. Criticism of
Lula further escalated with the onset of several corruption scandals involving top PT officials that
occurred during the latter half of Lula’s first term. 11 A congressional inquiry in April 2006 cleared
President Lula of any direct responsibility for the scandals.
October 2006 Elections
President Lula captured 61% of the votes to the PSDB’s Gerardo Alckmin’s 39% in the second
round of presidential elections held in late October 2006. President Lula won handily in the
poorer north and northeastern regions of the country, but failed to carry the more prosperous
7
Mercosur is a common market composed of Brazil, Argentina, Paraguay, and Uruguay that was established in 1991.
See CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy, by J. F. Hornbeck.
8
Susan Kaufman Purcell and Riordan Roett, eds., Brazil Under Cardoso, Boulder, CO: Lynne Reiner Publishers, 1997;
Mauricio A. Font and Anthony Peter Spanakos, Reforming Brazil, New York: Lexington Books, 2004.
9
Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation Under Lula,” Journal of
Latin American Studies, vol. 38, November 2006.
10
Jeffrey Cason, “Hopes Dashed? Lula’s Brazil,” Current History, February 2006.
11
Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” Paper Presented at the Latin
American Studies Association Conference, March 2006.
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southern and western states or São Paulo. Observers have assessed that Brazilians, though divided
by class and region, effectively voted in favor of continuing macroeconomic stability under a
second Lula Administration despite the corruption scandals that had involved Lula’s party during
the first term.
The PT did not fare as well as President Lula in the legislative elections, suffering a loss of nine
seats in the Chamber of Deputies and losing four Senate seats. Some assert that the election
outcome shows that President Lula successfully distanced himself from the PT and its corruption
scandals, relying on his personal popularity rather than his party affiliation to win. Others
attribute his win to the success of the Bolsa Familia program and the country’s macroeconomic
stability, which led voters in poorer income brackets to overwhelmingly support him. 12
The Second Lula Administration
Despite enjoying high approval ratings (69% in May 2009)13 and several years of strong
economic growth, President Lula’s second administration has been periodically hindered by
corruption scandals and a lack of support from members of his coalition. For example, legislative
progress stalled throughout 2007 as the President of the Brazilian Senate, Renan Calheiros, a key
Lula ally, faced corruption charges. In December 2007, Senators voted to acquit Calheiros of all
wrongdoing even though a congressional ethics panel had recommended that he be impeached.
President Lula suffered another major setback in December 2007 as Senators—including some of
his own supporters—voted not to extend the provisional tax on financial transactions (CPMF)
that his government had requested.14
October municipal elections dominated the political scene in Brazil throughout much of 2008.
Although polls predicted that PT candidates would sweep a majority of the mayoral races held in
large cities in the first round of voting, the PT did not perform as well as expected. While the
number of PT mayors increased from 411 to 559, the PT only won 6 mayoral races in state
capitals and lost a second round run-off election for the politically-important mayorship of São
Paulo. The PT-allied PMDB won 1,201 mayoral races while the main opposition party, the PSDB,
won 786. Together, the 12 parties in the ruling coalition won 76.9 million votes, nearly 60% of all
votes cast.15
President Lula has been challenged by an increasingly independent PMDB since that party’s
stronger than expected results in the municipal elections. Although the PMDB had agreed to back
a PT president in the Senate in exchange for PT support for a PMDB president in the Chamber of
Deputies, the PMDB reneged on the agreement and won control of both houses. Since taking
control, the PMDB has imposed its own legislative agenda by ignoring President Lula’s proposed
political and economic reforms and announcing it will repeal the constitutional article that gives
presidential decrees voting precedence over other legislation. President Lula has done little to
12
Matt Moffett and Geraldo Samor, “In Brazil Campaign, A Barroom Brawl and a Class War,” Wall Street Journal,
October 27, 2006; Wendy Hunter and Timothy J. Power, “Rewarding Lula: Executive Power, Social Policy, and the
Brazilian Elections of 2006,” Latin American Politics and Society, Spring 2007.
13
Elzio Barreto, “Approval for Brazil’s Lula recovers to near record,” Reuters, May 31, 2009.
14
“CPMF Failure May be Beginning of “Second Term Curse” for Lula,” Latin American Regional Report, December
2007.
15
“Brazil’s PMDB in Pole Position After Municipals,” Latin News Daily, October 28, 2008.
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challenge these decisions since the PT’s chances of maintaining the presidency in 2010 are likely
dependent on a continued alliance with the PMDB.16
Economic and Social Conditions
Throughout the last two decades, Brazil’s fiscal and monetary policies have focused primarily on
inflation control. When President Lula took office in 2003, Brazil had an extremely high level of
public debt, virtually necessitating that he adopt austere economic policies. Despite his leftist
political origins, President Lula has maintained restrained economic policies, even surpassing the
IMF’s fiscal and monetary targets. As a result, Brazil began to experience some benefits,
including lower inflation and a lower credit risk rating. In December 2005, the Lula government
repaid its $15.5 billion debt to the IMF ahead of schedule. The government’s overall foreign debt
was reduced by 19.9% between 2003 and 2006.17 Fiscal discipline has been accompanied by
record exports that enabled Brazil to achieve substantial GDP growth in recent years. Brazil still
suffers from high real interest rates, however, which have dampened investment and economic
growth.
Brazil is a major exporter of agricultural and industrial products and plays a significant role in the
world trading system. Since 2002, Brazil has been the world’s third largest exporter of
agricultural products after the United States and the European Union. In 2008, Brazil was the
world’s leading exporter of coffee, orange juice, sugar, chicken, beef, soy, and tobacco. Demand
for Brazilian commodity exports in Asia is strong, as is global demand for Brazil’s manufactured
goods and services. Brazil is the world’s second largest producer of ethanol (after the United
States) and its state-run oil company, Petrobras, a leader in deep-water oil drilling, has recently
announced the discovery of what may be the world’s largest oil field find in 25 years.18
Brazil also has a relatively balanced trade regime. Its main trading partners in 2008 were the
European Union (24% of exports, 22% of imports), the United States (14% of exports, 15% of
imports), China (8% of exports, 12% of imports), and its neighbors in Mercosur (11% of exports,
9% of imports).19 In 2008, the value of Brazil’s exports reached some $198 billion and the
country’s trade surplus was $25 billion. 20
Economic Challenges and Efforts to Boost Growth
One of President Lula’s goals for his second term is to boost Brazil’s lagging economic growth.
Between 2000 and 2006, Brazil’s annual growth rates averaged roughly 2.7%. In 2006, Brazil
posted GDP growth of about 2.8%, the second lowest recorded in Latin America. In 2007,
President Lula launched a Program to Accelerate Growth (PAC) aimed at boosting Brazil’s
growth rates to 5% per year through increased public and private investment in infrastructure.
The PAC provides tax breaks and incentives to spur investment and includes measures to improve
16
“Brazil: PMDB powerbrokers may hold key in 2010,” Oxford Analytica, March 30, 2009; “Power struggle exposes
senate wrongdoings,” Latin American Weekly Report, March 26, 2009.
17
“Brazil Foreign Debt at $168.9 Billion End-2006,” Latin America News Digest, January 26, 2007.
18
“Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
19
Mercosur trade statistics only include the other full members of the trade bloc: Argentina, Uruguay, and Paraguay.
20
Trade data made available by Global Trade Atlas, 2009.
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and simplify Brazil’s regulatory framework. While some have praised President Lula for the
PAC’s investments in much-needed infrastructure projects, others have criticized him for failing
to curb excessive public spending or to promote labor reform. GDP growth in Brazil reached
5.4% in 2007, and is estimated to have reached 5.1% in 2008.21
Despite the success of these efforts, some analysts have identified several factors that could
constrain Brazil’s long-term growth potential. These include a sizeable public debt burden,
excessive government spending, inflation, high taxes and interest rates, low investment and
savings rates, and an unwieldy public pension system that a 2006 report by the Organization for
Economic Co-operation and Development (OECD) asserted is a significant obstacle to sustained
economic growth. 22 Despite his popularity, President Lula has thus far not elected to use his
political capital to enact much-needed structural reforms to address these issues.
