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Brazil: Background and U.S. Relations

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Brazil-U.S. Relations Peter J. Meyer Analyst in Latin American Affairs Clare Ribando Seelke Specialist in Latin American Affairs August 18, 2009March 5, 2010 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 to 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 significant personal popularity, occasional corruption scandals and inter-party rivalries within his governing coalition have made it difficult to advance his agenda through Brazil’s fractured legislature. Lula’s top priority for 2010 is legislative approval of a new regulatory framework that will increase the state’s role in the exploitation of Brazil’s considerable offshore oil reserves. A presidential election to choose Lula’s successor is scheduled to be held in October 2010. President Lula has benefitted from a strong economy throughout most of his second term. The global financial crisis, however, has slowed Brazil’s economic growth and is threateningthreatened to erase some some of the social gains made in recent years. President Lula has implementedimplemented a number of countercyclical policies to boost the economy and protect those most exposed to the effects of the economic downturn. These actions appear to have been reasonably successful, as a number of analysts believe the Brazilian economy has already begun to recoverthe Brazilian economy was one of the first to recover from the global crisis and analysts now expect Brazil to experience significant growth in 2010. During the first Lula term, Brazil’s relations with the United States were generally positive, although despite the fact that President Lula prioritized strengthening relations with neighboring countries and and expanding ties with nontraditional partners, including India and China. Brazil-U.S. cooperation cooperation has increased during President Lula’s second term, particularly on energy issues. Two presidential 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 was expanded in November 2008. President Obama has made strengthening U.S.-Brazilian relations a majoran important part of his policy toward Latin America, meeting with President Lula a number of times since his inauguration. While. Although several differences between the countries have emerged in recent months, Brazil-U.S. relations remain friendly. The 111th Congress has maintained considerable interest in Brazil. 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. The Western Hemisphere Energy Compact (S. 587, Lugar)— which would provide $6 million to expand U.S.-Brazil biofuels cooperation in FY2010—was also introduced on March 12, 2009. An international custody case involving Brazil has been another concern of Congress. 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 June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill would suspend the Generalized System of Preferences for Brazil until the country meets its obligations under the Convention on the Civil Aspects of International Child Abduction months, Brazil-U.S. relations remain friendly. Members of Congress demonstrated considerable interest in Brazil during the first session of the 111th Congress. Members expressed particular concern over an international custody case involving Brazil. Both houses passed resolutions (H.Res. 125 and S.Res. 37) calling on Brazil to comply with the requirements of the Convention on the Civil Aspects of International Child Abduction, and another measure (H.R. 2702, C. Smith) was introduced in the House, which would suspend the Generalized System of Preferences for Brazil until the country meets its Convention obligations. Several other initiatives relating to Brazil also were introduced in the first session of the 111th Congress: S.Res. 74 (Lugar) 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; S. 587 (Lugar) would provide $6 million to expand U.S.-Brazil biofuels cooperation in FY2010; and S. 2044 (Menendez) would provide for re-liquidation of entries relating to certain Brazilian orange juice imports. 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. Congressional Research Service Brazil-U.S. Relations Contents Background Political and Economic Background............................................................................................1 Political Situation..............................................................................................1 Political Situation..........................2 The First Lula Administration ..............................................................................................1.2 The FirstSecond Lula Administration ...............................................................................................2 The Second Lula Administration3 October 2010 Elections ...........................................................................................3 Economic and Social Conditions ..............4 Economic Conditions ............................................................................................................4 Economic Challenges and Efforts to Boost Growth ......4 Economic Challenges............................................................................................................5 Slow Growth Rate...........................................................................................................5 Global Financial Crisis....................................................................................................5 Social Indicators ...................................................................................................................6 Foreign and Trade Policy ............................................................................................................7 Relations with the United States ..................................................................................................8 Selected Issues in U.S.-Brazil Relations Regional Integration and Leadership .....................................................................................7 Mercosur ........................................................................................................................7 Unasur and other Regional Organizations........................................................................8 Maintenance of Peace and Stability .................................................................................8 Expansion of Influence ............................................................................................9 Counternarcotics ...............9 Regional Backlash ..........................................................................................................9 Emerging Global Role......................................................................................................... 10 Counterterrorism and the Tri-Border Area Relations with the United States ............................................................................... 10 Energy Security .................................................................................................................. 11 Oil ............................................ 11 Selected Issues in U.S.-Brazil Relations .................................................................................... 12 Counternarcotics ................................................................................................................. 12 Counterterrorism and the Tri-Border Area ........................................................................... 13 Energy Security ..................................................................................................... 12............. 14 Ethanol and Other Biofuels ........................................................................................... 1214 Nuclear Energy ............................................................................................................. 1315 Oil ................................................................................................................................ 15 Trade Issues ........................................................................................................................ 1416 Doha Round of the World Trade Organization Talks ..................................................... 1416 World Trade Organization DisputesDispute ............................................................................... 14. 17 Generalized System of Preferences ............................................................................... 1517 Intellectual Property Rights ........................................................................................... 1518 Human Rights ..................................................................................................................... 1618 Violent Crime and Human Rights Abuses by Police....................................................... 1618 Race and Discrimination .............................................................................................. 1720 Trafficking in Persons for Forced Labor ....................................................................... 1820 Convention on the Civil Aspects of International Child Abduction....................................... 1921 HIV/AIDS .......................................................................................................................... 2023 Amazon Conservation......................................................................................................... 2123 Domestic Efforts ........................................................................................................... 2224 Carbon Offsets and Other International Initiatives ......................................................... 2325 Figures Figure A-1. Map of Brazil ......................................................................................................... 27 Congressional Research Service Brazil-U.S. Relations Appendixes Appendix. Map of Brazil........................................................................................................... 27.... 24 Contacts Author Contact Information ...................................................................................................... 2528 Acknowledgments .................................................................................................................... 28 Congressional Research Service Brazil-U.S. Relations Political and Economic 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 national 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 21 years of military rule (1964-1985), social problems, and uneven economic growth. 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).3 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 leftist Worker’s Party (PT), a former metalworker and union leader who had led the PT since the early 1980s.4 Cardoso was elected largely on the basis of the success 1 —and significant natural resources. 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. Brazil is the fifth-most populous country in the world. Its 191 million citizens are primarily of European, African, or mixed African and European descent.1 With a gross national income (GNI) of $1.4 trillion in 2008, 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. Per capita GNI is only $7,350, however, 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 setbacks, including 21 years of military rule, political instability, and uneven economic growth. 