Brazil-: Political and Economic Situation and
U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
October 11, 2012
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
As its economy has grown to be the sixth largest in the world, Brazil has consolidated its power
in South America and become increasingly prominent on the world stage. The Obama
Administration regards Brazil as an emerging center of influence, whose leadership it welcomes
“to pursue progress on bilateral, hemispheric, and global issues.” In recent years, U.S.-Brazil
relations have generally been positive despite Brazil’s prioritization of strengthening relations
with neighboring countries and expanding ties with nontraditional partners in the “developing
South.” Although some disagreements have emerged, Brazil and the United States continue to
engage on issues such as security, energy, trade, human rights, and the environment.
Political Situation
Dilma Rousseff of the ruling center-left Workers’ Party was inaugurated to a four-year
presidential term on January 1, 2011. She inherited a country that had benefited from 16 years of
stable and capable governance under Presidents Fernando Henrique Cardoso (1995-2002) and
Luis Inácio Lula da Silva (2003-2010). Rousseff’s multiparty coalition holds significant
majorities in both houses of Brazil’s legislature; however, keeping the unwieldy coalition together
to advance her policy agenda has proven challenging. Although she has won approval for a
federal worker pension reform, regulations for the 2014 World Cup, and a truth commission to
investigate abuses during the military regime (1964-1985), other important initiatives have yet to
advance. Rousseff has also lost several administration officials to corruption scandals but her
efforts to clean up her cabinet have won popular support. In September 2012, 62% of Brazilians
evaluated her administration as “good” or “very good.”
Economic Conditions
With a gross national income of $2.1 trillion, Brazil is the largest economy in Latin America.
Over the past five years, the country has enjoyed average annual growth of over 4%. This growth
has been driven by a boom in international demand for its commodity exports and the increased
purchasing power of Brazil’s fast-growing middle class. The country has also benefitted from a
series of policy reforms implemented over the course of two decades that have reduced inflation,
fostered growth, and enabled Brazil to better absorb international shocks like the recent global
financial crisis. After contracting by 0.3% in 2009, the Brazilian economy quickly bounced back
with 7.6% growth in 2010. The economy has since slowed; it grew by 2.7% in 2011 and is
expected to grow by just 1.5% in 2012. Unemployment remains near a record low, however, and
the Rousseff Administration is implementing several policies designed to stimulate the economy.
Congressional Action
The 112th Congress has maintained interest in U.S.-Brazil relations, with energy and trade issues
receiving particular attention. Congress allowed a duty on imported ethanol to expire at the end of
2011, removing a long-standing barrier to U.S.-Brazil biofuels cooperation. A bill introduced in
April 2012, H.R. 4621, would authorize the President to enter into negotiations with Brazil to
obtain open and reciprocal market access for trade in ethanol products. H.R. 6539, introduced in
September 2012, would create a U.S.-Brazil Joint Commission on Commerce and Trade to
address bilateral trade issues and promote commercial opportunities in both countries. Several
bills with implications for the long-standing U.S.-Brazil cotton dispute have also been introduced
in the second session. H.R. 5143 would prohibit payments to the Brazil Cotton Institute and
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thereby prevent the United States from complying with the terms of a temporary bilateral
agreement. Additionally, both versions of the 2012 farm bill, S. 3240 and H.R. 6083, include
potential modifications of the U.S. cotton program.
This report analyzes Brazil’s political, economic, and social conditions, and how those conditions
affect its role in the world and its relationship with the United States.
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Contents
Political Situation............................................................................................................................. 1
Background................................................................................................................................ 1
2010 Elections ........................................................................................................................... 3
Rousseff Administration ............................................................................................................ 4
Economic Conditions....................................................................................................................... 6
Background: Reform and Stabilization ..................................................................................... 7
Global Financial Crisis and Current Challenges ....................................................................... 7
Social Conditions....................................................................................................................... 9
Foreign Policy................................................................................................................................ 10
Regional Policy ....................................................................................................................... 10
South American Integration .............................................................................................. 10
Expansion of Influence into the Caribbean and Central America ..................................... 12
Emerging Global Role ............................................................................................................. 13
South-South Ties ............................................................................................................... 13
Democratization of Global Governance............................................................................ 14
U.S.-Brazil Relations ..................................................................................................................... 15
Security Cooperation ............................................................................................................... 16
Counternarcotics................................................................................................................ 17
Counterterrorism and the Tri-Border Area ........................................................................ 18
Defense.............................................................................................................................. 19
Energy Cooperation................................................................................................................. 20
Ethanol and Other Biofuels ............................................................................................... 20
Oil...................................................................................................................................... 21
Trade Relations........................................................................................................................ 22
Cotton Dispute .................................................................................................................. 23
Intellectual Property Rights............................................................................................... 24
Human Rights.......................................................................................................................... 25
Trafficking in Persons ....................................................................................................... 26
Violent Crime and Abuses by Police................................................................................. 27
Race and Discrimination ................................................................................................... 28
Amazon Conservation ............................................................................................................. 29
Figures
Figure 1. Map of Brazil.................................................................................................................... 3
Contacts
Author Contact Information........................................................................................................... 31
Acknowledgments ......................................................................................................................... 31
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Political Situation
Dilma Rousseff of the center-left1 Workers’ Party (Partido dos Trabalhadores, PT) is approaching
the halfway point of her four-year presidential term that began on January 1, 2011. She inherited a
country that had benefited from 16 years of capable governance under Presidents Fernando
Henrique Cardoso (1995-2002) and Luis Inácio Lula da Silva (2003-2010), during whose terms
Brazil made significant advances in economic stabilization and social inclusion.2 Rousseff has
primarily focused on domestic challenges during her first two years in office, seeking to boost
growth and protect employment in the near-term while implementing policies designed to
strengthen Brazil’s mid- and long-term economic competitiveness. Rousseff has also taken a
stronger stand against corruption than previous presidents, dismissing several cabinet officials
accused of abusing the public’s trust. This has caused some tensions in her multiparty governing
coalition, which holds significant majorities in both houses of Brazil’s legislature but has proven
difficult to control. Rousseff’s efforts to strengthen the economy and clean up her cabinet have
won her significant popular support. In September 2012, 62% of Brazilians rated the Rousseff
Administration as “good” or “very good.”3
Background
Brazil occupies almost half of the continent of South America and is the fifth most populous
country in the world with 191 million (2010) citizens.4 The country has a federal structure,
comprising 26 states, a federal district, and some 5,568 municipalities. Given its size and
resources, Brazil has long held potential to become a world power. However, its rise to
prominence has been hindered 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 some other South American countries.
Although it nominally allowed the judiciary and Congress to function during its tenure, the
Brazilian military stifled representative democracy and civic action, carefully preserving its
influence during one of the most protracted transitions to democracy to occur in Latin America.
During the first decade after the country’s return to civilian democratic rule, 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 died before taking office and
the other was impeached on corruption charges. The political and economic situation only began
to stabilize in the 1990s under President Fernando Henrique Cardoso.
1
Although the PT was founded as a leftist party, it moved toward the ideological center upon taking office in 2002.
Timothy J. Power and Cesar Zucco Jr., "Estimating Ideology of Brazilian Legislative Parties, 1990-2005," Latin
American Research Review, vol. 44, no. 1, 2009.
2
See, for example, “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; Juan Forero,
“Cardoso vs. Lula: Two Brazilian Presidents Vie Over Who Turned Country Around,” Washington Post, October 30,
2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
3
Jefferson Ribeiro, “Aprovação do Governo Dilma Sobe com Medidas Econômicas—CNI/Ibope,” Reuters Brasil,
September 26, 2012
4
Instituto Brasileiro de Geografia e Estatística (IBGE), Censo Demográfico 2010, November 2010.
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Cardoso, a prominent sociologist of the centrist5 Brazilian Social Democracy Party (Partido da
Social Democracia Brasileira, PSDB), was elected president in 1994. His victory was largely the
result of the success of the anti-inflation “Real Plan” that he implemented as finance minister
under President Itamar Franco (1992-1994). During his two terms in office, Cardoso brought
inflation under control, gradually opened the Brazilian economy to trade and investment, and
privatized a number of state-owned enterprises (see “Background: Reform and Stabilization”
below). He also established several conditional cash transfer programs designed to improve social
conditions in the country. Although Cardoso’s popularity declined considerably during his second
term as Brazil struggled with a series of financial crises and economic growth remained weak,
most analysts credit him with laying the foundation for the macroeconomic stability that Brazil
has enjoyed since he left office.6
Luis Inácio Lula da Silva—known as Lula—was elected president of Brazil in 2002. The election
was Lula’s fourth attempt at the presidency as the candidate of the PT, which he helped found as a
metalworker and union leader in the 1980s. During his first term, Lula maintained the marketoriented economic policies associated with his predecessor while placing a greater emphasis on
reducing poverty. He tightly controlled expenditures, raised the primary budget surplus, granted
additional autonomy to the Central Bank, and enacted social security and tax reforms. At the
same time, he reorganized and expanded some of the social programs initiated under Cardoso.
Lula’s most high profile program, Bolsa Familia (Family Grant), provides monthly cash transfers
to some 13 million poor families (52 million people)7 in exchange for ensuring that their children
attend school and receive proper medical care. Lula’s agenda stalled toward the end of his first
term as several top PT officials were implicated in corruption scandals. A congressional inquiry
eventually cleared the president of any direct responsibility, however, and Lula was elected to a
second term in 2006.
After primarily focusing on maintaining economic stability during his first term, Lula established
a larger role for the Brazilian state in economic development during his second term. He
implemented several stimulus measures to accelerate economic growth and counteract the effects
of the global financial crisis. He also expanded social programs like Bolsa Familia and launched
new programs, such as My House, My Life (Minha Casa, Minha Vida)—an attempt to increase
formal housing for low-income Brazilians.8 Just before leaving office, Lula won legislative
approval for a new regulatory framework that will increase the state’s role in the exploitation of
Brazil’s considerable offshore oil reserves in hopes of using the resources to fuel long-term
economic and social development.9 (For more information, see “Oil” below.) Although some
analysts have criticized Lula for allegedly protecting corrupt officials and not doing more to
advance what they view as crucial economic, political, and social reforms,10 he won the support
5
The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB); however, it has steadily
moved to the right since implementing market-oriented economic reforms during the Cardoso Administration. Power
and Zucco, 2009, op.cit.
6
See, for example, Riordan Roett, "How Reform Has Powered Brazil’s Rise," Current History, February 2010.
7
"Brazil Anti-Poverty Plan Fails to Tackle Causes," Oxford Analytica, June 15, 2011.
8
Andrew Downie, “Brazil’s Stimulus with a Ceiling (and Four Walls),” Time, April 22, 2009; “Brazil: Lula Raises
Subsidies to Poorest Families,” Oxford Analytica, August 3, 2009; “Lula’s Legacy to Brazil,” Latin American Regional
Report: Brazil & Southern Cone, April 2010.
9
“Brazil Congress Approves Oil Law,” Latin News Daily, December 2, 2010.
10
See, for example, Daniel Bramatti, “Lula, Sarney, Collor e Renan...por Lula, Sarney, Collor e Renan,” Estado de São
Paulo, August 9, 2009; “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; and Paulo
(continued...)
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of the vast majority of the Brazilian public during his two terms, leaving office with an 87%
approval rating.11
Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS Graphics.
2010 Elections
On October 31, 2010, Dilma Rousseff of the ruling PT won 56% of the vote to defeat José Serra
of the PSDB in a second round presidential runoff election.12 The second round was necessary
since Rousseff had fallen just short of an absolute majority—with 46.9% of the vote—in the first
round election held on October 3, 2010.13 Given the strength of the Brazilian economy and Lula’s
(...continued)
Kliass, “Lula’s Political Economy: Crisis and Continuity,” North American Congress on Latin America (NACLA),
March/April 2011.
11
Bradley Brooks, “Lula’s Legacy, Leaving Behind a Transformed Brazil,” Associated Press, December 27, 2010.
12
“Brazil: Lula Will Bolster—and May Hinder—Rousseff,” Oxford Analytica, November 1, 2010.
13
Marina Silva, a former Lula Administration environment minister who ran for president as the candidate of the Green
Party (Partido Verde, PV), outperformed the pre-election polls by taking 19.3% of the first round vote. Her
(continued...)
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overwhelming popularity, both major candidates had largely promised continuity during the
campaign. Rousseff pledged to consolidate gains made during the Lula Administration and Serra
proposed only relatively minor policy changes. Rousseff had never been elected to public office
previously but was chosen by Lula to run as his successor. She served as minister of mines and
energy from 2003-2005 and chief of staff from 2005-2010, during which time she was in charge
of strategic projects such as the government’s housing program, investments in infrastructure, and
coordination of the design of a new regulatory framework for developing Brazil’s offshore oil
reserves. Rousseff headed a multiparty electoral coalition with a running-mate from the
ideologically heterogeneous Party of the Brazilian Democratic Movement (Partido do Movimento
Democrático Brasileiro, PMDB).
In legislative elections conducted concurrently with the first round presidential election,
Rousseff’s coalition made significant gains in both houses of the Brazilian Congress. The PT now
holds 88 of the 513 seats in the Chamber of Deputies and 14 of the 81 seats in the Senate, making
it the largest party in the lower house and the second-largest party in the upper house. Rousseff’s
multiparty coalition holds over 60% of the seats in both houses of Congress, which are large
enough majorities to amend the constitution.14
Rousseff Administration
President Rousseff has primarily focused on domestic economic challenges since taking office.
Early in her term, she sought to constrain spending in order to ease inflationary pressures and
maintain a primary budget surplus of 3.1% of gross domestic product (GDP). She cut about $25
billion (R$50 billion) from the 2011 budget and limited the increase in the minimum wage (which
is linked to public sector wages and pensions).15 As Brazil’s economy has slowed, however,
Rousseff has favored more expansionary fiscal policies. She has maintained a strong role for the
state in the economy, launching a series of short-term stimulus packages and increasing import
tariffs to protect certain industries. At the same time, Rousseff has sought to encourage private
investment in the country’s overburdened infrastructure, selling licenses to build and operate
roads, railways, ports, and airports.16 Partially as a result of these measures, unemployment has
remained below 6%—a historic low.17
Although Rousseff’s governing coalition enjoys significant majorities in Congress, it has
presented her with a number of challenges. The seven parties in her cabinet are ideologically
diverse, and while some support the policies of the PT, others—including the large PMDB—have
demonstrated more interest in the distribution of government resources and the control of
ministries and state enterprises.18 Almost immediately, some sectors of the coalition voiced
discontent as a result of Rousseff’s cabinet appointments and her attempt to slow the growth of
(...continued)
unexpectedly strong finish kept Rousseff under 50% and forced a second round runoff. Serra won 32.6% of the first
round vote. “Brazil’s ‘Green Wave’ Shocker,” Latin News Daily, October 4, 2010.
14
Tribunal Superior Eleitoral (TSE), January 5, 2010, http://www.tse.gov.br/internet/index.html.
15
“Brazil: Rousseff’s Strong Start Boosts Confidence,” Oxford Analytica, April 7, 2011.
16
“Stimulus Measures Unlikely to Boost Brazilian Growth,” Oxford Analytica, July 9, 2012; Raymond Colitt, “ExGuerilla Rousseff Adopts Business Agenda to Spur Brazil,” Bloomberg, September 20, 2012.
17
“Country Report: Brazil,” Economist Intelligence Unit, September 2012.
18
Marco Antonio Villa, “PMDB Será Pedra no Sapato da Presidente,” Folha de São Paulo, November 20, 2010;
Otávio Cabral, “A Digestão do Poder,” Veja; July 29, 2009.
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government spending.19 Rousseff’s unwillingness to throw her full support behind officials
accused of corruption has exacerbated these intra-coalition differences. Seven of her cabinet
ministers have been forced out by corruption allegations.20 In protest, some allied legislators have
obstructed administration initiatives or even voted with the political opposition on key issues.21
Intra-coalition struggles may increase once again in the aftermath of the October 2012 municipal
elections, with the parties that demonstrated greater political strength pushing for more influence
in the government.
Despite these economic and coalition challenges, President Rousseff has been able to advance
portions of her policy agenda. In November 2011, Rousseff—who was imprisoned and tortured
by the country’s military government as a result of her participation in a leftist guerilla
organization—signed a law establishing a truth commission to investigate human rights abuses
committed during the authoritarian period (1964-1985). Unlike many South American countries,
Brazil has never taken steps to address human rights violations committed by the military. The
truth commission will have subpoena power and complete access to government documents, but
will not result in prosecutions since a 1979 amnesty law remains in place.22 Rousseff has also
won approval for a federal worker pension reform and regulations for the 2014 World Cup.23
Several other controversial issues remain on the Rousseff Administration’s agenda, however,
including a new revenue sharing framework that must be passed in order to begin developing the
majority of the country’s recently discovered offshore oil reserves (see “Oil” below).
Rousseff has maintained considerable popular support since taking office. In September 2012,
62% of Brazilians rated her administration as “good” or “very good” while just 7% rated it as
“bad” or “terrible.” Moreover, President Rousseff received a personal approval rating of 77%.
Rousseff’s strong public standing is largely the result of her efforts to improve economic
conditions. According to the September poll, her administration receives its highest marks for
reducing poverty and combating unemployment.24 Rousseff’s high approval rating also appears to
have benefitted her party in the first round of the October 2012 municipal elections. The PT
received the largest number of mayoral votes nationwide, and increased its total number of
mayoral seats by 14% to 627.25 Many analysts expected the PT to lose support in the elections as
a result of a high profile corruption case in front of the Supreme Court that has convicted a
number of former party officials for their involvement in a Lula-era vote-buying scheme.26
Rousseff’s anti-corruption efforts appear to have helped shield the PT from the fallout.
19
Vera Rosa and Rafael Moraes Moura, “Ministério de Dilma Mantém Fatia de Poder do PT e Desagrada a Aliados,”
Estado de São Paulo Digital, December 22, 2010.
20
“Coming Into Her Own,” Economist, February 18, 2012.
21
Juan Arias, “El Ala Izquierda del PT Critica la Política de Austeridad de Rousseff,” El País (Argentina), March 1,
2011; “Brazil’s Congress Calls ‘Go-Slow’ Strike,” Latin News Daily, August 11, 2011.
22
“Brazilian President Signs Truth Commission Law,” Associated Press, November 18, 2011.
23
Raymond Colitt, “Brazil Finds It Takes a Woman to Confront Congress without Fear,” Bloomberg, April 4, 2012.
24
Jefferson Ribeiro, “Aprovação do Governo Dilma Sobe com Medidas Econômicas—CNI/Ibope,” Reuters Brasil,
September 26, 2012; Diogo Alcântara, “CNI/Ibope: Aprovação do Governo Dilma Sobe para 62%,” Terra (Brazil),
September 26, 2012.
25
“PMDB é Campeão em Número de Prefeitos, PT Vence em Total de Votos,” Folha de São Paulo, October 8, 2012.
26
See, for example, Raymond Colitt, “Brazil Corruption Trial Chills Lula Legacy as Party Vote Suffers,” Bloomberg,
August 1, 2012.
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Economic Conditions
With a gross national income (GNI) of $2.1
Brazil in Brief
trillion,27 Brazil is the largest economy in
Approximate Size: Slightly Smaller than the United States
Latin America and the sixth largest in the
Population: 191 Million (2010)
world.28 Over the past five years, the
country has enjoyed relative macroeconomic Ethnic Groups: African, Portuguese, Italian, German,
Spanish, Japanese, Indigenous peoples, and people of Middle
stability and average annual growth of
Eastern descent.
nearly 4.3%.29 This growth has been driven
by a boom in international demand—
Religion: 74% Roman Catholic
particularly in Asia—for its commodity
Official Language: Portuguese
exports, and the increased purchasing power
GNI (Atlas Method): $2.1 Trillion (2011)
of Brazil’s fast-growing middle class, which
GNI per Capita (Atlas Method): $10,720 (2011)
has added some 40 million people since
2003 and now accounts for a majority of the
Life Expectancy: 73 years (2011)
population.30 In 2011, Brazil had a trade
Infant Mortality Rate: 14 per 100,000 live births (2011)
surplus of $29.8 billion, or 1.2% of GDP.
Adult Literacy Rate: 90% (2008)
The total value of its exports reached $256
billion (10.1% of GDP), with top exports
Poverty Rate: 24.9% (2009)
including commodities such as iron ore, oil,
Indigence Rate: 7% (2009)
soy, sugar, chicken, and beef, as well as
Sources: Instituto Brasileiro de Geografia e Estatística,
manufactured goods such as automobiles
31
U.S. State Department, World Bank, U.N. Economic
and machinery. The country’s current
Commission for Latin America and the Caribbean
economic strength is at least partially the
result a series of policy reforms
implemented over the course of two decades that have reduced inflation, fostered growth, and
enabled Brazil to better absorb international shocks like the recent global financial crisis.32 After
contracting by 0.3% in 2009, the Brazilian economy quickly bounced back with 7.6% growth in
2010. Economic growth has since slowed, however, with GDP expanding by 2.7% in 2011 and
private analysts forecasting an expansion of just 1.5% in 2012.33 The Rousseff Administration is
currently implementing several measures designed to boost growth in the short-run and make the
Brazilian economy more competitive in the future.
27
World Bank, “World Development Indicators,” http://data.worldbank.org/data-catalog/world-developmentindicators.
28
“Brazilian Economy Overtakes UK’s, Says CEBR,” BBC News, December 26, 2011.
29
“Country Report: Brazil,” Economist Intelligence Unit, March 2012.
30
The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn between approximately $590 and $2,544 (R$1,200-5,174) per month, now account for over half of the
Brazilian population. Marcelo Cortes Neri, Os Emergentes dos Emergentes: Reflexões Globais e Ações para a Nova
Classe Média Brasileira, Fundação Getulio Vargas, Rio de Janeiro, June 27, 2011.
31
Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, January 2011.
32
“Brazil Takes Off,” Economist, November 12, 2009.
33
“Country Report: Brazil,” Economist Intelligence Unit, September 2012.
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Background: Reform and Stabilization
Following the return to democracy in the late 1980s and early 1990s, Brazil struggled with
persistent high inflation and slow growth. In order to address these issues, the Brazilian
government launched the “Real Plan” in 1994. The plan consisted of a new currency (the real)
pegged to the U.S. dollar, a more restrictive monetary policy, and a severe fiscal adjustment that
included a 9% reduction in federal spending and an across-the-board tax increase of 5%. Prices
immediately began to stabilize, with annual inflation falling from 2,730% in 1993 to 17.8% in
1995. Fernando Henrique Cardoso, who had been in charge of the Real Plan as finance minister,
took office as president in 1995 and continued the economic reform push by privatizing stateowned enterprises and gradually opening the Brazilian economy to foreign trade and investment.