The global financial crisis has further complicated President Lula’s attempts to accelerate
economic growth. The Brazilian economy shrank at its fastest pace in 12 years during the last
quarter of 2008 and industrial output in the first quarter of 2009 was the lowest in at least 11
years. Unemployment rose to 9% in March 2009, reflecting the loss of over 800,000 jobs since
November 2008.23 President Lula has taken several steps to counteract these trends and minimize
the impact of the financial crisis on the Brazilian economy. The government has injected at least
$100 billion of additional liquidity into the local economy, provided support packages to
productive sectors, and cut the key interest rate by 3.5% to 10.25%.24 President Lula has also
acted to maintain domestic consumption in hopes of partially offsetting declines in global
demand. The government mandated an above-inflation increase to the minimum wage for 2009,
provided temporary tax relief, announced its intention to increase investments in its Program to
Accelerate Growth (PAC) to a total of $500 billion through 2010, and made it clear that it will not
cut spending on social programs like Bolsa Familia.25 Nonetheless, the Brazilian Central Bank
revised its 2009 GDP growth estimate downward to just 1.2% in April 2009; some analysts
believe the Brazilian economy may actually contract.26
Social Indicators
Despite its well-developed economy and large resource base, Brazil has had problems solving
deep-seated social problems like poverty and income inequality. Brazil has had one of the most
unequal income distributions in Latin America, a region with the highest income inequality in the
world. A 2004 World Bank study reported that some 50 million Brazilians live in poverty.27 The
21
“Brazil: Country Profile 2008,” Economist Intelligence Unit; “Country Report: Brazil,” Economist Intelligence Unit,
March 2009.
22
Fabio Giambiagi and Luiz de Mello, “Social Security Reform in Brazil: Achievements and Remaining Challenges,”
Organization for Economic Co-operation and Development (OECD), Economics Department Working Paper No. 534,
December 6, 2006.
23
Raymond Colitt, “Approval for Brazil’s Lula hit by economic crisis,” Washington Post, March 20, 2009; “Over the
worst?,” Latin American Economy & Business, April 2009.
24
“Will the economy grow in 2009?” Latin American Economy & Business, February 2009; “Brazil economy:
Bottoming out?” Economist Intelligence Unit, May 7, 2009.
25
“Will the economy grow in 2009?” Latin American Economy & Business, February 2009; Tax Relief for the Middle
Classes,” Latin American Weekly Report, December 18, 2008.
26
“Over the worst?,” Latin American Economy & Business, April 2009; “Brazil economy: Quick View—Record drop
in GDP,” Economist Intelligence Unit, March 10, 2009.
27
David De Ferranti et al., Inequality in Latin America: Breaking with History? Washington, DC: The World Bank,
(continued...)
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U.N. Development Program has identified 600 Brazilian municipalities, many in the north and
northeastern part of the country, in which poverty levels are similar to those present in poor
African countries. One major cause of poverty and inequality in Brazil has been the extreme
concentration of land ownership among the country’s elites. A 2004 study found that 1% of the
Brazilian population controlled 45% of the farmland. 28 The Brazilian government has also
acknowledged that there is a racial component to poverty in Brazil. People of African descent in
Brazil, also known as Afro-Brazilians, represent roughly 45% of the country’s population, but
constitute 64% of the poor and 69% of the extreme poor.29 Other factors that inhibit social
mobility in Brazil include a lack of access to quality education and job training opportunities for
the country’s poor.
Brazil’s endemic poverty and inequality have, until recently, not been significantly affected by the
government’s social programs. A March 2005 OECD study found that, even though Brazil had
spent the same level or more of public spending on social programs as other countries with
similar income levels, it had not achieved the same social indicators as those countries.30 There
has been more recent evidence, however, that the Lula government’s Bolsa Familia (Family
Stipend) program, combined with relative macroeconomic stability and growth over the past few
years, has reduced poverty rates, particularly in the north and northeast regions of the country.31
According to the Getulio Vargas Foundation, the level of poverty in Brazil during Lula’s first
term in government fell by 27.7%. Since 2002, the proportion of the Brazilian population who
define themselves as middle-class has risen from 44% to 52%.32
Foreign and Trade Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a regional power in
Latin America, a leader among developing countries in economic cooperation and collective
security efforts, and an emerging world power. Brazilian foreign policy has been based on the
principles of multilateralism, peaceful dispute settlement, and nonintervention in the affairs of
other countries.33 Brazil engages in multilateral diplomacy through the U.N. and the Organization
of America States (OAS). It is currently commanding a multinational U.N. stabilization force of
some 9,000 personnel in Haiti. Brazilian foreign policy has tended to emphasize regional
integration through organizations such as Mercosur, the Rio Group, and the Union of South
American Nations (UNASUR). Brazil’s role as a leader in South America has been challenged by
Hugo Chávez in Venezuela, who has used his country’s vast oil wealth to gain influence in the
(...continued)
2004.
28
“Special Report: Land Report Dilemma,” Latin America Regional Report, December 21, 2004.
29
Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa Econômica Aplicada (IPEA),
2001.
30
“Economic Survey of Brazil 2005,” Organization for Economic Cooperation and Development, March 2005.
31
Hall, “From Fome Zero to Bolsa Familia,” November 2006; “Human Development Report 2007/8,” United Nations
Development Program, November 2007.
32
Nilson Brandão Junior and Marianna Aragão, “Miséria no Brasil Cai 27,7% no 1º Mandato de Lula,” O Estado de
S.Paulo, September 20, 2007; “Brazil: Half the Nation, a Hundred Million Citizens Strong,” Economist, September 13,
2008.
33
Georges D. Landau, “The Decisionmaking Process in Foreign Policy: The Case of Brazil,” Center for Strategic and
International Studies: Washington, DC: March 2003.
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region, particularly in Bolivia and Ecuador. Whereas Lula emphasized forging relations with
other emerging economies during his first term, he appears to have adopted a more pragmatic
foreign policy during his second term, including a focus on improving Brazil-U.S. relations.
Since the mid-1990s, Brazil has had much more success in developing political cohesion than
true economic integration among its neighbors in the Southern Cone. Mercosur was established in
1991 by Brazil, Argentina, Paraguay, and Uruguay. In 1996, Chile and Bolivia became “associate
members”; Peru followed in 2003 (not implemented) and Venezuela and Mexico in 2004.34
Associate members have no voting rights and need not observe the common external tariff. In
October 2004, after years of talks, Mercosur and the Andean Community of Nations signed a
trade pact, giving all Andean countries—Bolivia, Colombia, Ecuador, Peru, and Venezuela—the
equivalent of associate membership. This breakthrough led to the creation of the South American
Community of Nations (later renamed UNASUR) two months later in a pact that included 12
countries (those in Mercosur, the Andean Community, along with Chile, Guyana, and Suriname).
In December 2005, Mercosur agreed to the accession of Venezuela as a full member, though the
Paraguayan Congress has yet to approve Venezuela’s entry. In December 2006, Bolivia expressed
its intention to join Mercosur as a full member, but critics say that its accession would politicize
the union unnecessarily.