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. During the first decade after its return to democracy, 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 and the other was impeached on corruption charges. Brazil was one of the last countries in the region to move away from state-led development; significant market-oriented policies were not implemented until the government of Fernando Henrique Cardoso (1994-2002).3 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 leftist Worker’s Party (PT).4 Cardoso’s election was largely a result of the success of the anti-inflation “Real Plan” that he implemented as Finance Minister. During his first term, Cardoso achieved macroeconomic stability, opened the Brazilian economy to trade and investment, and furthered privatization efforts. Despite these policy victories, Cardoso was unable to enact other political and social changes, such as social security, tax, or judicial reforms. A 1997 constitutional change allowed President Cardoso to run reelection, and he once again defeated Lula in October 1998. President Cardoso experienced a considerable decline in popularity during his second term, however, as 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 , 2010. 3 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. 4 In recent years, the PSDB has become ideologically centrist while the PT has move to the center-left. Timothy J. Power and Cesar Zucco Jr., "Estimating Ideology of Brazilian Legislative Parties, 1990-2005," Latin American (continued...) Congressional Research Service 1 Brazil-U.S. Relations 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 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 Research Review, vol. 44, no. 1, 2009. Congressional Research Service 1 Brazil-U.S. Relations 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 MarketCommon Market of the South (Mercosur),5 but fault him for failing to implement more aggressive political and social reforms.6 Political Situation The First Lula Administration In 2002, Lula —a former metalworker and union leader who had led the Worker’s Party (PT) since the early 1980s—ran in his fourth campaign for the presidency of Brazil. Unlike in his previous failed campaigns, heAlthough he continued to advocate for greater social justice, Lula moderated his leftist rhetoric and—while still advocating greater attention to social issues—promised 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” economic policies enacted by Cardoso. High Cardoso’s eight years in power. High unemployment rates and economic stagnation led voters to support Lula, a longtime critic of neoliberalism. Lula was elected decisively in the second round of voting with a significant majority of the vote, defeatingreject Cardoso’s designated successor, José Serra, the Minister of Health and senator from São PauloMinister of Health José Serra, and support Lula. During his first term, President Lula largely maintained the restrainedmarket-oriented economic policies associated with his predecessor. , while placing a greater emphasis on addressing social problems. In 2003, the Lula government enacted social security and tax reforms, and in 2004,committed to a primary budget surplus of 4.25% of GDP. Likewise, Lula implemented a law to allow more private investment in public infrastructure projects. President Lula also launched several social programs, some of which have been more successful than others. The Bolsa Familia (Family Stipend) program, which provides monthly stipends to 11.4 million poor families in exchange for in 2004. Although the Lula Administration tightly controlled expenditures, it also reorganized and expanded some of the social programs initiated under Cardoso. One conditional cash transfer program, known as Bolsa Familia (Family Stipend), has provided monthly stipends to some 11.4 million poor families in exchange for compulsory school attendance for all school-age children, has been credited with reducing poverty, though some critics. Supporters of the program credit it with reducing poverty and weakening the clientelist links between the poor and some local politicians. Critics argue that it has made poor households too dependent on government services.7 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 (...continued) Research Review, vol. 44, no. 1, 2009. dependent on government services. 7 Despite these initial legislative victories, Lula’s agenda stalled toward the end of his first term. Some left-leaning Brazilians criticized Lula for maintaining the orthodox economic policies of the Cardoso Administration and failing to do more to address social issues such as income inequality and land distribution. Criticism of Lula became more widespread with the onset of several corruption scandals involving top PT officials, although a congressional inquiry cleared President Lula of any direct responsibility in April 2006.8 5 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. 6 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. 7 Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation Under Lula,” Journal of Latin American Studies, vol. 38, November 2006. Congressional Research Service 2 Brazil-U.S. Relations [tactic] to shore up domestic support”8 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. 9 A congressional inquiry in April 2006 cleared President Lula of any direct responsibility for the scandals.; Riorden Roett, “How Reform Has Powered Brazil’s Rise,” Current History, February 2010. 8 Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” World Politics, vol. 59, no. 3, April 2007. Congressional Research Service 2 Brazil-U.S. Relations The Second Lula Administration President Lula defeated the PSDB’s Gerardo Alckmin in the second round of presidential elections held in late October 2006, capturing 61% of the vote. Lula won handily in the poorer north north and northeastern regions of the country, but failed to carry the more prosperous southern and and western states or São Paulo. Some observers assessed that Brazilians, though divided by class and 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. Others attribute his win to the success of the Bolsa Familia program, which led voters in poorer income brackets to overwhelmingly support him.10 The PT did not fare as well as Lula, suffering 9 Although Lula was able to overcome the PT’s corruption scandals, his party did not fare as well. In concurrent legislative elections, the PT suffered a loss of nine seats in the Chamber of Deputies and losing four Senate seats in the concurrent legislative elections. Despitefour seats in the Senate. Despite his administration enjoying high approval ratings (67% in August 2009)1173% in February 2010)10 and several years of strong economic growth, President Lula’s second administrationterm has been periodically hindered by corruption scandals and a lack of support from members of his coalition. Many of President Lula’s priorities—including significant tax and political reforms—have stalled in Brazil’s Congress, where the PT-allied but ideologically flexibleheterogeneous Party of the Brazilian Democratic Movement (PMDB) controls the presidencies of both the Senate and Chamber of Deputies. The PMDB has exercised increasing independence since its stronger than expected results in the October 2008 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. President Lula has done little to challenge these decisions since the PT’s chances of maintaining the presidency in 2010 are likely dependent on a continued alliance with the PMDB. 12 This has also led President Lula to vigorously defend Senate President José Sarney (President of Brazil 1985-1990) against a number of corruption allegations, ranging from abuse of public funds to nepotism.13 Given the ongoing corruption investigations and the political posturing that is expected to lead up to the October 2010 presidential election, some 8 Jeffrey Cason, “Hopes Dashed? Lula’s Brazil,” Current History, February 2006. 9 Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” World Politics, vol. 59, no. 3, April 2007. 10President Lula has done little to challenge the PMDB since the PT’s chances of maintaining the presidency in 2010 are likely dependent on a continued alliance.11 This has also led President Lula to vigorously defend Senate President José Sarney (President of Brazil 1985-1990) of the PMDB against a number of corruption allegations, ranging from nepotism to abuse of public funds.12 President Lula’s top priority for 2010 is legislative approval of a new regulatory framework that will increase the state’s role in the exploitation of Brazil’s considerable offshore oil reserves. (For more information, see “Oil” below). Among other provisions, the plan would make state-owned Petrobras the sole operator for all new offshore projects, replace the existing concessionary model with a production sharing regime, guarantee Petrobras a minimum 30% stake in all new joint ventures, create a new public company—Petrosal—for contract administration, and create a new social fund overseen by Congress that will direct offshore revenues toward four key areas: education, infrastructure, science and technology, and poverty reduction.13 Although the new regulatory framework is expected to pass, some analysts believe it is unlikely that the Brazilian Congress will act on the rest of President Lula’s agenda—such as politically sensitive, longstalled economic and political reforms—as the parties turn their attention toward the October 2010 presidential and legislative elections.14 9 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. 11 “Brazil: ‘Teflon’ Lula retains strong approval ratings,” Oxford Analytica, August 17, 2009. 1210 “Support for Brazil’s President Lula Reaches Record – Poll,” Dow Jones, March 1, 2010. 11 “Power struggle exposes senate wrongdoings,” Latin American Weekly Report, March 26, 2009; “Brazil: PMDB powerbrokers may hold key in 2010,” Oxford Analytica, March 30, 2009. 1312 Otávio Cabral, “Os Novos e Bons Companheiros,” Veja, July 22, 2009. Congressional Research Service 3 Brazil-U.S. Relations analysts believe it is unlikely that the Brazilian Congress will act on President Lula’s legislative agenda.14 13 “Brazil’s Oil Law still awaiting approval,” Latin American Regional Report: Brazil & Southern Cone, February 2010. 14 “Country Report: Brazil,” Economist Intelligence Unit, January 2010. Congressional Research Service 3 Brazil-U.S. Relations October 2010 Elections While some of President Lula’s supporters have pushed for a constitutional amendment that would allow him to run for a third term in the October 2010 elections, Lula has stressed the importance of alternation of power, stating unequivocally that “Brazil should not have a third mandate.”15 The top candidates to replace Lula include him include former Health Minister and 2002 candidate José Serra of the PSDB and current Minister of the Presidency Dilma RouseffRousseff of the PT. Economic and Social Other possible candidates include Deputy Ciro Gomes of the Brazilian Socialist Party (PSB) and former Lula Administration Environment Minister Marina Silva of the Green Party (PV). Although Serra has been the favorite in early polling, the lesser known Rousseff has begun to close the gap with the enthusiastic support of President Lula.16 Analysts believe that both Serra and Rouseff would maintain broad policy continuity, although Rousseff is more supportive of a strong state role in the economy than Serra.17 Economic 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 2006.16 and in 2009, Brazil became a net IMF creditor. Fiscal discipline has been accompanied by record exports. Brazil is a major exporter of that have 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’sBrazil is a 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, is 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.17 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).18 In 2008 in deep-water oil drilling. In 2009, the value of Brazil’s exports reached some $198153 billion, and the the country’s trade surplus was over $25 billion.18 15 16 “Lula speaks out on third term,” Latin News Daily, June 3, 2009. David Fleischer, “Brazil Focus Special Report,” March 1, 2010. 17 “Political Economy: The debate begins,” Latin American Regional Report: Brazil & Southern Cone, February 2010; “Serra waits, a bit too patiently, for the presidency,” The Economist, February 4, 2010; “Brazil: Rousseff nomination leaves PT divisions open,” Oxford Analytica, February 19, 2010. 18 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, February 2010$25 billion. 