Brazil: Political and Economic Situation and
-U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
March 27, 2014September 7, 2010
Congressional Research Service
7-5700
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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CRS Report for Congress
Prepared for Members and Committees of Congress
Brazil-U.S. Relations
Summary
As its economy has grown to be the 10th largest in the world, Brazil has consolidated its power in
South America, extended its influence to the broader region, and become increasingly prominent
on the world stage. The Obama Administration’s national security strategy 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 over the past two years—such as different policy approaches toward
the situations in Honduras and Iran—Brazil and the United States continue to work together on a
number of issues, including counternarcotics, counterterrorism, energy security, trade, human
rights, HIV/AIDS, and the environment.
Luis Inácio Lula da Silva, known as Lula, of the center-left Workers’ Party (PT) has served as
Brazil’s president since 2003. During his two terms, President Lula has largely maintained
orthodox economic policies while expanding the Brazilian state’s role in development. Although
occasional corruption scandals and inter-party rivalries within his governing coalition have made
it difficult to advance portions of his agenda, President Lula has been successful in passing some
social security and tax reforms, implementing and expanding a number of social welfare
programs, and encouraging public-private partnerships to invest in infrastructure and boost
economic growth. He is currently seeking legislative approval for a new regulatory framework to
govern the development of the country’s substantial offshore oil reserves, but portions of the new
framework have been deferred by Congress until after the October 3, 2010 presidential and
legislative elections. Lula has maintained high approval ratings (78% in late August 2010)
throughout his administration as Brazil has experienced strong economic growth and considerable
reductions in poverty.
Brazil’s recent economic success and Lula’s popularity have benefitted his designated successor,
Dilma Rousseff of the Workers’ Party. According to recent polls, Rousseff leads José Serra of the
centrist Brazilian Social Democratic Party by a substantial margin. While analysts believe that
both candidates would largely maintain the Lula Administration’s economic and social welfare
policies, most believe that Serra’s foreign policy would be more likely to align with that of the
United States.
The 111th Congress has demonstrated interest in several issues in U.S.-Brazil relations. Both
houses passed resolutions concerning an international child custody case involving Brazil (H.Res.
125 and S.Res. 37), and legislation related to the case (H.R. 2702) was introduced in the House.
Other pieces of legislation concerning Brazil include S.Res. 74, to recognize the importance of
the U.S.-Brazil partnership and pursue a bilateral tax treaty; S. 587, to provide $6 million to
expand U.S.-Brazil biofuels cooperation; and H.R. 5439, to offset U.S. contributions to a fund for
Brazilian cotton farmers, which was agreed to as a result of a World Trade Organization dispute,
by reducing subsidy payments for U.S. cotton farmers.
This report analyzes Brazil’s political, economic, and social conditions, and how those conditions
affect its role in the region and its relationship with the United States.
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Contents
Political and Economic Background............................................................................................1
Political Situation........................................................................................................................2
The First Lula Administration ...............................................................................................2
The Second Lula Administration ...........................................................................................4
October 2010 Elections .........................................................................................................5
Economic Conditions ..................................................................................................................6
Economic Challenges............................................................................................................6
Slow Growth Rate...........................................................................................................6
Global Financial Crisis....................................................................................................7
Social Indicators ...................................................................................................................7
Foreign and Trade Policy ............................................................................................................8
Regional Integration and Leadership .....................................................................................8
Common Market of the South .........................................................................................9
Union of South American Nations and other Regional Organizations...............................9
Maintenance of Peace and Stability ............................................................................... 10
Expansion of Influence ................................................................................................. 10
Regional Backlash ........................................................................................................ 11
Emerging Global Role......................................................................................................... 11
Relations with the United States ................................................................................................ 12
Selected Issues in U.S.-Brazil Relations .................................................................................... 14
Counternarcotics ................................................................................................................. 14
Counterterrorism and the Tri-Border Area ........................................................................... 14
Energy Security .................................................................................................................. 15
Ethanol and Other Biofuels ........................................................................................... 16
Nuclear Energy ............................................................................................................. 17
Oil ................................................................................................................................ 17
Trade Issues ........................................................................................................................ 18
Doha Round of the World Trade Organization Talks ..................................................... 18
World Trade Organization Dispute ................................................................................ 19
Generalized System of Preferences ............................................................................... 19
Intellectual Property Rights ........................................................................................... 20
Human Rights ..................................................................................................................... 20
Violent Crime and Human Rights Abuses by Police....................................................... 20
Race and Discrimination ............................................................................................... 22
Trafficking in Persons for Forced Labor ........................................................................ 23
Convention on the Civil Aspects of International Child Abduction....................................... 24
HIV/AIDS .......................................................................................................................... 25
Amazon Conservation......................................................................................................... 26
Domestic Efforts ........................................................................................................... 26
International Initiatives ................................................................................................. 27
Figures
Figure 1. Map of Brazil ...............................................................................................................3
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Contacts
Author Contact Information ...................................................................................................... 28
Acknowledgments .................................................................................................................... 29
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Political and Economic Background
Brazil is considered a significant political and economic power in Latin America, and an
emerging global leader. A former Portuguese colony that achieved independence in 1822, Brazil
occupies almost half of the continent of South America and boasts immense biodiversity—
including the vast Amazon rainforest—and significant natural resources. The country’s federal
structure, comprising 26 states, a Federal District, and some 5,581 municipalities, evolved from
the decentralized colonial structure devised by the Portuguese in an attempt to control Brazil’s
sizable territory. Brazil is the fifth-most populous country in the world. Its 191 million citizens
are primarily of European, African, or mixed African and European descent.1 With a gross
national income (GNI) of $1.4 trillion in 2008, Brazil’s diversified economy is the 10th largest in
the world, the largest in Latin America, and one of the largest in the developing world. Per capita
GNI is only $7,350, however, and the country has an unequal income distribution. 2
Brazil has long held potential to become a world power, but its rise to prominence has been
curtailed by setbacks, including 21 years of military rule, political instability, and uneven
economic growth. Brazil’s military governments ruled from 1964-1985 and, while repressive,
were not as brutal as those in other South American countries. Although nominally allowing the
judiciary and Congress to function during its tenure, the Brazilian military stifled representative
democracy and civic action in Brazil, carefully preserving its influence during one of the most
protracted transitions to democracy to occur in Latin America. During the first decade after its
return to democracy, Brazil experienced economic recession and political uncertainty as
numerous efforts to control runaway inflation failed and two elected presidents did not complete
their terms. One elected president died before taking office and the other was impeached on
corruption charges. Brazil was one of the last countries in the region to move away from state-led
development; significant market-oriented policies were not implemented until the government of
Fernando Henrique Cardoso (1994-2002).3
In 1994, Cardoso, a prominent sociologist of the centrist Brazilian Social Democratic Party
(Partido da Social Democracia Brasileira, PSDB), was elected by a wide margin over Luis
Inácio Lula da Silva of the center-left Workers’ Party (Partido dos Trabalhadores, PT).4
Cardoso’s election was largely a result of the success of the anti-inflation “Real Plan” that he
implemented as Finance Minister. During his first term, Cardoso achieved macroeconomic
stability, opened the Brazilian economy to trade and investment, and furthered privatization
efforts. Despite these policy victories, Cardoso was unable to enact other political and social
changes, such as social security, tax, or judicial reforms. A 1997 constitutional change allowed
President Cardoso to run for reelection, and he once again defeated Lula in October 1998.
1
Brazil has never had a large indigenous population. Today, Brazil’s indigenous population consists of roughly
460,000 persons, many of whom reside in the Amazon. U.S. Department of State, Country Reports on Human Rights
Practices 2007: Brazil, March 2008.
2
World Bank, World Development Report, 2010.
3
For a historical overview of Brazil’s political development, see Bolivar Lamounier, “Brazil: Inequality Against
Democracy,” in Larry Diamond, Jonathan Hughes, Juan J. Linz, and Seymour Martin Lipset, eds., Democracy in
Developing Countries: Latin America, Boulder, CO: Lynne Reiner, 1999.
4
Although the PSDB was founded as a center-left party and the PT was founded as a leftist party, both have moved
toward the ideological center over the past two decades. Timothy J. Power and Cesar Zucco Jr., "Estimating Ideology
of Brazilian Legislative Parties, 1990-2005," Latin American Research Review, vol. 44, no. 1, 2009.
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President Cardoso experienced a considerable decline in popularity during his second term,
however, as Brazil faced a series of financial crises. Most analysts credit Cardoso with restoring
macroeconomic stability to Brazil’s economy and solidifying its role as leader of the Common
Market of the South (Mercosur),5 but fault him for failing to implement more aggressive political
and social reforms.6
Political Situation
The First Lula Administration
Luis Inácio Lula da Silva—known as Lula—was first elected president of Brazil in 2002. The
election was Lula’s fourth attempt at the presidency as the candidate of the Workers’ Party (PT),
which he helped found as a metalworker and union leader in the 1980s. During the campaign,
Lula moderated his earlier leftist rhetoric, promising to maintain the fiscal and monetary policies
associated with Brazil’s standing International Monetary Fund (IMF) agreements while
continuing to advocate for stronger state support for Brazil’s poor. The election proved to be a
referendum on President Fernando Henrique Cardoso’s eight years in power. High unemployment
rates and economic stagnation led voters to reject Cardoso’s designated successor, Minister of
Health José Serra, and support Lula.
During his first term, President Lula largely maintained the market-oriented economic policies
associated with his predecessor, while placing a greater emphasis on reducing poverty. In 2003,
the Lula government enacted social security and tax reforms, and committed to a primary budget
surplus of 4.25% of GDP. In 2004, Lula implemented a law to allow more private investment in
public infrastructure projects. Although the Lula Administration tightly controlled expenditures, it
also reorganized and expanded some of the social programs initiated under Cardoso. One
conditional cash transfer program, known as Bolsa Familia (Family Stipend), now provides
monthly stipends to some 12.4 million poor families (49 million people) in exchange for
compulsory school attendance for all school-age children. Supporters of the program credit it with
reducing poverty and weakening clientelist links between the poor and some local politicians
while critics argue that it has made poor households too dependent on government services.7
Despite these initial legislative victories, Lula’s agenda stalled toward the end of his first term.
Some left-leaning Brazilians criticized Lula for maintaining the orthodox economic policies of
the Cardoso Administration and failing to do more to address social issues such as income
inequality and land distribution. Criticism of Lula became more widespread with the onset of
several corruption scandals involving top PT officials, although a congressional inquiry cleared
President Lula of any direct responsibility in April 2006.8
5
Mercosur is a common market composed of Brazil, Argentina, Paraguay, and Uruguay that was established in 1991.
See CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy, by J. F. Hornbeck.
6
Susan Kaufman Purcell and Riordan Roett, eds., Brazil Under Cardoso, Boulder, CO: Lynne Reiner Publishers, 1997;
Mauricio A. Font and Anthony Peter Spanakos, Reforming Brazil, New York: Lexington Books, 2004.
7
Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation Under Lula,” Journal of
Latin American Studies, vol. 38, November 2006; Riorden Roett, “How Reform Has Powered Brazil’s Rise,” Current
History, February 2010; "Bolsa Família benefits 49 m Brazilians," Latin News Daily, June 1, 2010.
8
Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” World Politics, vol. 59, no. 3,
April 2007.
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Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS Graphics.
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The Second Lula Administration
President Lula was elected to second term in October 2006, defeating the PSDB’s Gerardo
Alckmin in a second round runoff with 61% of the vote. Lula won handily in the poorer north and
northeastern regions of the country, but failed to carry the more prosperous southern and western
states or São Paulo. Some observers assessed that Brazilians, though divided by class and region,
effectively voted in favor of continuing macroeconomic stability under a second Lula
Administration. Others attribute his win to the success of the Bolsa Familia program, which led
voters in poorer income brackets to overwhelmingly support him. 9 Although Lula was able to
overcome the PT’s corruption scandals, his party did not fare as well; in concurrent legislative
elections, the PT suffered a loss of nine seats in the Chamber of Deputies and four seats in the
Senate.
Despite his administration enjoying high approval ratings (78% in late August 2010)10 and several
years of strong economic growth, President Lula’s second term has been periodically hindered by
corruption scandals and a lack of support from members of his coalition. During his second
administration, Lula has expanded social programs like Bolsa Familia, launched new programs
like Minha Casa, Minha Vida (My House, My Life)—an attempt to increase formal housing for
low-income Brazilians, and implemented various economic stimulus measures, such as his
Program to Accelerate Growth, which encourages public and private investment in the country’s
deteriorating infrastructure.11 Nonetheless, many of President Lula’s priorities—including
significant tax and political reforms—have stalled in Brazil’s Congress, where the PT-allied, but
ideologically heterogeneous, Party of the Brazilian Democratic Movement (Partido do
Movimento Democrático Brasileiro, PMDB) controls the presidencies of both the Senate and
Chamber of Deputies. President Lula has done little to challenge the PMDB since the PT’s
chances of maintaining the presidency in 2010 are likely dependent on a continued alliance.12
This has also led President Lula to vigorously defend Senate President José Sarney (President of
Brazil, 1985-1990) of the PMDB against a number of corruption allegations, ranging from
nepotism to abuse of public funds.13
With politically sensitive economic and political reforms stalled, President Lula’s main legislative
priority for 2010 has been the approval of a new regulatory framework that would increase the
state’s role in the exploitation of Brazil’s considerable offshore oil reserves. (For more
information, see “Oil” below). Among other provisions, the plan would make state-owned
Petróleo Brasileiro (Petrobras) the sole operator for all new offshore projects, replace the existing
concessionary model with a production sharing regime, guarantee Petrobras a minimum 30%
stake in all new joint ventures, create a new public company—Petrosal—to manage the
development of the offshore reserves, and create a new social fund overseen by Congress to direct
9
Matt Moffett and Geraldo Samor, “In Brazil Campaign, A Barroom Brawl and a Class War,” Wall Street Journal,
October 27, 2006; Wendy Hunter and Timothy J. Power, “Rewarding Lula: Executive Power, Social Policy, and the
Brazilian Elections of 2006,” Latin American Politics and Society, Spring 2007.
10
Rogerio Jelmayer, “Lula’s Hand-Picked Successor Widens Lead in Poll,” Wall Street Journal, August 28, 2010.
11
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.
12
“Power struggle exposes senate wrongdoings,” Latin American Weekly Report, March 26, 2009; “Brazil: PMDB
powerbrokers may hold key in 2010,” Oxford Analytica, March 30, 2009.
13
Otávio Cabral, “Os Novos e Bons Companheiros,” Veja, July 22, 2009.
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offshore revenues toward four key areas: education, infrastructure, science and technology, and
poverty reduction. 14 Although President Lula won legislative approval for the capitalization of
Petrobras and creation of Petrosal, Brazil’s Congress has deferred final passage of the other items
until after the October 2010 presidential and legislative elections.15
October 2010 Elections
Presidential, gubernatorial, and state and federal legislative elections will be held on October 3,
2010. While some of President Lula’s supporters suggested the possibility of amending the
constitution to allow him to run for a third term, Lula has stressed the importance of alternation of
power, stating unequivocally that “Brazil should not have a third mandate.”16 The top candidates
to replace him are Dilma Rousseff of the PT and José Serra of the PSDB. Rousseff has never run
for political office but served as Minister of Mines and Energy from 2003-2005 and Minister of
the Presidency from 2005-2010, before resigning to seek the presidency. She has the support of
six political parties and her running-mate is a member of the PMDB. Serra served as Health
Minister under President Cardoso, was the PSDB’s presidential nominee in 2002, and was the
Governor of São Paolo state until resigning to campaign. He is heading up a five-party coalition
with a running-mate from the conservative Democrats (Democratas, Dem) party. Seven other
candidates are also running, although former Lula Administration Environment Minister Marina
Silva of the Green Party (Partido Verde, PV) is the only one that has registered much support.
Analysts believe that both Serra and Rouseff would maintain broad policy continuity, although
Serra would likely diverge from Lula on foreign affairs. Rousseff would maintain generally
orthodox economic policies, like the country’s 3.3% of GDP primary surplus target, while
embracing the PT’s belief in a strong state role in development by continuing the Lula
Administration’s Program to Accelerate Growth and implementing its proposed new regulatory
framework for offshore oil reserves. Analysts believe Serra, who also supports an “activist,
muscular state,” would be more likely to restrain spending growth and maintain the current
balance between the state and private enterprise in the oil sector. Both candidates have pledged to
maintain social programs like Bolsa Familia.17 On foreign policy, both candidates would foster
Brazil’s expanding role on the world stage, with Rousseff likely to continue Lula’s focus on
south-south cooperation and Serra’s policies more likely to align with those of the United States
while still maintaining Brazil’s traditional independence. 18
14
“Brazil’s Oil Law still awaiting approval,” Latin American Regional Report: Brazil & Southern Cone, February
2010.
15
“Analysis-Election puts Brazil’s oil overhaul on hold,” Reuters, July 12, 2010; “Brazil’s Lula signs law creating new
oil company,” Reuters, August 2, 2010.
16
“Lula speaks out on third term,” Latin News Daily, June 3, 2009.
17
Vera Rosa, “Dilma defenderá Estado forte para embalar ‘novo desenvolvimentismo’,” Estado de São Paolo,
December 27, 2009; “Brazil: Candidates moot fiscal reform,” Latin American Regional Report: Brazil & Southern
Cone, May 2010; “Country Report: Brazil,” Economist Intelligence Unit, August 2010.
18
“Brazil: Foreign policy will test Lula’s successor,” Oxford Analytica, April 23, 2010; Brazil: Serra takes issue with
Lula’s foreign policy,” Latin American Weekly Report, June 3, 2010; “Country Report: Brazil,” Economist Intelligence
Unit, August 2010.
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According to a poll from late August 2010, Rousseff is leading Serra 51% to 27%; Silva has the
support of 9% of voters.19 If no candidate attains an absolute majority in the first round, a runoff
election will be held between the top two candidates on October 31, 2010.
Economic Conditions
Over the past two decades, Brazil’s fiscal and monetary policies have focused primarily on
inflation control. When President Lula took office in 2003, Brazil had an extremely high level of
public debt, virtually necessitating that he adopt austere economic policies. Despite his leftist
political origins, President Lula has maintained orthodox economic policies, even surpassing the
IMF’s fiscal and monetary targets. As a result, Brazil began to experience some benefits,
including lower inflation and a lower credit risk rating. In December 2005, the Lula government
repaid its $15.5 billion debt to the IMF ahead of schedule, and in 2009, Brazil became a net IMF
creditor.
Fiscal discipline has been accompanied by record exports. Brazil is a major exporter of
agricultural and industrial products and plays a significant role in the world trading system. Since
2002, Brazil has been the world’s third-largest exporter of agricultural products after the United
States and the European Union. Brazil is a leading exporter of coffee, orange juice, sugar,
chicken, beef, soy, and tobacco. Demand for Brazilian commodity exports in Asia is strong, as is
global demand for Brazil’s manufactured goods and services. Brazil is the world’s second-largest
producer of ethanol (after the United States), and its state-run oil company, Petrobras, is a leader
in deep-water oil drilling. In 2009, the value of Brazil’s exports reached some $153 billion, and
the country’s trade surplus was over $25 billion.20
Economic Challenges
Slow Growth Rate
One of President Lula’s goals for his second term was to boost Brazil’s lagging economic growth
rate, which averaged just 2.7% between 2000 and 2006. In 2007, President Lula launched a
$284.5 billion21 two-year Program to Accelerate Growth (Programa de Aceleração do
Crescimento, PAC), with the intention of increasing Brazil’s growth rate to 5% per year through
public and private investment in infrastructure. The Brazilian federal government directly
financed just 14% of the PAC, but provided incentives such as tax breaks and a simplified
regulatory framework in order to spur additional investment. State-run companies financed 35.5%
of the PAC, state and private banks financed 32.5%, and the private sector financed 18%.22
President Lula launched a second phase of the PAC in March 2010, although just 40% of stage
one PAC projects had been completed at that time according to government estimates. The second
stage of the PAC contemplates $541.3 billion in public and private investment between 2011 and
2014 and $356.8 billion23 after 2014. The largest share of the funds would go to the energy sector
19
Rogerio Jelmayer, “Lula’s Hand-Picked Successor Widens Lead in Poll,” Wall Street Journal, August 28, 2010.
Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, February 2010.
21
Figure based on the August 31, 2010 currency conversion rate of 1 Brazilian Real: 0.5645 U.S. Dollars
22
“Lula’s legacy to Brazil,” Latin American Regional Report: Brazil & Southern Cone, April 2010.
23
Figures based on the August 31, 2010 currency conversion rate of 1 Brazilian Real: 0.5645 U.S. Dollars
20
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while low-income housing and the transportation sector would also receive significant portions.24
Brazil’s economy grew 6.1% in 2007 and 5.1% in 2008, before contracting 0.2% in 2009 as a
result of the global financial crisis.25 (See discussion under “Global Financial Crisis” below).