Recent events do not bode well for the future of Mercosur. In 2006, Mercosur’s internal dispute
resolution process proved unable to resolve a dispute between Argentina and Uruguay over
whether to allow European companies to construct two paper mills along the river that
demarcates their border. At the same time, Uruguay diversified its trade with the United States
and even threatened to withdraw from Mercosur, arguing that it seems to serve only the needs of
Argentina and Brazil. Furthermore, Mercosur has not addressed trade asymmetries among its
members, resolved the issue of double tariffs on some imports from outside the region, or drafted
a common customs code, leaving some analysts to believe it has become a forum for foreign
policy posturing. Some within the Brazilian government and private sector believe Brazil has
outgrown Mercosur. These thoughts have only been reinforced by recent talks between Brazil and
the European Union concerning the possibility of a bilateral trade deal. 35
In addition to trying to expand its regional profile through established political and economic
channels, Brazilian government and business officials have worked together to expand the
country’s commercial interests in the region. Some of those efforts have been more successful
than others. One initiative has involved the use of so-called “ethanol diplomacy.” Brazil has
sought to reassert regional leadership vis-à-vis oil-rich Venezuela by signing bio-fuels partnership
agreements with countries that would otherwise be dependent on expensive oil imports.36 A notso-successful endeavor has involved trying to use Petrobras’ investments in Bolivia to influence
the populist government of Evo Morales. Even though Petrobras had made extensive investments
in Bolivia, the Lula government was caught off guard by Morales’s May 2006 nationalization of
his country’s natural gas industry. Although President Lula has since acceded to several of
Morales’s demands—including cutting tariffs for Bolivian exports to Brazil, stepping up
34
For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade
Policy, by J. F. Hornbeck.
35
“Deathknell Sounds,” Latin American Regional Report, January 2009.
36
“Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007.
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investments in Bolivia, and maintaining the level of Brazil’s daily gas imports from Bolivia—he
has also taken a number of steps to make Brazil less reliant on Bolivian natural gas.37
Brazil’s political, business, and military ventures are complemented by the country’s trade policy.
In Brazil, the Ministry of Foreign Relations continues to dominate trade policy, causing the
country’s commercial interests to be (at times) subsumed by a larger foreign policy goal, namely,
enhancing Brazil’s influence in Latin America and the world.38 For example, while concluding
meaningful trade agreements with developed economies (such as the United States and the
European Union) would probably be beneficial to Brazil’s long-term economic self-interest, the
Brazilian government has instead prioritized its leadership role within Mercosur and expanded
trade ties with countries in Africa, Asia and the Middle East.
Some analysts assert that these “south-south” initiatives have enhanced Brazil’s international
profile, but others have noted that they have yielded few concrete results for the country, and that
they have come at the expense of Brazil-U.S. relations. Roberto Abdenur, the former Brazilian
Ambassador to Washington, criticized the “south-south” approach of the Brazilian Foreign
Ministry for indoctrinating Brazilian diplomats with “anti-imperialist” and “anti-American”
attitudes. 39
Relations with the United States
Currently, relations between the United States and Brazil may be characterized as friendly. The
United States has increasingly regarded Brazil as a significant power, especially in its role as a
stabilizing force in Latin America. U.S. officials tend to describe Brazil as a friendly country,
similar to Chile, governed by a moderate leftist government. They assert that the United States
seeks to increase cooperation with moderate leftist governments in Latin America in order to ease
mounting tensions among the countries in South America, and to deal with populist governments
in the region. Brazil under President Lula has helped diffuse potential political crises in
Venezuela, Ecuador, and Bolivia, and supported Colombia’s ongoing struggle against terrorist
organizations and drug traffickers. Brazil is also commanding the U.N. stabilization force in
Haiti.
Although Brazil and the United States share common goals for regional stability, Brazil’s
independent approach to foreign policy has led to periodic disputes with the United States on
trade and political issues, including how (and whether) to create a Free Trade Area of the
Americas (FTAA) and Brazil’s vocal opposition to the war in Iraq and the U.S. embargo of Cuba.
Despite these disagreements, Brazil and the United States have worked closely on a wide range of
bilateral and regional issues. Brazil-U.S. cooperation has increased in recent years, as reflected in
the continuing high-level contacts between the two governments, particularly on energy issues.
Currently at least ten bilateral mechanisms are in place through which U.S. and Brazilian
government and business leaders interface on issues of shared concern.
37
“Bolivia’s Populism Steps on Brazil,” Christian Science Monitor, May 8, 2006; “Brazil May Pay a Price for
Generous Deal on Gas,” Financial Times, February 22, 2007; “Brazil Seeks to Lure Bolivia Away from Venezuela,”
Reuters, December 13, 2007; “New chapter in gas dispute with Bolivia,” Latin News Daily, March 30, 2009.
38
See CRS Report RL33258, Brazilian Trade Policy and the United States, by J. F. Hornbeck.
39
Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007.
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Brazil is considered a middle-income country and does not receive large amounts of U.S. foreign
assistance. Brazil received $15.3 million in U.S. aid in FY2008, will likely receive $21.5 million
in FY2009, and would receive $11.8 million under the Obama Administration’s request for
FY2010. U.S. assistance priorities in Brazil include supporting environmental programs and the
strengthening of local capacity to address threats to the Amazon, promoting renewable energy and
energy efficiency to mitigate climate change, strengthening the professionalism and peacekeeping
capabilities of the Brazilian military, and reducing the transmission of communicable diseases.40
Selected Issues in U.S.-Brazil Relations
The Bush Administration came to view Brazil as a strong partner whose cooperation should be
sought in order to solve regional and global problems and the Obama Administration appears to
be view Brazil in a similar light. Current issues of concern to both Brazil and the United States
include counternarcotics and counterterrorism efforts, energy security, trade, human rights, the
fight against HIV/AIDS, and the environment.
Counternarcotics
Brazil is not a significant drug producing country, but is a major conduit for the transit of cocaine,
marijuana, and some heroin from neighboring Andean countries destined for Europe and, to a
lesser extent, the United States. Brazil has also become the second largest consumer (after the
United States) of cocaine in the Western Hemisphere. The Bush Administration included Brazil
on a list of major drug-producing or drug-transit countries.41 Brazil received $1 million in U.S.
counternarcotics assistance in FY2008, will likely receive $1 million in FY2009, and would
receive $1 million again in 2010 under the Obama Administration’s request. Counternarcotics
assistance is used to strengthen Brazil’s interdiction capabilities and provide law enforcement
training.42
In recent years, Brazil has cooperated extensively with neighboring countries in counternarcotics
activities and implemented a law permitting the shooting down of civilian aircraft (with adequate
safeguards) suspected of being engaged in the trafficking of illicit narcotics. Brazil has also
constructed a $1.4 billion sensor and radar project called the Amazon Vigilance System (SIVAM
from its acronym in Portuguese) in an attempt to control illicit activity in its Amazon region. In
2008, Brazil’s federal police captured 18 metric tons of cocaine, 514 kilograms of cocaine base,
430 kilograms of crack cocaine, 182 metric tons of marijuana, 12 kilograms of heroin, 125,706
dosage units of ecstasy, and 95,653 dosage units of LSD. In 2007, Brazilian police arrested a
major Colombian-born drug trafficker and leader of the Norte del Valle cartel. He was extradited
to the United States in August 2008 to face charges of drug trafficking, money laundering, and
murder. Brazil’s federal police have since worked with Colombian authorities and the U.S. Drug
Enforcement Administration (DEA) to seize more than $700 million in cash from the cartel. 43
40
U.S. State Department, FY2010 Congressional Budget Justification for Foreign Operations, May 29, 2009.
Memorandum for the Secretary of State, “Major Illicit Drug-Producing and Drug-Transit Countries for FY2009,”
September 15, 2008, Presidential Determination No. 2008-28.
42
U.S. State Department, FY2010 Congressional Budget Justification for Foreign Operations, May 29, 2009.
43
U.S. Department of State, International Narcotics Control Strategy Report, February 27, 2009.