19 14 “Reform agenda may be shelved yet again,” Latin American Regional Report: Brazil & Southern Cone, February 2009; “Analysis—Brazil’s Senate scandal a risk to Lula’s agenda,” Reuters, August 11, 2009. 15 “Lula speaks out on third term,” Latin News Daily, June 3, 2009. 16 “Brazil Foreign Debt at $168.9 Billion End-2006,” Latin America News Digest, January 26, 2007. 17 Trade data made available by Global Trade Atlas, 2009. 18 Mercosur trade statistics only include the other full members of the trade bloc: Argentina, Uruguay, and Paraguay. 19 Trade data made available by Global Trade Atlas, 2009. Congressional Research Service 4 Brazil-U.S. Relations Economic Challenges and Efforts to Boost Growth Slow Growth Rate One of President Lula’s goals for his second term iswas to boost Brazil’s lagging economic growth. Between 2000 and 2006, Brazil’s annual growth rates rate, which averaged roughly 2.7%. In 2006, Brazil posted GDP growth of about 2.8%, the second lowest recorded in Latin America. In 2007, just 2.7% between 2000 and 2006. In 2007, President Lula launched a the Program to Accelerate Growth (PAC) aimed at boosting Brazil’s growth rates to 5% per year through increased, which aims to increase Brazil’s growth rate to 5% per year through 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 President Lula for the framework. According to official figures, the PAC has only invested $225 billion and spent $143 billion of the $356 billion programmed for the 2007-2009 period. The private sector accounted for $49.5 billion (33%) of the spent funds while state companies, the federal government, states and municipalities, and other public sector financing accounted for the rest.19 Some have praised President Lula for the PAC’s investments in much-needed infrastructure projects, others however, others have criticized him for failing to curb excessive public spending or to promote labor reformincreasing public spending and ignoring other factors that hamper economic growth. GDP growth in Brazil reached 5.4 6.1% in 2007, and is estimated to have reached and 5.1% in 2008.20 Despite the success of these effortsAlthough the PAC appears to have been somewhat successful, some analysts have identified several factors that could constrain Brazil’s long-term growth potential. These include a sizeable public debt burden, excessive significant 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. 21 Despite his popularity, President Lula has thus far not elected to use his political capital to enact much-neededthe structural reforms needed to address these issues. Global Financial Crisis The global financial crisis has further complicated President Lula’s attempts to accelerate economic growth. As a result of the crisis, the economic growth. The Brazilian economy contracted by 3.84% in the final last quarter of 2008 and 0.8% in the first quarter of 2009.22 Likewise, unemployment rose to 9% in March 2009, reflecting the loss of over 800,000 jobs.23 President Lula took several steps to counteract these trends and1% the first quarter of 2009, before returning to quarter-on-quarter growth in the second quarter of 2009.22 Although the recession was relatively short, export revenues fell by 22.2% and the country’s trade surplus fell by 1.4% in 2009. Brazil took several steps to minimize the impact of the crisis. The government injected at least $100 billion of additional liquidity into the local economy, provided support packages to productive sectors, and cut the key interest rate.2423 President Lula 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 President Lula’s actions appear to have been reasonably successful, as the Brazilian economy grew by an estimated 1.5% in the second quarter and 19 Figures based on the March 2, 2010 currency conversion rate of 1 Brazilian Real: 0.5578 U.S. Dollars. “Political Economy: The debate begins,” Latin American Regional Report: Brazil & Southern Cone, February 2010. 20 “Brazil: Country Profile 2008,” Economist Intelligence Unit; “Country Report: Brazil,” Economist Intelligence Unit, March 2009February 2010. 21 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. 22 “Brazilian economy starts to recover,” Latin News Daily, July 29, 2009. 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. Congressional Research Service 5 Brazil-U.S. Relations unemployment fell to 8.1% in June 2009.26 Some analysts now believe that the Brazilian economy may avoid a contraction in 2009 and could grow by 4.5% in 2010.27Late in, first out,” The Economist, September 14, 2009. 23 “Will the economy grow in 2009?” Latin American Economy & Business, February 2009; “Brazil economy: Bottoming out?” Economist Intelligence Unit, May 7, 2009. Congressional Research Service 5 Brazil-U.S. Relations relief, announced its intention to increase investments in its Program to Accelerate Growth (PAC), and maintained its spending on social programs like Bolsa Familia.24 The Brazilian government’s actions appear to have been reasonably successful. The economy contracted by just 0.3% in 2009 and Brazil was one of the first Latin American nations to emerge from recession. Analysts believe that the Brazilian economy will rebound with 5% growth in 2010, even as the Brazilian government begins to remove the stimulus measures put in place over the course of 2009.25 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.28 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 The wealthiest 5% of the population account for some 40% of the country’s wealth. 26 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. 2927 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-BraziliansAfroBrazilians, represent roughly 45% of the country’s population, but constitute 64% of the poor and 69% of the extreme poor.3028 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.3129 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.3230 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%.33 26 “Country Report: Brazil,” Economist Intelligence Unit, August 2009; “Brazil,” Latin News Daily,” July 24, 2009. Geri Smith, “Brazil’s Coming Rebound,” Businessweek, August 6, 2009. 28 David De Ferranti et al., Inequality in Latin America: Breaking with History? Washington, DC: The World Bank, 2004. 29percentage of Brazilians considered middle class has increased from 37.6% in 2003 to over 49% today. Nonetheless, some 70 million people (nearly 40% of the population) still live below the poverty line. 31 24 “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. 25 “Country Report: Brazil,” Economist Intelligence Unit, February 2010; “Brazil to end tax breaks, reduce stimulus— report,” Reuters, January 29, 2010. 26 “Brazil: Middle class expands but inequality persists,” Oxford Analytica, February 8, 2010. 27 “Special Report: Land Report Dilemma,” Latin America Regional Report, December 21, 2004. 30 28 Ricardo Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa Econômica Aplicada (IPEA), 2001. 3129 Organization for Economic Cooperation and Development, “Economic Survey of Brazil 2005,” March 2005. 27 3230 Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation Under Lula,” Journal of Latin American Studies, vol. 38, November 2006; United Nations Development Program, “Human Development Report 2007/8,” November 2007. 33 Nilson Brandão Junior and Marianna Aragão, “Miséria no Brasil Cai 27,7% no 1º Mandato de Lula,” Estado de São Paulo, September 20, 2007; “Brazil: Half the Nation, a Hundred Million Citizens Strong,” Economist, September 13, 200831 “Brazil: Middle class expands but inequality persists,” Oxford Analytica, February 8, 2010. Congressional Research Service 6 Brazil-U.S. Relations 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.3432 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, and is seeking a permanent seat on the U.N. Security Council. Brazilian foreign policy has also tended to emphasize regional integration through organizations such as Mercosur, the Rio Group, and the Union of South American Nations (UNASUR). 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 2004.35 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 the Union of South American Nations, 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 and Brazilian Congresses have 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. 36 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 34 Georges D. Landau, “The Decision making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and International Studies: Washington, DC: March 2003. 35 For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy, by J. F. Hornbeck. 36 “Deathknell Sounds,” Latin American Regional Report, January 2009. Congressional Research Service 7 Brazil-U.S. Relations than others. One initiative has involved the use of so-called “ethanol diplomacy.” Brazil has sought to reassert regional leadership by signing bio-fuels partnership agreements with countries that would otherwise be dependent on expensive oil imports.37 A not-so-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 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.38 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.39 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. 40 Others have criticized Brazil for not speaking out on human rights violations and undemocratic practices in other countries of the developing south. 41 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 assert that the United States seeks to increase cooperation with moderate leftist governments in Latin America (like Brazil) in order to ease mounting tensions among 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. 37 “Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007. 38 “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. 39 See CRS Report RL33258, Brazilian Trade Policy and the United States, by J. F. Hornbeck. 40 Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007. 41 “Brazil: Diplomacy criticised for undermining human rights,” Latin American Weekly Report, July 16, 2009; “Whose side is Brazil on?,” Economist, August 13, 2009. Congressional Research Service 8 Brazil-U.S. Relations Brazil and the United States have worked closely on a wide range of bilateral and regional issues, and Brazil-U.S. cooperation has increased in recent years, as reflected in the continuing highlevel contacts between the two governments, particularly on energy issues. Early in 2007, two high-level meetings between Presidents Bush and Lula culminated in the March 2007 signing of a U.S.-Brazil Memorandum of Understanding (MOU) to promote bio-fuels development in the Western Hemisphere.42 The initiative was expanded in November 2008 to include additional countries in Africa, Central America, and the Caribbean (See “Ethanol and Other Biofuels” section below).43a variety of sub-regional organizations—including Mercosur, the Union of South American Nations (UNASUR), and the Rio Group—as well as through the Organization of America States (OAS) and the United Nations. Regional Integration and Leadership Over the past two decades, Brazil has pushed for greater integration among Latin American nations while consolidating its status as a regional power. Brazil has played an important role in establishing new multilateral organizations, although it has had much more success in developing political cohesion than true economic integration. Brazil has also played an important role in maintaining regional peace and stability, however, its growing commercial and political influence has received some pushback from neighboring countries. Mercosur Brazil joined with Argentina, Paraguay, and Uruguay to establish the Common Market of the South (Mercosur)33 in 1991. The organization was originally created in order to promote economic integration and political cooperation, however, its progress in terms of economic integration has been quite limited. The pact calls for an incremental path to full integration, yet only a limited customs union has been achieved in its nearly 20 year existence. Likewise, Mercosur’s internal resolution process has proved unable to resolve disputes between members, and the group has not addressed trade asymmetries, drafted a common customs code, or resolved the issue of double tariffs on some imports from outside the region. 