Although the PAC appears to have been at least somewhat successful at boosting short-term
economic growth, some analysts have identified several factors that could constrain Brazil’s longterm growth potential. These include a sizeable public debt burden, significant government
spending, high taxes and interest rates, low investment and savings rates, and an unwieldy public
pension system that a 2006 report by the Organization for Economic Co-operation and
Development (OECD) asserted is a significant obstacle to sustained economic growth.26 Despite
his popularity, President Lula has thus far not elected to use his political capital to enact the
structural reforms needed to address these issues.
Global Financial Crisis
After experiencing strong growth in 2007 and most of 2008, the Brazilian economy was hit by the
global financial crisis in late 2008 and 2009. Brazil took several steps to minimize the impact of
the crisis. The government injected at least $100 billion of additional liquidity into the local
economy, provided support packages to productive sectors, and cut the key interest rate.27
President Lula also acted to maintain domestic consumption in hopes of partially offsetting
declines in global demand. The government mandated an above-inflation increase to the
minimum wage for 2009, provided temporary tax relief, announced its intention to increase
investments in the PAC, and maintained its spending on social programs like Bolsa Familia.28 The
Brazilian government’s actions appear to have been reasonably successful. Brazil was one of the
first Latin American nations to emerge from recession and the economy contracted by just 0.2%
in 2009. The country has continued to rebound strongly in 2010; analysts now expect real GDP to
grow by 7.8%, even as the Brazilian government removes its stimulus measures.29
Social Indicators
Despite its well-developed economy and large resource base, Brazil has had problems solving
deep-seated social problems like poverty and income inequality. Brazil has one of the most
unequal income distributions in Latin America, a region with the highest income inequality in the
world. The wealthiest 5% of the population account for some 40% of the country’s wealth. 30 One
major cause of poverty and inequality in Brazil has been the extreme concentration of land
24
“Lula’s legacy to Brazil,” Latin American Regional Report: Brazil & Southern Cone, April 2010.
“Country Report: Brazil,” Economist Intelligence Unit, August 2010.
26
Fabio Giambiagi and Luiz de Mello, “Social Security Reform in Brazil: Achievements and Remaining Challenges,”
Organization for Economic Co-operation and Development (OECD), Economics Department Working Paper No. 534,
December 6, 2006.
27
“Will the economy grow in 2009?” Latin American Economy & Business, February 2009; “Brazil economy:
Bottoming out?” Economist Intelligence Unit, May 7, 2009.
28
“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.
29
“Late in, first out,” The Economist, September 14, 2009; “Country Report: Brazil,” Economist Intelligence Unit,
August 2010.
30
“Brazil: Middle class expands but inequality persists,” Oxford Analytica, February 8, 2010.
25
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ownership among the country’s elites. A 2004 study found that 1% of the Brazilian population
controlled 45% of the farmland. 31 The Brazilian government has also acknowledged that there is a
racial component to poverty in Brazil. People of African descent in Brazil, also known as AfroBrazilians, represent 50.6% of the country’s population but constitute 67% of the poor. 32 Other
factors that inhibit social mobility in Brazil include a lack of access to quality education and job
training opportunities for the country’s poor.
Brazil’s endemic poverty and inequality have, until recently, not been significantly affected by the
government’s social programs. A March 2005 OECD study found that, even though Brazil had
spent the same level or more of public spending on social programs as other countries with
similar income levels, it had not achieved the same social indicators as those countries.33 There
has been more recent evidence, however, that the Lula government’s Bolsa Familia program,
combined with relative macroeconomic stability and growth over the past few years, has reduced
poverty rates, particularly in the north and northeast regions of the country.34 Since 2003, the
proportion of poor has fallen from 33.2% to 22.9% of the population, and 30 million Brazilians
have moved into the middle class.35
Foreign and Trade Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a regional power in
Latin America, a leader among developing countries in economic cooperation and collective
security efforts, and an emerging world power. Brazilian foreign policy has been based on the
principles of multilateralism, peaceful dispute settlement, and nonintervention in the affairs of
other countries.36 Brazil engages in multilateral diplomacy through a variety of sub-regional
organizations—including Mercosur, the Union of South American Nations (UNASUR), and the
Rio Group—as well as through the Organization of America States (OAS) and the United
Nations.
Regional Integration and Leadership
Over the past two decades, Brazil has pushed for greater integration among Latin American
nations while consolidating its status as a regional power. Brazil has played an important role in
establishing new multilateral organizations, although it has had much more success in developing
political cohesion than true economic integration. Brazil has also played an important role in
maintaining regional peace and stability; however, its growing commercial and political influence
has received some pushback from neighboring countries.
31
“Special Report: Land Report Dilemma,” Latin America Regional Report, December 21, 2004.
Fabiana Frayssinet, “Controversy Dogs Brazil’s Racial Equality Law,” Inter Press Service, July 9, 2010.
33
Organization for Economic Cooperation and Development, Economic Survey of Brazil 2005, March 2005.
34
Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation Under Lula,” Journal of
Latin American Studies, vol. 38, November 2006; United Nations Development Program, “Human Development
Report 2007/8,” November 2007.
35
The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn between $900 and $2,000 per month, now account for half of the Brazilian population. “Brazil: Poverty falls,
but regional inequities remain,” Oxford Analytica, June 21, 2010.
36
Georges D. Landau, “The Decision making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and
International Studies: Washington, DC: March 2003.
32
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Common Market of the South
Brazil joined with Argentina, Paraguay, and Uruguay to establish the Common Market of the
South (Mercosur)37 in 1991. The organization was originally created in order to promote
economic integration and political cooperation, however, its progress in terms of economic
integration has been quite limited. The pact calls for an incremental path to full integration, yet
only a limited customs union has been achieved in its nearly 20 year existence. Likewise,
Mercosur’s internal resolution process has proved unable to resolve disputes between members,
and the group has not addressed trade asymmetries.38 Although a common customs code that
provides for the elimination of double tariffs on non-Mercosur goods transported between
countries within the bloc was finally agreed to in August 2010, it still needs to be ratified by the
legislatures of each of the members.39
Despite its lack of economic integration, Mercosur has been an influential body. Since its
formation, it has greatly expanded its geographic reach. Chile, Mexico, and the members of the
Andean Community of Nations (CAN)—Bolivia, Colombia, Ecuador, Peru, and Venezuela—
have all become associate members.40 Venezuela will become the fifth full member of Mercosur
once all four founding nations ratify its inclusion; Paraguay is the only country yet to ratify the
accession.41 Mercosur has also played an important role on regional issues. For example, its
opposition to the Free Trade Area of the Americas (FTAA) was the principle reason why the
agreement stalled.
Union of South American Nations and other Regional Organizations
Even though Mercosur has largely abandoned its attempts to deepen integration among its
members, Brazil has continued to push for broader regional integration. The 2004 trade
agreement that provided CAN nations with associate membership in Mercosur led to the creation
of the South American Community of Nations. In May 2008, this was reformulated as the Union
of South American Nations (UNASUR) in a pact that included all 12 independent countries of
South America. Brazil has also pushed for the incorporation of more countries into the Rio
Group, a political forum with no formal institutions that includes a variety of Latin American and
Caribbean countries.42 Most recently, Brazil has supported the creation of a new Community of
Latin American and Caribbean States, which would bring together all of the countries of the
hemisphere except Canada and the United States.43
37
For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade
Policy, by J. F. Hornbeck.
38
“Deathknell Sounds,” Latin American Regional Report: Brazil & Southern Cone, January 2009.
39
“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.
40
Associate members have no voting rights and need not observe Mercosur’s common external tariff.
41
Maria Luiza Rabello, “Brazil Senators Approve Venezuela Entry into Mercosur,” Bloomberg, December 15, 2009.
42
The Rio Group was created in 1986 when the Contadora Group and the Contadora Support Group merged. Both
groups had favored a negotiated solution to the conflicts in Central America in the 1980s, rather than the U.S. push for
a military solution.
43
“Region: New body to represent the region, sans US,” Latin American Security & Strategic Review, February 2010.
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All of these organizations contribute to the region’s increasing independence, however, their
capacities are limited. Although Unasur played an important role in resolving a political conflict
in Bolivia in late 2008, it has shown a limited capacity to mediate regional differences since
then.44 Likewise, the Rio Group was able to reduce regional tensions following a Colombian
airstrike of a Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de
Colombia, FARC) camp inside Ecuador in March 2008, but it lacks any of the formal institutions
and mechanisms possessed by the OAS. Nonetheless, these regional organizations provide Brazil
with forums in which it can engage in multilateral diplomacy, develop consensus on regional
issues, and peacefully resolve disputes without having to turn to extra-regional powers, such as
the United States.
Maintenance of Peace and Stability
In addition to supporting the work of multilateral organizations, Brazil has used bilateral
diplomacy to encourage the peaceful resolution of conflicts and maintain stability in the region.
Brazil has commanded the U.N. Stabilization Mission in Haiti (MINUSTAH) since 2004. It
maintains the largest number of peacekeeping troops on the ground, and doubled its forces there
following the January 2010 earthquake. 45 Brazil has also worked with Colombia to end its longrunning conflict with the FARC. It has provided logistical assistance to the Colombian
government in obtaining the release of political hostages held by the FARC, called on the FARC
to end its armed rebellion and assimilate into the Colombian political system, and signed a
bilateral agreement with Colombia to allow cross-border privileges in hot pursuit of the FARC.46
Additionally, Brazil used bilateral diplomacy to convince each of the 12 member nations of
Unasur to sign onto its South American Defense Council in March 2009. The Council is designed
to safeguard peace and security by boosting regional cooperation on defense and national security
policies.47
Expansion of Influence
While Brazil has consolidated its power within South America, it has not traditionally exerted
much influence in Central America or the Caribbean. In recent years, Brazilian government and
business officials have sought to change this by expanding the country’s political and commercial
interests in the broader region. One initiative has involved the use of so-called “ethanol
diplomacy, ” in which Brazil has signed bio-fuels partnership agreements with several Central
American and Caribbean countries that would otherwise be dependent on expensive oil imports.48
Brazil has also become a regional observer of the Central American Integration System (SICA)
and promoted a trade agreement between SICA and Mercosur.49 Moreover, following the June
44
“Latin America: Regional tensions challenge UNASUR,” Oxford Analytica, August 21, 2009.
45
Fernanda Odilla, Simone Iglesias & Johanna Nublat, “Brasil vai dobrar efetivo militar no Haiti,” Folha de São
Paulo, January 21, 2010.