41
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Counterterrorism and the Tri-Border Area44
The Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay has long been used for arms
smuggling, money laundering, and other illicit purposes. According to the 2009 State Department
Country Reports on Terrorism, the United States remains concerned that Hezbollah and Hamas
are raising funds through illicit activities and from sympathizers in the sizable Middle Eastern
communities in the region. Indeed, reports have indicated that Hezbollah earns over $10 million a
year from criminal activities in the TBA45 Although it has been reported that al Qaeda’s
operations chief Khalid Shaikh Mohammed lived in the Brazilian TBA city of Foz de Iguazu in
1995 and Brazilian authorities arrested Ali al-Mahdi Ibrahim—who was wanted by Egypt for his
alleged role in the 1997 massacre of tourists at Luxor—in the TBA in 2003, the State Department
report states that there have been no corroborated reports that any Islamic groups have an
operational presence in the area.46 The United States joined with the countries of the TBA in the
“3+1 Group on Tri-Border Area Security” in 2002 and the group built a Joint Intelligence Center
to combat trans-border criminal organizations in the TBA in 2007.
The United States has also worked bilaterally with Brazil to improve its counterterrorism
capabilities. In addition to providing counterterrorism training, the United States has worked with
Brazil to implement the Container Security Initiative (CSI) at the port of Santos. While the State
Department Country Reports on Terrorism lauded the Brazilian government as a “cooperative
partner in countering terrorism,” it also noted that Brazil’s failure to strengthen its legal
counterterrorism framework by passing long-delayed anti-money laundering and counterterrorism
bills “significantly undermined its overall commitment to combating terrorism.”47
In January 2009, the Western Hemisphere Counterterrorism and Nonproliferation Act of 2009
(H.R. 375, Ros-Lehtinen) was introduced in the House. Among other provisions, the bill calls on
the U.S. Secretary of State to negotiate with Brazil, Argentina, and Paraguay to establish a
Regional Coordination Center (RCC) in the TBA to serve as a joint operational facility dedicated
to coordinating efforts, capacity, and intelligence to counter current and emerging threats and
prevent the proliferation of nuclear, chemical, and biological weapons. A similar provision can be
found in the Foreign Relations Authorization and Reform Act for Fiscal Years 2010 and 2011
(H.R. 2475, Ros-Lehtinen), which was introduced in the House in May 2009.
Energy Security
In the last few years, there has been significant congressional interest in issues related to Western
Hemisphere energy security. Brazil is widely regarded as a world leader in energy policy for
successfully reducing its reliance on foreign oil through increased domestic production and the
development of alternative energy resources. Currently, over 85% of Brazilian electricity is
generated through hydropower. 48 At the same time, Brazil has attained the ability to produce large
44
For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan.
45
Alain Rodier, “Notes D’Actualité N˚168: Les Trafics de Drogue du Hezbollah en Amérique Latine,” Centre
Français de Recherche sur le Rensignement, April 14, 2009.
46
“Latin America: A Safe Haven for Al Qaeda?” STRATFOR, September 4, 2003; U.S. Department of State, Office of
the Coordinator for Counterterrorism, “Country Reports on Terrorism,” April 30, 2009.
47
Ibid.
48
“Brazil: Hydrocarbons potential poses major challenges,” Oxford Analytica, November 20, 2007.
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amounts of enriched uranium as part of its nuclear energy program. More recently, Brazil’s staterun oil company, Petrobras, a leader in deep-water oil drilling, has discovered what may be the
world’s largest oil field find in 25 years.49
Oil
On September 2, 2008, President Lula celebrated the first oil output to be extracted from the new
offshore fields. The discovery of the Tupi field in November 2007, located in the Santos Basin
350 miles off the coast of Rio de Janeiro, has the potential to turn Brazil into a major oil and gas
producer and an important source of energy for the United States. The field alone may hold up to
50 billion barrels of oil. The Brazilian government is considering new measures that may pave the
way for a heavy state hand in the country’s energy markets, such as the creation of a new 100%
state-owned company to manage the exploration blocks. This has raised concerns among some
foreign investors.50 A number of analysts have also questioned the feasibility of developing the
reserves at this time given the global financial crisis and recent declines in oil prices. Since the
reserves are in the so-called “pre-salt” layer, drilling will be difficult and costly. While Petrobras
maintains that the reserves are economically viable as long as the price of crude oil remains above
$35 per barrel, some analysts believe development will be difficult to finance with oil anywhere
below $70 per barrel. 51 Brazil has announced that it will need $270 billion in investment over the
next 10 years to develop the reserves.52
Ethanol and Other Biofuels53
Brazil stands out as an example of a country that has become a net exporter of energy, partially by
increasing its use and production of ethanol. On March 9, 2007, the United States and Brazil, the
world’s two largest ethanol producing countries, signed a Memorandum of Understanding to
promote greater cooperation on ethanol and biofuels in the Western Hemisphere. The agreement
involves: (1) technology-sharing between the United States and Brazil; (2) feasibility studies and
technical assistance to build domestic biofuels industries in third countries; and, (3) multilateral
efforts to advance the global development of biofuels. The first countries to receive U.S.Brazilian assistance were the Dominican Republic, El Salvador, Haiti, and St. Kitts and Nevis. 54
On October 9, 2007, the House passed H.Res. 651 (Engel), recognizing the warm friendship and
expanding relationship that exists between the United States and Brazil and the importance of
U.S.-Brazil biofuels cooperation.
Since March 2007, the United States and Brazil have moved forward on all three facets of the
agreement. U.S. and Brazilian consultants have carried out feasibility studies that identified shortterm technical assistance opportunities in Haiti, the Dominican Republic, and El Salvador. On
49
“Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
“Brazil’s Golden Times Start to Roll,” LatinNews Daily, September 3, 2008; “Hydrocarbons Potential Poses Major
Challenges,” Oxford Analytica, November, 20, 2007.
51
“Brazil: Petrobras euphoria fades with oil price,” Oxford Analytica, December 11, 2008.
52
“Brazil needs $270 bln over 10-yrs for deepwater oil,” Reuters, March 19, 2009.
50
53
For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential for U.S.-Brazil Energy
Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
54
“Memorandum of Understanding Between the United States and Brazil to Advance Cooperation on Biofuels,” U.S.
Department of State, Office of the Spokesman, March 9, 2007.
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November 20, 2008, the United States and Brazil announced an agreement to expand their
biofuels cooperation and form new partnerships with Guatemala, Honduras, Jamaica, GuineaBissau, and Senegal.55 The United States and Brazil are also working with other members of the
International Biofuels Forum (IBF) to make biofuels standards and codes more uniform. In March
2009, the Western Hemisphere Energy Compact (S. 587, Lugar) was introduced. The legislation
would provide $6 million in FY2010 to expand U.S.-Brazil biofuels cooperation.56
Despite this progress, several potential obstacles to increased U.S.-Brazil cooperation on biofuels
exist, including current U.S. tariffs on most Brazilian ethanol imports. The United States currently
allows duty-free access on sugar-based ethanol imports from many countries through the
Caribbean Basin Initiative, Central American Free Trade Agreement, and the Andean Trade
Preferences Act, among others.57 Some Brazilian ethanol is processed at plants in the Caribbean
for duty-free entry into the United States, but exports arriving directly from Brazil are currently
subject to a 54-cent-per-gallon tax, plus a 2.5% tariff. Several bills were introduced in the 110th
Congress that would have eliminated or adjusted the ethanol tariff.
Nuclear Energy
Between the mid-1970s and the mid-1980s, Brazil sought to develop nuclear weapons as it
competed with Argentina for political and military dominance of the Southern Cone. In 1991,
Brazil and Argentina reached an agreement to use nuclear energy for peaceful purposes only.