Although Brazil enjoyed stronger growth rates for a few years following the Real Plan,
macroeconomic stability remained elusive. In order to take advantage of the improved economic
situation and high real interest rates, foreign investors began flooding Brazil with large capital
inflows. The increase in foreign capital contributed to currency appreciation and the eventual
overvaluation of the real. Following the 1997 East Asian and 1998 Russian financial crises,
international investors began to worry about Brazil’s overvalued exchange rate and substantial
fiscal deficits. The Brazilian government’s inability to pass legislation capable of addressing these
issues sparked a massive capital flight. Brazil was forced to adopt a floating exchange rate, and
the real lost 40% of its value.34
In the aftermath of the 1998-1999 financial crisis, Brazil adopted the three main pillars of its
current macroeconomic policy: a floating exchange rate, a primary budget surplus, and an
inflation-targeting monetary policy. Although these policies were introduced toward the end of
the Cardoso Administration, they were maintained and strengthened under President Lula and
now have support across the political spectrum. Under the current policy mix, inflation has
remained relatively low and economic growth has accelerated. Likewise, public debt has
declined, with Brazil repaying its $15.5 billion debt to the International Monetary Fund (IMF)
ahead of schedule in 2005, and becoming a net IMF creditor in 2009.35
Global Financial Crisis and Current Challenges
Brazil weathered the global financial crisis much better than previous international shocks. The
country experienced a brief recession in 2009, with an economic contraction of 0.3%, before
rebounding quickly with growth of 7.6% in 2010.36 Most analysts credit Brazil’s strong
macroeconomic framework and the Lula Administration’s timely policy response for successfully
mitigating the effects of the crisis.37 As the fallout of the financial crisis spread around the world,
the Brazilian government injected additional liquidity into the local economy, provided support
packages to productive sectors, and cut the key interest rate. President Lula also acted to boost
34
Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010; CRS Report 98-987,
Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
35
Antonio Rodriguez, “Brazil Switches Roles with Helping Hand for IMF,” Agence France Presse, October 5, 2009.
36
“Country Report: Brazil,” Economist Intelligence Unit, September 2012.
37
See, for example, “IMF Executive Board Concludes 2010 Article IV Consultation with Brazil,” International
Monetary Fund, August 5, 2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil),
December 29, 2010.
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domestic consumption in hopes of partially offsetting declines in global demand. The government
mandated above-inflation increases to the minimum wage, provided temporary tax reductions,
increased investments in its signature infrastructure program, and maintained its spending on
social programs like Bolsa Familia.38
Although Brazil recovered quickly from the financial crisis, the lingering effects of the global
downturn have presented challenges for the country’s economy. Slow growth rates and
expansionary monetary policies have kept interest rates low in Europe and the United States, and
have encouraged investors looking for higher returns to flood Brazil and other developing nations
with foreign capital. These policies have contributed to considerable appreciation of the Brazilian
real,39 and have hurt the competitiveness of Brazilian industry.40 The Brazilian government has
responded by accusing the United States and others of fueling “currency wars” through
“competitive devaluations,”41 and by instituting measures designed to discourage inflows of
foreign capital. It has imposed a financial operations tax, and the Brazilian Central Bank has been
willing to tolerate inflation at the high end of its target range in order to reduce interest rates to a
record low. As noted above, the Rousseff Administration has also implemented temporary
policies designed to support local industry and stimulate growth, such as raising import tariffs on
certain products and providing temporary tax cuts. Brazil’s economy, which grew by 2.7% in
2011, is forecast to grow by just 1.5% in 2012.42
A number of analysts maintain that Brazil’s slowing economic growth is the result of the
country’s structural challenges, and that the government should implement policies designed to
boost investment rather than domestic demand.43 While the Rousseff Administration has
continued to support short-term stimulus policies, as noted above, it has also taken a number of
actions in recent months to reduce business costs. It has cut payroll taxes, reduced energy costs,
and encouraged private investment in the country’s overburdened infrastructure by selling
licenses to build and operate roads, railways, ports, and airports.44 Rousseff has also announced
her Administration’s intention to use new royalties from the oil industry to invest in education.45
Although significant structural challenges remain, it appears as though the Rousseff
Administration recognizes the need to address them in order to foster Brazil’s long-term
economic development.
38
“Brazil Economy: Bottoming Out?” Economist Intelligence Unit, May 7, 2009; “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.
39
Ian Talley, “IMF Says Capital Controls Can Slow Investment Flows in India, Brazil,” Wall Street Journal, January 6,
2011.
40
“Brazil: Reserve Requirements Will Not Weaken Real,” Oxford Analytica, January 11, 2011; Matthew Bristow,
“Brazil Central Bank Moves to Curb Short Dollar Bets and Rein in Real Rally,” Bloomberg, July 10, 2011; “Brazil
Taxes Derivatives to Brake Currency Rally,” Reuters, July 27, 2011.
41
Ed Dolan, “Why Latin America Hates QE2,” Business Insider, January 20, 2011; “Brazil: Currency War Begins to
Exact Toll,” Latin American Weekly Report, January 6, 2011.
42
“Country Report: Brazil,” Economist Intelligence Unit, September 2012.
43
Paulo Vieira da Cunha and Vinod Thomas, “The Brazilian Economy: The Choices for Dilma,” Remarks at the InterAmerican Dialogue, Washington, DC, November 10, 2010; Arthur Carvalho and Gray Newman, “Brazil: Dismantling
the Policy Mismatch?,” Morgan Stanley Research, August 10, 2012.
44
“Stimulus Measures Unlikely to Boost Brazilian Growth,” Oxford Analytica, July 9, 2012; Raymond Colitt, “ExGuerilla Rousseff Adopts Business Agenda to Spur Brazil,” Bloomberg, September 20, 2012.
45
“Brazil: Rousseff Pledges 100% of Offshore Oil Royalties to Education,” Latin American Weekly Report, August 23,
2012.
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Social Conditions
Despite its fast-growing economy and large resource base, Brazil has had problems solving deepseated social problems. The country has one of the most unequal income distributions in Latin
America, a region with the highest income inequality in the world. The wealthiest 10% of the
population control about 45% of the country’s wealth while the poorest 10% control just 1.1% of
the wealth.46 Like elsewhere in Latin America, Brazil’s high inequality is partially a legacy of
extreme land concentration among the country’s elite. The Brazilian government has also
acknowledged that there is a racial component to inequality. While over 50% of Brazilians
identify themselves as black or mixed race, afro-Brazilians account for just 18% of the wealthiest
section of society (the so-called “Class A”) and over 76% of the poorest section of society (the
so-called “Class E”).47 Other factors that inhibit social mobility in Brazil include a lack of access
to quality education and job training opportunities.
The Brazilian government’s efforts to reduce social disparities have recently begun to
demonstrate results. As late as 2005, the Organization for Economic Cooperation and
Development (OECD) asserted that Brazil had not achieved the same social indicators as
countries with similar income levels despite having spent the same amount or more on social
programs.48 More recent evidence, however, indicates that Brazil has made substantial progress in
the last several years as a result of the country’s social policies and steady economic growth.
Between 1999 and 2009, the percentage of the population living in poverty fell from 37.5% to
24.9%, and the percentage living in extreme poverty fell from 12.9% to 7%.49 Inequality was also
reduced, with the Gini coefficient50 falling from 0.52 to 0.47.51 According to a recent study, these
changes are mostly attributable to increased earnings, though increased government transfers
through social security benefits and the Bolsa Familia program have also played a significant
role.52
In June 2011, President Rousseff launched an anti-poverty program known as Brazil Without
Poverty (Brasil Sem Miséria). The program is designed to eradicate extreme poverty by 2014. It
will increase transfer payments provided through existing programs such as Bolsa Familia;
increase access to public services such as education, electricity, health care, housing, and
sanitation; and increase economic opportunities in urban and rural areas by providing access to
microcredit, skills training, technical assistance, and new markets.53
46
“Brazil’s Income Gap Continues Wide in Brazil,” Associated Press, November 16, 2011.
Tom Phillips, “Brazil Census Shows African-Brazilians in the Majority for the First Time,” Guardian, November 17,
2011.
48
OECD, Economic Survey of Brazil 2005, March 2005.
49
United Nations, Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin
America, 2011, November 2011, http://www.eclac.cl/publicaciones/xml/5/45175/2011-819_PSI-Summary-WEB.pdf.
50
The Gini coefficient is a value between zero and one where zero represents complete equality and one represents
complete inequality.
51
Clóvis Rossi, “Desigualdade, o Fracaso da Esquerda,” Folha de São Paulo, August 26, 2012.
52
Instituto de Pesquisa Econômica Aplicada (IPEA), A Década Inclusiva (2001-2011): Desigualdade, Pobreza e
Políticas de Renda, Comunicados do Ipea N° 155, September 25, 2012.
53
Governo Federal do Brasil, Ministério do Desenvolvimento Social e Combate à Fome, Plano Brasil Sem Miséria,
http://www.brasilsemmiseria.gov.br/wp-content/themes/bsm2nd/caderno_brasil_sem_miseria.pdf.
47
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Foreign 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 center of global influence. Brazilian foreign policy has
traditionally been based on the principles of multilateralism, peaceful dispute settlement, and
nonintervention in the affairs of other countries.54 Adherence to these principles has enabled
Brazil to maintain peaceful relations with all 10 of its neighbors55 and to play a larger role in
global affairs than its economic and geopolitical power would otherwise allow. Building on its
traditional principles, Brazilian foreign policy under the PT administrations of Presidents Lula
and Rousseff has emphasized three areas of action: (1) reinforcing relations with traditional
partners such as its South American neighbors, the United States, and Europe; (2) diversifying
relations by forging stronger economic and political ties with other nations of the developing
world; and (3) supporting multilateralism by pushing for the democratization of global
governance.56
Regional Policy
Over the past decade, Brazil has firmly established itself as a regional power. Within South
America, Brazilian foreign policy supports economic and political integration efforts in order to
reinforce long-standing relationships with its neighbors. Although integration is the primary
purpose of organizations like the Common Market of the South (Mercosur) and the Union of
South American Nations (Unasur), they also serve as forums in which Brazil can exercise its
leadership and develop consensus around its positions on regional and global issues. Brazil’s
emphasis on forging new ties has led to increased engagement with countries in Central America
and the Caribbean, areas where Brazil has not traditionally had much influence. Brazil engages in
multilateral regional diplomacy through the Organization of American States (OAS);57 however, it
has demonstrated a preference for resolving issues, when possible, through regional forums that
do not include the United States.
South American Integration
In 1991, Brazil joined with Argentina, Paraguay, and Uruguay to establish the Common Market of
the South (Mercosur),58 an organization intended to promote economic integration and political
cooperation among the countries. Although member states have been able to achieve consensus
on a number of political issues, progress on the economic front has been slow. The Mercosur pact
54
Georges D. Landau, “The Decision Making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and
International Studies: Washington, DC: March 2003.
55
In addition to bordering nine of the eleven other independent countries in South America, Brazil borders French
Guiana—a territory of France (see Figure 1, for a map of Brazil and its neighbors).
56
“Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
“Brazil has Become the ‘Unavoidable Partner’ in the Global Decision-Making Process,” MercoPress, December 14,
2010.
57
For more information on the OAS, see CRS Report R42639, Organization of American States: Background and
Issues for Congress, by Peter J. Meyer.
58
For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade
Policy, by J. F. Hornbeck.
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calls for an incremental path to full economic integration, yet only a limited customs union has
been achieved thus far. Member states finally agreed on a common customs code and the
elimination of double tariffs on non-Mercosur goods transported between countries in August
2010;59 however, progress on other crucial issues has since stalled.60 In July 2012, Argentina,
Brazil, and Uruguay suspended Paraguay from Mercosur as a result of the express impeachment
of the Paraguayan president, which they maintain was undemocratic. At the same time, they
agreed to admit Venezuela, whose accession had been blocked by the Paraguayan legislature. A
number of analysts argue that these actions reflect the transformation of Mercosur into a political
bloc with few prospects for further economic integration.61
The ongoing problems with Mercosur have not prevented Brazil from pushing for broader
regional integration. In 2008, all 12 independent countries of South America joined together to
form the Union of South American Nations (Unasur).62 Primarily a political body, Unasur has
served as a forum for dispute resolution and the formation of common policy positions. With
Brazil playing an influential role, the organization helped resolve political conflicts in Bolivia in
2008 and Ecuador in September 2010, and took a strong stance against the ouster of the president
of Honduras in 2009.63 Brazilian diplomacy played an important role in convincing each of the
Unasur member states to also join the associated South American Defense Council, designed to
boost regional cooperation on security policies.64 Within the council, South American countries
have discussed defense spending and reviewed defense agreements with extra-regional powers.65
Notwithstanding its many successes, Unasur’s capacities are currently rather limited. Member
states are reluctant to cede authority to the organization, it has largely been unable to mediate
disputes when there is no regional consensus, and it is heavily reliant on presidential diplomacy
since it lacks strong formal institutions.66
By promoting integration through organizations like Mercosur and Unasur, Brazil has been able
to solidify its standing as a regional power. These organizations provide forums in which Brazil
can exercise leadership and build broad support for its positions on regional and global issues.
The successes of Mercosur and Unasur have instilled a confidence in South American nations that
the region can resolve internal problems without having to turn to extra-regional powers, such as
the United States. Some South American countries, however, are uncomfortable with Brazil’s
growing economic and political influence in the region. This has already generated backlash
against Brazilian companies in several cases, and led to tensions between Brazil and some of its
59
“Mercosur Wraps Up Successful Summit,” EFE News Service, August 3, 2010; “Las Reglas Comerciales Comunes
Tendran que ser Ratificadas por el Congreso de Cada Socio; Aprobaron el Código que Regirá el Comercio Dentro del
Mercosur,” Clarín, August 4, 2010.
60
“Deathknell Sounds,” Latin American Regional Report: Brazil & Southern Cone, January 2009.
61
See, for example, Guido Nejamkis, “Analysis: Venezuela Joins Trade Bloc Big on Politics, Protectionism,” Reuters,
July 30, 2012.
62
The treaty establishing Unasur entered into force on November 30, 2010, when Uruguay became the ninth country to
approve its ratification. “Uruguay Ratificó Tradatdo de la Unasur, que Completa Nueve Adhesiones,” Agence France
Presse, November 30, 2010.
63
“Unasur Assigns Itself Some Authority,” Latin News Daily, November 26, 2010.
64
“South American Defence Council,” Latin American Regional Report: Brazil & Southern Cone, April 2009.
65
“Brasil Propondrá Creación de un Consejo de Paz y Seguridad de la Unasur,” EFE News Service, January 13, 2010.
66
Andrés Serbin and Peter Hakim, “The Union of South American Nations (UNASUR),” Remarks at the InterAmerican Dialogue, Washington, DC, November 23, 2009; “Latin America: Regional Tensions Challenge UNASUR,”
Oxford Analytica, August 21, 2009.
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neighbors.67 Anxieties about Brazil’s intentions and role are likely to grow as Brazil continues to
pursue its regional and global interests.
Moreover, it is unclear if Brazil is willing to accept the costs and responsibilities associated with
regional leadership. Although the country has shouldered the burden for multilateral integration
efforts, such as providing 70% of the annual budget for Mercosur’s Structural Convergence and
Institutional Strengthening Fund,68 it has been less willing to make unilateral concessions to
foster development and good will among its neighbors. For example, when Lula agreed to pay
Paraguay a higher price for energy generated by a jointly owned hydroelectric plant in July 2009,
he was heavily criticized by some within Brazil and the Brazilian Congress blocked the
agreement until May 2011.69 Given that the country is still resolving its own economic and social
problems, it may be difficult to convince the Brazilian population that the somewhat intangible
benefits of regional leadership outweigh the very visible costs.
Expansion of Influence into the Caribbean and Central America
In addition to consolidating its power within South America, Brazil has sought to expand its
influence in the broader region by increasing its engagement in the Caribbean and Central
America. Brazil has taken on considerable responsibilities in Haiti, where it has commanded the
U.N. Stabilization Mission (MINUSTAH) since 2004. Some 10,000 Brazilian military personnel
have rotated through the country since the start of MINUSTAH, and with nearly 1,900 police and
troops currently on the ground, Brazil is the largest peacekeeping contingent in Haiti.70 Brazil is
also increasingly providing Caribbean and Central American nations with humanitarian and
technical assistance. Between 2005 and 2009, Cuba, Haiti, and Honduras were three of the top
four recipients of Brazilian humanitarian assistance, receiving over $50 million (R$79 million)
combined.71 Technical assistance has taken many forms, such as so-called “ethanol diplomacy,”
in which Brazil has signed bio-fuels partnership agreements with countries that would otherwise
be dependent on expensive oil imports.72 Moreover, Brazil has become a regional observer of the
Central American Integration System (SICA), promoted a trade agreement between SICA and
Mercosur, and supported the creation of a regional group known as the Community of Latin
American and Caribbean States, which includes all of the countries of the hemisphere except
Canada and the United States. Although Brazil has become much more visible as a result of these
efforts, most analysts assert that country’s influence in Central America and the Caribbean
remains limited.73
67
Simon Romero, “Brazil’s Long Shadow Vexes Some Neighbors,” New York Times, November 4, 2011.
“Brazil Invested 1.7bn Dollars in International Cooperation 2005-2009,” BBC Monitoring, January 14, 2011.
69
“Lula Criticised for ‘Partisan’ Foreign Policy,” Latin American Weekly Report, January 22, 2009; Pedro Servin,
“Paraguay-Brazil Energy Treaty Going Nowhere Fast,” Associated Press, December 16, 2009; Juliette Kerr, “Brazil –
Paraguay: Brazilian Congress Concludes Voting on Accord Altering Payment Terms for Itaipu Hydroelectric Plant,”
IHS Global Insight, May 12, 2011.
70
“Brasil Pide Compromiso Renovado de Comunidad Internacional con Haití,” Agence France Presse, January 12,
2011; Wilson Tosta and Glauber Goncalves, “Ex-Comandante Defende que Exército Continue no Haiti,” Estado de
São Paulo, November 5, 2010; United Nations, “UN Mission’s Summary Detailed by Country,” August 31, 2012.
71
IPEA, Cooperação Brasileira Para o Desenvolvimento Internacional: 2005-2009, Brasília, December 2010.
72
"Chávez, Lula Promote Competing Visions," Miami Herald, August 10, 2007.
73
See, for example, Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February
22, 2010; “Brazil is Challenging Mexico and U.S. Domination of Isthmus,” Latin America Data Base, NotiSur, June
11, 2009; and Andres Oppenheimer, “Brazil Stretching Clout to Central America,” Miami Herald, June 7, 2009.
68
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Emerging Global Role
As Brazil’s economy has grown to be the sixth largest in the world, the country has utilized its
growing economic clout to assert Brazilian influence on a range of global matters. On global
trade and financial issues, where Brazil’s economic weight ensures the country a principal role in
policy discussions, Brazil has sought to coordinate with, and represent, other developing nations.
This has coincided with a broader focus on “South-South” cooperation, in which Brazil has
expanded diplomatic and commercial ties with countries throughout the developing world. With
its increasing international prominence, Brazil has pushed for a democratization of global
governance institutions and a greater role for emerging powers in resolving issues of geopolitical
importance. Although few analysts deny that Brazil’s international stature has risen significantly
over the past decade, many believe that the country must overcome considerable challenges to be
considered a world power. These include undertaking reforms to maintain its current economic
trajectory, addressing long-standing domestic security challenges, and modernizing and
expanding its military capacity.74
South-South Ties
Brazilian foreign policy under the PT administrations of Presidents Lula and Rousseff has
prioritized relations with nontraditional partners in the developing world, or “South-South” ties.
During the Lula Administration, the country significantly expanded its diplomatic presence in the
developing world, opening 37 new embassies and 25 new consulates.75 Brazil also increased its
international development assistance, which totaled $362 million (0.02% of GDP) in 2009. The
majority of Brazil’s aid has gone to Latin America, the Caribbean, and Africa—with a special
emphasis on fellow Portuguese-speaking nations. It includes humanitarian assistance and
technical cooperation focused in sectors where Brazil has been particularly effective domestically,
such as poverty reduction, tropical agriculture and biofuels production, and the prevention and
treatment of HIV/AIDS and tropical diseases.76 These diplomatic and development ties have
coincided with increased commercial relations. While Brazil’s total world trade grew by nearly
350% between 2002 and 2011, trade with Latin America and the Caribbean grew by 380%; trade
with Africa grew by nearly 450%; trade with India grew by over 650%; and trade with China
grew by nearly 1,800%. China is now Brazil’s top trading partner, with total trade valued at $77.1
billion.77
Brazil’s focus on forging South-South ties under the PT has been criticized by a number of
analysts within and outside the country. Former Brazilian Ambassador to the United States
Roberto Abdenur claimed that the South-South approach of the Brazilian Foreign Ministry
indoctrinates Brazilian diplomats with “anti-imperialist” and “anti-American” attitudes. He also
criticized Lula for embracing autocratic leaders and failing to speak up for democracy and human
rights.78 Another former Ambassador to Washington, Rubens Barbosa, has argued that while the
74
See, for example, Julia Sweig, “A New Global Player,” Foreign Affairs, November/December 2010; Hal Brands,
Dilemmas of Brazilian Grand Strategy, U.S. Army War College, Strategic Studies Institute, Carlisle, PA, August 2010;
Peter Hakim, “Rising Brazil: The Choices of a New Global Power,” Política Externa, July 1, 2010; and “Geopolitical
Diary: A Boost for Brazil’s Military,” STRATFOR, December 24, 2008.
75
Larry Luxner, “Basking in Global Clout, Brazil Ponders Life After Lula,” Washington Diplomat, September 2010.
76
IPEA, December 2010, op.cit.
77
Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, March 2012.
78
Diego Schelp, “Diplomacia de Palanque,” Veja, September 8, 2010; Otávio Cabral, “Nem na Ditadura,” Veja,
(continued...)