46
“Agradece Colombia a Brasil apoyo en liberación de rehenes ,” Agencia Mexicana de Noticias, February 3, 2009;
Stan Lehman, “Lula: FARC debe hacer juego democrático y liberar rehenes,” Associated Press, December 5, 2008;
“Brazil Colombia: A Deal Signals Strategic Cooperation,” Stratfor, March 12, 2009.
47
“South American Defence Council,” Latin American Regional Report: Brazil & Southern Cone, April 2009.
48
“Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007.
49
Andres Oppenheimer, “Brazil stretching clout to Central America,” Miami Herald, June 7, 2009; “Brazil is
Challenging Mexico and U.S. Domination of Isthmus,” Latin America Data Base NotiSur, June 11, 2009.
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2009 ouster of Honduran President Manuel Zelaya, Brazil was vocal in advocating for Zelaya’s
reinstatement and allowed him to take refuge in its embassy. In doing so, it took on a much larger
than expected role given its typical noninterventionist foreign policy. 50 Despite these growing ties
to Central American and the Caribbean, analysts assert that Brazil’s influence remains mostly
confined to South America for the time being.51
Regional Backlash
Brazil’s expanding influence has generated some backlash in the region. Brazil was caught off
guard by Bolivia’s May 2006 nationalization of the country’s natural gas industry as President
Lula had hoped that Petrobras’ investments in Bolivia would prevent such an action.52 Paraguay
has also confronted Brazil over energy issues, demanding a greater price for the electricity
generated by the countries’ joint hydroelectric dam. 53 Venezuela—which has sought to increase
its regional influence in recent years through the provision of discounted oil—has criticized
Brazil’s promotion of biofuels, charging that biofuels were the principal cause of the recent food
crisis. While Brazil has thus far been able to maintain constructive relations with its South
American neighbors, reaching mutually acceptable compromises with Bolivia and Paraguay
while avoiding open confrontations with Venezuela, some analysts assert that such conflicts are
the result of a growing resentment in Latin America over Brazil’s expanding influence. They
believe similar conflicts are likely to continue as Brazil’s economic and geopolitical power
grows.54
Emerging Global Role
As the country has consolidated its power in South America and extended its influence to the
broader region, Brazil has also become increasingly prominent on the world stage. Brazil’s global
reach is largely the result of its fast-growing economy, which is the tenth largest in the world. The
country is rich in natural resources and possesses a dynamic agricultural sector. Brazil is the top
exporter of coffee, orange juice, sugar, chicken, beef, and soy; the second largest producer of
ethanol; and the third largest exporter of agricultural products. Brazil also has a relatively
balanced trade regime: Its main trading partners in 2008 were the European Union (24% of
exports, 22% of imports), the United States (14% of exports, 15% of imports), China (8% of
exports, 12% of imports), and its neighbors in Mercosur (11% of exports, 9% of imports).55 These
factors, in addition to President Lula’s focus on improving relations with other leaders of the
developing “South,” have made Brazil one of the most important leaders of the G-20 group of
50
Jens Glüsin, “South America’s Gentle Giant – Brazil Flexes Muscles Over Honduras Crisis,” Der Spiegel, October 9,
2009.
51
Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February 22, 2010.
52
“Bolivia’s Populism Steps on Brazil,” Christian Science Monitor, May 8, 2006; “Brazil May Pay a Price for
Generous Deal on Gas,” Financial Times, February 22, 2007; “Brazil Seeks to Lure Bolivia Away from Venezuela,”
Reuters, December 13, 2007; “New chapter in gas dispute with Bolivia,” Latin News Daily, March 30, 2009.
53
Joshua Goodman, “Paraguay Pushes ‘Imperialist’ Brazil on Hydro Power: Week Ahead,” Bloomberg, July 20, 2009.
54
Miguel Diaz & Paulo Roberto Almeida, “Brazil’s Candidacy for Major Power Status,” Stanley Foundation,
November 2008; Raúl Zibechi, “Is Brazil Creating Its Own ‘Backyard’?” Center for International Policy Americas
Program, February 3, 2009.
55
Mercosur trade statistics only include the other full members of the trade bloc: Argentina, Uruguay, and Paraguay.
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emerging nations and a top player in the Doha Round of World Trade Organization (WTO)
negotiations.56
In recent years, President Lula has utilized his country’s growing economic clout to assert
Brazilian influence in other global matters. In the aftermath of the global financial crisis, Brazil
became the foremost proponent of greater international financial regulation and a more
democratic global financial system. 57 Brazil also played an active role at the 2009 U.N.
Framework Convention on Climate Change Summit in Copenhagen, calling on developed
countries to agree to more substantial green house gas emission reductions, proposing a fund to
help poor nations cope with the effects of climate change, and helping craft the summit’s lastminute non-binding agreement.58 Additionally, Brazil has suggested that it might be able to act as
a mediator in the Middle East, worked with Turkey to craft a deal concerning Iran’s nuclear
program, and has pushed for reform of, and a permanent seat on, the U.N. Security Council.59
As Brazil has taken on a larger role in global affairs, its foreign policy has been subject to a
number of critiques. Some domestic observers have criticized Brazilian foreign policy under Lula
as being overly ideological. They have accused President Lula of catering to the demands of
regional leftists and have suggested that his international initiatives are designed to maintain
support among the base of the Workers’ Party, which is disillusioned with his Administration’s
market-friendly economic policies. 60 Likewise, Roberto Abdenur, the former Brazilian
Ambassador to Washington, has asserted that the “south-south” approach of the Brazilian Foreign
Ministry indoctrinates Brazilian diplomats with “anti-imperialist” and “anti-American”
attitudes. 61 International observers have criticized Brazil for not speaking out on human rights
violations and undemocratic practices.62 The country’s acceptance of the 2009 Iranian elections
and its opposition to sanctions on Iran over its nuclear program have been particular baffling to
many in the international community. Brazilian officials maintain that the country views
confrontational policies as counterproductive and prefers to maintain friendly relations with all
nations in hopes of fostering negotiated solutions to disagreements.63
Relations with the United States
Relations between the United States and Brazil may be characterized as generally friendly despite
a number of disagreements in recent years. The United States increasingly regards Brazil as a
significant power, especially in its role as a stabilizing force in Latin America. The Obama
56
Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February 22, 2010; “Brazil
takes off,” The Economist, November 12, 2009.
57
“Brasil defenderá mais regulação no G-20,” O Globo (Brazil), August 6, 2009.
58
Gaurav Singh, “China, India, Brazil Commit to Meet Copenhagen Accord Deadline,” Bloomberg, January 25, 2010.
59
“Brazilian minister on Middle East role,” BBC Monitoring, January 4, 2010; Erich Follath & Jens Glüsing, “Iran
Nuclear Deal: Brazil’s Lula Vaults into Big League of World Diplomacy,” Der Spiegel, May 25, 2010.
60
“Lula criticised for ‘partisan’ foreign policy,” Latin American Weekly Report, January 22, 2009.
61
Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007.
62
“Brazil: Diplomacy criticised for undermining human rights,” Latin American Weekly Report, July 16, 2009; “Whose
side is Brazil on?,” Economist, August 13, 2009.
63
Bill Varner, “Brazil Resists Push for Tougher Sanctions on Iran, Envoy Says,” Bloomberg, February 17, 2010;
Andres Oppenheimer, “Hubris is behind Brazil’s ties with Iran,” Miami Herald, February 21, 2010; “Brazil asserts its
autonomy before Clinton,” Latin News Daily, March 4, 2010.
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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 on
bilateral, hemispheric, and global issues.”64 Brazil and the United States have worked closely on a
wide range of issues, from promoting bio-fuels development in the Western Hemisphere and
Africa (see “Ethanol and Other Biofuels”) to providing security and fostering development in
Haiti. Likewise, Brazil-U.S. cooperation has increased in recent years, as reflected in the
continuing high-level contacts between the two governments, particularly on energy issues.
Although Brazil and the United States share a number of common goals, Brazil’s independent
approach to foreign policy has led to periodic disputes with the United States on trade and
political matters. These include how (and whether) to create a Free Trade Area of the Americas
and Brazil’s vocal opposition to the war in Iraq and the U.S. embargo of Cuba. Despite President
Lula’s friendly relationship with President Obama, a number of differences between Brazil and
the United States have emerged over the past two years. In addition to ongoing disputes over the
U.S. tariff on Brazilian ethanol and the Doha Round of WTO negotiations, Brazil criticized the
United States for failing to take a stronger stance on the political crisis in Honduras and reacted
negatively to an agreement between the United States and Colombia to provide the United States
access to seven Colombian military bases.65
Most recently, the Lula and Obama Administrations have clashed over policy toward Iran. In May
2010, President Lula worked with his Turkish counterpart, Prime Minister Erdoğan, to negotiate a
nuclear swap deal with Iran that was similar to a deal put forward by the International Atomic
Energy Agency (IAEA) in October 2009. The Brazilians saw the agreement as a confidencebuilding measure to bring Iran back to the negotiating table; however, it was immediately
dismissed by the Obama Administration, which saw the agreement as a delaying tactic, and
decided to push ahead with sanctions. Brazil then voted against the U.N. Security Council
resolution to impose sanctions, saying the council had “lost a historic opportunity to peacefully
negotiate the Iranian nuclear program.”66
Brazil is considered a middle-income country and does not receive large amounts of U.S. foreign
assistance. Brazil received $21.5 million in U.S. aid in FY2009, will receive an estimated $25.1
million in FY2010, and would receive $20.9 million under the Obama Administration’s request
for FY2011. U.S. assistance priorities in Brazil include supporting environmental programs and
the strengthening of local capacity to address threats to the Amazon, promoting renewable energy
and energy efficiency to mitigate climate change, strengthening the professionalism and
peacekeeping capabilities of the Brazilian military, and reducing the transmission of
communicable diseases.67
64
White House, National Security Strategy, May 2010, p. 44.
“Brazil-US rows building over Colombia, biofuel, trade: FM” Agence France Presse, August 2, 2009; “Brasil espera
una actitud más firme de EEUU contre el golpe,” EFE News Service, August 4, 2009.
66
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; “Brazil’s Lula says UN sanctions a mistake,” Latin News Daily, June 10, 2010.
67
U.S. State Department, FY2011 Congressional Budget Justification for Foreign Operations, February 1, 2010.
65
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Selected Issues in U.S.-Brazil Relations
As noted above, the Obama Administration’s National Security Strategy recognizes Brazil as an
emerging center of influence whose cooperation should be sought when addressing regional and
global problems. Current issues of concern to both Brazil and the United States include
counternarcotics and counterterrorism efforts, energy security, trade, human rights, the fight
against HIV/AIDS, and the environment.