Although Brazil subsequently joined the Nuclear Nonproliferation Treaty (NPT) and a number of
other multilateral nonproliferation regimes, some international observers became concerned when
Brazil commissioned a uranium enrichment plant in 2004 and refused to give International
Atomic Energy Agency (IAEA) inspectors full access to the centrifuge plant in 2005. The
Brazilian government maintained that it needed to enrich uranium in order to produce its own fuel
and it justified its refusal to give IAEA inspectors access by citing security concerns over the
proprietary aspects of the country’s nuclear technology. Negotiations between Brazil and the
IAEA ended in October 2005 when the Bush Administration lent its support to Brazil by asserting
that limited inspections should be enough for Brazil to comply with its international obligations.58
President Lula has stated Brazil’s intention to spend $540 million over the next eight years to
build a third nuclear power plant and a nuclear-powered submarine. In September 2008, the
Brazilian Minister for Energy and Mining announced that he would like Brazil to build 60 new
nuclear energy plants over the next 50 years. He claimed this expansion of nuclear power is the
55
“Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance
Energy Security and Promote Sustainable Development,” U.S. Department of State, Office of the Spokesman,
November 20, 2008.
56
Senator Lugar had introduced a similar measure in the 110th Congress, S. 1007, reported out of the Senate Foreign
Relations Committee on September 23, 2008.
57
For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI), by
Brent D. Yacobucci.
58
“New Round of Nuclear Enrichment Scare Stories,” Latin American Weekly Report, February 12, 2006; Bernard
Aronson, “Brazil’s Chance to Lead on Nuclear Containment,” Wall Street Journal, March 18, 2005; Sharon Squassoni
and David Fite, “Brazil as Litmus Test: Resende and Restrictions on Uranium Enrichment,” Arms Control Today,
October 2005.
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only way that Brazil will be able to meet the energy needs of its growing population while
avoiding massive carbon emissions through the burning of fossil fuels.59
Trade Issues
Trade issues are central to the bilateral relationship between Brazil and the United States, with
both countries being heavily involved in subregional, regional, and global trade talks. Brazil has
sought to strengthen Mercosur and to establish free trade agreements with most of the countries in
South America, while also pursuing efforts to negotiate a Mercosur-European Union free trade
agreement. The United States has been actively involved in the Doha negotiations and, until late
2005, pressed for action on the region-wide Free Trade Agreement of the Americas (FTAA).
Since negotiations for the FTAA have been largely abandoned, the United States has continued to
sign bilateral and subregional agreements with countries throughout Latin America. Bilateral
trade between the United States and Brazil totaled $63.4 billion in 2008, with U.S. exports to
Brazil increasing 34% to $32.9 billion and U.S. imports from Brazil increasing 19% to $30.5
billion.60
Doha Round of the World Trade Organization Talks 61
Brazil has had a leading role in the Doha round of the World Trade Organization (WTO) talks. In
2003, Brazil led the G-20 group of developing countries’ efforts to insist that developed countries
agree to reduce and eventually eliminate agricultural subsidies as part of any settlement. In late
July 2004, WTO members agreed on the framework for a possible Doha round agreement, but
formal talks were suspended indefinitely in July 2006 after key negotiating groups failed to break
a deadlock on the issue of agricultural tariffs and subsidies. In June 2007, negotiators from India
and Brazil walked out of a round of informal talks with representatives from the United States
and the European Union (EU), refusing to open their markets further unless U.S. and EU
subsidies were substantially reduced. Trade ministers again failed to reach a breakthrough at an
eight day negotiating ministerial held in July 2008, a non-agricultural market access (NAMA)
negotiating group meeting in October 2008, and a G-20 meeting in November 2008.62
World Trade Organization Disputes
Brazil won a WTO dispute settlement case against U.S. cotton subsidies in September 2004,
which the United States appealed, but Brazil’s position was reaffirmed by the WTO appellate
body in March 2005. In keeping with the requirement that the United States modify its policies or
negotiate a mutually satisfactory settlement with Brazil, the Bush Administration in early July
2005 asked Congress to modify the cotton subsidy program and Brazil agreed to temporarily
suspend retaliatory action. In December 2007, a WTO dispute panel ruled in support of Brazil’s
claim that the United States is not moving quickly enough to comply with the 2005 ruling that it
59
“Brazil’s Nuclear Ambitions Expand,” Latin American Regional Report, November 2008.
U.S. Department of Commerce statistics, as presented by Global Trade Atlas, 2009.
61
For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
62
“Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008; “WTO Members to Suspend Effort to Reach
Multilateral Deal on Sectorals, Chair Says,” BNA: International Trade Daily, October 23, 2008; “Lamy: Lack of
Political Will Blocking Doha Deal, But Cotton Doable,” Inside U.S. Trade, December 19, 2008.
60
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should remove some of its cotton subsidies.63 Brazil has argued that it has the right to impose up
to $2.5 billion in annual trade sanctions against U.S. imports as a result of this noncompliance.
The United States maintains that Brazil is “consistently overstating” the amount of compensation
it is entitled to and that retaliation should not exceed $22.8 million per year.64
In a separate decision, in December 2007 the WTO decided to investigate Brazil and Canada’s
claims that U.S. agriculture support programs have exceeded allowed levels.65 Brazil has asserted
that the United States has exceeded its annual commitment levels for the total aggregate measure
of support (AMS) in each of the years 1999, 2000, 2001, 2002, 2004, and 2005. It also has
complained that the U.S. export credit guarantee program operates as a WTO-legal export
subsidy. Canada is pursuing a similar case against the United States.
Generalized System of Preferences 66
The Generalized System of Preferences (GSP) provides duty-free tariff treatment to certain
products imported from developing countries. In the 109th Congress, renewal of the preference (as
established by Title V of the Trade Act of 1974) was somewhat controversial, owing, in part, to
concerns of some Members that a number of the more advanced developing countries (such as
Brazil and India) were contributing to the impasse in the Doha round of WTO talks. Compromise
language worked out between the House and Senate extended GSP for two years for all countries,
while asserting that the President “should” revoke “competitive need limitation (CNL)” waivers
for products from certain countries, based on the criteria specified. In June 2007, the Bush
Administration decided to revoke the CNL waivers on Brazilian brake parts and ferrozirconium. 67
The 110th Congress extended GSP until December 31, 2009 with P.L. 110-436.
Intellectual Property Rights
In the last few years, Brazil has taken steps to improve its record on protecting intellectual
property rights (IPR). The Brazilian government has created a national action plan to address
piracy and intellectual property crimes, which has included increased police actions. Brazil and
the United States continue to work together to address intellectual property issues, primarily
through the U.S.-Brazil Bilateral Consultative Mechanism and the U.S.-Brazil Commercial
Dialogue. In recognition of this progress, the United States Trade Representative lowered Brazil
from the Priority Watch List of countries with significant IPR violations to the Watch List in
2007. Brazil remained on the Watch List in 2008. In order to build on progress that has been
made, USTR recommends that Brazil should consider strengthening its IPR enforcement
legislation, more vigorously addressing book and internet piracy, and signing the World
Intellectual Property Organization Internet Treaties.68 The U.S. government has also expressed
63
“WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007. For more information,
see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program, by Randy Schnepf.
64
“U.S. Contests ‘Exaggerated’ Brazilian Claim For Compensation in Cotton Dispute at WTO,” BNA International
Trade Daily, March 3, 2009.
65
See CRS Report RL34351, Brazil’s and Canada’s WTO Cases Against U.S. Agricultural Support, by Randy
Schnepf.
66
This section was drawn from CRS Report RL33663, Generalized System of Preferences: Background and Renewal
Debate, by Vivian C. Jones.
67
“USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S. Trade, June 29, 2007.
68
USTR, Special 301 Report, April 2008.