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PT’s foreign policy has increased Brazil’s international influence, it has not been very costeffective in delivering concrete results. He also maintains that Brazil should devote the same
amount of attention to relations with developed nations as it has devoted to South-South ties.79
Officials from the current and previous Brazilian administrations assert that increased SouthSouth ties have not come at the expense of relations with the developed world. Moreover, they
assert that while Brazil supports the spread of democracy and human rights, it believes singling
out countries with confrontational declarations and policies is counterproductive.80
Democratization of Global Governance
Building off its traditional support for multilateralism and its more recent focus on South-South
ties, Brazil has sought to reinvigorate multilateral institutions by making them more
representative of the current geopolitical situation. Brazilian officials assert that the world is
becoming multipolar, and global governance institutions—including the International Monetary
Fund (IMF), the Group of Eight (G8), and the U.N. Security Council—lack legitimacy and
efficacy since they are no longer representative of the global balance of power.81 In order to
address these issues, Brazil has joined with other emerging and developing nations to push for
reform. These coalitions include more formal organizations, like the Brazil-Russia-India-ChinaSouth Africa (BRICS) group and the India-Brazil-South Africa (IBSA) forum, as well as ad hoc
arrangements.
Brazil’s efforts have produced mixed results. On the one hand, the country has been successful in
securing agreements to redistribute voting power within the IMF and replace the G8 with the
more representative G20 as the premier forum for international economic coordination. Likewise,
emerging nation coalitions have succeeded in blocking U.S. and European Union attempts to
conclude international agreements, such as the Doha trade negotiations and the Copenhagen
climate negotiations, without addressing developing nation demands.82 Efforts to enlarge and
reform the U.N. Security Council, however, have been unsuccessful thus far.83 Some observers
have expressed concerns that, by pushing for greater decision-making authority without being
prepared for the corresponding responsibilities of leadership, the actions of Brazil and other
emerging powers could create instability within the world system.84
In addition to seeking greater influence within global governance institutions, Brazil has pushed
for a greater role in resolving issues of geopolitical importance. During the Lula Administration,
Brazil was somewhat critical of the U.S. role in the Middle East, arguing that the U.N. should
(...continued)
February 7, 2007.
79
Rubens Barbosa, “Sobre uma Nova Política,” O Globo (Brazil), October 26, 2010.
80
“Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
Susan Glasser, “The Soft-Power Power,” Foreign Policy, December 2010.
81
Meeting with official from Brazil's Ministry of External Relations, Financial Affairs Office, December 8, 2010;
Celso Amorim, “Governance Must Reflect Global Reality,” Financial Times, November 15, 2010.
82
Celso Amorim, “The New Geopolitics: Emerging Powers and the Challenges of a Multipolar World,” Remarks at the
Carnegie Endowment for International Peace, Washington, DC, November 30, 2010; “Voting Power Shift Just Start of
IMF Reform, Says Chinese Official,” BBC Monitoring, November 5, 2010.
83
William Maclean, “Brazil Says US Spat Signals Tough Security Reform,” Reuters, September 11, 2010.
84
Jorge G. Castañeda, “Not Ready for Prime Time,” Foreign Affairs, vol. 89, no. 5 (September/October 2010); Andrew
F. Hart and Bruce D. Jones, “How Do Rising Powers Rise?,” Survival, vol. 52, no. 6 (November 29, 2010).
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oversee negotiations between Israel and the Palestinians and emerging powers should be more
involved.85 Brazil hosted the presidents of Israel and the Palestinian National Authority, and
suggested that it might be able to act as a mediator in the conflict. Brazil also recognized
Palestine as an independent state within its 1967 borders, setting off a wave of similar
recognitions throughout South America.86 At the September 2011 U.N. General Assembly,
President Rousseff called for Palestine’s full membership in the United Nations.87
Additionally, Brazil has been involved in discussions regarding Iran’s nuclear program. In May
2010, Lula worked with his Turkish counterpart to negotiate a deal with Iran under which Iran’s
enriched uranium would be reprocessed outside the country. The so-called “Tehran Declaration”
was similar to a deal put forward in October 2009 by the United States, France, and Russia that
had been supported by the International Atomic Energy Agency (IAEA). The Brazilians saw the
agreement as a confidence-building measure to bring Iran back to the negotiating table; however,
the Obama Administration and European nations viewed the agreement as a delaying tactic, noted
that the October 2009 deal was no longer sufficient since Iran had continued to enrich uranium,
and pushed ahead with sanctions.88 Brazil voted against U.N. Security Resolution 1929 (June
2010), saying the council had “lost a historic opportunity to peacefully negotiate the Iranian
nuclear program,” but agreed to abide by the sanctions.89 While some analysts dismissed Brazil’s
efforts as naive and unhelpful,90 others argued that the negotiation attempt demonstrated Brazil’s
growing prominence and the potential for new states to play important roles in resolving issues of
geopolitical importance.91
U.S.-Brazil Relations
Relations between Brazil and the United States are generally friendly. According to U.S. officials,
“as two of the world’s largest economies and democracies, with shared values and increasingly
converging goals, Brazil and the United States are natural partners in a rapidly changing world.”92
The Obama Administration’s National Security Strategy states that the United States “welcome[s]
Brazil’s leadership and seek[s] to move beyond dated North-South divisions to pursue progress
85
Iuri Dantas and Fabiola Moura, “Lula Says U.S. Shouldn’t Broker Middle East Talks,” Bloomberg, November 20,
2009.
86
“Brazilian Minister on Middle East Role,” BBC Monitoring, January 4, 2010; Sean Goforth, “Brazil’s Middle East
Roadmap,” World Politics Review, January 20, 2011.
87
“Statement by H.E. Dilma Rousseff, President of the Federative Republic of Brazil, at the Opening of the General
Debate of the 66th Session of the United Nations General Assembly,” September 21, 2011,
http://gadebate.un.org/sites/default/files/gastatements/66/BR_en_0.pdf.
88
Trita Parsi, “The Turkey-Brazil-Iran Deal: Can Washington Take 'Yes' for an Answer?” Foreign Policy, May 17,
2010; “Unexpected US Opposition Overshadows Lula's Successful Iran Nuclear Deal,” Latin American Security &
Strategic Review, May 2010.
89
"Brazil's Lula Says UN Sanctions a Mistake," Latin News Daily, June 10, 2010; “Brazil Will Back Iran Sanctions,”
Al Jazeera, August 11, 2010.
90
See, for example, Duda Teixeira, “Esperteza Atômica,” Veja, May 26, 2010; and “An Iranian Banana Skin,”
Economist, June 17, 2010.
91
See, for example, Erich Follath and Jens Glüsing, “Brazil’s Lula Vaults into Big League of World Diplomacy,”
Spiegel Online, May 25, 2010; Carlo Patti, "Brazil and the Nuclear Issues in the Years of the Luiz Inácio Lula da Silva
Government (2003-2010)," Revista Brasileira de Política Internacional, vol. 53, no. 2 (2010).
92
William J. Burns, Deputy Secretary of State, “Building a Deeper Partnership with Brazil,” Remarks in Rio de
Janeiro, Brazil, March 1, 2012.
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on bilateral, hemispheric, and global issues.”93 The United States and Brazil have established over
25 dialogues to enhance coordination and cooperation on a wide variety of issues. Among other
topics, the United States and Brazil engage on security, energy, trade, human rights, and the
environment.
Although Brazil and the United States share a number of common goals, the countries’
occasionally divergent national interests and independent foreign policies have led to
disagreements on trade and political matters. Some long-running disputes include the stalled
Doha trade negotiations and Brazilian opposition to U.S. support for cotton producers. Additional
differences have emerged in recent years, many of which have centered around the countries’
approaches to foreign policy. In 2010 and 2011, for example, Brazil used its temporary seat on the
U.N. Security Council to advocate engagement with internationally isolated regimes like Iran,
Libya, and Syria, rather than sanctions, which it views as a prelude to armed conflict. Some
analysts and policymakers assert that Brazil’s increasing global prominence and involvement on
an array of issues will inevitably lead to disputes with the United States and that managing those
disputes in a transparent and respectful manner will be key to maintaining friendly relations
moving forward.94
As a middle-income country, Brazil does not receive large amounts of U.S. foreign assistance.
Brazil received $25.1 million in U.S. aid in FY2010, $23.3 million in FY2011, and an estimated
$17.2 million in FY2012. The Obama Administration has requested just $6.1 million in foreign
assistance for Brazil in FY2013. U.S. assistance to the country is transitioning from supporting
development programs in Brazil to providing assistance designed to promote development in
third countries. About one-third of the FY2013 aid request would be used to strengthen the
Brazilian government's development agency (the Brazilian Cooperation Agency) and implement
jointly funded projects in other developing countries.95
On September 28, 2012, President Obama signed into law the Continuing Appropriations
Resolution, FY2013 (P.L. 112-175). The resolution funds regular foreign aid accounts at the same
level as in FY2012 plus 0.612%. The aid allocations for particular countries, such as Brazil, are
left to the discretion of the responsible agencies. Until a full year appropriation is approved,
however, the State Department and the U.S. Agency for International Development (USAID) plan
only to fund programs that are running out of resources or meet some urgent foreign policy
priority. The Continuing Appropriations Resolution expires on March 27, 2013.
Security Cooperation
Although U.S.-Brazilian cooperation on security issues has traditionally been limited, law
enforcement and military ties have increased in recent years. Areas of coordination include
counternarcotics, counterterrorism, and defense.
93
White House, National Security Strategy, May 2010, p. 44,
http://www.whitehouse.gov/sites/default/files/rss_viewer/national_security_strategy.pdf.
94
See, for example, Peter Hakim, “US-Brazil Relations: Expect More Conflict,” Infolatam, October 21, 2010; U.S.
Ambassador Thomas Shannon, “Prospects for U.S.-Brazil Bilateral Relations,” Remarks at Brazil-U.S. Business
Council Annual Plenary Meeting, December 7, 2010; and William J. Burns, Deputy Secretary of State, “Building a
Deeper Partnership with Brazil,” Remarks in Rio de Janeiro, Brazil, March 1, 2012.
95
U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2013, April 3, 2012,
http://www.state.gov/documents/organization/185015.pdf.
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Counternarcotics
While Brazil is not a major drug-producing country, it is the second largest consumer of cocaine
in the world and serves as a transit country for illicit drugs from neighboring Andean countries
destined primarily for Europe. In recognition of these challenges, Brazil has taken several steps to
improve its antidrug efforts. In 2004, it 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. Under its Strategic Border
Plan, introduced in June 2011, the Brazilian government has deployed inter-agency resources to
strengthen border security in high-risk locations, including unmanned aerial vehicles (UAVs) to
monitor illicit activity along its borders and in the remote Amazon region.96 As part of this effort,
Brazil has signed agreements and carried out joint operations with neighboring countries.97
According to the U.S. Department of State, “Brazil’s focus on inter-agency cooperation and
border security resulted in significantly improved interdiction efforts in 2011.” Through October
2011, the federal police seized 15.2 metric tons of cocaine, 87.4 metric tons of marijuana,
194,776 dosage units of ecstasy, 72,492 dosage units of LSD, and 42,000 dosage unites of
methamphetamine.98
The United States and Brazil cooperate on counternarcotics issues in a number of ways. U.S.
counternarcotics assistance provides training for Brazilian law enforcement, assists interdiction
programs at Brazil’s international airports, supports drug prevention programs, and is designed to
improve Brazil’s capacity to dismantle criminal organizations. Brazil received $1 million in U.S.
counternarcotics assistance in FY2010, $1 million in FY2011, and an estimated $2.9 million in
FY2012. Under the Obama Administration’s request for FY2013, Brazil would receive $1.9
million in counternarcotics assistance.99
Brazil has also served as a bridge between the United States and Bolivia, which expelled the Drug
Enforcement Administration (DEA) from its territory in 2008 as a result of alleged interference in
the country’s internal affairs. Under a trilateral anti-drug cooperation agreement signed in January
2012, the United States and Brazil are providing assistance to Bolivia in the monitoring and
eradication of coca crops. According to the agreement, the United States is responsible for
providing monitoring equipment, Brazil is responsible for obtaining and interpreting satellite
images, and Bolivia is responsible for conducting any necessary field work.100
96
U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, 2012 International
Narcotics Control Strategy Report (INCSR), March 7, 2012, http://www.state.gov/j/inl/rls/nrcrpt/2012/index.htm;
“Hermes 450: O Vigilante Das Fronteiras Brasileiras,” Terra (Brazil), August 25, 2011.
97
“Brazil-Region: Flying Start for the New ‘Border Strategy’,” Latin American Security & Strategic Review, July
2011.
98
INCSR, 2012, op.cit.
99
U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2012, April 2011,
and Congressional Budget Justification for Foreign Operations, Fiscal Year 2013, April 3, 2012.
100
“Signing of Trilateral Agreement on the Integrated Monitoring System for Surplus Coca Cultivation Reduction Pilot
Project,” Joint Communiqué, January 20, 2012.
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Counterterrorism and the Tri-Border Area101
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 State Department’s
Country Reports on Terrorism, there are no known operational cells of al Qaeda or Hezbollahrelated groups in the hemisphere; however, the United States remains concerned that the proceeds
from legal and illegal goods flowing through the TBA could potentially be diverted to support
terrorist groups.102 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 transborder criminal organizations in the TBA in 2007.
In December 2010, the U.S. Treasury Department sanctioned Hezbollah's chief representative in
South America, Bilal Mohsen Wehbe, for transferring funds collected in Brazil to Hezbollah in
Lebanon. According to the Treasury Department, Wehbe and an associate raised more than
$500,000 from Lebanese businessmen in the TBA following the 2006 conflict between Israel and
Hezbollah. Wehbe also reportedly has overseen Hezbollah’s counterintelligence activity in the
TBA and has worked for the office of Iranian Supreme Leader Ayatollah Ali Khamene'i.103
Beyond efforts in the TBA, the United States has worked bilaterally with Brazil to improve its
counterterrorism capabilities. The United States has worked with Brazil to implement the
Container Security Initiative (CSI) at the port of Santos, and U.S. authorities are currently
training Brazilian airline employees to identify fraudulent documents. The State Department’s
Country Reports on Terrorism for 2011 states “the Brazilian government continued to support
counterterrorism-related activities, including investigating potential terrorism financing,
document forgery networks, and other illicit activity.”104 Brazil has yet to adopt legislation,
however, to make terrorism and terrorism financing autonomous offenses. Like many other Latin
American nations, Brazil 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.105 Nevertheless, some Brazilian officials have pushed for
antiterrorism legislation, asserting that the country will face new threats as a result of hosting the
2014 World Cup and the 2016 Olympics.106
101
For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan and June S.
Beittel.
102
U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism 2011, July
31, 2012, http://www.state.gov/j/ct/rls/crt/2011/195546.htm.
103
U.S. Department of the Treasury, “Treasury Targets Hizballah Financial Network,” Press Release, December 9,
2010.
104
Country Reports on Terrorism 2011, 2012, op.cit.
105
“Anti-Terrorism Law Project Scrapped,” Latin American Security & Strategic Review, January 2008; Juliana
Barbassa, “Brazil Denies Terrorists Operate Within Borders,” Associated Press, September 3, 2011.
106
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; “High Risk of Terror Attacks During 2014 World Cup:
Police,” Agence France Presse, November 17, 2011.
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Defense
According to the U.S. Department of Defense, cooperation with Brazil’s Ministry of Defense and
the Brazilian military is closer today than it has been at any point in over 30 years. The U.S. and
Brazilian militaries have worked together closely in Haiti, where Brazil commands the U.N.
Stabilization Mission (MINUSTAH). Joint efforts in the aftermath of Haiti’s January 2010
earthquake were the largest combined operations of U.S. and Brazilian military forces since
World War II. In April 2010, the United States and Brazil signed a Defense Cooperation
Agreement designed to promote cooperation in areas such as research and development,
technology security, and acquisition of defense products and services. This was followed by a
General Security of Military Information Agreement, signed in November 2010, which will
facilitate the sharing of classified defense and military information. In an effort to elevate bilateral
defense ties, President Rousseff joined with President Obama in April 2012 to launch a
presidential-level Defense Cooperation Dialogue. Additional areas of defense cooperation include
information exchanges, combined military training, and joint military exercises.107
Two pending defense procurement deals could impact future military ties between the United
States and Brazil. The Brazilian air force intends to purchase 36 new fighter jets, and the Boeing
F/A-18 Super Hornet is one of three finalists along with the Saab JAS-39 Gripen of Sweden and
the Dassault Rafale of France. Brazil’s National Defense Strategy places significant emphasis on
building the country’s domestic defense industry, and technology transfer is reportedly a top
consideration in the fighter deal. According to U.S. officials, the technology transfer package the
United States has offered is unprecedented in the U.S.-Brazil relationship and is the same type of
package that the United States provides its closest partners in the North Atlantic Treaty
Organization (NATO).108 Nevertheless, Brazilian officials remain wary of relying on U.S.
hardware as a result of past experiences109 in which the U.S. government blocked sales of
Brazilian arms containing U.S. technology.110 A final decision has been delayed for several years
and is reportedly now scheduled for mid-2013.111
The U.S. Air Force is currently considering purchasing 20 A-29 Super Tucano light attack
aircraft, produced by Brazil’s Embraer in partnership with U.S.-based Sierra Nevada, to be
provided to the Afghan military for counterinsurgency and training purposes. The Air Force
awarded the $355 million contract to Embraer in late December 2011, but the procurement
process was challenged by U.S.-based Hawker Beechcraft. After temporarily suspending the
contract in January 2012, the Air Force cancelled the order in late February 2012. Brazilian
officials expressed displeasure with the sudden cancellation, and asserted that the decision would
not be “conducive to strengthening relations between the two countries on defense affairs.” 112
Some reports have suggested that the cancellation was for political, rather than technical reasons,
and Sierra Nevada is suing the Air Force to have the original contract reinstated. A second
107
U.S. Department of Defense, Office of the Secretary of Defense, “Fact Sheet: U.S.-Brazil Defense Cooperation,”
March 14, 2011.
108
Jeb Blount and Guillermo Parra-Bernal, “US Jet Contract Decision ‘Surprised Brazil Gov’t,” Reuters, March 1,
2012.
109
In 2006, for example, the United States prevented Brazil from selling 24 Super Tucano light attack planes to
Venezuela.
110
“No Brazil Fighter Jet Decision Before Lula Leaves,” Agence France Presse, December 7, 2010.
111
Brian Winter, “Brazil Delays Jets Decision Until 2013; Boeing Ascendant,” Reuters, September 24, 2012.
112
Joe Leahy, “Brazil Warns US Over Cancelled Aircraft Deal,” Financial Times, March 2, 2012.
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bidding process between the two competitors is now closed and the Air Force expects to
announce the winner in early 2013.113
Energy Cooperation
Energy has been another important area of U.S-Brazilian cooperation in recent years. Brazil is
widely regarded as a world leader in energy policy for successfully reducing its reliance on
foreign oil through the development of alternative energy resources and increased domestic
production. In addition to being the world’s second-largest producer of ethanol, Brazil currently
generates 85% of its electricity through hydropower. Brazil also has recently discovered large
offshore oil deposits that have the potential to turn the country into a major oil and gas producer
and an important source of energy for the United States.114 To facilitate greater cooperation in the
development of safe, secure, and affordable energy, President Obama and President Rousseff
launched a Strategic Energy Dialogue in March 2011.
Ethanol and Other Biofuels115
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. In 1975, in response to sharp increases in global oil
prices, the Brazilian government began a national program to promote the production and
consumption of sugarcane ethanol. Brazil now produces some 390,000 barrels per day.116 Within
Brazil, pure ethanol is available at nearly every fueling station and gasoline is required to include
a 20% ethanol blend. About 90% of new cars sold in Brazil each year are fitted with “flex-fuel”
engines capable of running on fuel blends ranging from pure ethanol to pure gasoline. As a result,
ethanol accounts for over half of all fuel pumped in Brazil.117
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. 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.118 Over the
past five years, the United States and Brazil have moved forward on all three facets of the
agreement. Presidents Obama and Rousseff signed onto a partnership agreement for the
development of aviation biofuels in March 2011,119 and in October 2011, Boeing and Brazil’s
113
Vinod Sreeharsha, “Embraer, Hawker Beechcraft Face Off Again Over Planes for Afghanistan,” McClatchy
Newspapers, June 15, 2012.
114
Energy Information Administration (EIA), “Country Analysis Briefs: Brazil,” February 28, 2012.
115
For more information on biofuels, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging
Issues, by Randy Schnepf .
116
EIA, 2012, op.cit.
117
Chris Kraul, “Brazil Raises Cane Over U.S. Ethanol Barriers; Proponents Say Sugar-Based Fuel is a Better Choice
than Corn,” Los Angeles Times, November 4, 2009; “Brazil: Long-term Ethanol Outlook Remains Bright,” Oxford
Analytica, October 6, 2009; Leonardo Goy, “Brazil to Cut Ethanol Blend in Gasoline from Oct. 1,” Reuters, August 30
2011.
118
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, http://www.state.gov/p/wha/rls/158654.htm.
119
The “Partnership for the Development of Aviation Biofuels” agreement is available at
http://www.whitehouse.gov/sites/default/files/uploads/Partnership_Development_Aviation_Biofuels.pdf.
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Embraer announced plans to build a joint research center.120 Brazil and the United States have
also worked together in a number of Latin American, Caribbean, and African countries. In March
2011, Presidents Obama and Rousseff agreed to commit $3 million to support the development of
legal regimes and domestic biofuels production in the Dominican Republic, El Salvador,
Guatemala, Haiti, Honduras, Jamaica, and Senegal.121 Additionally, the United States and Brazil
are working with other members of the International Biofuels Forum (IBF) to make biofuels
standards and codes more uniform.
Brazil and the United States have taken steps to liberalize trade in ethanol over the past year. In
December 2011, the Brazilian government issued a resolution to extend its duty-free treatment of
imported ethanol until December 31, 2015.122 Similarly, Congress allowed a 54-cent-per-gallon
duty on imported ethanol to expire at the end of 2011. Prior to its expiration, the duty served as a
significant barrier to direct imports of Brazilian ethanol in most years. Although some Brazilian
ethanol was allowed to enter the United States duty-free after being reprocessed in Caribbean
Basin Initiative (CBI) countries, such imports could only account for up to 7% of the U.S. ethanol
market. A 2.5% ad valorem tariff on ethanol imports to the United States remains in place
permanently unless the Harmonized Tariff Schedule code is changed. A bill introduced in April
2012, H.R. 4621 (Rangel), would authorize the President to enter into negotiations with Brazil to
obtain open and reciprocal market access for trade in ethanol products.