Counternarcotics
Although Brazil is not a major drug-producing country, it serves as a major transit country for
illicit drugs from neighboring Andean countries destined primarily for Europe. Urban gangs—
such as São Paulo’s First Command of the Capital (Primeiro Comando da Capital, PCC) and Rio
de Janeiro’s Red Command (Comando Vermelho, CV)—have begun playing greater roles in
narcotics and weapons smuggling, establishing their presence in other countries in the region and
forging ties with Colombian and Mexican traffickers. Brazil has also become the second-largest
consumer (after the United States) of cocaine in the world.
With U.S. support, Brazil has taken several steps to improve its counternarcotics capabilities. In
2004, Brazil implemented an Air Bridge Denial program, which authorizes lethal force for air
interdiction, and in 2006, Brazil passed an anti-drug law that prohibits and penalizes the
cultivation and trafficking of illicit drugs. Brazil has also worked with its neighbors to construct
Joint Intelligence Centers at strategic points along its borders and invested in a sensor and radar
project called the Amazon Vigilance System in an attempt to control illicit activity in its Amazon
region. In 2009, Brazil’s federal police captured 18.9 metric tons of cocaine, 1.4 metric tons of
cocaine base, 513 kilograms of crack cocaine, 150.6 metric tons of marijuana, 3.3 kilograms of
heroin, and 183.3 tons of precursor chemicals.68
Brazil received $1 million in U.S. counternarcotics assistance in FY2009, is receiving $1 million
in FY2010, and would receive an estimated $1 million in FY2011 under the Obama
Administration’s request.69 U.S. counternarcotics assistance includes training for Brazil’s federal
police, support for interdiction programs at Brazil’s ports, and expanding the capabilities of
special investigations units.
Counterterrorism and the Tri-Border Area70
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
Country Reports on Terrorism, the United States remains concerned that Hezbollah and Hamas
are raising funds through illicit activities and from sympathizers in the sizable Middle Eastern
communities in the region. Indeed, reports have indicated that Hezbollah earns over $10 million
per year from criminal activities in the TBA. 71 Although it has been reported that al Qaeda’s
68
U.S. Department of State, International Narcotics Control Strategy Report 2010, Volume 1, March 1, 2010.
U.S. State Department, FY2011 Congressional Budget Justification for Foreign Operations, February 1, 2010.
70
For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan.
71
Alain Rodier, “Notes D’Actualité N˚168: Les Trafics de Drogue du Hezbollah en Amérique Latine,” Centre
(continued...)
69
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former operations chief, Khalid Shaikh Mohammed, lived in the Brazilian TBA city of Foz de
Iguazu in 1995 and Brazilian authorities arrested Ali al-Mahdi Ibrahim—who was wanted by
Egypt for his alleged role in the 1997 massacre of tourists at Luxor—in the TBA in 2003, the
State Department report states that there have been no corroborated reports that any Islamic
groups have an operational presence in the area.72 The United States joined with the countries of
the TBA in the “3+1 Group on Tri-Border Area Security” in 2002 and the group built a Joint
Intelligence Center to combat trans-border criminal organizations in the TBA in 2007.
The United States has also worked bilaterally with Brazil to improve its counterterrorism
capabilities. In addition to providing counterterrorism training, the United States has worked with
Brazil to implement the Container Security Initiative (CSI) at the port of Santos. While the State
Department Country Reports on Terrorism lauded the Brazilian government for a number of
counterterrorism actions, it also noted that Brazil’s overall commitment to combating terrorism
was undermined by the government’s failure to strengthen its legal counterterrorism framework
by passing long-delayed anti-money laundering and counterterrorism bills.73 Brazil, like many
Latin American nations, has been reluctant to adopt specific antiterrorism legislation as a result of
the difficulty of defining terrorism in a way that does not include the actions of social movements
and other groups whose actions of political dissent were condemned as terrorism by repressive
military regimes in the past.74 Nonetheless, some Brazilian officials continue to push for
antiterrorism legislation, asserting that the country will face new threats as a result of hosting the
2014 World Cup and the 2016 Olympics.75
In January 2009, the Western Hemisphere Counterterrorism and Nonproliferation Act of 2009
(H.R. 375, Ros-Lehtinen) was introduced in the House. Among other provisions, the bill calls on
the U.S. Secretary of State to negotiate with Brazil, Argentina, and Paraguay to establish a
Regional Coordination Center (RCC) in the TBA to serve as a joint operational facility dedicated
to coordinating efforts, capacity, and intelligence to counter current and emerging threats and
prevent the proliferation of nuclear, chemical, and biological weapons. A similar provision can be
found in the Foreign Relations Authorization and Reform Act for Fiscal Years 2010 and 2011
(H.R. 2475, Ros-Lehtinen), which was introduced in the House in May 2009.
Energy Security
In the last few years, there has been significant congressional interest in issues related to Western
Hemisphere energy security. Brazil is widely regarded as a world leader in energy policy for
successfully reducing its reliance on foreign oil through increased domestic production and the
development of alternative energy resources. In addition to being the world’s second largest
producer of ethanol, Brazil currently generates over 85% of its electricity through hydropower.76
(...continued)
Français de Recherche sur le Rensignement, April 14, 2009.
72
“Latin America: A Safe Haven for Al Qaeda?” STRATFOR, September 4, 2003; U.S. Department of State, Office of
the Coordinator for Counterterrorism, Country Reports on Terrorism, August 5, 2010.
73
U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism, August 5,
2010.
74
“Anti-terrorism law project scrapped,” Latin American Security & Strategic Review, January 2008.
75
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.
76
“Brazil: Hydrocarbons potential poses major challenges,” Oxford Analytica, November 20, 2007.
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At the same time, Brazil has attained the ability to produce large amounts of enriched uranium as
part of its nuclear energy program. More recently, Brazil’s state-run oil company, Petrobras, a
leader in deep-water oil drilling, has discovered what may be the world’s largest oil field find in
25 years.77
Ethanol and Other Biofuels78
Brazil stands out as an example of a country that has become a net exporter of energy, partially by
increasing its use and production of ethanol. On March 9, 2007, the United States and Brazil, the
world’s two largest ethanol-producing countries, signed a Memorandum of Understanding to
promote greater cooperation on ethanol and biofuels in the Western Hemisphere. The agreement
involves: (1) technology sharing between the United States and Brazil; (2) feasibility studies and
technical assistance to build domestic biofuels industries in third countries; and, (3) multilateral
efforts to advance the global development of biofuels. The first countries to receive U.S.Brazilian assistance were the Dominican Republic, El Salvador, Haiti, and St. Kitts and Nevis. 79
Since March 2007, the United States and Brazil have moved forward on all three facets of the
agreement. U.S. and Brazilian consultants have carried out feasibility studies that identified shortterm technical assistance opportunities in Haiti, the Dominican Republic, and El Salvador. On
November 20, 2008, the United States and Brazil announced an agreement to expand their
biofuels cooperation and form new partnerships with Guatemala, Honduras, Jamaica, GuineaBissau, and Senegal.80 The United States and Brazil are also working with other members of the
International Biofuels Forum (IBF) to make biofuels standards and codes more uniform. In March
2009, the Western Hemisphere Energy Compact (S. 587, Lugar) was introduced. The legislation
would provide $6 million to expand U.S.-Brazil biofuels cooperation.81
Despite this progress, several potential obstacles to increased U.S.-Brazil cooperation on biofuels
exist, including current U.S. tariffs on most Brazilian ethanol imports. The United States currently
allows duty-free access on sugar-based ethanol imports from many countries through the
Caribbean Basin Initiative, Central American Free Trade Agreement, and the Andean Trade
Preferences Act, among others.82 Some Brazilian ethanol is processed at plants in the Caribbean
for duty-free entry into the United States, but exports arriving directly from Brazil are currently
subject to a 54-cent-per-gallon tax, plus a 2.5% tariff. Several bills were introduced in the 110th
Congress that would have eliminated or adjusted the ethanol tariff.
77
“Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential for U.S.-Brazil Energy
Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
79
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.
80
U.S. Department of State, Office of the Spokesman, “Joint Statement by the United States and Brazil Announcing the
Expansion of Cooperation on Biofuels to Advance Energy Security and Promote Sustainable Development,” November
20, 2008.
81
Senator Lugar had introduced a similar measure in the 110th Congress, S. 1007, reported out of the Senate Foreign
Relations Committee on September 23, 2008.
82
For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI), by
Brent D. Yacobucci.
78
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Nuclear Energy
Between the mid-1970s and the mid-1980s, Brazil’s military government sought to develop
nuclear weapons as it competed with Argentina for political and military dominance of the
Southern Cone. Brazil’s 1988 constitution limits nuclear activity to peaceful purposes, however,
and in 1991, Brazil and Argentina reached an agreement not to pursue nuclear weapons. Although
Brazil subsequently joined the Nuclear Nonproliferation Treaty (NPT) and a number of other
multilateral nonproliferation regimes, some international observers became concerned when
Brazil commissioned a uranium enrichment plant in 2004 and refused to give IAEA inspectors
full access to the centrifuge plant in 2005. The Brazilian government maintained that it needed to
enrich uranium in order to produce its own fuel, and it justified its refusal to give IAEA inspectors
access by citing security concerns over the proprietary aspects of the country’s nuclear
technology. Negotiations between Brazil and the IAEA ended in October 2005 when the Bush
Administration lent its support to Brazil by asserting that limited inspections should be enough
for Brazil to comply with its international obligations.83
President Lula has stated Brazil’s intention to spend $540 million over the next eight years to
build a third nuclear power plant. In September 2008, the Brazilian Minister for Energy and
Mining announced plans to build 60 new nuclear energy plants over the next 50 years. The
Minister claimed that an expansion of nuclear power would be the only way that Brazil would be
able to meet the energy needs of its growing population while avoiding massive carbon emissions
through the burning of fossil fuels.84
Oil
The recent discovery of substantial oil fields in the Santos Basin, which extends 500 miles along
the Brazilian coast, has the potential to turn Brazil into a major oil and gas producer and an
important source of energy for the United States. The Tupi field, discovered in November 2007,
has confirmed oil reserves of between five and eight billion barrels, and it is estimated that the
entire Santos Basin could hold up to 50 billion barrels of oil. President Lula asserts that the oil
fields have the potential to transform Brazil and improve living conditions for its people. He
intends to implement a new regulatory framework, which will increase the state’s role in the
exploitation of the reserves while investing the profits in a new social fund for education,
infrastructure, science and technology, and poverty reduction.85
Exploiting the new fields will be difficult and costly, however, as the oil is located in the so-called
“pre-salt” layer, beneath layers of rock and salt up to 7,000 meters below the seabed. Brazil’s
state-owned oil company, Petrobras, has announced that it will need $270 billion in investment
over the next 10 years to develop the reserves. 86 Some foreign investors have questioned whether
the company will be able to access sufficient finance given the Brazilian government’s intentions
83
“New Round of Nuclear Enrichment Scare Stories,” Latin American Weekly Report, February 12, 2006; Bernard
Aronson, “Brazil’s Chance to Lead on Nuclear Containment,” Wall Street Journal, March 18, 2005; Sharon Squassoni
and David Fite, “Brazil as Litmus Test: Resende and Restrictions on Uranium Enrichment,” Arms Control Today,
October 2005.