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concerns about Brazil’s periodic threats to issue compulsory licenses for patented pharmaceutical
products. In May 2007, Brazil broke a patent on a drug used to treat HIV/AIDs that is produced
by Merck & Co. in order to import a cheaper version of that drug from India.69
Human Rights
The U.S. State Department’s Country Report on Human Rights on Brazil covering 2008 states
that while “the federal government generally respected the human rights of its citizens ... there
continued to be numerous, serious abuses, and the records of several state governments were
poor.” Three human rights issues of particular concern include crime and human rights abuses by
police, race and discrimination, and trafficking in persons.
Violent Crime and Human Rights Abuses by Police
Most observers agree that the related problems of urban crime, drugs, and violence, on the one
hand, and corruption and brutality in law enforcement and prisons, on the other, are threatening
citizens’ security in Brazil. Crime is most rampant in the urban shanty towns (favelas) in Rio de
Janeiro and São Paulo. Violence has traditionally been linked to turf wars being waged between
rival drug gangs for control of the drug industry or to clashes between drug gangs and police
officials, who have been criticized for the brutal manner in which they have responded to the
gang violence. Prison conditions in Brazil range from “poor to extremely harsh and life
threatening,” and the countrywide prison system, which housed more than 400,000 inmates in
2007, had almost double the system’s designed capacity.70
The current weaknesses in Brazil’s criminal justice system became dramatically apparent in 2006,
when gangs launched violent attacks that destabilized the cities of São Paulo and Rio de Janeiro.
In May 2006, street combat and rioting organized by a prison-based gang network, the First
Capital Command (PCC), paralyzed the city of São Paulo for several days. 71 Officially, the
violent gang attacks, which were followed by police reprisals, resulted in at least 186 deaths.72 In
late December 2006, drug gangs torched buses and attacked police stations in Rio de Janeiro,
leaving some 25 dead. Recent clashes have also involved vigilante militias, composed of off-duty
police and prison guards, which are now charging citizens to “protect” them from the drug gangs.
Rio de Janeiro officials have identified the militias as criminal groups but have thus far been
unable to contain them. 73
Human rights groups have identified extrajudicial killings by police and prison authorities as
Brazil’s most pressing human rights problem. 74 Upon completing a November 2007 visit to
69
70
“Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007.
U.S. Department of State, Country Reports on Human Rights Practices 2008: Brazil, February 25, 2009.
71
Formed in 1993 to protest the country’s poor prison conditions, the PCC now has at least 6,000 dues-paying
members and reportedly exerts control over more than 140,000 prisoners in the São Paulo prison system. Stephen
Hanson, “Brazil’s Powerful Prison Gang,” Council on Foreign Relations, September 26, 2006.
72
“Brazil: Battle of São Paulo Leaves a Disquieting Balance,” Latin American Weekly Report, May 23, 2006; “Police
are Criticized in Wave of Gang Violence in Brazil,” New York Times, May 30, 2006; “Attacks in São Paulo Prompt
Fears of Renewed Gang Offensive,” EFE, February 7. 2007.
73
“Troops Alone Will Not Solve State of Violence,” Latin American Brazil & Southern Cone Report, January 2007;
“Brazilian Slums Face a New Problem: Vigilante Militias,” Christian Science Monitor, February 8, 2007.
74
Brazilian authorities report that, partially in response to violent gang attacks, São Paulo state police killed 533
(continued...)
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Brazil, a U.N. Special Rapporteur concluded that police in Brazil are allowed to “kill with
impunity in the name of security.”75 Indeed, Rio de Janeiro police killed nearly four people per
day in 2008, a 6% increase from 2007. Some have defended these strong-arm tactics, crediting
them for a 10% decline in Rio de Janeiro’s murder rate.76
Many analysts have asserted that Brazilian politicians at all levels of government have failed to
devote the resources and political will necessary to confront the country’s serious public security
problems. In particular, they maintain that there has been a lack of coordination between federal,
state, and local officials, and that political calculations have often prevented state governments,
which have been largely ineffective in responding to the recent violence, from seeking muchneeded assistance from the federal government. President Lula did not launch any major anticrime initiatives during his first term, but announced a $3 billion anti-crime initiative in August
2007 that combines police reform, prison construction, and other public security measures with
significant investments in prevention, and rehabilitation programs.77
Race and Discrimination 78
People of African descent in Brazil, also known as Afro-Brazilians, represent 45% of the
country’s population, but constitute 64% of the poor and 69% of the extreme poor.79 During the
Cardoso administration, the Brazilian government began to collect better official statistics on
Afro-Brazilians. These statistics found significant education, health, and wage disparities between
Afro-Brazilians and Brazil’s general population.
Brazil now has the most extensive anti-discrimination legislation geared towards Afrodescendants of any country in Latin America. In 2001, Brazil became the first Latin American
country to endorse quotas in order to increase minority representation in government service.
Since 2002, several state universities in Brazil have enacted quotas setting aside admission slots
for black students. Although most Brazilians favor government programs to combat social
exclusion, they disagree as to whether the beneficiaries of affirmative action programs should be
selected on the basis of race or income. 80 In 2003, Brazil became the first country in the world to
establish a Special Secretariat with a ministerial rank to manage Racial Equity Promotion
Policies. Afro-Brazilian activists, while acknowledging recent government efforts on behalf of
Afro-descendants, have noted that most universities have preferred not to implement quota
systems, and that the Special Secretariat lacks the funding, staff, and clout necessary to advance
its initiatives. 81
(...continued)
alleged criminals in 2006 compared to 300 in 2005. See “Police Killings of Suspects Up in Brazil,” Associated Press,
February 1, 2007. President Lula has taken some steps to combat police brutality in Brazil.
75
“Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News
Service, November 15, 2007.
76
“Police raid fatalities in Rio revive debate over policy,” Latin American Security & Strategic Review, February 2009.
77
“Brazil: Public Security Program Finally Launched,” Latin American Weekly Report, August 23, 2007.
78
For more information, see CRS Report RL32713, Afro-Latinos in Latin America and Considerations for U.S. Policy,
by Clare Ribando Seelke and June S. Beittel.
79
Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa Econômica Aplicada (IPEA), 2001
80
Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1, 2004.
81
Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue Policy Reform,” Citizen
Action in the Americas, No. 17, April 2005.
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Despite these limitations, Brazil has taken a leadership role in advancing issues of race and
discrimination within the Organization of American States, where it is leading the drafting of an
Inter-American Convention for the Prevention of Racism and All Forms of Discrimination and
Intolerance. In March 2008, Brazil and the Untied States signed an agreement known as the
United States-Brazil Joint Action Plan Against Racial Discrimination to bilaterally promote racial
equality in areas such as education, health, housing, and labor.82 On September 9, 2008, the
House passed H.Res. 1254 (Engel), expressing congressional support for the U.S.-Brazil antidiscrimination plan.
Trafficking in Persons for Forced Labor 83
Brazil is a source, transit, and destination country for people, especially women and children,
trafficked for forced labor or sexual exploitation. In the U.S. State Department’s Trafficking in
Persons (TIP) report, June 2008, Brazil was listed as a Tier 2 country. The report recognizes the
Brazilian government’s increased efforts to rescue victims of slave labor and provide greater
services to victims, but cites only limited progress in bringing traffickers to justice and effectively
penalizing those who exploit forced labor.84
In Brazil, between 25,000 and 100,000 men have reportedly been recruited to labor in slave-like
conditions, many in the country’s agribusiness industry. Roughly half of the close to 6,000 people
freed from slave labor in 2007 were found working in sugarcane properties. Some have alleged
that there are some 1,000 charcoal-making camps in the Brazilian Amazon that are using slave
labor to produce pig iron, a key ingredient of steel, that is then purchased by major companies in
the United States. Child prostitution, child sex tourism, and the trafficking of foreign workers into
forced factory labor are also significant problems in Brazil. 85
Goldman Custody Case86
Over the past several years, a high-profile child custody case has focused attention on Brazil’s
noncompliance with the Hague Convention on the Civil Aspects of International Child
Abduction. In June 2004, Sean Goldman was taken to Brazil by his mother, Bruna Bianchi
Carneiro Ribeiro Goldman, a Brazilian native. Ms. Bianchi then informed her husband David
82
“Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008.