Oil
In recent years, Brazil has discovered substantial new oil fields off its coast that have the potential
to turn the country into one of the top five oil and gas producers in the world,123 and an important
source of energy for the United States. The new discoveries are so-called “pre-salt” reserves,
located beneath layers of rock and salt up to 23,000 feet below the ocean surface. Analysts have
estimated that the total recoverable reserves of pre-salt oil and natural gas may exceed 50 billion
barrels of oil equivalent.124
In December 2010, the Brazilian Congress approved a new regulatory framework for developing
the approximately 70% of pre-salt reserves that have not already been auctioned off.125 The new
framework will increase the state’s role in hopes of using the resources to fuel long-term
economic and social development. Among other provisions, the framework establishes stateowned Petróleo Brasileiro S.A. (Petrobras) as the sole operator for all new offshore projects;
replaces the existing concessionary model with a production sharing regime; guarantees Petrobras
a minimum 30% stake in all new joint ventures; creates a new public company—Petrosal—to
manage the development of the offshore reserves; and creates a new social fund overseen by the
Brazilian Congress to direct offshore revenues toward four key areas: education, infrastructure,
science and technology, and poverty reduction.126 The development of these reserves may be
120
Brian Winter, “Insight-U.S. and Brazil: At Last, Friends on Ethanol,” Reuters, September 14, 2012.
White House, Office of the Press Secretary, “Fact Sheet: U.S.-Brazil Strategic Energy Dialogue,” March 19, 2011.
122
Ministério do Desenvolvimiento, Indústria e Comércio Exterior, Câmara de Comércio Exterior (CAMEX),
Resolução N° 94, de 8 de Dezembro de 2011.
123
Mark S. Langevin, Brazil's Hydrocarbon Bonanza: Can the State Manage Pre-Salt Production for National
Development and Geopolitical Power?, Brazil-Works, Discussion Paper, May 2012.
124
EIA, 2012, op.cit.
125
Langevin, 2012, op.cit.
126
“Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long(continued...)
121
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delayed, however, as there is currently considerable debate within the Brazilian Congress
regarding the distribution of oil royalties, and Petrobras is unable to auction the rights to the fields
until a new royalties framework is in place.127
Exploiting the new fields will be difficult and costly. Some foreign investors have questioned
whether Petrobras will be able to access sufficient finance to develop the pre-salt reserves given
the enlarged role of the Brazilian government under the new regulatory framework and increased
concerns about offshore oil drilling as a result of the 2010 BP oil spill in the Gulf of Mexico.128
Other analysts maintain that the Brazilian reserves are becoming ever-more attractive as a result
of the rising price of oil and Brazil’s political stability at a time of conflict in other oil producing
nations.129 Petrobras intends to invest $141.8 billion in exploration and production between 2012
and 2016, $67.1 billion of which will go toward developing the pre-salt reserves.130
Brazil and the United States are working together under the Strategic Energy Dialogue to foster
the safe and efficient development of oil reserves in both countries. Through technical workshops
and other activities, government regulators and private industry have exchanged best practices on
issues such as spill response, well integrity, subsea containment, the use of dispersants, and
national contingency plans. Brazil and the United States have also cooperated on financing. In
April 2009, the Export-Import Bank of the United States offered to consider up to $2 billion in
financing to secure the purchase of U.S. goods and services by Petrobras. The Bank has approved
$300 million in financing so far, and has told Petrobras that it would consider increasing its offer
above $2 billion if requested.131
Trade Relations
Trade issues play a central role in U.S.-Brazil relations. Although both countries have been
closely involved in global, regional, and sub-regional trade talks, they have frequently disagreed
on the substance of trade agreements. Within the World Trade Organization (WTO) Doha Round
of multilateral trade negotiations132 that began in 2001, for example, Brazil has led the G-20
group of developing countries in insisting that developed countries agree to reduce and eventually
eliminate agricultural subsidies as part of any settlement. Similarly, opposition from Brazil and
other South American countries effectively killed the U.S.-backed Free Trade Area of the
Americas (FTAA) in 2005.
(...continued)
Term Perspective,” Oxford Analytica, May 2010.
127
“Brazil: O Petróleo é Nosso,” Latin American Regional Report: Brazil & Southern Cone, November 2011; “No
Brazil Oil Royalty Vote Before 2012-Minister,” Reuters, November 17, 2011.
128
“Brazil’s Golden Times Start to Roll,” Latin News Daily, September 3, 2008; “Hydrocarbons Potential Poses Major
Challenges,” Oxford Analytica, November, 20, 2007; “Brazil Industry: Petrobras Under Pressure,” Economist
Intelligence Unit, August 26, 2010.
129
Danielle Nogueira and Ramona Ordonez, “Conflitos no Oriente Médio Tornam Pré-Sal Mais Atraente,” O Globo
Online (Brazil), March 2, 2011.
130
Janes Rocha, “Mesmo com Incertezas, Pré-sal Estimula Projetos,” Valor Online (Brazil), September 25, 2012.
131
Export-Import Bank of the United States, “Facts About Ex-Im Bank Loans to Support Petrobras’s Purchases of
Goods and Services Made by American Workers,” May 27, 2011.
132
For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
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During President Obama’s March 2011 visit to Brazil, the U.S. and Brazilian governments
concluded an Agreement on Trade and Economic Cooperation. The agreement creates a new
bilateral trade dialogue designed to foster deeper cooperation on issues such as intellectual
property rights, trade facilitation, and technical barriers to trade.133 During Secretary of State
Clinton’s April 2012 visit to Brazil, she indicated that the United States is interested in furthering
trade relations by negotiating a bilateral investment treaty and eventually a free trade
agreement.134 It is unlikely that the United States and Brazil will complete such agreements in the
near-term, however, as Brazil has never ratified a bilateral investment treaty, and the two
countries continue to have significant differences regarding trade issues.135
Brazil currently benefits from the Generalized System of Preferences (GSP), which provides
duty-free tariff treatment to certain products imported from developing countries. According to
Brazil’s Ministry of Development, about 13% of Brazilian exports fall under the umbrella of
GSP.136 Some Brazil-based subsidiaries of U.S. companies are among those that benefit. On
October 21, 2011, the President signed the Trade Adjustment Assistance Extension Act of 2011
(P.L. 112-40), extending GSP until July 31, 2013.137
Trade between the United States and Brazil totaled $74.3 billion in 2011, an increase of 25% over
2010 levels. U.S. exports to Brazil were valued at $42.9 billion while U.S. imports from Brazil
were valued at $31.4 billion. The United States is Brazil’s second-largest trading partner, behind
China, and Brazil is the eighth-largest trading partner of the United States. Top U.S. exports to
Brazil include machinery, oil and coal, and civilian aircraft and parts. The top U.S. imports from
Brazil are crude oil, iron and steel, machinery, and coffee.138
In September 2012, H.R. 6539 (Nunes) was introduced in the House. The bill would establish a
United States-Brazil Joint Commission on Commerce and Trade. Among other activities, the 16member bilateral commission would address bilateral trade matters, seek removal of trade
barriers, and promote commercial opportunities between the United States and Brazil.
Cotton Dispute139
Over the past eight years, Brazil and the United States have been involved in a dispute over U.S.
government support for cotton farmers. In 2002, Brazil went to the WTO to challenge several
provisions of the U.S. cotton program. A WTO dispute settlement panel ruled in Brazil’s favor in
2004, finding that certain U.S. agricultural support payments and export guarantees were
133
White House, Office of the Press Secretary, “Strengthening the U.S.-Brazil Economic Relationship,” March 19,
2011.
134
“Clinton: EEUU Quiere Avanzar Hacia Acuerdo de Libre Comercio con Brasil,” Agence France Presse, April 16,
2012.
135
See, for example, Doug Palmer and Brad Haynes, “U.S. Warns Brazil on Tariffs, Gets Stinging Rebuke,” Reuters,
September 20, 2012.
136
“Deputados dos EUA Renovam Redução de Taxas,” Folha de São Paulo, September 9, 2011.
137
For more information on GSP, see CRS Report RL33663, Generalized System of Preferences: Background and
Renewal Debate, by Vivian C. Jones
138
U.S. Department of Commerce and Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas,
March 2012.
139
For more information on the U.S.-Brazil WTO cotton dispute, see CRS Report RL32571, Brazil’s WTO Case
Against the U.S. Cotton Program by Randy Schnepf.
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inconsistent with its WTO commitments. Although Congress modified agricultural support
programs in 2005, a WTO compliance panel ruled in 2007 that the U.S. actions were
insufficient.140 Following a ruling from a WTO arbitration panel, Brazil announced in March
2010 that it intended to impose retaliatory measures against the United States worth $829 million,
including $591 million in higher tariffs on a range of U.S. products and $239 million through
suspension of certain intellectual property rights obligations.
The United States reached a temporary agreement with Brazil in June 2010 to avoid the WTOsanctioned retaliatory measures. Under the agreement, the United States pledged to make some
short-term changes to its export credit guarantees and provide the Brazil Cotton Institute with
$147 million annually for a fund to assist Brazilian cotton farmers with technical assistance,
marketing, and market research. In exchange, Brazil agreed to temporarily suspend its retaliation
with the intention of reaching a permanent agreement with the United States after Congress has
an opportunity to adjust the subsidy program.141 A bill that would prohibit payments to the Brazil
Cotton Institute, H.R. 5143 (Kind), was introduced in April 2012. If enacted, the United States
would be unable to comply with the terms of the temporary agreement.
Congress is currently considering changes to the cotton program as part of the 2012 farm bill. The
Senate passed its version of the bill, S. 3240, on June 26, 2012. The House version, H.R. 6083,
was reported out by the Committee on Agriculture on September 13, 2012. Both of the
accompanying committee reports (S.Rept. 112-203142 and H.Rept. 112-669) assert that the bills
would make modifications to the cotton program that should allow the United States to meet its
WTO obligations and reach a permanent agreement with Brazil. The Brazilian government has
objected to several of the provisions that are included in both bills, however, and maintains that
some of the potential modifications “seem to have actually made things worse.”143
Intellectual Property Rights
Brazil and the United States have periodically engaged in disputes over intellectual property
rights. One issue of particular concern to the U.S. government has been Brazil’s threats to issue
compulsory licenses for patented pharmaceutical products. Internationally recognized as having
one of the world’s most successful HIV/AIDS programs, Brazil has guaranteed its citizens
universal free access to antiretroviral therapy (ART) since 1996. In 2001, Brazil decided to
develop generic ART drugs under the compulsory licensing provision of its patent law, and
thereby reduce treatment costs. In response, the United States submitted a complaint to the
WTO—which it later withdrew—asserting that Brazil’s practices violated the Trade-Related
Aspects of Intellectual Property Rights (TRIPS) agreement. 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
140
“WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007.
Swell Chan, “U.S. and Brazil Reach Agreement on Cotton Dispute,” New York Times, April 6, 2010; Ana Nicolaci
da Costa, “Brazil Suspends Retaliation in U.S. Cotton Row,” Reuters, June 17, 2010.
142
The Senate report is available at: http://www.ag.senate.gov/download/?id=5d91a4e4-d805-4623-ae718402bd6b912e.
143
Letter from Mauro Vieira, Ambassador of Brazil to the United States, to the Honorable Debbie Stabenow,
Chairwoman of the Senate Committee on Agriculture, Nutrition & Forestry, July 13, 2012. For more information on
the farm bill, see CRS Report R42552, The 2012 Farm Bill: A Comparison of Senate-Passed S. 3240 and the House
Agriculture Committee’s H.R. 6083 with Current Law, coordinated by Ralph M. Chite.
141
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emergencies in a cost-effective manner. In 2003, the WTO temporarily waived some provisions
of the TRIPS agreement to allow the export of generic drugs to countries confronting a grave
public health challenge (such as HIV/AIDS, tuberculosis, or malaria). The waiver was made
permanent in 2005.
Since the public health exception to the TRIPS agreement was made permanent, Brazil has
issued, or threatened to issue, compulsory licenses on patented pharmaceutical products on
several occasions. In 2007, Brazil broke a patent on a drug used to treat HIV/AIDS that is
produced by Merck & Co. in order to save the Brazilian government an estimated $240 million
over five years.144 Brazil now produces 10 of the 20 drugs used to treat HIV/AIDS and distributes
them to African and Latin American countries.145 In 2009, Brazil suggested that developing
countries should be allowed to lift patent rights to produce more vaccine to battle the A(H1N1)
flu epidemic.146
According to the U.S. Trade Representative (USTR), Brazil has improved its record on protecting
intellectual property rights in recent years. In recognition of this progress, USTR lowered Brazil
from the Priority Watch List of countries with significant intellectual property rights violations to
the Watch List in 2007. The country has remained on the Watch List every year since 2007,
however, as USTR remains “concerned about the widespread availability of pirated and
counterfeit products in Brazil.” In its 2012 Special 301 Report, USTR commended Brazil’s
enforcement efforts, which led to the seizure of over $1 billion worth of pirated and counterfeit
goods in 2011. USTR also urged Brazil to arrest and prosecute those responsible, and strengthen
its copyright law.147 The United States and Brazil are currently working to improve their
cooperation on intellectual property rights issues under the Agreement on Trade and Economic
Cooperation signed in March 2011.148
Human Rights
According to the U.S. State Department’s Country Reports on Human Rights Practices, the most
significant human rights abuses reported in Brazil in 2011 were “substandard prison conditions;
human trafficking, especially sex trafficking of children and adolescents; and forced labor.” Other
human rights problems included “excessive force, beatings, abuse, and torture of detainees and
inmates by police and prison security forces; prolonged pretrial detention and inordinate delays of
trials; violence and discrimination against women; violence against children, including sexual
abuse; violence based on sexual orientation; discrimination against indigenous persons and
minorities; insufficient enforcement of labor laws; and child labor in the informal sector.” The
report asserts that the Brazilian government prosecuted officials who committed abuses but
lengthy appeals processes remained a problem.149
144
“Brazil to Break Merck AIDS Drug Patent: Government Wants Lower Price on Anti-retroviral Medication,”
Associated Press, May 4, 2007.
145
“Brazil Says it has AIDS under Control,” Agence France Presse, November 29, 2011.
146
“Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009.
147
U.S. Trade Representative, Special 301 Report, April 2012,
http://www.ustr.gov/sites/default/files/2012%20Special%20301%20Report_0.pdf.
148
The agreement is available at: http://www.whitehouse.gov/sites/default/files/uploads/Brazil_ATEC.pdf.
149
U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, Country Reports on Human Rights
Practices for 2011, May 24, 2012, http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.
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Trafficking in Persons150
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
efforts to do so. As a result, it is listed as a Tier 2 country.151 Brazil is a large source country for
men, women, and children trafficked for commercial sexual exploitation. Some are exploited in
sex trafficking within the country while others are trafficked to neighboring countries or abroad to
Europe and the United States. Brazil is also a source country for men and children subject to
forced labor within the country.152 Between 25,000 and 40,000 Brazilian men have reportedly
been recruited to labor in slave-like conditions, typically on cattle ranches, logging and mining
camps, and sugar-cane plantations.153
Over the past year, the Brazilian government has taken a number of actions to address the
problem of human trafficking. The Brazilian Tourism Ministry began a campaign against sex
tourism, asking websites to remove content related to sex tourism and distributing posters
warning of criminal penalties for the sexual exploitation of minors.154 The Ministry of Labor’s
mobile units rescued 2,428 victims from slave-like labor conditions, provided $3.4 million in
back-pay and damages to rescued workers, and maintained a “dirty list” of 294 employers that are
responsible for slave-like labor. Additionally, the Brazilian government secured convictions in
nine human trafficking cases. At the same time, government-provided services for trafficking
victims remained inadequate, only 10% of slave-like labor cases were criminally prosecuted, and
a significant number of those rescued from slave-like labor were re-trafficked.
The State Department report offers a number of recommendations for Brazil. It calls for the
Brazilian government to increase efforts to investigate and prosecute trafficking offenses, and
adopt legislation to apply more stringent sentences to trafficking offenders. It also calls for the
Brazilian government to increase dedicated funding to provide specialized services to trafficking
victims. Moreover, the State Department report suggests that Brazil should enhance collaboration
between government entities, and increase anti-trafficking training for law enforcement and
judicial officials.155
150
For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando Seelke.
151
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 subject to U.S. sanctions since 2003.
152
U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2012, June 19, 2012, http://www.state.gov/j/tip/rls/tiprpt/2012/index.htm.
153
Christopher Looft, “Senator’s Trial Points to Modern-Day ‘Slaves’ in Brazil,” InSight: Organized Crime in the
Americas, March 9, 2012.
154
“Brazil Takes on Websites that Promote Sex Tourism,” Associated Press, March 27, 2012.
155
U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2012, June 19, 2012.
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Violent Crime and Abuses by Police
Most observers agree that the related problems of urban crime, illicit drug use, 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 prevalent in urban shanty towns (favelas) in
Rio de Janeiro and São Paulo. Violence traditionally has been linked to turf wars being waged
between rival gangs for control of the drug industry or to clashes between drug gangs and police
officers, some of whom have formed paramilitary militias that rid their communities of drug
gangs only to engage in the very same illicit activities.
As police forces in São Paulo and Rio de Janeiro have employed strong-arm tactics designed to
curb rampant criminality, some human rights groups have raised concerns over 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.”156 Indeed, more
than 11,000 people were killed by the two police forces between 2003 and 2009. Although the
officers involved reported nearly all of the killings as legitimate acts of self defense, or
“resistance killings,” a 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 indicated 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 between 2000 and 2009,
only 42 generated criminal charges by state prosecutors and just 4 led to convictions.157
Analysts have long 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, there have been a number of efforts in recent years to improve the situation.
During the Lula Administration, federal government expenditures on public security more than
tripled.158 Under the National Program for Public Safety with Citizenship (Programa Nacional de
Segurança Pública com Cidadanía, PRONASCI), the Brazilian government improved
coordination of federal violence prevention and law enforcement strategies, and placed greater
emphasis on social policies and human rights.159 In September 2012, President Rousseff signed
legislation criminalizing membership in militias, paramilitary organizations, and death squads.
Affiliation with such groups—which often include members of the police, military, and fire
squads—is now punishable with four to eight years in jail.160
Some state level efforts have also improved. One of the more high profile examples is the state of
Rio de Janeiro’s “Favela Pacification Program.” Whereas previous law enforcement efforts
generally centered around quick raids followed by long periods of government neglect, the favela
pacification program is designed to establish a permanent state presence in areas controlled by
156
“Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News
Service, November 15, 2007.
157
Human Rights Watch, Lethal Force: Police Violence and Public Security in Rio de Janeiro and São Paulo,
December 2009, http://www.hrw.org/sites/default/files/reports/brazil1209webwcover.pdf.
158
“Recent Public Security Policies in Brazil,” Document provided in a meeting with officials from Brazil's Ministry of
External Relations, December 9, 2010.
159
Joe Bateman, “Brazilian Citizen Security Policies: Variety of Experiences Useful in Regional Debates,” Washington
Office on Latin America (WOLA), August 22, 2012.
160
“Brasil: Será Delito Integrar Groups de Exterminio, Milicias y Paramilitares,” Agence France Presse, September 28,
2012.
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organized crime. Under the initiative, elite police units enter favelas and clear them of drug
gangs. Newly recruited Police Pacification Units (Unidades de Polícia Pacificadora, UPPs) then
set up a permanent security presence, and other governmental institutions establish basic social
services. UPPs are now present in 28 favelas and have enjoyed considerable success thus far.
According to a study of the first 13 UPPs established, intentional homicides decreased 58%,
deaths for “resisting authority” declined 98%, and robbery decreased 54% over four-and-a-half
years. Although there have been significant increases in reports of other criminal offenses—such
as domestic violence (290%), rape (164%), and theft (55%)—some analysts think the increases
may reflect a greater willingness by favela residents to report crimes to the police.161
Race and Discrimination
People of African descent in Brazil, also known as Afro-Brazilians, have long been
disproportionately affected by the country’s high level of inequality. Little concrete information
was available, however, until the Brazilian government began to collect better statistics on AfroBrazilians during the Cardoso Administration (1995-2002). These statistics—which found
significant education, health, and wage disparities between Afro-Brazilians and Brazil’s general
population—prompted the Brazilian government to enact antidiscrimination and affirmative
action legislation.
Brazil now has the most extensive antidiscrimination and affirmative action legislation of any
country in Latin America. In 2001, Brazil became the first Latin American country to endorse
quotas to increase minority representation in government service. 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. In 2010, Brazil enacted the Statute of Racial Equality, which offers tax
incentives for enterprises that undertake racial inclusion, stipulates that the government shall
adopt affirmative action programs to reduce ethnic inequalities, and reaffirms that African and
Brazilian black history should be taught in all elementary and middle schools, among other
provisions. Most recently, in August 2012, Brazil adopted an affirmative action law that requires
federal universities to reserve half of their spots for graduates of public high schools and
distribute those spots according to the racial makeup of each state.162 Although most Brazilians
favor government efforts to combat social exclusion, affirmative action initiatives have been
somewhat controversial.163
In March 2008, Brazil and the United States signed an agreement known as the United StatesBrazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality.
The initiative recognizes that Brazil and the United States are multi-ethnic, multi-racial
democracies, and seeks to promote equality of opportunity for the members of all racial and
ethnic communities. To that end, Brazil and the United States share best practices through
activities such as training programs, workshops, technical expert exchanges, scholarships, and
public-private partnerships.164 Current areas of focus include: expanding access to education for
students of African descent, eliminating racial health disparities, mitigating environmental
161
“UPPs Succeed in Lowering Violent Crime Rates,” Latin News Daily, September 19, 2012.
Simon Romero, “Brazil Enacts Affirmative Action Law for Universities,” New York Times, August 30, 2012.
163
Diogo Schelp, “Queremos Dividir o Brasil como na Foto?” Veja, September 2, 2009; “Affirming a Divide,”
Economist, January 28, 2012.
164
U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” April 11, 2012.
162
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impacts in communities of African descent, addressing challenges in criminal justice systems, and
guaranteeing equal access to economic opportunities.165 Congress called for continued U.S.
support for the Joint Action Plan in the report (H.Rept. 112-331) accompanying the Consolidated
Appropriations Act of 2012 (P.L. 112-74).