34 Despite its lack of economic integration, Mercosur has been an influential body. Since its formation, it has greatly expanded its geographic reach. Chile, Mexico, and the members of the Andean Community of Nations (CAN)—Bolivia, Colombia, Ecuador, Peru, and Venezuela— have all become associate members.35 Venezuela will become the fifth full member of Mercosur once all four founding nations ratify its inclusion; Paraguay is the only country yet to ratify the accession.36 Mercosur has also played an important role on regional issues. For example, its opposition to the Free Trade Area of the Americas (FTAA) was the principle reason why the agreement stalled. 32 Georges D. Landau, “The Decision making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and International Studies: Washington, DC: March 2003. 33 For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy, by J. F. Hornbeck. 34 “Deathknell Sounds,” Latin American Regional Report: Brazil & Southern Cone, January 2009. 35 Associate members have no voting rights and need not observe Mercosur’s common external tariff. 36 Maria Luiza Rabello, “Brazil Senators Approve Venezuela Entry into Mercosur,” Bloomberg, December 15, 2009. Congressional Research Service 7 Brazil-U.S. Relations Unasur and other Regional Organizations Even though Mercosur has largely abandoned its attempts to deepen integration among its members, Brazil has continued to push for broader regional integration. The 2004 trade agreement that provided CAN nations with associate membership in Mercosur led to the creation of the South American Community of Nations. In May 2008, this was reformulated as the Union of South American Nations (Unasur) in a pact that included all 12 independent countries of South America. Brazil has also pushed for the incorporation of more countries into the Rio Group, a political forum with no formal institutions that includes a variety of Latin American and Caribbean countries.37 Most recently, Brazil has supported the creation of a new Community of Latin American and Caribbean States, which would bring together all of the countries of the hemisphere except Canada and the United States.38 All of these organizations contribute to the region’s increasing independence, however, their capacities are limited. Although Unasur played an important role in resolving a political conflict in Bolivia in late 2008, it has shown a limited capacity to mediate regional differences since then.39 Likewise, the Rio Group was able to reduce regional tensions following a Colombian airstrike of a Revolutionary Armed Forces of Colombia (FARC) camp inside Ecuador in March 2008, but it lacks any of the formal institutions and mechanisms possessed by the Organization of American States (OAS). Nonetheless, these regional organizations provide Brazil with forums in which it can engage in multilateral diplomacy, develop consensus on regional issues, and peacefully resolve disputes without having to turn to extra-regional powers, such as the United States. Maintenance of Peace and Stability In addition to supporting the work of multilateral organizations, Brazil has used bilateral diplomacy to encourage the peaceful resolution of conflicts and maintain stability in the region. Brazil has commanded the U.N. Stabilization Mission in Haiti (MINUSTAH) since 2004. It maintains the largest number of peacekeeping troops on the ground, and doubled its forces there following the January 2010 earthquake. 40 Brazil has also worked with Colombia to end its longrunning conflict with the Revolutionary Armed Forces of Colombia (FARC) guerilla group. It has provided logistical assistance to the Colombian government in obtaining the release of political hostages held by the FARC, called on the FARC to end its armed rebellion and assimilate into the Colombian political system, and signed a bilateral agreement with Colombia to allow crossborder privileges in hot pursuit of the FARC.41 Additionally, Brazil used bilateral diplomacy to convince each of the 12 member nations of Unasur to sign onto its South American Defense 37 The Rio Group was created in 1986 when the Contadora Group and the Contadora Support Group merged. Both groups had favored a negotiated solution to the conflicts in Central America in the 1980s, rather than the U.S. push for a military solution. 38 “Region: New body to represent the region, sans US,” Latin American Security & Strategic Review, February 2010. 39 “Latin America: Regional tensions challenge UNASUR,” Oxford Analytica, August 21, 2009. 40 Fernanda Odilla, Simone Iglesias & Johanna Nublat, “Brasil vai dobrar efetivo militar no Haiti,” Folha de São Paulo, January 21, 2010. 41 “Agradece Colombia a Brasil apoyo en liberación de rehenes ,” Agencia Mexicana de Noticias, February 3, 2009; Stan Lehman, “Lula: FARC debe hacer juego democrático y liberar rehenes,” Associated Press, December 5, 2008; “Brazil Colombia: A Deal Signals Strategic Cooperation,” Stratfor, March 12, 2009. Congressional Research Service 8 Brazil-U.S. Relations Council in March 2009. The Council is designed to safeguard peace and security by boosting regional cooperation on defense and national security policies.42 Expansion of Influence While Brazil has consolidated its power within South America, it has not traditionally exerted much influence in Central America or the Caribbean. In recent years, Brazilian government and business officials have sought to change this by expanding the country’s political and commercial interests in the broader region. One initiative has involved the use of so-called “ethanol diplomacy, ” in which Brazil has signed bio-fuels partnership agreements with several Central American and Caribbean countries that would otherwise be dependent on expensive oil imports.43 Brazil has also become a regional observer of the Central American Integration System (SICA) and promoted a trade agreement between SICA and Mercosur.44 Moreover, following the June 2009 ouster of Honduran President Manuel Zelaya, Brazil was vocal in advocating for Zelaya’s reinstatement and allowed him to take refuge in its embassy. In doing so, it took on a much larger than expected role given its typical noninterventionist foreign policy. 45 Despite these growing ties to Central American and the Caribbean, analysts assert that Brazil’s influence remains mostly confined to South America for the time being.46 Regional Backlash Brazil’s expanding influence has generated some backlash in the region. Brazil was caught off guard by Bolivia’s May 2006 nationalization of the country’s natural gas industry as President Lula had hoped that Petrobras’ investments in Bolivia would prevent such an action.47 Paraguay has also confronted Brazil over energy issues, demanding a greater price for the electricity generated by the countries’ joint hydroelectric dam. 48 Venezuela—which has sought to increase its regional influence in recent years through the provision of discounted oil—has criticized Brazil’s promotion of biofuels, charging that biofuels were the principal cause of the recent food crisis. While Brazil has thus far been able to maintain constructive relations with its South American neighbors, reaching mutually acceptable compromises with Bolivia and Paraguay while avoiding open confrontations with Venezuela, some analysts assert that such conflicts are the result of a growing resentment in Latin America over Brazil’s expanding influence. They believe similar conflicts are likely to continue as Brazil’s geopolitical power grows.49 42 “South American Defence Council,” Latin American Regional Report: Brazil & Southern Cone, April 2009. “Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007. 44 Andres Oppenheimer, “Brazil stretching clout to Central America,” Miami Herald, June 7, 2009; “Brazil is Challenging Mexico and U.S. Domination of Isthmus,” Latin America Data Base NotiSur, June 11, 2009. 45 Jens Glüsin, “South America’s Gentle Giant – Brazil Flexes Muscles Over Honduras Crisis,” Der Spiegel, October 9, 2009. 46 Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February 22, 2010. 43 47 “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. 48 Joshua Goodman, “Paraguay Pushes ‘Imperialist’ Brazil on Hydro Power: Week Ahead,” Bloomberg, July 20, 2009. 49 Miguel Diaz & Paulo Roberto Almeida, “Brazil’s Candidacy for Major Power Status,” Stanley Foundation, November 2008; Raúl Zibechi, “Is Brazil Creating Its Own ‘Backyard’?” Center for International Policy Americas Program, February 3, 2009. Congressional Research Service 9 Brazil-U.S. Relations Emerging Global Role As the country has consolidated its power in South America and extended its influence to the broader region, Brazil has also become increasingly prominent on the world stage. Brazil’s global reach is largely the result of its fast-growing economy, which is the tenth largest in the world. The country is rich in natural resources and possesses a dynamic agricultural sector. Brazil is the top exporter of coffee, orange juice, sugar, chicken, beef, and soy; the second largest producer of ethanol; and the third largest exporter of agricultural products. 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).50 These factors, in addition to President Lula’s focus on improving relations with other leaders of the developing “South,” have made Brazil one of the most important leaders of the G-20 group of emerging nations and a top player in the Doha Round of World Trade Organization (WTO) negotiations.51 In recent years, President Lula has utilized his country’s growing economic clout to assert Brazilian influence in other global matters. In the aftermath of the global financial crisis, Brazil became the foremost proponent of greater international financial regulation and a more democratic global financial system. 52 Brazil also played an active role at the 2009 U.N. Framework Convention on Climate Change Summit in Copenhagen, calling on developed countries to agree to more substantial green house gas emission reductions, proposing a fund to help poor nations cope with the effects of climate change, and helping craft the summit’s lastminute non-binding agreement.53 Additionally, Brazil has suggested that it might be able to act as a mediator in the Middle East, and has pushed for reform of, and a permanent seat on, the U.N. Security Council. 54 As Brazil has taken on a larger role in global affairs, its foreign policy has been subject to a number of critiques. Some domestic observers have criticized Brazilian foreign policy under Lula as being overly ideological. They have accused President Lula of catering to the demands of regional leftists and have suggested that his international initiatives are designed to maintain support among the base of the Worker’s Party, which is disillusioned with his Administration’s market-friendly economic policies. 55 Likewise, Roberto Abdenur, the former Brazilian Ambassador to Washington, has asserted that the “south-south” approach of the Brazilian Foreign Ministry indoctrinates Brazilian diplomats with “anti-imperialist” and “anti-American” attitudes. 56 International observers have criticized Brazil for not speaking out on human rights violations and undemocratic practices.57 The country’s acceptance of the 2009 Iranian elections and refusal to sanction Iran for its nuclear program have been particular baffling to many in the 50 Mercosur trade statistics only include the other full members of the trade bloc: Argentina, Uruguay, and Paraguay. 51 Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February 22, 2010; “Brazil takes off,” The Economist, November 12, 2009. 52 “Brasil defenderá mais regulação no G-20,” O Globo (Brazil), August 6, 2009. 53 Gaurav Singh, “China, India, Brazil Commit to Meet Copenhagen Accord Deadline,” Bloomberg, January 25, 2010. 54 “Brazilian minister on Middle East role,” BBC Monitoring, January 4, 2010. 55 “Lula criticised for ‘partisan’ foreign policy,” Latin American Weekly Report, January 22, 2009. 