For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando Seelke.
84
Since 2001, the U.S. State Department has evaluated foreign governments’ efforts to combat trafficking in persons in
its annual Trafficking in Persons (TIP) reports, which are issued each June. Countries are grouped into four categories
according to the U.S. assessment of efforts they are making to combat trafficking. Tier 1 is made up of countries
deemed by the State Department to have a serious trafficking problem but fully complying with the minimum standards
for the elimination of trafficking. Those standards are defined in the Victims of Trafficking and Violence Protection
Act of 2000 (P.L. 106-386) as amended. Tier 2 is composed of governments not fully complying with those standards
but which are seen as making significant efforts to comply. Tier 2 Watch List, first added as a category in the 2004
report, is made up of countries that are on the border between Tier 2 and Tier 3. Tier 3 includes those countries whose
governments the State Department deems as not fully complying with TVPA’s anti-TIP standards and not making
significant efforts to do so. Tier 3 countries have been made subject to U.S. sanctions since 2003.
85
Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg Markets, December 2006;
U.S. Department of State, Trafficking in Persons Report 2008, June 4, 2008.
86
For more information on international parental child abductions, see CRS Report RS21261, International Parental
Child Abductions, by Alison M. Smith.
83
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Goldman—a U.S. citizen—that their marriage was over, she would not be returning to the United
States, and she wanted full custody of Sean. In August 2004, the Superior Court of New Jersey
ruled that Ms. Bianchi’s continued retention of Sean constituted parental kidnapping under U.S.
law and awarded Mr. Goldman custody.87 In September 2004, Mr. Goldman filed an application
for Sean’s return under the 1980 Hague Convention on the Civil Aspects of International Child
Abduction, to which both the United States and Brazil are party and which entered into force
between the countries on December 1, 2003. Under the Convention, a child removed from a
country in violation of a parent’s custodial rights should be promptly returned to the place of his
or her habitual residence. The courts of the country of the child’s residence can then resolve the
custody dispute. 88 In 2005, a Brazilian federal judge ruled that although Sean had been moved to
Brazil wrongfully, he should remain in Brazil because he had become settled in his new
location.89 In August 2008, Ms. Bianchi died and a Brazilian state court judge granted temporary
custody of Sean to the man Ms. Bianchi married following her move to Brazil, Joao Paulo Lins e
Silva.90 Mr. Goldman appealed the ruling, and on June 2, 2009, a Brazilian federal judge ruled
that Brazil must respect the Hague Convention and ordered that Sean be returned to his father.
Just a day later, however, a Brazilian Supreme Court justice stayed the order in accordance with a
request from the Brazilian Progressive Party, which argued that sending the child to the United
States would be unconstitutional. 91 The Brazilian Supreme Court must now hear the case.
The U.S. State Department’s Report on Compliance with the Hague Convention on the Civil
Aspects of International Child Abduction cites Brazil for patterns of noncompliance with the
Convention. It faults Brazilian courts for treating Convention cases as custody decisions,
demonstrating bias toward Brazilian citizens, and making the judicial process excessively
lengthy. In February 2009, Secretary of State Clinton brought up the Goldman case in her meeting
with Brazilian Foreign Minister Celso Amorim in Washington, and in March 2009, President
Obama raised the matter in his meeting with President Lula. Both Brazilian leaders maintain that
the Goldman case will be settled by the country’s independent judiciary.92 There are currently
some 50 unresolved cases of children being retained in Brazil after having been wrongly removed
from the United States.93 On March 11, 2009, the House unanimously passed H.Res. 125 (C.
Smith), calling on Brazil to meet its obligations under the Hague Convention to return Sean
Goldman to his father in the United States. On March 24, 2009, the Senate approved S.Res. 37
(Lautenberg) by unanimous consent, calling on Brazil to comply with the requirements of the
Convention on the Civil Aspects of International Child Abduction and to assist in the safe return
of Sean Goldman to his father in the United States.
87
David G. Goldman V. Bruna B. Goldman, FD-13-395-05C (Superior Court of New Jersey 2004).
Hague Conference on Private International Law: Final Act, Draft Conventions on Civil Aspects of International
Child Abduction and on International Access to Justice, Articles on the Law Applicable to Certain Consumer Sales,
and Recommendations and Decisions of the Conference, Oct. 25, 1980, 19 I.L.M. 1501 (1980).
89
Under Article 12 of the Hague Convention, a judge may refuse to return a child if the child has become settled in his
or her new home and more than one year has passed from the date of the child’s removal.
90
Joshua Partlow, “Fight for 8-Year-Old Colors Relationship Between U.S., Brazil,” Washington Post Foreign Service,
March 13, 2009; Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times, February 25,
2009.
91
Alexei Barrionuevo, “Judge in Brazil Stays Ruling Ordering Return of Boy to U.S.,” New York Times, June 3, 2009.
88
92
Joshua Partlow, “Fight for 8-Year-Old Colors Relationship Between U.S., Brazil,” Washington Post Foreign Service,
March 13, 2009; Darlene Superville, “Obama, Brazil leader focus on economy, energy,” Associated Press, March 14,
2009.
93
Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times, February 25, 2009.
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HIV/AIDS
Internationally recognized as having one of the world’s most successful HIV/AIDS program,
Brazil has made the fight against the spread of HIV/AIDS a national priority. Initially focused on
disease prevention, Brazil’s HIV/AIDS program expanded to providing antiretroviral (ART)
drugs on a limited basis by 1991, and later guaranteeing universal access by 1996. Currently
some 172,000 Brazilians have access to free generic versions of ART drugs, some of which are
locally produced and financed by the Brazilian government. The incidence of HIV/AIDS in
Brazil has stabilized since 1997, and universal free access to ART has increased average survival
times from 18 months for those diagnosed in 1995, to 58 months for those diagnosed in 1996.94
HIV prevalence has been stable at 0.5% for the general population in Brazil since 2000, so most
government prevention efforts are now targeted at high-risk groups where prevalence rates are
still above 5%.
Brazil’s decision to develop generic ART drugs to treat HIV/AIDS under the compulsory
licensing provision of its patent law led to a subsequent 80% drop in the cost of treatment. That
decision brought Brazil into conflict with the United States and the international pharmaceutical
industry. In May 2001, the United States submitted a complaint to the WTO, which was later
withdrawn, that Brazil’s practices violated the Trade-Related Aspects of Intellectual Property
Rights (TRIPS) agreement and prevented companies from developing new products in Brazil.
While the pharmaceutical industry argued that TRIPS was an essential tool to protect intellectual
property rights, developing countries (like Brazil) countered that TRIPS inhibited their ability to
fight public health emergencies in a cost-effective manner. In August 2003, a WTO decision
temporarily waived part of the TRIPS rules to allow the export of generic drugs to countries
confronting a grave public health challenge (such as HIV/AIDS, tuberculosis, or malaria). That
temporary waiver became permanent in late 2005.95
Brazil currently manufactures older ART drugs locally both for domestic consumption and for
export to several African countries but has to import newer medicines. According to Brazil’s
Ministry of Health, tough negotiations with pharmaceutical companies have resulted in $1.1
billion savings for the country’s HIV/AIDS program.
Amazon Conservation
The Amazon basin spans the borders of eight countries and is the most biodiverse tract of tropical
rainforest in the world. It holds 20% of the Earth’s fresh water and 10% of all known species.
Approximately 60% of the Amazon falls within Brazilian borders, making Brazil home to 40% of
the world’s remaining tropical forests.96
The Brazilian Amazon was largely undeveloped until the 1960s, when the military government
began subsidizing the settlement and development of the region as a matter of national security.