84
“Brazil’s Nuclear Ambitions Expand,” Latin American Regional Report: Brazil & Southern Cone, November 2008.
85
“Brazil’s Oil Law still awaiting approval,” Latin American Regional Report: Brazil & Southern Cone, February
2010.
86
“Brazil needs $270 bln over 10-yrs for deepwater oil,” Reuters, March 19, 2009.
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to implement a new regulatory framework and increased concerns about offshore oil drilling as a
result of the recent BP oil spill in the Gulf of Mexico. 87 Nonetheless, Petrobras secured a record
$41.5 billion from financial markets in 2009, including a preliminary commitment of $2 billion
from the Export-Import Bank of the United States, $12.5 billion over 20 years from Brazil’s stateowned National Bank of Economic and Social Development (BNDES), and $10 billion over 10
years from China in exchange for guaranteed oil deliveries of 150,000 barrels per day (bdp) in
2009 and 200,000 bpd for the next decade. 88
Trade Issues
Trade issues are central to the bilateral relationship between Brazil and the United States, with
both countries being heavily involved in subregional, regional, and global trade talks. Brazil has
sought to strengthen Mercosur and establish free trade agreements with most of the countries in
South America, while also pursuing efforts to negotiate a Mercosur-European Union free trade
agreement. The United States has been actively involved in the Doha negotiations and, until late
2005, pressed for action on the region-wide Free Trade Agreement of the Americas (FTAA).
Since negotiations for the FTAA have been largely abandoned, the United States has continued to
sign bilateral and subregional agreements with countries throughout Latin America. Bilateral
trade between the United States and Brazil totaled $46.2 billion in 2009, a nearly 23% decline
from 2008. U.S. exports to Brazil amounted to $26.2 billion while U.S. imports from Brazil
amounted to $20.1 billion. 89
Doha Round of the World Trade Organization Talks 90
Brazil has had a leading role in the Doha round of the World Trade Organization (WTO) talks. In
2003, Brazil led the G-20 group of developing countries’ efforts to insist that developed countries
agree to reduce and eventually eliminate agricultural subsidies as part of any settlement. In late
July 2004, WTO members agreed on the framework for a possible Doha round agreement, but
formal talks were suspended indefinitely in July 2006 after key negotiating groups failed to break
a deadlock on the issue of agricultural tariffs and subsidies. In June 2007, negotiators from India
and Brazil walked out of a round of informal talks with representatives from the United States
and the European Union (EU), refusing to open their markets further unless U.S. and EU
subsidies were substantially reduced. In recent years, trade ministers have repeatedly failed to
reach an agreement to conclude the Doha round and the U.S. negotiating position remains a
source of contention with Brazil. 91
87
“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.
88
Export-Import Bank of the United States, Summary of Minutes of Board of Directors, April 14, 2009; “Brazil: Da
Silva Goes to China,” Stratfor, May 19, 2009; “China’s Sinopec negotiating first oil exploration deal in Brazil,” EFE
News Service, June 29, 2009; “Brazil industry: Petrobras under pressure,” Economist Intelligence Unit, August 26,
2010.
89
U.S. Department of Commerce statistics, as presented by Global Trade Atlas, February 2010.
90
For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
91
“Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008; “Brazil-US rows building over Colombia,
biofuels, trade: FM,” Agence France Presse, August 2, 2009.
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World Trade Organization Dispute92
Over the past eight years, Brazil and the United States have been involved in a dispute over U.S.
subsidies for cotton farmers. Brazil initiated the dispute in 2002, and a WTO dispute settlement
panel ruled in Brazil’s favor in September 2004. The United States appealed the ruling but it was
reaffirmed by the WTO appellate body in March 2005. Although the Bush Administration asked
Congress to modify the cotton subsidy program in July 2005, a WTO dispute panel ruled in
December 2007 that the United States was not moving quickly enough to comply with the 2004
ruling. 93 Brazil and the United States then went to arbitration over the level of trade sanctions that
Brazil would have the right to impose against the United States, leading to an August 31, 2009
decision by a WTO arbitration panel, which largely favored Brazil’s retaliation request. In March
2010, Brazil announced it would be imposing WTO-sanctioned retaliatory measures 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. In order to avoid these
retaliatory measures, the United States reached an agreement with Brazil on June 17, 2010. Under
the agreement, the United States pledged to make some short-term changes to its export credit
guarantees and provide Brazil $147 million annually for a fund to assist Brazilian cotton farmers
with technical assistance, marketing, and market research. In exchange, Brazil will suspend its
retaliation with the intention of reaching a permanent agreement with the United States after
Congress has a chance to adjust the subsidy program in the 2012 Farm Bill.94
In May 2010, H.R. 5439 (Flake) was introduced in the House. The bill would require that the
U.S. contributions to the fund established by the United States and Brazil to assist Brazilian
cotton farmers be fully offset by reductions in direct payments for U.S. cotton producers under
the Farm Bill.
Generalized System of Preferences 95
The Generalized System of Preferences (GSP) provides duty-free tariff treatment to certain
products imported from developing countries. In the 109th Congress, renewal of the preference (as
established by Title V of the Trade Act of 1974) was somewhat controversial, owing, in part, to
concerns of some Members that a number of the more advanced developing countries (such as
Brazil and India) were contributing to the impasse in the Doha round of WTO talks. Compromise
language worked out between the House and Senate extended GSP for two years for all countries,
while asserting that the President “should” revoke “competitive need limitation (CNL)” waivers
for products from certain countries, based on the criteria specified. In June 2007, the Bush
Administration decided to revoke the CNL waivers on Brazilian brake parts and ferrozirconium. 96
The 111th Congress extended GSP until December 31, 2010 with P.L. 111-124.
92
For more information on U.S.-Brazil WTO disputes, see CRS Report RL32571, Brazil’s WTO Case Against the U.S.
Cotton Program by Randy Schnepf.
93
“WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007.
94
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.
95
This section was drawn from CRS Report RL33663, Generalized System of Preferences: Background and Renewal
Debate, by Vivian C. Jones.
96
“USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S. Trade, June 29, 2007.
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On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill would suspend GSP
for Brazil until the country meets its obligations under the Convention on the Civil Aspects of
International Child Abduction.
Intellectual Property Rights
In the last few years, Brazil has taken steps to improve its record on protecting intellectual
property rights (IPR). The Brazilian government has created a national action plan to address
piracy and intellectual property crimes, which has included increased police actions. Brazil and
the United States continue to work together to address intellectual property issues, primarily
through the U.S.-Brazil Bilateral Consultative Mechanism and the U.S.-Brazil Commercial
Dialogue. In recognition of this progress, the United States Trade Representative lowered Brazil
from the Priority Watch List of countries with significant IPR violations to the Watch List in
2007. Brazil has remained on the Watch List every year since 2007. In order to build on progress
that has been made, USTR recommends that Brazil should consider strengthening its IPR
enforcement legislation, more vigorously addressing book and internet piracy, and signing the
World Intellectual Property Organization Internet Treaties. 97 The U.S. government has also
expressed concerns about Brazil’s periodic threats to issue compulsory licenses for patented
pharmaceutical products. In May 2007, Brazil broke a patent on a drug used to treat HIV/AIDS
that is produced by Merck & Co. in order to import a cheaper version of that drug from India.98 In
July 2009, President Lula suggested that developing countries should be allowed to lift patent
rights to produce more vaccine to battle the A(H1N1) flu epidemic. 99
Human Rights
The U.S. State Department’s Country Report on Human Rights on Brazil covering 2009 states
that the “federal government generally respected the human rights of its citizens; however, there
continued to be numerous, serious abuses, and the records of several state governments were
poor.”100 Some human rights issues of particular concern include ongoing crime and human rights
abuses by police, race and discrimination, and trafficking in persons.
Violent Crime and Human Rights Abuses by Police
Most observers agree that the related problems of urban crime, drugs, and violence, on the one
hand, and corruption and brutality in law enforcement and prisons, on the other, are threatening
citizens’ security in Brazil. Crime is most rampant in the urban shanty towns (favelas) in Rio de
Janeiro and São Paulo. Violence has traditionally been linked to turf wars being waged between
rival drug gangs for control of the drug industry or to clashes between drug gangs and police
officials, who have been criticized for the brutal manner in which they have responded to the
gang violence.
97
U.S. Trade Representative, Special 301 Report, April 30, 2010.
“Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007.
99
“Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009.
100
U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, 2009 Country Reports on Human
Rights Practices, March 11, 2010.
98
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The weaknesses in Brazil’s criminal justice system have became dramatically apparent in recent
years as gangs have launched violent attacks that have destabilized the cities of São Paulo and
Rio de Janeiro. In one such attack in May 2006, street combat and rioting organized by a prisonbased gang network, the First Capital Command (Primeiro Comando da Capital, PCC), paralyzed
the city of São Paulo for several days.101 Officially, the violent gang attacks, which were followed
by police reprisals, resulted in at least 186 deaths.102 More recently, in October 2009, gunmen of
the Red Command (Comando Vermelho, CV) launched a raid on the Morro dos Macacos favela to
wrest control of the drug trade from the rival Friends of Friends (Amigos dos Amigos, ADA)
gang. Over the course of several days, 31 people were killed, including three police sharpshooters
whose helicopter was shot down as they tried to control the situation.103
As police forces in São Paulo and Rio de Janeiro have employed strong-arm tactics in hopes of
curbing the rampant gang violence, some human rights groups have raised concerns over a rising
number of extrajudicial killings. Upon completing a November 2007 visit to Brazil, a U.N.