56 Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007. 57 “Brazil: Diplomacy criticised for undermining human rights,” Latin American Weekly Report, July 16, 2009; “Whose side is Brazil on?,” Economist, August 13, 2009. Congressional Research Service 10 Brazil-U.S. Relations international community. Brazilian officials maintain that the country views confrontational policies as counterproductive and prefers to maintain friendly relations with all nations in hopes of fostering negotiated solutions to disagreements.58 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 assert that the United States seeks to increase cooperation with moderate leftist governments in Latin America (like Brazil) in order to ease mounting tensions among 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. Brazil and the United States have worked closely on a wide range of bilateral and regional issues, and Brazil-U.S. cooperation has increased in recent years, as reflected in the continuing highlevel contacts between the two governments, particularly on energy issues. Early in 2007, two high-level meetings between Presidents Bush and Lula culminated in the March 2007 signing of a U.S.-Brazil Memorandum of Understanding (MOU) to promote bio-fuels development in the Western Hemisphere.59 The initiative was expanded in November 2008 to include additional countries in Africa, Central America, and the Caribbean (See “Ethanol and Other Biofuels” section below).60 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 President Lula’s friendly relationship with President Obama, a number of differences between Brazil and the United States have emerged in recent months. In addition to ongoing disputes over the U.S. tariff on Brazilian ethanol and the Doha Round of WTO negotiations, Brazil has called oncriticized the United States for failing to take a stronger stance on the political crisis in Honduras Honduras and has reacted negatively to the U.S. proposal to usea recent agreement that will provide the United States with access to seven Colombian military bases, which the Brazilian foreign minister described as “a strong military presence whose aim and capability seems to go well beyond what might be needed inside Colombia.”44 61 58 Bill Varner, “Brazil Resists Push for Tougher Sanctions on Iran, Envoy Says,” Bloomberg, February 17, 2010; Andres Oppenheimer, “Hubris is behind Brazil’s ties with Iran,” Miami Herald, February 21, 2010; “Brazil asserts its autonomy before Clinton,” Latin News Daily, March 4, 2010. 59 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. 60 U.S. Department of State, Office of the Spokesman, “Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance Energy Security and Promote Sustainable Development,” November 20, 2008. 61 “Brazil-US rows building over Colombia, biofuel, trade: FM” Agence France Presse, August 2, 2009; “Brasil espera una actitud más firme de EEUU contre el golpe,” EFE News Service, August 4, 2009. Congressional Research Service 11 Brazil-U.S. Relations Brazil is considered a middle-income country and does not receive large amounts of U.S. foreign assistance. Brazil received $15.321.5 million in U.S. aid in FY2008, will likely receive $21.5 million in FY2009FY2009, will receive an estimated $25 million in FY2010, and would receive $11.820.9 million under the Obama Administration’s request for FY2010 for FY2011. U.S. assistance priorities in Brazil include supporting environmental programs and the the strengthening of local capacity to address threats to the Amazon, promoting renewable energy and and energy efficiency to mitigate climate change, strengthening the professionalism and peacekeeping peacekeeping capabilities of the Brazilian military, and reducing the transmission of communicable diseases.4562 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 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. 42 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. 43 U.S. Department of State, Office of the Spokesman, “Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance Energy Security and Promote Sustainable Development,” November 20, 2008. 44 “Brazil-US rows building over Colombia, biofuel, trade: FM” Agence France Presse, August 2, 2009; “Brasil espera una actitud más firme de EEUU contre el golpe,” EFE News Service, August 4, 2009. 45 U.S. State Department, FY2010 Congressional Budget Justification for Foreign Operations, May 29, 2009. Congressional Research Service 9 Brazil-U.S. Relations Counternarcotics Although Brazil is not a major drug-producing country, it serves as a major transit country for illicit drugs from neighboring Andean countries destined primarily for Europe. Urban gangs— such as São Paulo’s First Command of the Capital (PCC) and Rio de Janeiro’s Red Command (CV)—have begun playing greater roles in narcotics and weapons smuggling, establishing their presence in other countries in the region and forging ties with Colombian and Mexican traffickers. Brazil has also become the second-largest consumer (after the United States) of cocaine in the world. With U.S. support, Brazil has taken several steps to improve its counternarcotics capabilities. In 2004, Brazil implemented an Air Bridge Denial program, which authorizes lethal force for air interdiction, and in 2006, Brazil passed an anti-drug law that prohibits and penalizes the cultivation and trafficking of illicit drugs. Brazil has also worked with its neighbors to construct Joint Intelligence Centers at strategic points along its borders and invested in a sensor and radar project called the Amazon Vigilance System in an attempt to control illicit activity in its Amazon region. In 20082009, Brazil’s federal police captured 18.9 metric tons of cocaine, 514 kilograms1.4 metric tons of cocaine base, 430513 kilograms of crack, 182 cocaine, 150.6 metric tons of marijuana, 12 kilograms of heroin, 125,706 dosage units of ecstasy, and 95,653 dosage units of LSD.46 Additionally, Brazilian police arrested a major Colombian-born drug trafficker and leader of the Norte del Valle cartel in 2007 and extradited him to the United States in 2008. Brazilian authorities also worked with the Drug Enforcement Administration (DEA) in 2008 to investigate a major Brazilian trafficker, leading to the arrests and indictments of 10 members of his network. Despite these accomplishments, the United States remains concerned that Brazil lacks the legal structure necessary to prevent narcotics trafficking and money laundering, and that Brazil’s federal police lack the resources they need to control the country’s extensive border regions. Brazil received $992,000 in U.S. counternarcotics assistance in FY2008, is expected to receive $1 million in FY2009, and would receive $1 million in FY2010 under the Obama Administration’s request.47 U.S. counternarcotics assistance includes training for the Brazil’s federal police, support for interdiction programs at Brazil’s ports, and expanding the capabilities of special investigations units. Counterterrorism and the Tri-Border Area483.3 kilograms of heroin, and 183.3 tons of precursor chemicals.63 Brazil received $992,000 in U.S. counternarcotics assistance in FY2008, was expected to receive $1 million in FY2009, and an would receive an estimated $1 million in FY2010 under the Obama Administration’s request.64 U.S. counternarcotics assistance includes training for the Brazil’s federal police, support for interdiction programs at Brazil’s ports, and expanding the capabilities of special investigations units. 62 U.S. State Department, FY2010 Congressional Budget Justification for Foreign Operations, May 29, 2009; “Budget and Allocations for FY 2011 Rollout,” provided to CRS by the U.S. Department of State, January 29, 2010. 63 U.S. Department of State, International Narcotics Control Strategy Report 2010, Volume 1, March 1, 2010. 64 U.S. Department of State, “Summary and Highlights, International Affairs, Function 150, Fiscal Year 2010.” Congressional Research Service 12 Brazil-U.S. Relations Counterterrorism and the Tri-Border Area65 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 TBA. 4966 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 46 U.S. Department of State, International Narcotics Control Strategy Report, February 27, 2009. U.S. Department of State, “Summary and Highlights, International Affairs, Function 150, Fiscal Year 2010.” 48 For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan. 49 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. 47 Congressional Research Service 10 Brazil-U.S. Relations 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.5067 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.”5168 Brazil, like many Latin American nations, has been reluctant to adopt specific antiterrorism legislation as a result of the difficulty of defining terrorism in a way that does not include the actions of social movements and other groups whose actions of political dissent were condemned as terrorism by repressive military regimes in the past.5269 Nonetheless, some Brazilian officials continue to push for antiterrorism legislation, asserting that the country will face new threats as a result of hosting the 2014 World Cup and the 2016 Olympics.70 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. 53 At the same time, Brazil has attained the ability to produce large 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.54 5065 For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan. 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. 67 “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. 5168 Ibid. 5269 “Anti-terrorism law project scrapped,” Latin American Security & Strategic Review, January 2008. 53 “Brazil: Hydrocarbons potential poses major challenges,” Oxford Analytica, November 20, 2007. 54 “Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.70 Guila Flint, “Jobim alerta para ameaça de atentados e diz que país deve se preparar para problemas durante Copa e Olimpíadas,” O Globo (Brazil), January 26, 2010. 66 Congressional Research Service 11 Brazil-U.S. Relations 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.55 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. 56 Brazil has announced that it will need $270 billion in investment over the next 10 years to develop the reserves.57 In May 2009, Brazil and China signed an agreement under which China will provide Petrobras with $10 billion in financing in exchange for guaranteed oil deliveries of 150,000 barrels per day (bdp) in 2009 and 200,000 bpd for the next decade. 58 Also in May of 2009, the Export-Import Bank of the United States approved a $2 billion financing agreement with Petrobras. In August 2009, the U.S. government reportedly indicated that it was prepared to go beyond the original agreement to provide up to $10 billion in financing. 59 Ethanol and Other Biofuels6013 Brazil-U.S. Relations 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. In addition to being the world’s second largest producer of ethanol, Brazil currently generates over 85% of its electricity through hydropower.71 At the same time, Brazil has attained the ability to produce large amounts of enriched uranium as part of its nuclear energy program. 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.72 Ethanol and Other Biofuels73 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. 6174 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 November 20, 2008, the United States and Brazil announced an agreement to expand their 55 “Brazil’s Golden Times Start to Roll,” Latin News Daily, September 3, 2008; “Hydrocarbons Potential Poses Major Challenges,” Oxford Analytica, November, 20, 2007. 56 “Brazil: Petrobras euphoria fades with oil price,” Oxford Analytica, December 11, 2008. 57 “Brazil needs $270 bln over 10-yrs for deepwater oil,” Reuters, March 19, 2009. 58 “Brazil: Da Silva Goes to China,” Stratfor, May 19, 2009. 59 “Brazil: U.S.-Chinese Competition in Latin America,” Stratfor, August 12, 2009. 