Over the last 40 years, the human population has grown from 4 million to over 20 million and the
94
Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in Resource-Limited Settings,”
World Health Organization, February 2005.
95
Mary Anastasia O’Grady, Wall Street Journal, December 16, 2005.
96
Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter,
December 2008; “Amazon: World’s largest tropical rainforest and river basin,” World Wildlife Fund, 2009.
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resulting settlements, roads, logging, cattle ranching, and subsistence and commercial agriculture
have led to approximately 15% of the Brazilian Amazon being deforested. 97 In the 1980s, some
predicted that deforestation would decline if the Brazilian government stopped providing tax
incentives and credit subsidies to settlers and agricultural producers. Those predictions have not
borne out, however, as the complex and often interrelated causes of deforestation have multiplied
rather than decreased. 98 Between 1990 and 2000, Brazil lost an area of rainforest twice the size of
Portugal. Deforestation rates declined following the peak year of 2004, but in November 2008,
the National Institute for Space Research (INPE) announced a new increase in the rate of
deforestation, with almost 12,000 square kilometers being cleared between July 2007 and July
2008.99
Domestic Efforts
Recognizing that deforestation threatens the biodiversity of the Amazon region and is responsible
for 70% of Brazil’s annual greenhouse-gas emissions, the Lula Administration has expanded
protected areas and implemented new environmental policies.100 During its first five years in
office, the Lula Administration created 62 new natural reserves, bringing the total area of the
Brazilian Amazon protected by law to 280,000 square kilometers, the fourth largest percentage of
protected area in relation to territory in the world. 101 President Lula has also signed a Public
Forest Management Law that encourages sustainable development, placed a moratorium on
soybean plantings and cattle ranching in the Amazon, and announced a plan to reduce the rate of
Amazon deforestation by half to 5,850 square kilometers per year by 2017. Brazil plans to meet
this goal by increasing federal patrols of forested areas, replanting 55,000 square kilometers of
forest, and financing sustainable development projects in areas where the local economy depends
on logging. 102 The Lula Administration maintains that these efforts have been successful,
highlighting the fact that just 197 square kilometers of the Amazon were deforested between
February and April 2009, a 90% reduction from the same period in 2008.103
Although some conservation groups have praised President Lula for his Administration’s actions,
a number of environmentalists—including former Environment Minister Marina Silva and current
Environment Minister Carlos Minc—have questioned the Administration’s commitment to
sustainable development.104 Critics assert that the Administration favors agricultural interests over
conservation and that Brazil’s occasional declines in deforestation rates are not the result of the
97
Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter,
December 2008.
98
Some have suggested that access to pristine tracts of rainforests through roads is the primary driver of deforestation
in the Amazon. Regional roads constructed by the government, as well as local roads created by logging operations,
provide access to forested areas. Using these roads, farmers clear remaining forests and practice slash and burn
agriculture until the land loses much of its soil fertility and it becomes more profitable to move to other forested tracts
rather than resuscitate their existing lands. After agriculture, pastures grasses are generally planted and cattle are raised.
Eventually, cattle grazing and cyclical burning will alter the ecosystem sufficiently that forests cannot regenerate.
99
“Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008.
100
“Brazil: The Land Cries for Amazonia,” Latin America Data Base NotiSur, February 13, 2009.
101
“Brazil: Government policy for Amazon still ambiguous,” Latin News Weekly Report, May 22, 2008.
102
“Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008.
103
Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009.
104
Joshua Partlow, “Brazil’s Decision to Reduce Deforestation Praised,” Pittsburgh Post-Gazette, December 7, 2008;
Ana Paula Paiva, “Brazil environment minister says lacks support,” Reuters, May 28, 2009.
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Lula Administration’s initiatives, but correspond to declining global commodity prices that make
it less profitable to clear the forests. They point out that deforestation rates only began falling as
commodity prices collapsed in late 2008.105 In order to combat further deforestation, some
analysts maintain that the Brazilian government will have to greatly increase the number of
people employed to work in protected areas and do more to confront agricultural producers
operating within the Amazon. 106
Carbon Offsets and Other International Initiatives
The Amazon absorbs nearly two billion tons of carbon dioxide each year, making it a sink for
global carbon emissions and an important asset in the prevention of climate change. 107 The Kyoto
Protocol—of which Brazil is a signatory—created a Clean Development Mechanism (CDM),
which allows emission reduction projects in developing countries to earn certified emission
reduction credits (CERs) that can then be traded or sold to industrialized countries to meet their
mandated emission reduction targets. Brazil has taken full advantage of the CDM, and is host to
156 of the 1,511 emission reduction projects worldwide. These 156 projects represent 20.1
million CERs, or a reduction of 20.1 million tons of carbon dioxide. 108 The CDM allows for a
wide variety of emission reduction projects but in terms of forestry, CERs are only awarded for
afforestation and reforestation projects, not forest conservation. As a result, forestry projects
account for a very small percentage of the total CERs awarded. A number of industrialized
countries that would like to achieve a greater percentage of their mandated emission reductions
through carbon offsets have teamed with developing countries with substantial tropical forests to
propose widening the CDM to include forest conservation. Brazil has opposed such a plan,
arguing it would absolve rich countries from cutting their own emissions.109 Brazil has supported
the rise of voluntary offset markets, however, in which organizations and individuals not subject
to mandatory emission reductions can buy carbon offsets to contribute to conservation and clean
energy projects.
Brazil believes Amazon conservation should be done through public funding rather than a carbon
market. Accordingly, it launched the “Amazon Fund” in August 2008. The fund is intended to
attract donations from countries, companies, and non-governmental organizations to assist in
Brazil’s Amazon conservation efforts. Brazil intends to raise $21 billion by 2021—and hopes to
raise $1 billion within a year—to support forest conservation, scientific research, and sustainable
development. Norway has donated $140 million to the fund—with a pledge of $1 billion by
2015—and Germany has contributed $24.5 million.110
USAID environment programs support Amazon conservation through the promotion of proper
land-use and encouragement of environmentally-friendly income generation activities for the
rural poor. In FY2006, USAID initiated the Amazon Basin Conservation Initiative, which
105
Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009.
Ibid; Joshua Partlow, “A Protected Forest’s Fast Decline,” Washington Post, February 6, 2009.
107
“Brazil: Global warming risks threaten Amazonia,” Oxford Analytica, March 16, 2009.
108
United Nations Framework Convention on Climate Change, “CDM Statistics,” March 2009.
109
“Rich, poor in dispute over rainforest cash,” Reuters, December 4, 2008. For more information on Forest Carbon
Markets, see CRS Report RL34560, Forest Carbon Markets: Potential and Drawbacks, by Ross W. Gorte and
Jonathan L. Ramseur.
110
“Brazil’s Amazon Fund not to suffer from financial crisis; minister,” Xinhua News Agency, October 25, 2008;
“Germany pledges euro18 million to Amazon fund,” Associated Press, December 18, 2008.
106
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supports community groups, governments, and public and private organizations working
throughout the Amazon Basin in their efforts to conserve the Amazon’s globally important biodiversity. USAID provided $5.2 million for environmental programs in Brazil in FY2007 and an
estimated $9.5 million in FY2008. The Joint Explanatory Statement of the Omnibus
Appropriations Act for FY2009 (P.L. 111-8) recommends that, in addition to funding for country
programs, no less than $25 million be made available for the Amazon Basin Conservation
Initiative, $10 million of which is directed to activities in the Brazilian Amazon.
Figure 1. Map of Brazil
Source: CRS.
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Author Contact Information
Clare Ribando Seelke
Specialist in Latin American Affairs
cseelke@crs.loc.gov, 7-5229
Congressional Research Service
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
24