Special Rapporteur concluded that police in Brazil are allowed to “kill with impunity in the name
of security.”104 Indeed, more than 11,000 people have been killed by the two police forces since
2003. Although the officers involved have reported nearly all of the killings as legitimate acts of
self defense, or “resistance killings,” a recent two year investigation by Human Rights Watch
concluded that “a substantial portion of the alleged resistance killings reported...[were] in fact
extrajudicial executions.” The Human Rights Watch report also indicates that those police officers
responsible for extrajudicial killings enjoy near total impunity. For example, of the over 7,800
complaints against police officers recorded by the Rio Police Ombudsman’s Office over the past
decade, only 42 generated criminal charges by state prosecutors and just four led to
convictions. 105 Despite these criticisms, some have defended the strong-arm tactics. São Paulo’s
public security secretariat maintains that Human Rights Watch failed to take note of the fact that
annual state killings by police have declined by 50% since 2003 while the homicide rate has been
reduced by 70% over the past decade.106
Many analysts have asserted that Brazilian politicians at all levels of government have failed to
devote the resources and political will necessary to confront the country’s serious public security
problems; however, this may be changing. The state of Rio de Janeiro launched a new anticrime
initiative in 2009 that considerably expands the number of personnel charged with maintaining
security. Whereas previous police efforts generally centered around quick raids, the new initiative
establishes Police Pacification Units (Unidades de Polícia Pacificadora, UPPs) that will maintain
permanent presences in the favelas. After the favelas are cleared of drug gangs, the UPPs are
101
Formed in 1993 to protest the country’s poor prison conditions, the PCC now has at least 6,000 dues-paying
members and reportedly exerts control over more than 140,000 prisoners in the São Paulo prison system. Stephen
Hanson, “Brazil’s Powerful Prison Gang,” Council on Foreign Relations, September 26, 2006.
102
“Brazil: Battle of São Paulo Leaves a Disquieting Balance,” Latin American Weekly Report, May 23, 2006; “Police
are Criticized in Wave of Gang Violence in Brazil,” New York Times, May 30, 2006; “Attacks in São Paulo Prompt
Fears of Renewed Gang Offensive,” EFE News Service, February 7. 2007.
103
“Brazil: Rio police intervention in gang war leaves high toll,” Latin American Security & Strategic Review, October
2009.
104
“Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News
Service, November 15, 2007.
105
“Lethal Force: Police Violence and Public Security in Rio de Janeiro and São Paulo,” Human Rights Watch,
December 2009.
106
“Human Rights: Police violence under renewed scrutiny,” Latin American Regional Report: Brazil & Southern
Cone, January 2010.
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charged with maintaining security and other governmental institutions are brought in to provide
basic social services. The new initiative has been rather successful thus far in reducing crime and
violence without extensive bloodshed. The murder rate in Rio de Janeiro was down 16.5% in the
first quarter of 2010 and 14.4% in the second quarter of 2010, compared to the same periods in
2009.107 Rio de Janeiro’s government has expanded the initiative from the seven pilot favelas
targeted in 2009 to 40 additional favelas in 2010, and intends to establish UPPs in 100 favelas by
the time Brazil hosts the World Cup in 2014.108
Race and Discrimination109
People of African descent in Brazil, also known as Afro-Brazilians, represent 50.6% of the
country’s population but constitute 67% of the poor. 110 During the Cardoso Administration, the
Brazilian government began to collect better official statistics on Afro-Brazilians. These statistics
found significant education, health, and wage disparities between Afro-Brazilians and Brazil’s
general population.
Brazil now has the most extensive anti-discrimination legislation geared towards Afrodescendants of any country in Latin America. In 2001, Brazil became the first Latin American
country to endorse quotas in order to increase minority representation in government service.
Since 2002, several state universities in Brazil have enacted quotas setting aside admission slots
for black students. Although most Brazilians favor government programs to combat social
exclusion, they disagree as to whether the beneficiaries of affirmative action programs should be
selected on the basis of race or income. 111 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 July 2010, President Lula signed 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. Afro-Brazilian activists, while acknowledging recent government efforts on behalf of
Afro-descendants, have noted that some of the legislation was weakened before passing and many
of the initiatives lack the funding, staff, and clout necessary to be effective. 112
Despite these limitations, Brazil has taken a leadership role in advancing issues of race and
discrimination within the Organization of American States, where it is leading the drafting of an
Inter-American Convention for the Prevention of Racism and All Forms of Discrimination and
Intolerance. In March 2008, Brazil and the United States signed an agreement known as the
107
“Brazil: Rio sees sharp fall in violent crime,” Latin American Security & Strategic Review, May 2010; “Brazil:
Murder rate falling in Rio,” Latin American Regional Report: Brazil & Southern Cone, August 2010.
108
“Brazil: Forty Rio favelas targeted for ‘pacification,’” Latin American Security & Strategic Review, January 2010;
Christian Parenti, “Retaking Rio,” The Nation, May 12, 2010.
109
For more information, see CRS Report RL32713, Afro-Latinos in Latin America and Considerations for U.S.
Policy, by Clare Ribando Seelke and June S. Beittel.
110
Fabiana Frayssinet, “Controversy Dogs Brazil’s Racial Equality Law,” Inter Press Service, July 9, 2010.
111
Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1, 2004.
112
Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue Policy Reform,” Citizen
Action in the Americas, No. 17, April 2005; Fabiana Frayssinet, “Controversy Dogs Brazil’s Racial Equality Law,”
Inter Press Service, July 9, 2010; Arthur Brice, “Brazil enacts racial discrimination law, but some say it’s not needed,”
CNN, July 21, 2010.
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United States-Brazil Joint Action Plan Against Racial Discrimination to bilaterally promote racial
equality in areas such as education, health, housing, and labor.113 On September 9, 2008, the
House passed H.Res. 1254 (Engel), expressing congressional support for the U.S.-Brazil antidiscrimination plan.
Trafficking in Persons for Forced Labor114
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.115 Brazil is a source, transit, and
destination country for people, especially women and children, trafficked for commercial sexual
exploitation. Brazilian Federal Police estimate that between 250,000 and 400,000 children are
exploited in domestic prostitution, especially in the country’s coastal resort areas where child sex
tourism is prevalent.
Brazil is also a source country for men trafficked internally for forced labor. More than 25,000
men have reportedly been recruited to labor in slave-like conditions, many in the country’s
agribusiness industry. Roughly half of the more than 11,000 people freed from debt slavery in
2007 and 2008 were found working on sugarcane plantations.116 While the Brazilian government
announced an agreement with the sugar industry to provide decent working conditions for the
country’s sugarcane cutters in June 2009, the accord does not establish minimum wages or formal
obligations.117 Reports suggest that significant numbers of men working in cattle ranching,
mining, and the production of charcoal for pig iron—a key ingredient of steel that is then
purchased by major companies in the United States—are also subjected to slave labor.118
Over the past year, the Brazilian government has taken a number of actions to address the
problem of human trafficking. Anti-slave labor mobile units under the Ministry of Labor
increased their operations, inspecting remote areas, freeing 3,769 victims, and forcing those
responsible to pay fines and restitution. Those responsible for slave labor paid some $3.3 million
in fines as a result of the 2009 operations. The Brazilian government also continued prosecuting
traffickers, providing assistance to victims, and broadcasting its anti-trafficking public awareness
113
“Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008.
For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando Seelke.
115
Since 2001, the U.S. State Department has evaluated foreign governments’ efforts to combat trafficking in persons
in its annual Trafficking in Persons (TIP) reports, which are issued each June. Countries are grouped into four
categories according to the U.S. assessment of efforts they are making to combat trafficking. Tier 1 is made up of
countries deemed by the State Department to have a serious trafficking problem but fully complying with the minimum
standards for the elimination of trafficking. Those standards are defined in the Victims of Trafficking and Violence
Protection Act of 2000 (P.L. 106-386) as amended. Tier 2 is composed of governments not fully complying with those
standards but which are seen as making significant efforts to comply. Tier 2 Watch List, first added as a category in the
2004 report, is made up of countries that are on the border between Tier 2 and Tier 3. Tier 3 includes those countries
whose governments the State Department deems as not fully complying with TVPA’s anti-TIP standards and not
making significant efforts to do so. Tier 3 countries have been made subject to U.S. sanctions since 2003.
116
U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report, June
4, 2008 & June 16, 2009.
117
“Brazil seeks decent working conditions for sugarcane cutters,” EFE News Service, June 26, 2009.
114
118
Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg Markets, December 2006;
U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report 2010,
June 14, 2010.
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campaign. Additionally, the Brazilian government continued implementing a national plan of
action to prevent trafficking in persons. Despite these actions, Brazil has made only limited
progress in bringing traffickers to justice and effectively penalizing those who exploit forced
labor.119
Convention on the Civil Aspects of International Child Abduction
Over the past several years, a high-profile child custody case has focused attention on Brazil’s
noncompliance with the Hague Convention on the Civil Aspects of International Child
Abduction. 120 In June 2004, Sean Goldman was taken to Brazil by his mother, Bruna Bianchi
Carneiro Ribeiro Goldman, a Brazilian native. Ms. Bianchi then divorced her husband David
Goldman—a U.S. citizen—and asserted full custody of Sean. In August 2004, the Superior Court
of New Jersey ruled that Ms. Bianchi’s continued retention of Sean constituted parental
kidnapping under U.S. law and awarded Mr. Goldman custody.121
In September 2004, Mr. Goldman filed an application for Sean’s return under the 1980 Hague
Convention on the Civil Aspects of International Child Abduction, to which both the United
States and Brazil are party and which entered into force between the countries on December 1,
2003. Under the Convention, a child removed from a country in violation of a parent’s custodial
rights should be promptly returned to the place of his or her habitual residence. The courts of the
country of the child’s residence can then resolve the custody dispute. 122
In 2005, a Brazilian federal judge ruled that although Sean had been moved to Brazil wrongfully,
he should remain in Brazil because he had become settled in his new location. 123 In August 2008,
Ms. Bianchi died and a Brazilian state court judge granted temporary custody of Sean to the man
Ms. Bianchi married following her move to Brazil, Joao Paulo Lins e Silva.124 The custody case
then bounced between federal appeals courts and the Brazilian Supreme Court until December 22,
2009, when the Brazilian Supreme Court issued a definitive ruling that ordered that Sean be
returned to his father. On December 24, 2009, Sean was handed over to Mr. Goldman at the U.S.
Consulate in Rio de Janeiro.125
The U.S. State Department’s Report on Compliance with the Hague Convention on the Civil
Aspects of International Child Abduction cites Brazil for patterns of noncompliance with the
Convention. It faults Brazilian courts for treating Convention cases as custody decisions,
119
U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2010, June 14, 2010.
120
For more information on international parental child abductions, see CRS Report RS21261, International Parental
Child Abductions, by Alison M. Smith.