60 biofuels cooperation and form new partnerships with Guatemala, Honduras, Jamaica, GuineaBissau, and Senegal.75 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.76 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 71 “Brazil: Hydrocarbons potential poses major challenges,” Oxford Analytica, November 20, 2007. “Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008. 73 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. 6174 U.S. Department of State, Office of the Spokesman, “Memorandum of Understanding Between the United States and Brazil to Advance Cooperation on Biofuels,” March 9, 2007. Congressional Research Service 12 Brazil-U.S. Relations biofuels cooperation and form new partnerships with Guatemala, Honduras, Jamaica, GuineaBissau, and Senegal.62 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.63 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.64 75 U.S. Department of State, Office of the Spokesman, “Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance Energy Security and Promote Sustainable Development,” November 20, 2008. 76 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. 72 Congressional Research Service 14 Brazil-U.S. Relations Preferences Act, among others.77 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. Brazil’s 1988 constitution limits nuclear activity to peaceful purposes, however, and in 1991, Brazil and Argentina reached an agreement not to pursue nuclear weapons. 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.6578 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 62 U.S. Department of State, Office of the Spokesman, “Joint Statement by the United States and Brazil Announcing the Expansion of Cooperation on Biofuels to Advance Energy Security and Promote Sustainable Development,” November 20, 2008. 63 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. 64 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.79 Oil The recent discovery of substantial oil fields in the Santos Basin, which extends 500 miles along the Brazilian coast, has the potential to turn Brazil into a major oil and gas producer and an important source of energy for the United States. The Tupi field, discovered in November 2007, has confirmed oil reserves of between five and eight billion barrels, and it is estimated that the entire Santos Basin could hold up to 50 billion barrels of oil. President Lula asserts that the oil fields have the potential to transform Brazil and improve living conditions for its people. He intends to implement a new regulatory framework, which will increase the state’s role in the exploitation of the reserves while investing the profits in a new social fund for education, infrastructure, science and technology, and poverty reduction.80 77 For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI), by Brent D. Yacobucci. 6578 “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. 79 “Brazil’s Nuclear Ambitions Expand,” Latin American Regional Report, November 2008. 80 “Brazil’s Oil Law still awaiting approval,” Latin American Regional Report: Brazil & Southern Cone, February 2010. Congressional Research Service 15 Brazil-U.S. Relations Exploiting the new fields will be difficult and costly, however, as the oil is located in the so-called “pre-salt” layer, beneath layers of rock and salt up to 7,000 meters below the seabed. Brazil’s state-owned oil company, Petrobras, has announced that it will need $270 billion in investment over the next 10 years to develop the reserves. 81 Some foreign investors have questioned whether the company will be able to access sufficient finance should the Brazilian government implement its proposed regulatory framework. 82 Nonetheless, Petrobras has already received several financing commitments. In April 2009, the Export-Import Bank of the United States approved a preliminary $2 billion loan commitment to Petrobras.83 Since then, the U.S. government has reportedly indicated that it is prepared to go beyond the original agreement to provide up to $10 billion in financing. 84 In May 2009, Brazil and China signed an agreement under which China will provide Petrobras with $10 billion in financing in exchange for guaranteed oil deliveries of 150,000 barrels per day (bdp) in 2009 and 200,000 bpd for the next decade.85 Brazil’s stateowned National Bank of Economic and Social Development (BNDES) will provide Petrobras with an additional $12.5 billion over 20 years.86 Congressional Research Service 13 Brazil-U.S. Relations 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.66 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 $63.446.2 billion in 2008, with2009, a nearly 23% decline from 2008. U.S. exports to Brazil increasing 34% to $32.9 billion and Brazil amounted to $26.2 billion while U.S. imports from Brazil increasing 19% to $30.5 billion.67 amounted to $20.1 billion. 87 Doha Round of the World Trade Organization Talks 6888 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. In recent years, trade ministers have repeatedly failed to reach an agreement to conclude the Doha round and the U.S. negotiating position remains a source of contention with Brazil. 69 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 66 67 “Brazil’s Nuclear Ambitions Expand,” Latin American Regional Report, November 2008. U.S. Department of Commerce statistics, as presented by Global Trade Atlas, 2009. 68 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson. 69 “Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008; “Brazil-US rows building over Colombia, biofuels, trade: FM,” Agence France Presse, August 2, 2009. Congressional Research Service 14 Brazil-U.S. Relations should remove some of its cotton subsidies.70 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.71 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.72 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 7381 “Brazil needs $270 bln over 10-yrs for deepwater oil,” Reuters, March 19, 2009. 82 “Brazil’s Golden Times Start to Roll,” Latin News Daily, September 3, 2008; “Hydrocarbons Potential Poses Major Challenges,” Oxford Analytica, November, 20, 2007. 83 Export-Import Bank of the United States, Summary of Minutes of Board of Directors, April 14, 2009. 84 “Brazil: U.S.-Chinese Competition in Latin America,” Stratfor, August 12, 2009. 85 “Brazil: Da Silva Goes to China,” Stratfor, May 19, 2009. 86 “China’s Sinopec negotiating first oil exploration deal in Brazil,” EFE News Service, June 29, 2009. 87 U.S. Department of Commerce statistics, as presented by Global Trade Atlas, February 2010. 88 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson. Congressional Research Service 16 Brazil-U.S. Relations 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. In recent years, trade ministers have repeatedly failed to reach an agreement to conclude the Doha round and the U.S. negotiating position remains a source of contention with Brazil. 89 World Trade Organization Dispute90 On December 21, 2009, Brazil announced that the WTO had authorized the country to impose trade retaliation measures worth $829.3 million in 2010 as a result of a nearly decade long dispute over U.S. cotton subsidies. Although Brazil has not yet finalized its decision to impose retaliatory measures, it has indicated that it may levy duties of up to 100% on a preliminary list of 222 goods of U.S. origin valued at $561 million and implement cross-retaliation in sectors outside the trade in goods—such as U.S. copyrights and patents—for the remaining $268.3 million.91 Brazil initiated the dispute with the United States in 2002, and a WTO dispute settlement panel ruled in Brazil’s favor in September 2004. The United States appealed the ruling but it was reaffirmed by the WTO appellate body in March 2005. Although the Bush Administration asked Congress to modify the cotton subsidy program in July 2005, a WTO dispute panel ruled in December 2007 that the United States was not moving quickly enough to comply with the 2004 ruling. 92 Brazil and the United States then went to arbitration over the level of trade sanctions Brazil has the right to impose against the United States, leading to an August 31, 2009 decision by a WTO arbitration panel, which largely favored Brazil’s retaliation request. Generalized System of Preferences 93 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. 7494 The 110th111th Congress extended GSP until December 31, 20092010 with P.L. 110-436. On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill would suspend GSP for Brazil until the country meets its obligations under the Convention on the Civil Aspects of International Child 111-124. 89 “Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008; “Brazil-US rows building over Colombia, biofuels, trade: FM,” Agence France Presse, August 2, 2009. 90 For more information on U.S.-Brazil WTO disputes, see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program and CRS Report RL34351, Brazil’s and Canada’s WTO Cases Against U.S. Agricultural Direct Payments, by Randy Schnepf. 91 BNA, International Trade Reporter, "Brazil Says Entitled to Impose $829 Million in Annual Sanctions on U.S. in Cotton Case," December 24, 2009. 92 “WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007. 93 This section was drawn from CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones. 94 “USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S. Trade, June 29, 2007. Congressional Research Service 17 Brazil-U.S. Relations On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill would suspend GSP for Brazil until the country meets its obligations under the Convention on the Civil Aspects of International Child Abduction. 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 and 2009. In order to build on progress that has been made, USTR recommends that Brazil should consider strengthening its IPR enforcement 70 “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. 71 “U.S. Contests ‘Exaggerated’ Brazilian Claim For Compensation in Cotton Dispute at WTO,” BNA International Trade Daily, March 3, 2009. 72 See CRS Report RL34351, Brazil’s and Canada’s WTO Cases Against U.S. Agricultural Support, by Randy Schnepf. 73 This section was drawn from CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones. 74 “USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S. Trade, June 29, 2007. Congressional Research Service 15 Brazil-U.S. Relations legislation, more vigorously addressing book and internet piracy, and signing the World Intellectual Property Organization Internet Treaties.7595 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.7696 In July 2009, President Lula suggested that developing countries should be allowed to lift patent rights to produce more vaccine to battle the A(H1N1) flu epidemic.7797 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.” ThreeSome human rights issues of particular concern include ongoing 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.78 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. 79 Officially, the violent gang attacks, which were followed by police reprisals, resulted in at least 186 deaths.80 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. 75 U.S. Trade Representative, “Special 301 Report,” April 30, 2009. “Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007. 77 “Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009. 78 U.S. Department of State, “Country Reports on Human Rights Practices 2008” February 25, 2009. 76 79 The weaknesses in Brazil’s criminal justice system have became dramatically apparent in recent years as gangs have launched violent attacks that have destabilized the cities of São Paulo and 95 U.S. Trade Representative, “Special 301 Report,” April 30, 2009. “Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007. 97 “Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009. 