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. The
Amazon also holds 10% of the world’s carbon stores and absorbs nearly 2 billion tons of carbon
dioxide each year, making it a sink for global carbon emissions and an important asset in the
mitigation of climate change. Approximately 60% of the Amazon falls within Brazilian borders,
making Brazil home to 40% of the world’s remaining tropical forests.166 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. The human population
grew from 6 million in 1960 to 25 million in 2010, and approximately 20% of the Brazilian
Amazon has now been deforested as a result of settlements, roads, logging, farming and other
activities.167
Recognizing that continued destruction of the Amazon is damaging to Brazil’s global image and
could threaten energy generation and agricultural production in the future,168 the Brazilian
government has implemented a series of policies designed to slow deforestation. For example, the
Lula and Rousseff Administrations have significantly expanded the country’s nature reserves,
bringing Brazil’s total area of protected land to nearly 300,000 square miles.169 Likewise, the
Brazilian government adopted a plan to reduce the rate of Amazon deforestation by half—based
on the 1996-2005 average—to 2,300 square miles per year by 2017, and reduce Amazon
deforestation by 80% by 2020. To meet these targets, the Brazilian government is increasing
surveillance, replanting over 21,000 square miles of forest, and financing sustainable
development projects in areas where the local economy depends on logging.170 Brazil appears to
be on track to achieve its goals, as annual deforestation has fallen from about 10,700 square miles
in 2004 to about 2,500 square miles in 2011.171 There is considerable debate as to whether these
decreases are the result of government policies or changing economic circumstances, such as
lower commodity prices. One recent study, which examined deforestation in the Brazilian
165
U.S. Department of State, Office of the Spokesperson, “U.S.-Brazil Joint Action Plan Technical Meeting,” August
20, 2012.
166
“Brazil: Global Warming Risks Threaten Amazonia,” Oxford Analytica, March 16, 2009; Conor Foley, “The End of
the Amazon?,” Foreign Policy, June 2009; 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.
167
Bryan Walsh, “Amazonia: What’s Happening to the World’s Biggest Rain Forest?,” TIME, January 18, 2012.
168
See, for example, Fabiana Frayssinet, “Climate Change-Brazil: Farmers ‘Have Good Reason to Worry’,” Inter Press
Service, September 21, 2011; and “Amazonian Deforestation May Cut Rainfall by a Fifth: Study,” Agence France
Presse, September 5, 2012.
169
“Brazil: Government Policy for Amazon Still Ambiguous,” Latin News Weekly Report, May 22, 2008; “In
Anticipation of Rio+20, Brazil Creates New Nature Reserves and Closes Major Land-fill,” MercoPress, June 7, 2012.
170
“Government Sets Targets to Cut Deforestation,” Latin American Regional Report: Brazil & Southern Cone,
December 2008; “Brazil: Climate Credentials to the Fore in Copenhagen,” Oxford Analytica, November 19, 2009.
171
Fabiana Frayssinet, “Climate Change: Brazil Perfects Monitoring of Amazon Carbon Emissions,” Inter Press
Service, August 27, 2012.
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Amazon between 2005 and 2009, found that about half of the reduction in deforestation was
attributable to the Brazilian government’s conservation policies.172
Some environmentalists are concerned that government policy changes may halt or even reverse
Brazil’s recent progress in reducing deforestation. In December 2011, President Rousseff signed a
law transferring responsibility for environmental oversight of non-federal lands from Brazil’s
federal environmental agency, the Instituto Brasileiro do Meio Ambiente e dos Recursos
(IBAMA), to local officials. While the federal government maintains that local officials are better
placed to manage such resources, critics argue that local authorities lack the necessary finances
and are more susceptible to intimidation and corruption.173 Many environmentalists are also
concerned about potential changes to Brazil’s forest code—a law that requires rural landowners to
set aside between 20% and 80% of their land for natural vegetation. The Brazilian Congress
approved a major overhaul of the code in April 2012. Although President Rousseff vetoed some
of the most controversial provisions, the final version relaxes conservation requirements for
environmentally sensitive areas like river banks, reduces reforestation requirements for land that
has already been deforested, and decreases the total amount of forest that must be preserved.174
Supporters of the reform assert that it is necessary in order to bring farmers into compliance with
the law, and argue that the updated forest code remains among the strictest regulations of
privately-owned property in the world.175
U.S. environment programs in Brazil are designed to support tropical forest 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 other organizations
working throughout the Amazon Basin to conserve the forest’s biodiversity. USAID provided
Brazil with $14 million for environmental programs in FY2010, $11.5 million in FY2011, and an
estimated $10 million in FY2012.176 Although the Obama Administration did not request any aid
for environmental programs in Brazil for FY2013, the report (S.Rept. 112-172) accompanying the
Senate version of the annual foreign aid appropriations bill, S. 3241, recommends $10 million to
continue USAID’s activities in the Brazilian Amazon.
In August 2010, the United States and Brazil signed a debt-for-nature agreement under the
Tropical Forest Conservation Act of 2008 (P.L. 105-214). According to the agreement, the United
States will reduce Brazil’s debt payments by $21 million over five years. In exchange, the
Brazilian government will commit those funds to activities to conserve protected areas, improve
natural resource management, and develop sustainable livelihoods in endangered areas outside of
the Amazon such as the Atlantic Rainforest, Caatinga, and Cerrado ecosystems.177
172
Juliano Assunção, Clarissa C. e Grandour, and Rudi Rocha, Deforestation Slowdown in the Legal Amazon: Prices
or Policies, Climate Policy Initiative, Working Paper, Rio de Janeiro, February 6, 2012,
http://climatepolicyinitiative.org/wp-content/uploads/2012/03/Deforestation-Prices-or-Policies-Working-Paper.pdf.
173
Paulo Prada, “Special Report: Brazil Backslides on Protecting the Amazon,” Reuters, August 3, 2012.
174
“Environmental Law in Brazil: Compromise or Deadlock?,” Economist, June 2, 2012; Fernanda Krakovics,
“Ruralistas Vencem, e Senado Aprova Novo Código Florestal,” O Globo (Brazil), September 26, 2012.
175
Reese Ewing, “Interview-Brazil Land Use Bill to Make Forests Profitable,” Reuters, June 1, 2011; Kátia Abreu,
“Código Florestal e a Busca da Perfeição,” Folha de São Paulo, September 29, 2012.
176
U.S. Agency for International Development (USAID), CN #122, August 18, 2011; USAID, CN #90, July 12, 2012.
177
U.S. Department of State, Office of the Spokesman, “Debt-for-Nature Agreement to Conserve Brazil’s Tropical
Forests,” August 12, 2010. For more information on the Tropical Forest Conservation Act, see CRS Report RL31286,
Debt-for-Nature Initiatives and the Tropical Forest Conservation Act: Status and Implementation, by Pervaze A.
(continued...)
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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.
(...continued)
Sheikh.
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www.crs.gov
RL33456
Brazil: Political and Economic Situation and U.S. Relations
Summary
The United States has traditionally enjoyed cooperative relations with Brazil, which is the
seventh-largest economy in the world and is recognized by the Obama Administration’s National
Security Strategy as an emerging center of influence. Administration officials have often
highlighted Brazil’s status as a multicultural democracy, referring to the country as a natural
partner that shares values and goals with the United States. Bilateral ties have been strained from
time to time, however, as the countries’ occasionally divergent national interests and independent
foreign policies have led to disagreements. U.S.-Brazilian relations have been particularly
strained over the past year as a result of alleged National Security Agency (NSA) activities inside
Brazil. Nevertheless, the countries continue to engage on issues such as trade, energy, security,
racial equality, and the environment.
Political and Economic Situation
Dilma Rousseff of the center-left Workers’ Party was inaugurated to a four-year presidential term
on January 1, 2011, inheriting a country that had benefited from 16 years of stable governance
under Presidents Fernando Henrique Cardoso (1995-2002) and Luis Inácio Lula da Silva (20032010). She has spent much of her time in office focusing on domestic economic challenges.
Brazil experienced a rapid economic expansion from 2004 to 2010, but growth began to slow in
2011. While Rousseff’s efforts to stimulate domestic consumption and protect domestic industry
have helped keep unemployment near record lows, economic growth has yet to accelerate,
averaging 2% annually during the first three years of her term.
Rousseff has also had to contend with several political challenges. Mass demonstrations took
place across Brazil in June 2013, with protesters calling for better quality public services, among
other demands. Rousseff implemented some policy reforms in response to the demonstrations, but
smaller-scale protests have continued to occur and could grow in size in the lead-up to Brazil
hosting the World Cup in June and July 2014. The Brazilian Congress has provided additional
challenges for Rousseff, with some sectors of her multiparty coalition opposing her legislative
initiatives. Although Rousseff’s approval rating declined significantly during 2013, it has partially
recovered and stood at 41% in February 2014. National and state elections are scheduled for
October 2014, and early polling suggests Rousseff is favored to win reelection.
Congressional Action
Brazil has remained a subject of interest in the 113th Congress. In June 2013, the House
Committee on Ways and Means, Subcommittee on Trade, held a hearing examining the
opportunities and challenges of the U.S.-Brazil trade and investment relationship. As part of the
farm bill reauthorization (P.L. 113-79), Congress approved modifications to the U.S. cotton
program that could help resolve a long-running trade dispute with Brazil. Congress also continued
to support conservation of the Amazon Rainforest, appropriating $10.5 million for environmental
programs in the Brazilian Amazon in the Consolidated Appropriations Act, 2014 (P.L. 113-76).
Other measures that have been introduced in the 113th Congress include two bills designed to
pressure Brazil to amend its constitution and allow the extradition of Brazilian nationals; H.R.
571 would suspend foreign assistance to Brazil, and H.R. 572 would suspend the issuance of
visas to Brazilian nationals until Brazil changes its extradition policy.
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Brazil: Political and Economic Situation and U.S. Relations
Contents
Political and Economic Situation ..................................................................................................... 1
Background................................................................................................................................ 1
Cardoso Administration (1995-2002).................................................................................. 3
Lula Administration (2003-2010)........................................................................................ 3
Rousseff Administration (2011-Present) ................................................................................... 5
Economic Challenges .......................................................................................................... 6
Mass Demonstrations .......................................................................................................... 7
2014 Elections ........................................................................................................................... 9
U.S.-Brazil Relations ..................................................................................................................... 10
U.S. Foreign Assistance and Trilateral Development Initiatives ............................................. 11
Commercial Relations ............................................................................................................. 12
Bilateral Trade and Investment ......................................................................................... 13
Cotton Dispute .................................................................................................................. 15
Energy Ties .............................................................................................................................. 16
Biofuels ............................................................................................................................. 16
Oil...................................................................................................................................... 17
Security Cooperation ............................................................................................................... 19
Counternarcotics................................................................................................................ 20
Counterterrorism ............................................................................................................... 21
Defense .............................................................................................................................. 22
Promotion of Racial Equality .................................................................................................. 23
Amazon Conservation ............................................................................................................. 24
Figures
Figure 1. Map of Brazil.................................................................................................................... 2
Figure 2. U.S. Trade with Brazil: 2004-2013................................................................................. 14
Figure 3. U.S. Oil Trade with Brazil: 2004-2013 .......................................................................... 19
Figure 4. Deforestation in the Brazilian Amazon: 2004-2013 ....................................................... 25
Tables
Table 1. U.S. Assistance to Brazil: FY2010-FY2015 .................................................................... 11
Appendixes
Appendix. Legislative Initiatives in the 113th Congress ................................................................. 28
Contacts
Author Contact Information........................................................................................................... 28
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Brazil: Political and Economic Situation and U.S. Relations
Political and Economic Situation
President Dilma Rousseff of the center-left Workers Party took office on January 1, 2011, and is
now in the final year of her term. She inherited a country that had benefited from 16 years of
capable governance under Presidents Fernando Henrique Cardoso (1995-2002) and Luis Inácio
Lula da Silva (2003-2010), during whose terms Brazil made significant advances in economic
stabilization and social inclusion. Rousseff has faced a series of challenges in office, however, as
the Brazilian economy has slowed and citizens have taken to the streets to express a variety of
frustrations. While Rousseff has won support from the Brazilian Congress for portions of her
policy agenda, she occasionally has been stymied by sectors of her own multiparty coalition.
Brazil continues to face considerable economic challenges as the country prepares to host the
World Cup in June and July 2014 and hold national and state elections in October 2014.
Nevertheless, early polling suggests that Rousseff is favored to win a second term as president.
Background
Brazil occupies almost half of the continent of South America and is the fifth most populous
country in the world with 201 million citizens.1 The country declared independence from Portugal
in 1822, initially establishing a constitutional monarchy and retaining a slave-based, plantation
economy. Brazil abolished slavery in 1888 and became a republic in 1889, but economic and
political power remained concentrated in the hands of large rural landowners and the vast
majority of Brazilians remained outside the political system. The authoritarian government of
Getúlio Vargas (1930-1945) began the incorporation of the working classes but exerted strict
control over labor as part of his broader push to centralize power. Vargas also increased the state’s
role in the economy and pursued import-substitution industrialization. Brazil enjoyed multiparty
democracy between 1945 and 1964, but experienced polarization and instability as economic
growth slowed, inflation increased, and populism gained strength.
The Brazilian military seized power in a 1964 coup, ushering in two decades of authoritarian rule
(1964-1985). Although repressive—especially between 1969 and 1974, the Brazilian military was
not as brutal as those in some other South American countries. It nominally allowed the judiciary
and Congress to function during its tenure, but stifled representative democracy and civic action,
carefully preserving its influence during one of the most protracted transitions to democracy to
occur in Latin America. Brazil continued to pursue state-led development during most of the
military era, and industrialization helped foster the transformation of Brazil into a predominantly
urban society.
Brazil restored civilian rule in 1985, and a national constituent assembly, elected in 1986,
promulgated a new constitution in 1988. The constitution, as amended, established a liberal
democracy with a strong president, a bicameral Congress consisting of the 513-member Chamber
of Deputies and the 81-member Senate, and an independent judiciary. Power is somewhat
decentralized under the country’s federal structure, which includes 26 states, a federal district, and
some 5,570 municipalities. The reestablishment of democracy did not ensure stability, however,
1
United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Statistical Yearbook for Latin
America and the Caribbean, 2013, December 2013, p.33, http://www.eclac.cl/publicaciones/xml/5/51945/
AnuarioEstadistico2013.pdf.
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as Brazil experienced economic recession and political uncertainty during the first decade after
the political transition. Numerous efforts to control runaway inflation failed and two elected
presidents did not complete their terms; one died before taking office and the other was
impeached on corruption charges.2
Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS Graphics.
2
Brazil: A Country Study, ed. Rex A. Hudson, 5th ed. (Washington, DC: Library of Congress, 1998).
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Cardoso Administration (1995-2002)
Brazil’s economic and political situation began to stabilize under President Fernando Henrique
Cardoso, who was elected to serve two terms between 1995 and 2002. A prominent sociologist of
the centrist3 Brazilian Social Democracy Party (Partido da Social Democracia Brasileira,
PSDB), Cardoso’s initial election in 1994 was largely the result of the success of the anti-inflation
“Real Plan” that he implemented as finance minister under President Itamar Franco (1992-1994).
The plan consisted of a new currency (the real) pegged to the U.S. dollar, a more restrictive
monetary policy, and a severe fiscal adjustment that included a 9% reduction in federal spending
and an across-the-board tax increase of 5%. Prices immediately began to stabilize, with annual
inflation falling from 2,730% in 1993 to about 18% in 1995.4 Cardoso continued the economic
reform push after taking office, privatizing some state-owned enterprises and gradually opening
the Brazilian economy to foreign trade and investment.
Although these policies contributed to stronger growth rates for a few years, macroeconomic
stability remained elusive. Foreign investors began flooding Brazil with large capital inflows that
contributed to currency appreciation and the eventual overvaluation of the real. Following the
1997 East Asian and 1998 Russian financial crises, concerns about Brazil’s overvalued exchange
rate and substantial fiscal deficits sparked a massive capital flight. Brazil was forced to adopt a
floating exchange rate and the real lost 40% of its value.5
Cardoso’s popularity declined as Brazil struggled with these economic challenges; however, most
analysts credit him with laying the foundation for the macroeconomic stability that Brazil has
experienced since he left office. In the aftermath of the 1998-1999 financial crises, Brazil adopted
the three main pillars of its macroeconomic policy: a floating exchange rate, a primary budget
surplus, and an inflation-targeting monetary policy. Cardoso also established a series of targeted
income transfer programs designed to alleviate poverty. These economic and social policies have
been maintained and built upon by subsequent administrations.
Lula Administration (2003-2010)
Luis Inácio Lula da Silva—known as Lula—was elected president of Brazil in 2002, his fourth
attempt at the presidency as the candidate of the center-left6 Workers Party (Partido dos
Trabalhadores, PT) that he helped found as a metalworker and union leader. During his first term,
Lula maintained the market-oriented economic policies associated with his predecessor. He
tightly controlled expenditures, raised the primary budget surplus, and granted additional
autonomy to the Central Bank. At the same time, he placed greater emphasis on reducing poverty,
reorganizing and expanding some of the social programs that had been initiated under Cardoso.
The most high profile program, Bolsa Familia (“Family Grant”), provides monthly cash transfers
3
The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB). It has moved to the right,
however, since implementing market-oriented economic reforms during the Cardoso Administration. Timothy J. Power
and Cesar Zucco Jr., “Estimating Ideology of Brazilian Legislative Parties, 1990-2005,” Latin American Research
Review, vol. 44, no. 1, 2009.
4
CRS Report 98-987, Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
5
Ibid; Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010.
6
Although the PT was founded as a leftist party, it moved toward the ideological center upon taking office in 2002.
Power and Zucco, 2009, op.cit.
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to poor families that ensure their children attend school and receive proper medical care. Lula’s
agenda stalled toward the end of his first term as several top PT officials were implicated in a
vote-buying scheme. Although the scandal ultimately led to the convictions of 25 people—
including Lula’s former chief of staff—in 2012,7 Lula was reelected in 2006.
After primarily focusing on maintaining economic stability during his first term, Lula established
a larger role for the Brazilian state in economic development during his second term. He
expanded Bolsa Familia and launched new social welfare programs such as Minha Casa, Minha
Vida (“My House, My Life”)—an attempt to increase formal housing for low-income Brazilians.
He also continued to raise the minimum wage, which, adjusted for inflation, increased nearly
64% during his eight years in office.8 In response to the global financial crisis, the Lula
Administration implemented a series of stimulus measures designed to offset declines in global
demand with increased domestic consumption. Analysts have credited the administration’s timely
policy response for mitigating the effects of the crisis and facilitating recovery;9 the Brazilian
economy contracted by 0.3% in 2009 before rebounding with 7.5% growth in 2010.10 Moreover,
Lula won legislative approval for a new regulatory framework that is designed to increase the
state’s role in the exploitation of Brazil’s considerable offshore oil reserves and use the resources
to fuel long-term economic and social development.
Although some observers criticized Lula for not doing more to advance certain policy reforms,11
most give him credit for improving social inclusion in Brazil. Between 2001 and 2011, the
percentage of the population living in poverty fell from 37.5% to 20.9%, and the percentage
living in extreme poverty fell from 13.2% to 6.1%.12 Income inequality was also reduced, with
the Gini coefficient13 falling from 0.64 to 0.56 during the same time period.14 While these
advances were partially the result of stronger economic growth driven by a boom in international
demand for Brazilian commodities, government policy also played a role. According to a 2012
study, about 28% of the decline in income inequality in Brazil between 2001 and 2009 was
attributable to increases in the minimum wage and another 12.7% of the decline was attributable
to the Bolsa Família program.15
7
“Brazil Politics: Supreme Court Gives Tough Sentences in ‘Mensalão’ Trial,” Economist Intelligence Unit, October
26, 2012.
8
Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
9
See, for example, International Monetary Fund (IMF), “IMF Executive Board Concludes 2010 Article IV
Consultation with Brazil,” August 5, 2010.
10
IMF, World Economic Outlook Database, October 2013, accessed February 2014.
11
See, for example, “Brazil's Presidential Election: Lula's Legacy,” Economist, September 30, 2010; and Paulo Kliass,
“Lula's Political Economy: Crisis and Continuity,” North American Congress on Latin America (NACLA), March/April
2011.
12
ECLAC, Statistical Yearbook for Latin America and the Caribbean, 2012, December 2012, p.65,
http://www.eclac.cl/publicaciones/xml/4/48864/AnuarioEstadistico2012_ing.pdf.
13
The Gini coefficient is a value between zero and one, where zero represents complete equality and one represents
complete inequality.
14
ECLAC, December 2012, op.cit., p.70.
15
Pedro H. G. Ferreira de Souza, Poverty, Inequality and Social Policies in Brazil, 1995-2009, U.N. Development
Programme, International Policy Centre for Inclusive Growth, Working Paper Number 87, Brasilia, February 2012,
p.19, http://www.ipc-undp.org/pub/IPCWorkingPaper87.pdf.
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Brazil at a Glance
Land Area: 8.5 million sq. km. (slightly smaller than the United States)
Population: 201.5 million (2014 est.)
Race/Ethnicity: White—47.7%, Brown—43.1%, Black—7.6%, Asian—1.1%, Indigenous—0.4% (Self-identification,
2010)
Religion: Catholic—65%, Evangelical Christian—22%, None—8%, Other—4% (2010)
Official Language: Portuguese
Gross Domestic Product (GDP): $2.2 trillion (2013 est.)
GDP per Capita: $10,958 (2013 est.)
Top Exports: iron ore, soy beans, oil, meat, motor vehicles and parts, machinery, and sugar (2013)
Life Expectancy at Birth: 73.2 years (2010-2015 est.)
Infant Mortality Rate: 19 per 1,000 live births (2010-2015 est.)
Adult Literacy Rate: 90.4% (2011)
Poverty Rate: 18.6% (2012)
Indigence Rate: 5.4% (2012)
Sources: Area, race/ethnicity, and religion statistics from the Instituto Brasileiro de Geografia e Estatística (IBGE); GDP
estimates from the International Monetary Fund (IMF); trade data from Global Trade Atlas; population and social
statistics from the U.N. Economic Commission for Latin America and the Caribbean (ECLAC).
Rousseff Administration (2011-Present)
Dilma Rousseff of the center-left PT was inaugurated to a four-year term in January 2011,
becoming Brazil’s first woman president. She had never been elected to public office prior to
winning the presidency,16 but was chosen by Lula to run as his successor. Rousseff served as
minister of mines and energy from 2003 to 2005 and Lula’s chief of staff from 2005 to 2010,
during which time she was in charge of strategic projects such as the government’s housing
program, investments in infrastructure, and a new regulatory framework for developing Brazil’s
offshore oil reserves. Rousseff is an economist by training. She originally became involved in
politics by joining underground leftist groups that fought against the military regime; Rousseff
was arrested, tortured, and imprisoned for nearly three years during the authoritarian period.17
Although her multiparty coalition nominally holds significant majorities in both houses of the
Brazilian Congress, Rousseff has struggled throughout her term to hold the ideologically diverse
coalition together. Given the fragmented nature of Brazil’s political system, presidents have
traditionally distributed control of ministries and state enterprises to coalition partners in order to
construct governing majorities. Rousseff’s distribution of appointments, which heavily favors the
PT over the other seven parties with representation in the 39-member cabinet, has upset some
sectors of the coalition. Her dismissal of six cabinet ministers accused of corruption during her
16
Rousseff won 56% of the vote to defeat José Serra of the PSDB in a second round runoff election on October 31,
2010. The second round was necessary since Rousseff had fallen just short of an absolute majority—with 47% of the
vote—in the first round election held on October 3, 2010. In the first round, she was followed by Serra at 33%, and
Marina Silva, a former Lula Administration environment minister that ran for president as the candidate of the Green
Party (Partido Verde, PV), at 19%.
17
Presidência da República Federativa do Brasil, “Presidenta: Biografia,” July 4, 2011.
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first year in office and periodic efforts to more tightly control government expenditures have
exacerbated these intra-coalition divisions. In Brazil’s 513-seat Chamber of Deputies, for
example, the number of deputies supporting the Rousseff Administration on at least 90% of votes
fell from 306 (60%) in 2011 to 123 (24%) in 2013.18 While Rousseff has been able to win
legislative support for portions of her policy agenda, she has lost key congressional votes on
issues such as the distribution of oil royalties and reforms to Brazil’s forest conservation law.19
Economic Challenges
Rousseff has spent the majority of her time in office focused on domestic economic challenges.
With a gross domestic product (GDP) of $2.2 trillion,20 Brazil is the largest economy in Latin
America and the seventh-largest economy in the world. The country experienced rapid economic
growth from 2004 to 2010, driven by a boom in international demand—particularly from China—
for Brazilian commodities such as meat, sugar, soybeans, iron ore, and crude oil. The initial
expansion was reinforced by domestic consumption from Brazil’s fast-growing middle class,21
which now accounts for a majority of the population.22 As international commodity prices began
to fall, however, economic growth slowed.
The Rousseff Administration has sought to offset the weaker international economic situation by
boosting domestic consumption and protecting domestic industry. The Administration has
pursued an expansionary fiscal policy, implementing a series of short-term stimulus packages. It
has also adopted a new industrial policy, known as Brasil Maior (“Bigger Brazil”), which has
included targeted tax cuts and financing through the Brazilian Development Bank (BNDES) for
domestic manufacturing, stronger preferences for locally produced goods in government
procurement, and restrictions on imports.23
While these measures have helped keep unemployment near historic lows (5.1% in February
2014),24 economic growth has yet to recover. The Brazilian economy expanded by an average of
about 2% annually from 2011 to 2013,25 and is forecast to grow by 2.3% in 2014.26 As a result of
lower tax receipts, the Brazilian government has been forced to rely on accounting maneuvers
and extraordinary revenue to meet its primary budget surplus target.27 Moreover, these economic
18
José Roberto de Toledo, Isadora Peron, and Rodrigo Burgarelli, “PSD e PSB Puxam Derrotas do Governo na
Câmara; Núcleo Fiel a Dilma Fica 60% Menor,” O Estado de São Paulo, January 20, 2014.
19
Joe Leahy, “Brazil Grapples with Dysfunctional Congress; Controversy over Pastor Highlights Complexity of
Dealing with a Congress Hostage to Diverse Interest Groups,” Financial Times, April 10, 2013.
20
IMF, World Economic Outlook Database, October 2013, accessed February 2014.
21
The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn approximately $760-$3,280 (R$1,734-7,475) per month, are generally referred to as the “new middle class.”
22
Marcelo Cortes Neri, Os Emergentes dos Emergentes: Reflexões Globais e Ações para a Nova Classe Média
Brasileira, Fundação Getulio Vargas, Rio de Janeiro, June 27, 2011, p.35.
23
“Brazil: Propping Up Industry,” Economist Intelligence Unit, August 15, 2011; Howard Schneider, “Brazil’s Inward
Turn Bothers U.S.” Washington Post, December 4, 2012.
24
Instituto Brasileiro de Geografia e Estatística (IBGE), “Unemployment Rate was 5.1% in February,” March 27,
2014.
25
IMF, World Economic Outlook Database, October 2013, accessed February 2014.
26
IMF, World Economic Outlook Update, Is the Tide Rising?, January 21, 2014.
27
Paulo Trevisani, “Brazil Changes Budget; Freezes Some Spending to Regain Markets’ Confidence,” Wall Street
Journal, February 20, 2014.
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policies have helped push inflation to the upper edge of the government’s targeted boundary
(4.5% with a 2-point tolerance band), weakening citizens’ purchasing power and eroding national
competitiveness. In order to keep inflation under control, the Brazilian Central Bank, which
previously had reduced interest rates to record lows, was forced to reverse course and adopt a
tighter monetary policy.28
Many analysts maintain that Brazil’s slower economic growth is the result of structural
constraints such as “infrastructure deficiencies, high labor costs and low skill levels, a high tax
burden and an onerous tax system, excessive administrative burdens, shallow credit markets, and
barriers to international trade.”29 They argue that the Brazilian government should address these
constraints and thereby improve productivity and boost investment, rather than continuing to try
to stimulate consumption.30 It appears as though the Rousseff Administration recognizes these
constraints on growth. Among other measures, it has cut taxes and encouraged private investment
in the country’s overburdened infrastructure by tendering concessions to build and operate roads,
railways, ports, and airports. Significant challenges remain, however, as Brazil is ranked 116th out
of 189 countries in the World Banks’s 2014 “Ease of Doing Business” index,31 and gross
domestic investment stands at 18.4% of GDP32—well below the 22%-23% of GDP that
economists estimate is necessary to sustain higher economic growth.33
Mass Demonstrations
Mass demonstrations took place across Brazil in June 2013, and smaller protests have continued
to take place periodically since then. The protests began on June 6, 2013, when about 2,000
people took to the streets of São Paulo to oppose an increase in bus fares. The crowds started to
grow as Brazilians shocked by the heavy-handed police response joined in subsequent
demonstrations. The situation then rapidly evolved as Brazilians began to air a broader array of
grievances and news of the demonstrations was relayed through social media. At the peak of the
demonstrations on June 20, 2013, an estimated 1.2 million people protested in 80 cities across
Brazil.34
While the protesters voiced a wide range of complaints, the underlying cause of the
demonstrations appears to be the government’s failure to meet citizens’ rising expectations. Some
40 million Brazilians have joined the middle class since 2003,35 and many that have left poverty
behind expect further improvements in their living standards. Public education, health, and
transportation services are generally perceived to be low quality, however, and the slowing
economy and rising cost of living have reinforced the precarious position of the new middle class.
Moreover, inequality remains high by international standards despite a significant reduction over
28
Walter Brandimarte, “Insight – Brazil’s Tombini: An Inflation Hawk, Believe It or Not,” Reuters, August 23, 2013.
Organisation for Economic Co-operation and Development (OECD), OECD Economic Surveys: Brazil, October
2013.
30
Ibid; “The Days of Easy Growth are Over for Now,” Latin America Monitor: Brazil, July 2013; IMF, Brazil: Staff
Report for the 2013 Article IV Consultation, IMF Country Report No. 13/312, Washington, DC, October 2013,
http://www.imf.org/external/pubs/ft/scr/2013/cr13312.pdf.
31
World Bank, “Ease of Doing Business in Brazil,” http://www.doingbusiness.org/data/exploreeconomies/brazil.
32
IMF, October 2013, op.cit., p.45.
33
Joe Leahy, “Investors Worry the Dilma Model is Unravelling in Brazil,” Financial Times, May 20, 2013.
34
“Brazil’s Stormy June: Not Turkey or Egypt,” Latin American Security & Strategic Review, June 2013.
35
Neri, 2011, op.cit., p.35.
29
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the past decade; the top 10% of Brazilians receive over 46% of all income—more than the bottom
80% of Brazilians combined.36
Although there continues to be broad support for Brazil’s development model, which includes
relatively high taxes (36.3% of GDP in 2012)37 and an active role for the government in the
economy,38 many Brazilians believe public funds are being squandered through corruption and
unnecessary expenditures. Some 200 federal legislators are reportedly facing criminal charges,39
and, until recently, several legislators that had been convicted in high-profile corruption cases
were allowed to keep their seats in Congress. The Confederations Cup soccer tournament that
Brazil hosted in June 2013 as a prelude to the 2014 World Cup served as a useful backdrop for
protesters seeking to highlight the divergence between the priorities of average citizens, who
demand better public services, and Brazilian politicians, who are investing about $11.2 billion
(R$25.6 billion)40 to upgrade soccer stadiums and related infrastructure. Over the course of June
2013, the percentage of Brazilians rating the Rousseff Administration as “good” or “excellent”
fell 27 points to 30%.41 Politicians from other parties and at other levels of government saw
similar declines, reflecting citizens’ general discontent with the Brazilian political class.
The demonstrations appear to have caught Brazilian politicians off-guard.42 Prior to the protests,
President Rousseff enjoyed high approval ratings, and many in the ruling coalition assumed that
Brazilians would continue to reward them politically for Brazil’s decade-long rise in living
standards. According to some analysts, however, it is precisely because Brazilians enjoy more
economic security that they have been able to focus on broader quality of life and good
governance issues.43 Moreover, while some labor unions and social movements have close ties to,
and regularly consult with, the PT and other Brazilian political parties, the protests reportedly
have been fueled by youth without strong connections to the political system.44
In an attempt to regain the initiative, Rousseff called on Brazilian policy makers to adopt a
variety of policy changes—some of which she had previously proposed—to address the
protesters’ demands. Her five so-called “pacts” related to fiscal responsibility, political reform,
healthcare, public transportation, and education.45 While some of Rousseff’s initiatives have
moved forward, others have not. Her political reform proposal found little support in the Brazilian
Congress, but small-scale electoral changes and several anti-corruption and transparency
measures have been enacted. The Brazilian Congress also adopted a measure to dedicate 75% of
36
ECLAC, December 2013, op.cit., p.77.
OECD, ECLAC, and Inter-American Center of Tax Administrations, Revenue Statistics in Latin America, 19902012, January 2014.
38
For example, a November 2013 poll found that 67% of Brazilians think the government, rather than the private
sector, should be most responsible for investing to produce economic growth. Ricardo Mendonça, “Brasileiros se
Dividem sobre Impostos e Papel do Governo,” Folha de São Paulo, December 8, 2013.
39
Simon Romero, “Public Rage Catching Up With Brazil’s Congress,” New York Times, June 27, 2013.
40
República Federativa do Brasil, Ministério do Esporte, “Matriz de Responsabilidades Consolidada,” September
2013.
41
“Avaliação da Presidente Dilma Rousseff,” Datafolha, June 28, 2013.
42
Francisco Peregil, “Las Protestas Dejan a Brasil Perplejo,” El País (Spain), June 23, 2013; “A Direção do PT está em
Pânico, Diz Historiador,” Folha de São Paulo, June 23, 2013.
43
Bob Moser, “Record Low Unemployment Fueling Protestor Confidence in Brazil,” MercoPress, July 2, 2013.
44
Fernando Rodrigues, “Movimento está Divorciado dos Políticos Tradicionais,” Folha de São Paulo, June 18, 2013.
45
Presidência da República Federativa do Brasil, “Discurso da Presidenta da República, Dilma Rousseff, durante
Reunião com Governadores e Prefeitos de Capitais,” June 24, 2013.
37
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the funds generated by oil royalties to education and 25% to health care. For its part, the Rousseff
Administration has increased expenditures for urban transportation projects, and created a
program known as Mais Médicos (“More Doctors”) that has brought nearly 14,000 (mainly
Cuban) doctors to Brazil to work in underserved communities.46
Although some Brazilians have continued to protest, the demonstrations have been less frequent
and smaller in scale since June 2013. The protests also appear to have lost some public support as
a result of so-called “Black Bloc” demonstrators that have engaged in confrontations with police
and vandalism. Between June 2013 and February 2014, the percentage of Brazilians supporting
the protests fell from 81% to 52% and the percentage opposed to the protests increased from 15%
to 42%.47 Nevertheless, large-scale demonstrations could reemerge in the lead-up to the World
Cup, which is scheduled to be played in Brazil between June 12 and July 13, 2014.
2014 Elections
Brazil is scheduled to hold presidential, legislative, and state office elections on October 5, 2014.
President Rousseff is running for reelection as the PT’s candidate and is currently attempting to
solidify alliances with the rest of the parties in her ruling coalition. The principal opposition
candidates appear to be Aécio Neves, a Senator from the state of Minas Gerais and the candidate
of the PSDB, and Eduardo Campos, the governor of the state of Pernambuco and the candidate of
the center-left Brazilian Socialist Party (Partido Socialista Brasileiro, PSB). Campos has forged
an alliance with Marina Silva, who served as an environment minister in the Lula Administration
and won 19% of the presidential vote in 2009. While the PSDB has led the political opposition
since the PT first took power in 2003, the PSB was a member of the ruling coalition until
September 2013. Neves and Campos have adopted similar campaign rhetoric, promising to
maintain the successful social policies of the PT while increasing government efficiency,
strengthening the economy, reducing crime, and improving the quality of public services.48
Early polling suggests that Rousseff is favored to win reelection. A February 2014 poll found that
when asked to choose between the top three contenders, 47% of Brazilians would vote for
Rousseff, 17% would vote for Neves, and 12% would vote for Campos. Nevertheless, there are
some indications that the race could tighten. Rousseff’s approval rating has only partially
recovered since its precipitous drop in June 2013 and currently stands at 41%. Likewise, 67% of
Brazilians say they would prefer that the next president take different actions than those of
President Rousseff. Rousseff also currently benefits from higher name recognition, which will
likely change over the course of the campaign. While Rousseff is known to all Brazilians, 24%
have never heard of Neves and 45% have never heard of Campos.49 If no candidate wins an
absolute majority, a runoff election would be scheduled for October 26, 2014.
46
Paulo Victor Chagas, “Cinco Pactos Foram a Resposta do Governo Federal aos Protestos de Junho,” Agência Brasil,
December 31, 2013; Johanna Nublat, “Com Nova Leva, Cubanos Serão 82% do Mais Médicos,” Folha de São Paulo,
March 6, 2014.
47
Fabiano Maisonnave, “Aprovação à Realização da Copa é a Menor em 5 Anos,” Folha de São Paulo, February 24,
2014.
48
Gustavo Patu, “Críticas de Aécio e Campos ao PT são Quase Idênticas,” Folha de São Paulo, February 9, 2014.
49
Datafolha, Intenção de Voto para Presidente 2014, February 20, 2014; Fernando Rodrigues, “Dilma Para de Subir,
Mas Seria Reeleita No 1° Turno,” Folha de São Paulo, February 23, 2014.
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U.S.-Brazil Relations
The United States and Brazil have traditionally enjoyed cooperative relations. The Obama
Administration’s National Security Strategy recognizes Brazil as an emerging center of influence
and asserts that the U.S. government welcomes Brazil’s leadership to “pursue progress on
bilateral, hemispheric, and global issues.”50 To this end, the countries have at least 20 active
bilateral dialogues, which serve as vehicles for policy coordination on issues of mutual concern.51
State Department officials maintain that the United States and Brazil are “natural partners” with
“shared values and increasingly converging goals.”52 Through the Obama Administration’s
100,000 Strong in the Americas initiative and Brazil’s Science without Borders program, for
example, both countries are seeking to create new academic and research partnerships and
increase educational exchanges among U.S. and Brazilian students.
Nevertheless, bilateral ties have been strained from time to time as the countries’ occasionally
divergent national interests and independent foreign policies have led to disagreements. Several
long-running disputes relate to trade, where Brazil has pushed the United States to reduce
protections for U.S. agriculture and the United States has pushed Brazil to reduce protections for
Brazilian industry (see “Commercial Relations”). Other disagreements have arisen as Brazil has
taken on a larger role in international affairs. In 2010 and 2011, for example, Brazil used its
temporary seat on the U.N. Security Council to advocate engagement with internationally isolated
regimes like Iran, Libya, and Syria. While the United States and Brazil generally agreed on
desired outcomes in these countries, Brazil’s long-standing commitment to the peaceful resolution
of conflicts and its aversion to the use of military force (or economic sanctions, which it views as
a prelude to the use of force) led it to approach the issues much differently than the United States.
Bilateral relations have been particularly strained over the past year as the press has reported on
alleged National Security Agency (NSA) activities in Brazil. The reports, which indicated that the
NSA had spied on President Rousseff and the state-owned oil company Petróleo Brasileiro S.A.
(Petrobras) in addition to engaging in broader electronic surveillance, led Brazil to indefinitely
postpone a state visit to Washington that Rousseff was scheduled to make in October 2013. They
also appear to have influenced Brazil’s decision to award a $4.5 billion fighter jet procurement
deal to Sweden’s Saab AB over Boeing (see “Defense”). At the September 2013 U.N. General
Assembly, Rousseff denounced alleged NSA activities as a breach of international law and a
threat to democratic governance, stating, “I fought against authoritarianism and censorship, and I
cannot but defend, in an uncompromising fashion, the right to privacy of individuals and the
sovereignty of my country. In the absence of the right to privacy, there can be no true freedom of
expression and opinion, and therefore no effective democracy.” She also asserted that “friendly
governments and societies that seek to build a true strategic partnership ... cannot allow recurring
illegal actions to take place as if they were normal. They are unacceptable.”53
50
White House, National Security Strategy, May 2010, p. 44.
U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S. Relations with Brazil,” Fact Sheet, October
3, 2013.
52
William J. Burns, Deputy Secretary of State, “Building a Deeper Partnership with Brazil,” Remarks in Rio de
Janeiro, Brazil, March 1, 2012.
53
President Dilma Rousseff, Statement by H.E. Dilma Rousseff, President of the Federative Republic of Brazil, at the
Opening of the General Debate of the 68th Session of the United Nations General Assembly, September 24, 2013.
51
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U.S. Foreign Assistance and Trilateral Development Initiatives
As a middle-income country, Brazil does not receive large amounts of U.S. assistance. The
United States provided Brazil with $25.5 million in FY2011, $19 million in FY2012, and $15.2
million in FY2013. The Obama Administration estimates that $13.9 million will be provided to
Brazil in FY2014 and has requested $3.4 million for Brazil in FY2015 (see Table 1). The
majority of the assistance provided in recent years has supported conservation programs in the
Brazilian Amazon (see “Amazon Conservation”). The FY2015 request is significantly lower than
the FY2014 estimate as a result of the Administration not requesting additional funds for these
environmental programs in Brazil. The United States has also provided Brazil with security
assistance, much of which has focused on counternarcotics and military capacity building efforts
(see “Security Cooperation”).
Table 1. U.S. Assistance to Brazil: FY2010-FY2015
In thousands of U.S. dollars
FY2010
FY2011
FY2012
FY2013
FY2014
(estimate)
25,099
23,321
18,038
15,185
13,865
3,365
16,789
15,000
12,800
11,462
12,500
2,000
GHP-State
1,300
1,300
1,300
881
500
500
GHP-USAID
5,000
4,990
0
0
0
0
INCLE
1,000
1,000
3,000
2,000
0
0
NADR
400
400
300
270
240
240
IMET
610
631
638
572
625
625
1,928
2,167
919
NA
NA
NA
583
1,012
557
NA
NA
NA
0
127
247
NA
NA
NA
1,345
1,028
115
NA
NA
NA
27,027
25,488
18,957
15,185
13,865
3,365
Account
State Department and
USAID, Subtotal
DA
DOD, Subtotala
1004
2249c
2561
Total
FY2015
(request)
Sources: U.S. Department of State, Congressional Budget Justifications for Foreign Operations, Fiscal Years 2012,
2013, 2014, and 2015; U.S. Department of Defense, Reports to Congress on Foreign-Assistance Related Programs,
Fiscal Years 2010, 2011, and 2012.
Notes: DA=Development Assistance; GHP=Global Health Programs; INCLE=International Narcotics Control
and Law Enforcement; NADR=Nonproliferation Anti-terrorism, Demining, and Related programs;
IMET=International Military Education and Training; 1004=DOD counternarcotics aid; 2249c=DOD
counterterrorism education and training; and 2561=DOD humanitarian aid.
a.
DOD assistance data for FY2013, FY2014, and FY2015 are not yet available.
Most U.S. assistance is provided through the State Department and U.S. Agency for International
Development (USAID), and is funded through annual Department of State, Foreign Operations,
and Related Programs appropriations measures. A small portion of U.S. assistance for Brazil is
provided through the Department of Defense (DOD), and is funded through annual DOD
appropriations measures.
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In recent years, USAID has begun working with Brazil’s development agency, the Brazilian
Cooperation Agency (Agência Brasileria de Cooperação, ABC), in third countries. Under these
so-called trilateral development initiatives, the United States and Brazil share expertise and
funding in order to accomplish common goals.54 The Administration’s FY2014 budget request
included funding to strengthen ABC’s capacity and implement jointly funded food security
projects in countries such as Haiti, Honduras, and Mozambique. It also included funding designed
to foster collaboration between the Centers for Disease Control and Prevention (CDC) and the
Brazilian Ministry of Health in order to combat HIV/AIDS in Brazil and Lusophone Africa.55
A measure introduced in the 113th Congress, H.R. 571 (T. Ryan), would suspend foreign
assistance to Brazil until the country amends its constitution to allow the extradition of Brazilian
nationals. The bill, which was prompted by the case of a Brazilian woman who allegedly killed
her American husband before fleeing to Brazil, has yet to advance.
Commercial Relations
Trade policy has often been a contentious issue in U.S.-Brazilian relations. Over the past two
decades, Brazil’s trade policy has prioritized regional integration through the Common Market of
the South (Mercosur)56 and multilateral negotiations at the World Trade Organization (WTO).57
Brazil is the industrial hub of Mercosur, which was established in 1991 and also includes
Argentina, Paraguay, Uruguay, and Venezuela. While the bloc was created with the intention of
incrementally advancing toward full economic integration, only a limited customs union has been
achieved thus far. The group has also been plagued by internal disputes and frequent rule
changes. Instead of serving as a platform for insertion into the global economy as originally
envisioned, Mercosur has evolved into a more protectionist arrangement, shielding its members
from external competition. Beginning in the 1990s, the United States sought to incorporate
Mercosur and other sub-regional trade blocs into a hemisphere-wide Free Trade Area of the
Americas (FTAA).58 The initiative was effectively killed in 2005, however, when the United
States was unable to persuade Brazil and the other members of Mercosur to continue the
negotiations.