96 Congressional Research Service 18 Brazil-U.S. Relations Rio de Janeiro. In one such attack in May 2006, street combat and rioting organized by a prisonbased gang network, the First Capital Command (PCC), paralyzed the city of São Paulo for several days. 98 Officially, the violent gang attacks, which were followed by police reprisals, resulted in at least 186 deaths.99 More recently, in October 2009, gunmen of the Red Command (CV) launched a raid on the Morro dos Macacos favela to wrest control of the drug trade from the rival Friends of Friends gang. Over the course of several days, 31 people were killed, including three police sharpshooters whose helicopter was shot down as they tried to control the situation.100 As police forces in São Paulo and Rio de Janeiro have employed strong-arm tactics in hopes of curbing the rampant gang violence, some human rights groups have raised concerns over a rising number of extrajudicial killings. 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.”101 Indeed, more than 11,000 people have been killed by the two police forces since 2003. Although the officers involved have reported nearly all of the killings as legitimate acts of self defense, or “resistance killings,” a recent two year investigation by Human Rights Watch concluded that “a substantial portion of the alleged resistance killings reported...[were] in fact extrajudicial executions.” The Human Rights Watch report also indicates that those police officers responsible for extrajudicial killings enjoy near total impunity. For example, of the over 7,800 complaints against police officers recorded by the Rio Police Ombudsman’s Office over the past decade, only 42 generated criminal charges by state prosecutors and just four led to convictions. 102 Despite these criticisms, some have defended the strong-arm tactics. São Paulo’s public security secretariat maintains that Human Rights Watch failed to take note of the fact that annual state killings by police have declined by 50% since 2003 while the homicide rate has been reduced by 70% over the past decade.103 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, however, this may be changing. The state of Rio de Janeiro launched a new anticrime initiative in 2009 that considerably expands the number of personnel charged with maintaining security. Whereas previous police efforts generally centered around quick raids, the new initiative establishes Police Pacification Units (UPPs) that will maintain permanent presences in the favelas. After the favelas are cleared of drug gangs, the UPPs are charged with maintaining security and other governmental institutions are brought in to provide basic social services. The new initiative has been rather successful in reducing crime and violence without extensive 98 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. 8099 “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 News Service, February 7. 2007. Congressional Research Service 16 Brazil-U.S. Relations Rio de Janeiro officials have identified the militias as criminal groups but have thus far been unable to contain them. 81 Human rights groups have identified extrajudicial killings by police and prison authorities as Brazil’s most pressing human rights problem. 82 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.”83 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, however, crediting them for a 10% decline in Rio de Janeiro’s murder rate.84 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. 85 Race and Discrimination 86 100 “Brazil: Rio police intervention in gang war leaves high toll,” Latin America Security & Strategic Review, October 2009. 101 “Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News Service, November 15, 2007. 102 “Lethal Force: Police Violence and Public Security in Rio de Janeiro and São Paulo,” Human Rights Watch, December 2009. 103 “Human Rights: Police violence under renewed scrutiny,” Latin American Regional Report: Brazil & Southern Cone, January 2010. Congressional Research Service 19 Brazil-U.S. Relations bloodshed. Rio de Janeiro’s government intends to expand the initiative from the seven pilot favelas targeted in 2009 to 40 additional favelas in 2010.104 Race and Discrimination 105 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.87106 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. 88 In 2003, Brazil became the first country in the world to 81 “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. 82 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. 83 “Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News Service, November 15, 2007. 84 “Police raid fatalities in Rio revive debate over policy,” Latin American Security & Strategic Review, February 2009. 85 “Brazil: Public Security Program Finally Launched,” Latin American Weekly Report, August 23, 2007. 86 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. 87 Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa Econômica Aplicada (IPEA), 2001 88 Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1, 2004. Congressional Research Service 17 Brazil-U.S. Relations 107 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. 89108 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.90109 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 91110 According to the U.S. State Department’s Trafficking in Persons report, Brazil does not fully comply with the minimum standards for the elimination of trafficking, but is making significant 104 “Brazil: Forty Rio favelas targeted for ‘pacification,’” Latin American Security & Strategic Review, January 2010. 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. 106 Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa Econômica Aplicada (IPEA), 2001 107 Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1, 2004. 108 Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue Policy Reform,” Citizen Action in the Americas, No. 17, April 2005. 109 “Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008. 110 For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by Clare Ribando Seelke. 105 Congressional Research Service 20 Brazil-U.S. Relations efforts to do so. As a result, it is listed as a Tier 2 country.111efforts to do so. As a result, it is listed as a Tier 2 country.92 Brazil is a source, transit, and destination country for people, especially women and children, trafficked for commercial sexual exploitation. Brazilian Federal Police estimate that between 250,000 and 400,000 children are exploited in domestic prostitution, especially in the country’s coastal resort areas where child sex tourism is prevalent. Brazil is also a source country for men trafficked internally for forced labor. More than 25,000 men have reportedly been recruited to labor in slave-like conditions, many in the country’s agribusiness industry. Roughly half of the more than 11,000 people freed from debt slavery in 2007 and 2008 were found working on sugarcane plantations.93112 While the Brazilian government announced an agreement with the sugar industry to provide decent working conditions for the country’s sugarcane cutters in June 2009, the accord does not establish minimum wages or formal obligations.94113 Reports suggest that significant numbers of men working in cattle ranching, mining, 89 Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue Policy Reform,” Citizen Action in the Americas, No. 17, April 2005. 90 “Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008. 91 For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by Clare Ribando Seelke. 92 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. 93 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 4, 2008 & June 16, 2009. 94 “Brazil seeks decent working conditions for sugarcane cutters,” EFE News Service, June 26, 2009. Congressional Research Service 18 Brazil-U.S. Relations and the production of charcoal for pig iron—a key ingredient of steel that is then purchased by major companies in the United States—are also subjected to slave labor. 95 Over the past year, the Brazilian government has taken a number of actions to address the problem of human trafficking. Anti-slave labor mobile units under the Ministry of Labor increased their operations, inspecting remote areas, freeing victims, and forcing those responsible to pay fines and restitution. Slave labor victims received some $3.6 million in compensation as a result of the 2008 operations. The Brazilian government also continued prosecuting traffickers, providing assistance to victims, and broadcasting its anti-trafficking public awareness campaign. Additionally, the Brazilian government began implementing a national plan of action to prevent trafficking in persons. Despite these actions, Brazil has made only limited progress in bringing traffickers to justice and effectively penalizing those who exploit forced labor. 96 Convention on the Civil Aspects of International Child Abduction 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. 97 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 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.98 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. 99 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. 100 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.101 Mr. Goldman 95 Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg Markets, December 2006; U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 16, 2009. 96 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 16, 2009. 97 For more information on international parental child abductions, see CRS Report RS21261, International Parental Child Abductions, by Alison M. Smith. 98 David G. Goldman V. Bruna B. Goldman, FD-13-395-05C (Superior Court of New Jersey 2004). 99 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). 100 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. 101 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, (continued...) Congressional Research Service 19 Brazil-U.S. Relations 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 conservative Progressive Party, which argued that sending the child to the United States would be unconstitutional. 102 The Brazilian Supreme Court unanimously refused to consider the Progressive Party’s appeal and sent the case back to a federal court, which authorized Mr. Goldman to live in Brazil and share custody of Sean until the court reaches a definitive verdict.103 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, 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.104 There are currently some 50 unresolved cases of children being retained in Brazil after having been wrongly removed from the United States.105 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. On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill would suspend the Generalized System of Preferences for Brazil until the country meets its obligations under the Convention on the Civil Aspects of International Child Abduction. HIV/AIDS Internationally recognized as having one of the world’s most successful HIV/AIDS programs, 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 therapy (ART) 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 1996.106 (...continued) February 25, 2009. 102 Alexei Barrionuevo, “Judge in Brazil Stays Ruling Ordering Return of Boy to U.S.,” New York Times, June 3, 2009. 103 Stan Lehman, “Brazil court rebuffs bid to block boy’s return,” Associated Press, June 10, 2009; “Brazil court tilts in favor of U.S. father in custody fight,” EFE News Service, June 19, 2009. 104 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. 105 Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times, February 25, 2009. 106 Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in Resource-Limited Settings,” (continued...) Congressional Research Service 20 Brazil-U.S. Relations mining, and the production of charcoal for pig iron—a key ingredient of steel that is then purchased by major companies in the United States—are also subjected to slave labor.114 Over the past year, the Brazilian government has taken a number of actions to address the problem of human trafficking. Anti-slave labor mobile units under the Ministry of Labor increased their operations, inspecting remote areas, freeing victims, and forcing those responsible to pay fines and restitution. Slave labor victims received some $3.6 million in compensation as a result of the 2008 operations. The Brazilian government also continued prosecuting traffickers, providing assistance to victims, and broadcasting its anti-trafficking public awareness campaign. Additionally, the Brazilian government began implementing a national plan of action to prevent trafficking in persons. Despite these actions, Brazil has made only limited progress in bringing traffickers to justice and effectively penalizing those who exploit forced labor. 