At the WTO, Brazil has played a key role in the Doha Round59 of multilateral trade negotiations
that began in 2001. It has led the G-20 group of developing nations in insisting that developed
countries reduce agricultural tariffs and subsidies. Brazil has also resisted calls by the United
States and other developed countries for increased access to developing nations’ industrial and
54
Paulo Sotero, Shaping U.S.-Brazil Relationship after the Snowden Affair: A Conversation with Ambassador Thomas
A. Shannon, Woodrow Wilson International Center for Scholars, Brazil Institute, Special Report, Washington, DC,
February 2014, http://www.wilsoncenter.org/sites/default/files/AmbassadorThomas%20Shannon%20-%20Final.pdf.
55
U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2014, Annex:
Regional Perspectives, July 2, 2013, http://www.state.gov/documents/organization/208291.pdf.
56
For background information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for
U.S. Trade Policy, by J. F. Hornbeck.
57
João Augusto de Castro Neves, Brazil's Slow and Uncertain Shift from Protectionism to Free Trade, Inter-American
Dialogue, Working Paper, January 2014, http://www.thedialogue.org/uploads/CastroNeves_Trade.pdf.
58
For background information on the FTAA see CRS Report RS20864, A Free Trade Area of the Americas: Major
Policy Issues and Status of Negotiations, by J. F. Hornbeck.
59
For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
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services sectors. In 2013, Brazil’s widely respected diplomat and trade representative Roberto
Azevêdo was appointed Director General of the WTO. He has sought to revive the Doha Round,
successfully negotiating a small-scale agreement on trade facilitation measures in December
2013. Negotiations on more sensitive issues like agriculture reportedly remain stalled.60
Some Brazilian analysts have argued that the international trading system is undergoing a
significant transformation and that Brazil should reconsider its current trade policy.61 They
maintain that large-scale agreements like the Trans-Pacific Partnership (TPP) and the
Transatlantic Trade and Investment Partnership (TTIP)62 could establish new and more
comprehensive rules for trade and investment. By setting new global standards, the agreements
could effectively bypass the current round of WTO negotiations and threaten Brazil’s ability to
shape the international trading system. The agreements could also place Brazilian companies at a
competitive disadvantage and threaten the global market share of Brazilian exports. In order to
remain relevant and take advantage of changing opportunities, these analysts argue that Brazil
should conclude trade negotiations with the European Union (EU) and consider pursuing a trade
agreement with the United States. While major shifts in trade policy appear to be unlikely in the
near term, Brazil has already placed renewed emphasis on concluding an agreement between
Mercosur and the EU.63 Further policy shifts may depend on how the TPP and TTIP negotiations
advance and economic conditions in Brazil.
Bilateral Trade and Investment
Despite these differences in trade policy and the lack of a free trade agreement, U.S.-Brazil trade
has grown considerably over the past decade (see Figure 2). Whereas total U.S. merchandise
trade with the world increased 68% between 2004 and 2013, U.S.-Brazil merchandise trade
increased 105% to $71.7 billion during the same time period. U.S. goods exports to Brazil
increased 218% to $44.1 billion and U.S. goods imports from Brazil increased 30% to $27.6
billion. As a result of the relatively faster growth of U.S. exports compared to imports (which
declined significantly in the aftermath of the financial crisis), the United States has run a trade
surplus in goods with Brazil since 2008. In 2013, the surplus was valued at $16.6 billion.64 Top
U.S. goods exports to Brazil included heavy and electric machinery, refined oil products, and
civilian aircraft and parts. Top U.S. goods imports from Brazil included crude oil, iron and steel,
machinery, civilian aircraft, ethanol, and coffee. In 2013, Brazil was the United States’ ninthlargest trading partner, and the United States was Brazil’s second-largest trading partner, behind
China.65
60
“The World Trade Organization: Unaccustomed Victory,” The Economist, December 14, 2013.
See, for example, “Chances Perdidas,” Correio Braziliense, January 2, 2014; Sonia Filgueiras, “Olhar do Planalto –
Sob o Risco do Isolamento,” Brasil Econômico, December 18, 2013; and Vera Thorstensen and Lucas Ferraz, The
Impacts of TTIP on Brazil, Fundação Getulio Vargas, Study Sponsored by the Confederação Nacional da Industria
(CNI), November 2013.
62
For more information on these agreements, see CRS Report R42694, The Trans-Pacific Partnership (TPP)
Negotiations and Issues for Congress, coordinated by Ian F. Fergusson; and CRS Report R43387, Transatlantic Trade
and Investment Partnership (TTIP) Negotiations, by Shayerah Ilias Akhtar and Vivian C. Jones.
63
Carlos Caicedo, “Brazil Keen to Speed Up EU-Mercosur Free-Trade Deal at Expense of Argentina,” IHS Global
Insight, March 13, 2014.
64
U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb, accessed March 2014.
65
U.S. Department of Commerce and República Federativa do Brasil, Secretaria de Comércio Exterior (SECEX) data,
(continued...)
61
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Figure 2. U.S. Trade with Brazil: 2004-2013
In billions of U.S. dollars
50
40
30
20
10
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-10
-20
Goods Exports
Services Exports
Goods Trade Balance
Goods Imports
Services Imports
Services Trade Balance
Source: CRS presentation of U.S. Department of Commerce Data.
Notes: Services trade data are not yet available for 2013.
U.S.-Brazil services trade has grown even more quickly than merchandise trade, increasing by
356% between 2004 and 2012 (the most recent year for which data are available). In 2012, total
trade in services amounted to $30.7 billion. The United States continued to run a substantial trade
surplus, valued at $17 billion, as U.S. services exports to Brazil totaled $23.9 billion and U.S.
services imports from Brazil totaled $6.9 billion. Travel, telecommunications, and royalties and
license fees were the top categories of U.S. services exports to Brazil while business,
professional, and technical services was the top category of U.S. services imports from Brazil.66
Brazil has traditionally benefited from the Generalized System of Preferences (GSP), which
provides non-reciprocal, duty-free tariff treatment to certain products imported from designated
developing countries. Legal authorization for the GSP program expired on July 31, 2013, and
Congress has yet to renew it.67 In 2012, the last full year that the GSP was in effect, Brazil was
the third-largest beneficiary of the program. The country’s duty free imports to the United States
under the GSP program were valued at $2.3 billion, equivalent to about 7% of all U.S. imports
from Brazil in 2012.68 Some observers have questioned the inclusion of Brazil and other upper-
(...continued)
as made available by Global Trade Atlas, accessed March 2014.
66
U.S. Department of Commerce data, as made available by the Bureau of Economic Analysis, accessed March 2014.
67
For more information on GSP and potential congressional reauthorization of the program, see CRS Report RL33663,
Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones.
68
U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb, accessed March 2014.
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middle-income countries in the GSP; the European Union removed such countries from its GSP
program as of 2014.69
Foreign direct investment (FDI) between the United States and Brazil currently flows mostly in
one direction, towards Brazil. As of 2012 (the most recent year for which data are available), the
accumulated stock of U.S. FDI in Brazil was $79.4 billion, with significant investments in
manufacturing and finance, among other sectors. Brazilian FDI in the United States has increased
considerably over the past decade, but remains low by comparison. In 2012, the stock of Brazilian
FDI in the United States totaled $3.6 billion.70
Cotton Dispute71
For more than a decade, Brazil and the United States have been involved in a dispute over U.S.
government support for cotton farmers. In 2002, Brazil went to the WTO to challenge several
provisions of the U.S. cotton program. A WTO dispute settlement panel ruled in Brazil’s favor in
2004, finding that certain U.S. agricultural support payments and export guarantees were
inconsistent with its WTO commitments. Although Congress modified agricultural support
programs in 2005, a WTO compliance panel ruled in 2007 that the U.S. actions were insufficient.
Following a ruling from a WTO arbitration panel, Brazil announced in March 2010 that it
intended to impose retaliatory measures against the United States worth $829 million. This
included $591 million in higher tariffs on a range of U.S. products and $239 million through
suspension of certain intellectual property rights obligations.
The United States reached a temporary agreement with Brazil in June 2010 to avoid the WTOsanctioned retaliatory measures. Under the agreement, the United States pledged to make some
short-term changes to its export credit guarantees and provide the Brazil Cotton Institute with
$147 million annually for a fund to assist Brazilian cotton farmers with technical assistance,
marketing, and market research. In exchange, Brazil agreed to temporarily suspend its retaliation
with the intention of reaching a permanent agreement with the United States after Congress had
an opportunity to adjust the subsidy program in the farm bill reauthorization.72
The U.S. government stopped complying with the temporary agreement in 2013, however,
making only a portion of the required monthly payment in September 2013 and then stopping
payments altogether as of October 2013. Secretary of Agriculture Tom Vilsack reportedly asserted
that the partial payment was required by budget sequestration and that he had no authority to
continue making payments once the farm bill expired at the end of September.73 The suspension
of payments led the Brazilian government to once again explore retaliatory measures.74
69
European Commission, “New GSP as of 2014,” December 18, 2013.
U.S. Bureau of Economic Analysis, “Balance of Payments and Direct Investment Position Data,” accessed March
2014.
71
For more information on the U.S.-Brazil WTO cotton dispute, see CRS Report R43336, Status of the WTO BrazilU.S. Cotton Case, by Randy Schnepf.
72
Swell Chan, “U.S. and Brazil Reach Agreement on Cotton Dispute,” New York Times, April 6, 2010; Ana Nicolaci
da Costa, “Brazil Suspends Retaliation in U.S. Cotton Row,” Reuters, June 17, 2010.
73
William Mauldin, “U.S. to Stop Brazil Farm Payments; Sequester Will Stop Assistance Related to Cotton Dispute,”
Wall Street Journal, August 7, 2013.
74
República Federativa do Brasil, Ministério do Desenvolvimento, Indústria e Comércio Exterior, Câmara de
Comércio Exterior (CAMEX), Resolução N° 105, de 18 de Dezembro de 2013.
70
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Congress passed a new farm bill (P.L. 113-79) that President Obama signed into law on February
7, 2014. The conference report accompanying the act (H.Rept. 113-333) states that the legislation
includes several substantive changes to U.S. cotton support programs and the export credit
guarantee program in order to resolve the dispute with Brazil. Nevertheless, Brazil’s Foreign
Trade Board (Câmara de Comércio Exterior, CAMEX) maintains that the new farm bill contains
elements that will continue to distort the international cotton market, and it has authorized the
Brazilian government to request a WTO panel to assess whether the farm bill brings the United
States into compliance with previous rulings.75 The Brazilian government has reportedly decided
not to immediately request such a panel and instead enter into negotiations with the United States
in hope of achieving a mutually agreeable resolution.76
Energy Ties
Energy has been another important area of U.S.-Brazilian cooperation in recent years. Brazil is
widely regarded as a world leader in energy policy for successfully reducing its reliance on
foreign oil through the development of alternative energy resources and increased domestic
production. In addition to being the world’s second-largest producer of ethanol (after the United
States), Brazil generates 80% of its electricity through hydropower.77 Brazil also has discovered
large offshore oil deposits that have the potential to turn the country into a major oil and gas
producer and an important source of energy for the United States. To facilitate greater cooperation
in the development of safe, secure, and affordable energy, President Obama and President
Rousseff launched a Strategic Energy Dialogue in March 2011.
Biofuels
In response to sharp increases in global oil prices in the 1970s, the Brazilian government began a
national program to promote the production and consumption of sugarcane ethanol. Today, most
cars in Brazil are capable of running on pure ethanol, which is available at nearly every fueling
station, or gasoline, which is required to include a 20%-25% ethanol blend.78 Ethanol’s share of
the Brazilian light-duty fuel market reportedly declined from 50% in 2009 to 30% in 2012,
however, as the Brazilian government held down gasoline prices as part of its efforts to control
inflation.79 Government policy and international sugar prices that have provided incentives for
sugarcane processors to produce sugar rather than ethanol have contributed to lower levels of
investment and production in the ethanol industry. In 2012, Brazil produced 405,000 barrels per
day of ethanol, which was more than it produced in 2011 but less than it produced 2010.80 The
Brazilian government has sought to provide some relief to the ethanol industry by raising gasoline
prices, increasing the ethanol blend requirement from 20% to 25%, and reducing taxes on
ethanol. Nevertheless, some analysts maintain that the lack of transparency and certainty
75
CAMEX, “CAMEX Autoriza Abertura de Painel na OMC sobre Legislação Agrícola Norte-Americana,” February
19, 2014.
76
“Brazil Threatens Compliance Panel Over Farm Bill; Pursues Negotiations First,” Inside U.S. Trade, February 20,
2014.
77
U.S. Energy Information Administration (EIA), Country Analysis Briefs: Brazil, October 1, 2013.
78
Ibid.
79
Claire Casey, “Is Brazil the Energy Power of the Future (and Always Will Be)?,” Americas Quarterly, (Summer
2013).
80
EIA, October 2013, op.cit.
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regarding how gasoline prices are determined are likely to continue to discourage investment in
the industry.81
In 2007, the United States and Brazil, the world’s two largest ethanol-producing and consuming
countries, signed a memorandum of understanding to promote greater cooperation on ethanol and
other biofuels. 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.82
Since then, the United States and Brazil have moved forward on all three facets of the agreement.
Bilaterally, the U.S. and Brazilian governments are attempting to improve methods for modeling
the sustainability of biofuels, including their effects on greenhouse gas emissions and land use,
and exchanging information on how to maximize fuel economy in flex-fuel vehicles. They are
also coordinating efforts to develop sustainable aviation biofuels. At the same time, the U.S. and
Brazilian governments are working together in third countries, and have provided joint technical
assistance designed to strengthen policy frameworks, implement blending laws, and develop
domestic production capabilities in the Dominican Republic, El Salvador, Guatemala, Haiti,
Honduras, Jamaica, and Senegal. Multilaterally, the United States and Brazil are working with
other members of the Global Bioenergy Partnership (GBEP) to promote the sustainable
production and use of modern bioenergy.83
In addition to these efforts, Brazil and the United States have taken steps to liberalize trade in
ethanol. In December 2011, the Brazilian government issued a resolution to extend its duty-free
treatment of imported ethanol until December 31, 2015.84 Similarly, the U.S. Congress allowed a
54-cent-per-gallon duty on imported ethanol to expire at the end of 2011. Prior to its expiration,
the duty served as a significant barrier to direct imports of Brazilian ethanol in most years.85 Total
bilateral ethanol trade has actually declined since then, however, falling from 33,000 barrels per
day in 2011 to 19,000 barrels per day in 2013. This decline is the result of lower U.S. exports to
Brazil, as imports from Brazil have increased from 7,000 barrels per day to 16,000 barrels per day
during the same time period. In 2013, U.S. imports from Brazil were equivalent to about 1.8% of
total U.S. ethanol consumption.86
Oil
Since 2007, Brazil has discovered substantial new offshore oil fields that have the potential to
turn the country into one of the top five oil and gas producers in the world87 and an important
81
Casey, 2013, op.cit.
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, http://www.state.gov/p/wha/rls/158654.htm.
83
White House, Office of the Press Secretary, “Fact Sheet: The U.S.-Brazil Strategic Energy Dialogue,” April 9, 2012.
84
Ministério do Desenvolvimiento, Indústria e Comércio Exterior, Câmara de Comércio Exterior (CAMEX),
Resolução N° 94, de 8 de Dezembro de 2011.
85
Although some Brazilian ethanol was allowed to enter the United States duty-free after being reprocessed in
Caribbean Basin Initiative (CBI) countries, such imports could only account for up to 7% of the U.S. ethanol market. A
2.5% ad valorem tariff on ethanol imports to the United States remains in place permanently unless the Harmonized
Tariff Schedule code is changed.
86
EIA, “Petroleum & Other Liquids: Data,” accessed March 2014.
87
Mark S. Langevin, Brazil’s Hydrocarbon Bonanza: Can the State Manage Pre-Salt Production for National
Development and Geopolitical Power?, Brazil-Works, Discussion Paper, May 2012.
82
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source of energy for the United States. The new discoveries are so-called “pre-salt” reserves,
located beneath layers of rock and salt more than 18,000 feet below the ocean surface. Some
energy analysts have estimated that the total recoverable reserves of pre-salt oil and natural gas
may exceed 50 billion barrels of oil equivalent.88 Brazil’s proven oil reserves stood at 15.3 billion
barrels at the end of 2012, accounting for slightly less than 1% of global reserves.89 Nearly 94%
of Brazil’s proven reserves are located offshore.90
In December 2010, the Brazilian Congress approved a new regulatory framework for developing
the approximately 70% of pre-salt reserves that had not already been auctioned off.91 The new
framework increased the role of the Brazilian government and is designed to ensure that the
country’s oil reserves are used to fuel long-term economic and social development. Among other
provisions, the framework establishes state-owned Petróleo Brasileiro S.A. (Petrobras) as the sole
operator for all new offshore projects; replaces the existing concessionary model with a
production sharing regime; guarantees Petrobras a minimum 30% stake in all new joint ventures;
creates a new public company—Petrosal—to manage the development of the offshore reserves;
increases local content requirements; and creates a new social fund overseen by the Brazilian
Congress to direct offshore revenues toward four key areas: education, infrastructure, science and
technology, and poverty reduction.92 The Brazilian Congress continued to debate a new law
regarding the distribution of oil royalties until March 2013.93
The delay in approving the new regulatory framework and royalty distribution law prevented
Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels (Agência Nacional do
Petróleo, Gás Natural e Biocombustíveis, ANP) from auctioning new concessions for nearly five
years. As a result, oil production did not increase as quickly as originally predicted and actually
slightly declined between 2011 and 2012 to 2.1 million barrels per day.94 Even so, the Brazilian
government received record revenues from the oil industry in 2012 that amounted to about $14
billion (R$31.8 billion).95
The ANP held its first auction of pre-salt concessions under the new regulatory framework in
October 2013. While the ANP reportedly had expected more than 40 companies to participate,
only 11 companies signed up for the auction, and a consortium of five companies (Petrobras,
Royal Dutch Shell, Total, China National Petroleum Corporation, and China National Offshore
Oil Corporation) was the sole bidder.96 The Brazilian government declared the auction a success,
but some energy analysts maintain that the country will need to modify the new regulatory
88
EIA, October 2013, op.cit.
BP, BP Statistical Review of World Energy, June 2013, p. 6, http://www.bp.com/content/dam/bp/pdf/statisticalreview/statistical_review_of_world_energy_2013.pdf.
90
Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP), Oil, Natural Gas and Biofuels Statistical
Yearbook 2013, 2013, p. 26.
91
Langevin, 2012, op.cit.
92
“Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long-Term
Perspective,” Oxford Analytica, May 2010.
93
The royalty distribution law has not yet gone into effect as it is being challenged in Brazil’s Supreme Court.
94
BP, June 2013, op.cit., p.8.
95
ANP, 2013, op.cit.
96
“Weak Libra Interest Rounds Out a Rough Week for Brazil’s Rousseff,” Latin News Daily Report, September 20,
2013; “Brazil’s Oil Revolution Gets Off to a Slippery Start,” Latin News Daily Report, October 22, 2013.
89
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framework prior to auctioning other concessions in order to attract the investment necessary to
develop its reserves and accelerate production.97
U.S.-Brazilian oil trade has expanded significantly over the past decade (see Figure 3). U.S.
crude oil imports from Brazil grew rapidly from 51,000 barrels per day in 2004 to 295,000 barrels
per day in 2009. They have declined since then, however, as U.S. consumption has fallen and
U.S. domestic production has increased. In 2013, the United States imported 109,000 barrels per
day of crude oil from Brazil, which was equivalent to about 1.4% of total U.S. crude imports.
U.S. exports of refined products to Brazil have also grown quickly, increasing 544% from 27,000
barrels per day in 2004 to 174,000 barrels per day in 2013. As a result, U.S. refined product
exports to Brazil exceeded U.S. crude imports from Brazil for the first time in at least a decade in
2013.98 Brazil has been forced to increasingly rely on imports as its consumption has grown more
quickly than its production and refinery capacity. Some energy analysts expect this trend to
continue until at least 2017, when two new Brazilian refineries are scheduled to begin
operations.99
Figure 3. U.S. Oil Trade with Brazil: 2004-2013
In thousands of barrels per day
350
300
250
200
150
100
50
0
2004
2005
2006
2007
U.S. Crude Oil Imports
2008
2009
2010
2011
2012
2013
U.S. Petroleum Product Exports
Source: CRS presentation of U.S. Energy Information Administration (EIA) data.
Security Cooperation
Although U.S.-Brazilian cooperation on security issues has traditionally been limited, law
enforcement and military ties have increased in recent years. Areas of coordination include
counternarcotics, counterterrorism, and defense.
97
Matthew Cowley and Paulo Trevisani, “Brazil Seen Having to Alter Oil Rules,” Wall Street Journal, October 22,
2013.
98
EIA, “Petroleum & Other Liquids: Data,” accessed March 2014.
99
Jeb Blount, “Analysis: Petrobras Fuel Woes Make Brazil Dependent on U.S., India,” Reuters, January 22, 2014.
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Counternarcotics
While Brazil is not a major drug-producing country, it is the world’s second-largest consumer of
cocaine hydrochloride and likely the world’s largest consumer of cocaine-base products. It also
serves as a transit point for illicit drugs destined for Europe.100 Security analysts contend that
organized crime in Brazil has increased in scope and scale over the past decade as the drug trade
has expanded. Some of the country’s large, well-organized, and heavily armed criminal groups,
such as the Red Command (Comando Vermelho, CV) and the First Capital Command (Primeiro
Comando da Capital, PCC), have reportedly begun to operate transnationally, eliminating
intermediaries in order to control cross-border trafficking.101
In recognition of these challenges, Brazil has taken several steps to improve its antidrug efforts.
In 2004, it 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 sought to improve security along the
15,719 kilometer border that it shares with 10 nations, including the region’s cocaine producers—
Bolivia, Colombia, and Peru. Under its Strategic Border Plan, introduced in June 2011, the
Brazilian government has reportedly deployed inter-agency resources, including unmanned aerial
vehicles (UAVs), to monitor illicit activity in high-risk locations along its borders and in the
remote Amazon region. It has also signed agreements and carried out joint operations with
neighboring countries.102 In 2013, Brazilian authorities reportedly seized 35.7 metric tons of
cocaine and 220.8 metric tons of marijuana.103
In 2008, the U.S. and Brazilian governments signed a memorandum of understanding designed to
enhance the capacity of Brazilian authorities to combat drug trafficking and reduce domestic drug
demand. To these ends, the United States provided support to a canine unit and special
investigation units within the Brazilian Federal Police, and provided support to non-governmental
organizations that work with addicts and their families in 2013.104 U.S. counternarcotics
assistance to Brazil amounted to $2 million in FY2011, $3.5 million in FY2012, and $1.9 million
in FY2013.105 The Obama Administration did not request any counternarcotics assistance for
Brazil in FY2014 or FY2015.106
100
U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, International Narcotics
Control Strategy Report (INCSR), Volume I: Drug and Chemical Control, March 2014, http://www.state.gov/j/inl/rls/
nrcrpt/2014/vol1/222851.htm.
101
Robert Muggah and Guztavo Diniz, Securing the Border: Brazil’s “South America First” Approach to
Transnational Organized Crime, Igarapé Institute, Strategic Paper 5, October 2013, http://pt.igarape.org.br/wp-content/
uploads/2013/10/SP_05_EN_Securing-the-border_7th_oct.pdf.
102
U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, International Narcotics
Control Strategy Report (INCSR), Volume I: Drug and Chemical Control, March 7, 2012, http://www.state.gov/j/inl/
rls/nrcrpt/2012/vol1/184098.htm#Brazil; “Hermes 450: O Vigilante Das Fronteiras Brasileiras,” Terra (Brazil), August
25, 2011; “Brazil-Region: Flying Start for the New ‘Border Strategy’,” Latin American Security & Strategic Review,
July 2011.
103
INCSR, 2014, op.cit.
104
Ibid.
105
U.S. Department of State, USAID, and U.S. Department of Defense data as presented by the Foreign Assistance
Dashboard, accessed March 2014.
106
U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2014, May 17,
2013, and Congressional Budget Justification, Department of State, Foreign Operations, and Related Programs, Fiscal
Year 2015, March 4, 2014.
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Counterterrorism107
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 State Department’s
Country Reports on Terrorism, there are no known operational cells of al Qaeda or Hezbollahrelated groups in the Western Hemisphere; however, the United States remains concerned that
proceeds from legal and illegal goods flowing through the TBA could potentially be diverted to
support terrorist groups.108 For example, in December 2010, the U.S. Treasury Department
sanctioned Hezbollah’s chief representative in South America, Bilal Mohsen Wehbe, for
transferring funds collected in Brazil to Hezbollah in Lebanon. According to the Treasury
Department, Wehbe and an associate raised more than $500,000 from Lebanese businessmen in
the TBA following the 2006 conflict between Israel and Hezbollah. Wehbe also reportedly had
overseen Hezbollah’s counterintelligence activity in the TBA and had worked for the office of
Iranian Supreme Leader Ayatollah Ali Khamene'i.109
The U.S. government has worked with Brazil to address concerns about the TBA and strengthen
the country’s counterterrorism capabilities. The countries of the TBA and the United States
created 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 2007. Within Brazil, the
United States has supported efforts to implement the Container Security Initiative (CSI) at the
port of Santos, and has sought to strengthen Brazil’s capacity to secure its borders and conduct
terrorism-related investigations. U.S. authorities are currently assisting Brazil with major event
security management as it prepares to host the 2014 World Cup and 2016 Summer Olympic
Games.110
The State Department’s Country Reports on Terrorism for 2012 recognized the Brazilian
government’s continued support for counterterrorism-related activities, including investigating
potential terrorism financing and document forgery networks.111 However, Brazil has yet to adopt
legislation to make terrorism and terrorism financing autonomous offenses. Like many other
Latin American nations, Brazil 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. Despite these challenges, some Brazilian legislators have
renewed their efforts to enact an anti-terrorism law, maintaining that Brazil needs to strengthen its
legal framework in advance of the upcoming major sporting events.112
107
For more information on terrorism concerns in Latin America, see CRS Report RS21049, Latin America: Terrorism
Issues, by Mark P. Sullivan and June S. Beittel.
108
U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism 2012, May
30, 2013, http://www.state.gov/j/ct/rls/crt/2012/209984.htm.
109
U.S. Department of the Treasury, “Treasury Targets Hizballah Financial Network,” Press Release, December 9,
2010.
110
Country Reports on Terrorism 2012, May 2013, op.cit.
111
Ibid.
112
Fernanda Odilla and Gabriela Guerreiro, “Lei Antiterrorismo Pode Dar Pena de Até 40 Anos a Manifestantes,”
Folha de São Paulo, February 12, 2014; Paloma Rodrigues, “Após Morte de Cinegrafista, Senado Tenta Acelerar ‘Lei
Antiterror’,” CartaCapital, February 11, 2014.
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Defense
According to General John F. Kelly, Commander of U.S. Southern Command, challenges in
broader bilateral relations have affected U.S.-Brazilian defense ties, but military-to-military
cooperation at the operational and tactical levels remains strong.113 The U.S. and Brazilian
militaries have worked together closely in Haiti, where Brazil commands the U.N. Stabilization
Mission (MINUSTAH). Joint efforts in the aftermath of Haiti’s January 2010 earthquake were the
largest combined operations of U.S. and Brazilian military forces since World War II. Other areas
of military-to-military cooperation include information exchanges, combined military training,
and joint military exercises. In April 2010, the U.S. and Brazilian governments signed a Defense
Cooperation Agreement designed to promote cooperation in areas such as research and
development, technology security, and acquisition of defense products and services. This was
followed by a General Security of Military Information Agreement, signed in November 2010,
which is designed to facilitate the sharing of classified defense and military information.114 Both
agreements still need to be approved by the Brazilian Congress. Additional coordination takes
place through a presidential-level Defense Cooperation Dialogue, which President Obama and
President Rousseff launched in April 2012.
As noted above, the United States provides International Military Education and Training (IMET)
aid to Brazil. The assistance is designed to strengthen military-to-military relationships, increase
the professionalization of Brazilian forces, and enhance Brazil’s capacity to assume a larger role
in peacekeeping operations and in combating terrorism. IMET assistance amounted to $631,000
in FY2011, $638,000 in FY2012, and $572,000 in FY2013. Brazil is receiving an estimated
$625,000 in IMET in FY2014, and the Administration has requested $625,000 in IMET
assistance for Brazil in FY2015.115
Two defense procurement deals have received considerable attention in recent years. In February
2013, the U.S. Air Force awarded a $427 million contract for light air support aircraft and
associated maintenance and training to Brazil’s Embraer S.A. and its U.S.-based partner, Sierra
Nevada Corp. Under the contract, Embraer will provide 20 A-29 Super Tucano aircraft to the
Afghan military for advanced flight training, surveillance, close air support, and air interdiction
missions.116 The U.S. Air Force had originally awarded the contract to Embraer in December
2011, but the order was cancelled after U.S.-based Hawker Beechcraft challenged the
procurement process.
Some observers assumed that the U.S. contract with Embraer increased the likelihood that Brazil
would award a contract for 36 new fighter jets to Boeing. Brazil awarded the $4.5 billion contract
to Sweden’s Saab AB in December 2013, however, choosing the Gripen NG over Boeing’s F/A18 Super Hornet. While the decision appears to have been at least partially a reaction to alleged
NSA surveillance activities inside Brazil, there were also other considerations.117 The Brazilian
113
General John F. Kelly, Commander, United States Southern Command, Posture Statement before the 113th
Congress House Armed Services Committee, February 26, 2014, p. 21, http://www.southcom.mil/newsroom/
Documents/2014_SOUTHCOM_Posture_Statement_HASC_FINAL_PDF.pdf.
114
U.S. Department of Defense, Office of the Secretary of Defense, “Fact Sheet: U.S.-Brazil Defense Cooperation,”
March 14, 2011.
115
U.S. Department of State, Congressional Budget Justifications for Foreign Operations, Fiscal Years 2013, 2014,
and 2015, available at http://www.state.gov/f/releases/iab/index.htm.
116
“Brazilian Firm to Provide Aircraft to Afghan Air Force,” American Forces Press Service, February 27, 2013.
117
Alfonso Soto and Brian Winter, “Saab Wins Brazil Jet Deal after NSA Spying Sours Boeing Bid,” Reuters,
(continued...)
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Air Force announced its preference for the Gripen in January 2010, reportedly citing its lower
purchase and maintenance costs and the ability to transfer more technology to Brazil.118 Given
Brazil’s current economic challenges and the fact that some Brazilian officials were already wary
of relying on U.S. hardware as a result of past experiences in which the U.S. government blocked
sales of Brazilian arms containing U.S. technology,119 the NSA allegations may have been enough
to push Boeing out of the running.
Promotion of Racial Equality
Brazil has experienced significant improvements in economic and social conditions over the past
decade; however, considerable socioeconomic disparities between races persist. While AfroBrazilians comprise about half of the Brazilian population,120 they account for less than 25% of
Brazilians that have completed post-secondary degrees and 17% of Brazilians that have
completed graduate degrees.121 In 2010, the median income of Afro-Brazilians was 64% of the
median income of white Brazilians.122 Even after controlling for education, occupation, and
location, white Brazilians reportedly receive higher wages than Afro-Brazilians.123 Moreover,
Afro-Brazilians are disproportionately the victims of Brazil’s high levels of crime and violence.
In 2010, the homicide rate for Afro-Brazilians was 36.5 per 100,000—nearly two and a half times
the rate of other Brazilians.124
In order to reduce racial disparities, the Brazilian government has enacted a series of
antidiscrimination and affirmative action measures. Brazil became the first Latin American
country to endorse racial quotas in government service in 2002, and became the first country in
the world to establish a special secretariat with a ministerial rank to manage racial equity
promotion policies in 2003. In 2010, Brazil enacted the Statute of Racial Equality. Among other
provisions, the law offers tax incentives for businesses that undertake racial inclusion, calls on the
government to adopt affirmative action programs, and reaffirms that African and Afro-Brazilian
history should be taught in all elementary and middle schools. In 2012, Brazil adopted a law that
requires federal universities to reserve half of their admissions spots for students who are AfroBrazilian, indigenous, or graduates of public high schools (which tend to serve the poorest
students). The law gradually increases the admissions spots required to be reserved from 12.5% in
2013 to 50% in 2016, with half of the reserved spots set aside for low income students of all races
with the highest grades and the other half divided in accordance with the racial makeup of each
state.125 Most recently, President Rousseff has proposed reserving 20% of jobs in the federal
(...continued)
December 18, 2013.
118
Raymond Colitt, “Brazil Air Force Prefers Swedish Jets – Report,” Reuters, January 5, 2010.
119
In 2006, for example, the United States prevented Brazil from selling 24 Super Tucano light attack planes to
Venezuela.
120
According to Brazil's 2010 census, 43.1% of Brazilians self-identify as parda (“brown”) and 7.6% self-identify as
preta (“black”). IBGE, Censo Demográfico 2010, November 2011.
121
Tatiana Dias Silva and Fernanda Lira Goes, Igualdade Racial no Brasil: Reflexões no Ano Internacional dos
Afrodescendentes, Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro, 2013, p. 20.
122
IBGE, 2011, op.cit.
123
Dias & Goes, 2013, op.cit., p.21.
124
Daniel R. C. Cerqueira and Rodrigo Leandro de Moura, Vidas Perdidas e Racismo no Brasil, IPEA, Nota Técnica
N° 10, Brasília, November 2013, p. 6.
125
Simon Romero, “Brazil Enacts Affirmative Action Law for Universities,” New York Times, August 30, 2012;
(continued...)
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government for Afro-Brazilians.126 Although race-based affirmative action policies have been
rather controversial among some sectors of the Brazilian population,127 they have been upheld as
constitutional by the Brazilian Supreme Court.
In March 2008, Brazil and the United States signed an agreement known as the United StatesBrazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality.
The initiative recognizes that Brazil and the United States are multi-ethnic, multi-racial
democracies, and seeks to promote equality of opportunity for the members of all racial and
ethnic communities. To that end, Brazil and the United States share best practices through
activities such as training programs, workshops, technical expert exchanges, scholarships, and
public-private partnerships.128 Current areas of focus include expanding access to education for
students of African descent, eliminating racial health disparities, mitigating environmental
impacts in communities of African descent, addressing challenges in criminal justice systems, and
guaranteeing equal access to economic opportunities.129 H.Rept. 113-185, which is considered
part of the explanatory statement accompanying the Consolidated Appropriations Act, 2014 (P.L.
113-76), recognizes the work being done under the U.S.-Brazil Joint Action Plan to Eliminate
Racial and Ethnic Discrimination and Promote Equality, and states that the legislation includes
funds to continue the initiative in FY2014.
Amazon Conservation
The Amazon Basin is estimated to span more than 6.8 million square kilometers. It produces
about 20% of the world’s fresh water discharge and contains the largest remaining rainforest on
Earth.130 In addition to supporting significant biological diversity, the Amazon Rainforest is a
global sink for carbon emissions and an important asset in the mitigation of climate change. The
forest biomass is estimated to hold about 100 billion tons of carbon, which is equivalent to more
than 10 years of global fossil fuel emissions.131
Although the Amazon Basin is shared by seven nations,132 69% of it lies within Brazil.133 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. Partially
(...continued)
“Rousseff Decrees Affirmative Action,” Latin News Daily Report, October 16, 2012.
126
Tatiana Dias Silva and Josenilton Marques da Silva, Reserva de Vagas para Negros em Concursos Públicos: Uma
Análise a partir do Projeto de Lei 6.738/2013, (IPEA), Nota Técnica N° 17, Brasília, February 2014.
127
See, for example, Diogo Schelp, “Queremos Dividir o Brasil como na Foto?” Veja, September 2, 2009; and Julia
Carvalho, “O Grande Erro das Cotas,” Veja, August 29, 2012.
128
U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” April 11, 2012.
129
U.S. Department of State, Office of the Spokesperson, “Steering Group Meeting of the U.S.-Brazil Joint Action Plan
to Eliminate Racial and Ethnic Discrimination and Promote Equality,” Media Note, July 17, 2013.
130
United Nations Environment Programme (UNEP), Global International Waters Assessment: Amazon Basin, GIWA
Regional Assessment 40b, Kalmar, Sweden, 2004, http://www.unep.org/dewa/giwa/areas/reports/r40b/
giwa_regional_assessment_40b.pdf.
131
Eric A. Davidson et al., “The Amazon Basin in Transition,” Nature, vol. 481 (January 19, 2012), p. 321.
132
The seven nations that share the Amazon Basin are Brazil, Bolivia, Colombia, Ecuador, Guyana, Peru, and
Venezuela. The Amazon Rainforest extends beyond the Amazon Basin into Suriname and French Guiana.
133
UNEP, 2004, op.cit.
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as a result of these incentives, the human population grew from 6 million in 1960 to 25 million in
2010. Forest cover in the Brazilian Amazon has declined to about 80% of its original area as a
result of settlements, roads, logging, farming, and other activities in the region.134
Figure 4. Deforestation in the Brazilian Amazon: 2004-2013
In square kilometers
30,000
25,000
20,000
15,000
10,000
5,000
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: CRS presentation of data from the Brazilian government’s Instituto Nacional de Pesquisas Espaciais
(INPE).
Recognizing that continued destruction of the Amazon Rainforest is damaging to Brazil’s global
image and could threaten energy generation and agricultural production in the future,135 the
Brazilian government has implemented a series of policies designed to slow deforestation. From
2004 to 2011, for example, Brazil increased the size of its nature reserves by 500,000 square
kilometers. Likewise, the Brazilian government adopted a plan to reduce the rate of Amazon
deforestation by 80%—based on the 1996-2005 average—to 3,925 square kilometers per year by
2020. To meet this target, the Brazilian government is increasing surveillance, replanting forest,
and financing sustainable development projects.136 Brazil appears to be on track to achieve its
goal, as annual deforestation has fallen from 27,772 square kilometers in 2004 to 5,843 square
kilometers in 2013 (see Figure 4).137 There is considerable debate, however, as to whether these
decreases are the result of government policies or changing economic circumstances, such as
lower commodity prices. According to a 2012 study, about half of the reduction in deforestation
134
Davidson et al., 2012, op.cit., p.321.
See, for example, Fabiana Frayssinet, “Climate Change-Brazil: Farmers ‘Have Good Reason to Worry’,” Inter Press
Service, September 21, 2011; and “Amazonian Deforestation May Cut Rainfall by a Fifth: Study,” Agence France
Presse, September 5, 2012.
136
República Federativa do Brasil, Ministério do Meio Ambiente, Plano de Ação para Prevenção e Controle do
Desmatamento na Amazônia Legal (PPCDAm): 3ª Fase (2012-2015), Brasília, June 2013.
137
República Federativa do Brasil, Ministério da Ciência, Tecnologia e Inovação, Instituto Nacional de Pesquisas
Espaciais (INPE), Projeto PRODES, Monitoramento da Floresta Amazônica Brasileira por Satélite, accessed March
2013.
135
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in the Brazilian Amazon between 2005 and 2009 was attributable to the Brazilian government’s
conservation policies.138
Despite recent progress, Brazil’s deforestation rate increased by nearly 28% between 2012 and
2013—a development that some analysts have attributed to government policy changes. In 2011,
President Rousseff signed a law transferring responsibility for environmental oversight of nonfederal lands from Brazil’s federal environmental protection agency to local officials. While the
federal government maintains that local officials are better placed to manage such resources,
critics argue that local authorities lack the necessary finances and are more susceptible to
intimidation and corruption.139 Many environmentalists are also concerned about changes to
Brazil’s forest code—a law that requires rural landowners to set aside 20%-80% of their land for
natural vegetation. The Brazilian Congress approved a major overhaul of the code in 2012.
Although President Rousseff vetoed some of the most controversial provisions, the final version
reportedly relaxed conservation requirements for environmentally sensitive areas like river banks,
reduced reforestation requirements for land that had already been deforested, and decreased the
total amount of forest that must be preserved.140 Supporters of the reform assert that it was
necessary in order to bring farmers into compliance with the law, and argue that the updated
forest code remains among the strictest regulations of privately owned property in the world.141
In recent years, the United States has provided assistance to Brazil designed to support tropical
forest conservation through the promotion of sustainable 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 other organizations working throughout the Amazon Basin to conserve the
forest’s biodiversity. USAID provided Brazil with $11.5 million for environmental programs in
FY2011, $10.8 million in FY2012, and $9.6 million in FY2013.142 The explanatory statement143
accompanying the Consolidated Appropriations Act, 2014 (P.L. 113-76) stipulates that $10.5
million of the funds appropriated by the act should support environmental programs in the
Brazilian Amazon in FY2014. As was the case in FY2013 and FY2014, the Obama
Administration has not requested any funding for environmental programs in Brazil in FY2015.144
In addition to providing foreign aid, the United States has signed a debt-for-nature agreement
with Brazil under the Tropical Forest Conservation Act of 2008 (P.L. 105-214). According to the
August 2010 agreement, the United States is reducing Brazil’s debt payments by $21 million over
five years. In exchange, the Brazilian government is committing those funds to activities to
conserve protected areas, improve natural resource management, and develop sustainable
138
Juliano Assunção, Clarissa C. e Grandour, and Rudi Rocha, Deforestation Slowdown in the Legal Amazon: Prices
or Policies, Climate Policy Initiative, Working Paper, Rio de Janeiro, February 6, 2012,
http://climatepolicyinitiative.org/wp-content/uploads/2012/03/Deforestation-Prices-or-Policies-Working-Paper.pdf.
139
Paulo Prada, “Special Report: Brazil Backslides on Protecting the Amazon,” Reuters, August 3, 2012.
140
“Brazil President Makes Final Changes to Forestry Law,” Agence France Presse, October 18, 2012.
141
Reese Ewing, “Interview-Brazil Land Use Bill to Make Forests Profitable,” Reuters, June 1, 2011; Kátia Abreu,
“Código Florestal e a Busca da Perfeição,” Folha de São Paulo, September 29, 2012.
142
USAID data, as presented by the Foreign Assistance Dashboard, accessed March 2014.
143
The joint explanatory statement is available from the House Committee on Rules at http://rules.house.gov/bill/113/
hr-3547-sa.
144
U.S. Department of State, Congressional Budget Justification, Department of State, Foreign Operations, and
Related Programs, Fiscal Year 2015, March 4, 2014.
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livelihoods in endangered areas outside of the Amazon Rainforest such as the Atlantic Rainforest,
Caatinga, and Cerrado ecosystems.145
145
U.S. Department of State, Office of the Spokesman, “Debt-for-Nature Agreement to Conserve Brazil’s Tropical
Forests,” August 12, 2010. For more information on the Tropical Forest Conservation Act, see CRS Report RL31286,
Debt-for-Nature Initiatives and the Tropical Forest Conservation Act: Status and Implementation, by Pervaze A.
Sheikh.
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Appendix. Legislative Initiatives in the
113th Congress
P.L. 113-79 (H.R. 2642). Agricultural Act of 2014. Signed into law on February 7, 2014. Includes
changes to the U.S. cotton program that could allow for a resolution to a long-standing WTO
dispute with Brazil.
P.L. 113-76 (H.R. 3547). Consolidated Appropriations Act, 2014. Signed into law on January 17,
2014. The explanatory statement accompanying the act stipulates that $10.5 million of the funds
appropriated should support environmental programs in the Brazilian Amazon. H.Rept. 113-185
(which accompanied H.R. 2855 and is considered part of the explanatory statement) recognizes
the work being done under the U.S.-Brazil Joint Action Plan to Eliminate Racial and Ethnic
Discrimination and Promote Equality, and states that the legislation includes funds to continue the
initiative in FY2014.
S. 744 (Schumer). Border Security, Economic Opportunity, and Immigration Modernization Act.
Agreed to in the Senate on June 27, 2013. Includes a provision that would require U.S. consular
missions to explore options for expanding visa processing capacity in Brazil.
H.R. 1644 (Kind). Introduced April 18, 2013; referred to the House Committee on Agriculture.
Among other provisions, would prohibit the Secretary of Agriculture from making payments to
the Brazilian Cotton Institute. The payments are part of a temporary agreement between the
United States and Brazil regarding the WTO cotton dispute.
H.R. 571 (T. Ryan). Karl Hoerig Foreign Aid Suspension Act. Introduced February 6, 2013;
referred to the House Committee on Foreign Affairs. Would suspend U.S. assistance to Brazil
until it amends its constitution to allow the extradition of Brazilian nationals.
H.R. 572 (T. Ryan). End Immunity for Brazilian Criminals Act. Introduced February 6, 2013;
referred to the House Committee on the Judiciary. Would suspend the issuance of visas to
Brazilians until Brazil amends its constitution to allow the extradition of Brazilian nationals.
Author Contact Information
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
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