115 Convention on the Civil Aspects of International Child Abduction 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. 116 In June 2004, Sean Goldman was taken to Brazil by his mother, Bruna Bianchi 111 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. 112 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 4, 2008 & June 16, 2009. 113 “Brazil seeks decent working conditions for sugarcane cutters,” EFE News Service, June 26, 2009. 114 Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg Markets, December 2006; U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 16, 2009. 115 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,” June 16, 2009. 116 For more information on international parental child abductions, see CRS Report RS21261, International Parental (continued...) Congressional Research Service 21 Brazil-U.S. Relations Carneiro Ribeiro Goldman, a Brazilian native. Ms. Bianchi then divorced her husband David Goldman—a U.S. citizen—and asserted 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.117 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. 118 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. 119 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.120 The custody case then bounced between federal appeals courts and the Brazilian Supreme Court until December 22, 2009, when the Brazilian Supreme Court issued a definitive ruling that ordered that Sean be returned to his father. On December 24, 2009, Sean was handed over to Mr. Goldman at the U.S. Consulate in Rio de Janeiro.121 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. There are currently some 50 unresolved cases of children being retained in Brazil after having been wrongly removed from the United States.122 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. On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill (...continued) Child Abductions, by Alison M. Smith. 117 David G. Goldman V. Bruna B. Goldman, FD-13-395-05C (Superior Court of New Jersey 2004). 118 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). 119 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. 120 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. 121 Marcelo Soares & Chris Kraul, “Boy leaves brazil with his father: The long custody battle over Sean Goldman had strained U.S.-Brazil relations,” Los Angeles Times, December 25, 2009. 122 Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times, February 25, 2009. Congressional Research Service 22 Brazil-U.S. Relations would suspend the Generalized System of Preferences for Brazil until the country meets its obligations under the Convention on the Civil Aspects of International Child Abduction. HIV/AIDS Internationally recognized as having one of the world’s most successful HIV/AIDS programs, 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 therapy (ART) 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 1996.123 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 2005.107124 Brazil currently manufactures older ART drugs for domestic consumption and 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 in 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.108 125 123 Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in Resource-Limited Settings,” World Health Organization, February 2005. 124 Mary Anastasia O’Grady, “Brazil Could Turn a Trade Victory into Defeat,” Wall Street Journal, December 16, 2005. 125 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. Congressional Research Service 23 Brazil-U.S. Relations 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 resulting settlements, roads, logging, cattle ranching, and subsistence and commercial agriculture have led to approximately 15% of the Brazilian Amazon being deforested. 109126 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. 110 Between 1990 and 2000, Brazil lost an area of rainforest twice the size (...continued) World Health Organization, February 2005. 107 Mary Anastasia O’Grady, “Brazil Could Turn a Trade Victory into Defeat,” Wall Street Journal, December 16, 2005. 108 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. 109 Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter, December 2008. 110 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, (continued...) Congressional Research Service 21 Brazil-U.S. Relations 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 over 4,600 square miles being cleared between July 2007 and July 2008.111127 Between 1990 and 2000, Brazil lost an area of rainforest twice the size of Portugal, however, deforestation rates have generally declined since the peak year of 2004.128 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.112129 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 nearly 110,000 square miles, the fourth-largest percentage of protected area in relation to territory in the world.113130 President Lula has also signed a Public Forest Management Law that encourages sustainable development, and placed a moratorium on soybean plantings and cattle ranching in the Amazon, and announced a plan. Moreover, Brazil intends to reduce the rate of of Amazon deforestation by half to 2,300 square miles per year by 2017. Brazil plans to meet this goal—based on the 1996-2005 average—to 2,300 square miles per year—by 2017 and reduce Amazon deforestation by 80% by 2020. Brazil plans to meet these goals by increasing federal patrols of forested areas, replanting over 21,000 square miles of forest, and financing sustainable development projects in areas where the local economy depends on logging.114 on logging. 131 The Lula Administration maintains that theseits efforts have been successful, highlighting the fact that just 762,706 square miles of the Amazon were deforested between February and April 2009, a 90% reduction from the same period in 2008.115July 2008 and July 2009, the lowest annual level since the National Institute for Space Studies began monitoring deforestation in 1988.132 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.116 Critics assert that the Administration favors agricultural interests over conservation. This claim was reinforced by President Lula’s June 2009 approval of an environmental law that grants nearly 260,000 square miles of the Amazon to illegal squatters, 72% of which will go to large land holders.117 Critics also maintain that Brazil’s occasional declines in deforestation rates are not the result of the 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 2008.118 In order to combat further deforestation, some analysts maintain that the Brazilian (...continued)133 Critics assert that the Administration favors agricultural interests over 126 Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter, December 2008. 127 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 existing lands. After agriculture, pasture grasses are generally planted and cattle are raised. Eventually, cattle grazing and cyclical burning alter the ecosystem to the point that forests cannot regenerate. 111128 “Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008. 112129 “Brazil: The Land Cries for Amazonia,” Latin America Data Base NotiSur, February 13, 2009. 113130 “Brazil: Government policy for Amazon still ambiguous,” Latin News Weekly Report, May 22, 2008. 114 131 “Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008. 115 Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009. 116; “Brazil: Climate credentials to the fore in Copenhagen,” Oxford Analytica, November 19, 2009. 132 “Brazil says Amazon deforestation slowest in 21 years,” Reuters, November 12, 2009. 133 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. 117 Jose Pedro Martins, “Brazil: Environmentalists and Church Protest Legalization of Fraudulently Obtained Lands in the Amazon,” Latin America Data Base NotiSur, June 25, 2009. 118 Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009. Congressional Research Service 22 Brazil-U.S. Relations (continued...) Congressional Research Service 24 Brazil-U.S. Relations conservation. This claim was reinforced by President Lula’s June 2009 approval of an environmental law that grants nearly 260,000 square miles of the Amazon to illegal squatters, 72% of which will go to large land holders.134 Critics also maintain that Brazil’s occasional declines in deforestation rates are not the result of the 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 2008.135 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. 119136 Carbon Offsets and Other International Initiatives The Amazon holds 10% of the carbon stores in the world’s ecosystem and 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.120137 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 over 9% of the worldwide emission reduction projects. These projects represent 33.5 million CERs, or a reduction of 33.5 million tons of carbon dioxide. 121138 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. 122139 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.123 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 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 119 development. Norway has pledged $1 billion to (...continued) Ana Paula Paiva, “Brazil environment minister says lacks support,” Reuters, May 28, 2009. 134 Jose Pedro Martins, “Brazil: Environmentalists and Church Protest Legalization of Fraudulently Obtained Lands in the Amazon,” Latin America Data Base NotiSur, June 25, 2009. 135 Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009. 136 Ibid; Joshua Partlow, “A Protected Forest’s Fast Decline,” Washington Post, February 6, 2009. 137 “Brazil: Global warming risks threaten Amazonia,” Oxford Analytica, March 16, 2009; Conor Foley, “The End of the Amazon?,” Foreign Policy, June 2009. 121138 United Nations Framework Convention on Climate Change, “CDM Statistics,” August 2009. 122 139 “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. 123 “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. 120 Congressional Research Service 23 Brazil-U.S. Relations 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: Map Resources. Adapted by CRS Graphics. Congressional Research Service 24 Brazil-U.S. Relations Author Contact Information Peter J. Meyer Analyst in Latin American Affairs pmeyer@crs.loc.gov, 7-5474 Congressional Research Service Clare Ribando Seelke Specialist in Latin American Affairs cseelke@crs.loc.gov, 7-5229 25 Congressional Research Service 25 Brazil-U.S. Relations the fund through 2015 and Germany has pledged $26.8 million. The first projects funded by the Amazon Fund were announced in December 2009. They include projects to regenerate degraded land, monitor land registration titles, and pay rubber tappers and other forest dwellers to protect the forest.140 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 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, $9.5 million in FY2008, and $10 million in FY2009. The Conference Report (H.Rept. 111-366) to the FY2010 Consolidated Appropriations Act (P.L. 111-117) asserts that, of the funds appropriated in the act for biodiversity programs, $25 million are to go to the Amazon Basin Conservation Initiative, $10 million of which is directed to activities in Brazil. 140 “Brazil unveils first foreign-funded Amazon projects,” Reuters, December 4, 2009. Congressional Research Service 26 Brazil-U.S. Relations Appendix. Map of Brazil Figure A-1. Map of Brazil Source: Map Resources. Adapted by CRS Graphics. Congressional Research Service 27 Brazil-U.S. Relations Author Contact Information Peter J. Meyer Analyst in Latin American Affairs pmeyer@crs.loc.gov, 7-5474 Acknowledgments Clare Ribando Seelke, Specialist in Latin American Affairs, contributed to this report. Congressional Research Service 28