121
David G. Goldman V. Bruna B. Goldman, FD-13-395-05C (Superior Court of New Jersey 2004).
122
Hague Conference on Private International Law: Final Act, Draft Conventions on Civil Aspects of International
Child Abduction and on International Access to Justice, Articles on the Law Applicable to Certain Consumer Sales,
and Recommendations and Decisions of the Conference, Oct. 25, 1980, 19 I.L.M. 1501 (1980).
123
Under Article 12 of the Hague Convention, a judge may refuse to return a child if the child has become settled in his
or her new home and more than one year has passed from the date of the child’s removal.
124
Joshua Partlow, “Fight for 8-Year-Old Colors Relationship Between U.S., Brazil,” Washington Post Foreign
Service, March 13, 2009; Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times,
February 25, 2009.
125
Marcelo Soares & Chris Kraul, “Boy leaves brazil with his father: The long custody battle over Sean Goldman had
strained U.S.-Brazil relations,” Los Angeles Times, December 25, 2009.
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demonstrating bias toward Brazilian citizens, and making the judicial process excessively
lengthy. There are currently some 50 unresolved cases of children being retained in Brazil after
having been wrongly removed from the United States.126
On March 11, 2009, the House unanimously passed H.Res. 125 (C. Smith), calling on Brazil to
meet its obligations under the Hague Convention to return Sean Goldman to his father in the
United States. On March 24, 2009, the Senate approved S.Res. 37 (Lautenberg) by unanimous
consent, calling on Brazil to comply with the requirements of the Convention on the Civil Aspects
of International Child Abduction and to assist in the safe return of Sean Goldman to his father in
the United States. On June 4, 2009, H.R. 2702 (C. Smith) was introduced in the House. The bill
would suspend the Generalized System of Preferences for Brazil until the country meets its
obligations under the Convention on the Civil Aspects of International Child Abduction.
HIV/AIDS
Internationally recognized as having one of the world’s most successful HIV/AIDS programs,
Brazil has made the fight against the spread of HIV/AIDS a national priority. Initially focused on
disease prevention, Brazil’s HIV/AIDS program expanded to providing antiretroviral therapy
(ART) on a limited basis by 1991, and later guaranteeing universal access by 1996. Currently
some 172,000 Brazilians have access to free generic versions of ART drugs, some of which are
locally produced and financed by the Brazilian government. The incidence of HIV/AIDS in
Brazil has stabilized since 1997, and universal free access to ART has increased average survival
times from 18 months for those diagnosed in 1995, to 58 months for those diagnosed in 1996.127
HIV prevalence has been stable at 0.5% for the general population in Brazil since 2000, so most
government prevention efforts are now targeted at high-risk groups where prevalence rates are
still above 5%.
Brazil’s decision to develop generic ART drugs to treat HIV/AIDS under the compulsory
licensing provision of its patent law led to a subsequent 80% drop in the cost of treatment. That
decision brought Brazil into conflict with the United States and the international pharmaceutical
industry. In May 2001, the United States submitted a complaint to the WTO, which was later
withdrawn, that Brazil’s practices violated the Trade-Related Aspects of Intellectual Property
Rights (TRIPS) agreement and prevented companies from developing new products in Brazil.
While the pharmaceutical industry argued that TRIPS was an essential tool to protect intellectual
property rights, developing countries (like Brazil) countered that TRIPS inhibited their ability to
fight public health emergencies in a cost-effective manner. In August 2003, a WTO decision
temporarily waived part of the TRIPS rules to allow the export of generic drugs to countries
confronting a grave public health challenge (such as HIV/AIDS, tuberculosis, or malaria). That
temporary waiver became permanent in late 2005.128
Brazil currently manufactures older ART drugs for domestic consumption and export to several
African countries but has to import newer medicines. According to Brazil’s Ministry of Health,
126
Kirk Semple, “Court Battle Over a Child Strains Ties in 2 Nations,” New York Times, February 25, 2009.
127
Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in Resource-Limited Settings,”
World Health Organization, February 2005.
128
Mary Anastasia O’Grady, “Brazil Could Turn a Trade Victory into Defeat,” Wall Street Journal, December 16,
2005.
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tough negotiations with pharmaceutical companies have resulted in $1.1 billion in savings for the
country’s HIV/AIDS program.
Amazon Conservation
The Amazon basin spans the borders of eight countries and is the most biodiverse tract of tropical
rainforest in the world. It holds 20% of the Earth’s fresh water and 10% of all known species.
Approximately 60% of the Amazon falls within Brazilian borders, making Brazil home to 40% of
the world’s remaining tropical forests.129
The Brazilian Amazon was largely undeveloped until the 1960s, when the military government
began subsidizing the settlement and development of the region as a matter of national security.
Over the last 40 years, the human population has grown from 4 million to over 20 million, and the
resulting settlements, roads, logging, cattle ranching, and subsistence and commercial agriculture
have led to approximately 15% of the Brazilian Amazon being deforested. 130 In the 1980s, some
predicted that deforestation would decline if the Brazilian government stopped providing tax
incentives and credit subsidies to settlers and agricultural producers. Those predictions have not
borne out, however, as the complex and often interrelated causes of deforestation have multiplied
rather than decreased. 131 Between 1990 and 2000, Brazil lost approximately 70,000 square miles
of forest; however, deforestation rates have generally declined since the peak year of 2004.132
Domestic Efforts
Recognizing that deforestation threatens the biodiversity of the Amazon region and is responsible
for 70% of Brazil’s annual greenhouse-gas emissions, the Lula Administration has expanded
protected areas and implemented new environmental policies.133 During its first five years in
office, the Lula Administration created 62 new natural reserves, bringing the total area of the
Brazilian Amazon protected by law to nearly 110,000 square miles, the fourth-largest percentage
of protected area in relation to territory in the world.134 President Lula has also signed a Public
Forest Management Law that encourages sustainable development and placed a moratorium on
soybean plantings and cattle ranching in the Amazon. Moreover, Brazil intends 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. Brazil plans to meet these
goals by increasing federal patrols of forested areas, replanting over 21,000 square miles of
forest, and financing sustainable development projects in areas where the local economy depends
129
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.
130
Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter,
December 2008.
131
Some have suggested that access to pristine tracts of rainforests through roads is the primary driver of deforestation
in the Amazon. Regional roads constructed by the government, as well as local roads created by logging operations,
provide access to forested areas. Using these roads, farmers clear remaining forests and practice slash and burn
agriculture until the land loses much of its soil fertility and it becomes more profitable to move to other forested tracts
rather than resuscitate existing lands. After agriculture, pasture grasses are generally planted and cattle are raised.
Eventually, cattle grazing and cyclical burning alter the ecosystem to the point that forests cannot regenerate.
132
“Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008.
133
“Brazil: The Land Cries for Amazonia,” Latin America Data Base NotiSur, February 13, 2009.
134
“Brazil: Government policy for Amazon still ambiguous,” Latin News Weekly Report, May 22, 2008.
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on logging. 135 The Lula Administration maintains that its efforts have been successful,
highlighting the fact that just 900 square miles of the Amazon were deforested between July 2009
and July 2010, a 48% drop from the year before and the lowest annual level since Brazil’s
National Institute for Space Studies began monitoring deforestation in 1988.136
Although some conservation groups have praised President Lula for his Administration’s actions,
a number of environmentalists—including former Environment Ministers Marina Silva and
Carlos Minc—have questioned the Administration’s commitment to sustainable development.137
Critics assert that the Administration favors agricultural interests over conservation. This claim
was reinforced by President Lula’s June 2009 approval of an environmental law that grants nearly
260,000 square miles of the Amazon to illegal squatters, 72% of which will go to large land
holders.138 Critics also maintain that Brazil’s occasional declines in deforestation rates are not the
result of the Lula Administration’s initiatives, but correspond to declining global commodity
prices that make it less profitable to clear the forests. They point out that deforestation rates only
began falling as commodity prices collapsed in late 2008 as a result of the global financial
crisis.139 In order to combat further deforestation, some analysts maintain that the Brazilian
government will have to greatly increase the number of people employed to work in protected
areas and do more to confront agricultural producers operating within the Amazon. 140
International Initiatives
The Amazon holds 10% of the carbon stores in the world’s ecosystem and absorbs nearly two
billion tons of carbon dioxide each year, making it a sink for global carbon emissions and an
important asset in the prevention of climate change.141 The Kyoto Protocol—of which Brazil is a
signatory—created a Clean Development Mechanism (CDM), which allows emission reduction
projects in developing countries to earn certified emission reduction credits (CERs) that can then
be traded or sold to industrialized countries to meet their mandated emission reduction targets.
Brazil has taken full advantage of the CDM, and is host to nearly 10% of the worldwide emission
reduction projects. These projects represent 42.5 million CERs, or a reduction of 42.5 million
tons of carbon dioxide. 142 The CDM allows for a wide variety of emission reduction projects, but
in terms of forestry, CERs are only awarded for afforestation and reforestation projects, not forest
conservation. As a result, forestry projects account for a very small percentage of the total CERs
awarded. A number of industrialized countries that would like to achieve a greater percentage of
their mandated emission reductions through carbon offsets have teamed with developing
countries with substantial tropical forests to propose widening the CDM to include forest
135
“Government Sets Targets to Cut Deforestation,” Latin American Regional Report, December 2008; “Brazil:
Climate credentials to the fore in Copenhagen,” Oxford Analytica, November 19, 2009.
136
“Brazil says Amazon deforestation slowest in 21 years,” Reuters, November 12, 2009; “Brazil officials: Amazon
deforestation declining,” Associated Press, August 31, 2010.
137
Joshua Partlow, “Brazil’s Decision to Reduce Deforestation Praised,” Pittsburgh Post-Gazette, December 7, 2008;
Ana Paula Paiva, “Brazil environment minister says lacks support,” Reuters, May 28, 2009.
138
Jose Pedro Martins, “Brazil: Environmentalists and Church Protest Legalization of Fraudulently Obtained Lands in
the Amazon,” Latin America Data Base NotiSur, June 25, 2009.
139
Raymond Colitt, “Brazil on target in slowing Amazon deforestation,” Reuters, June 2, 2009.
140
Ibid; Joshua Partlow, “A Protected Forest’s Fast Decline,” Washington Post, February 6, 2009.
141
“Brazil: Global warming risks threaten Amazonia,” Oxford Analytica, March 16, 2009; Conor Foley, “The End of
the Amazon?,” Foreign Policy, June 2009.
142
United Nations Framework Convention on Climate Change, “CDM Statistics,” September 2010.
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conservation. Brazil has opposed such a plan, arguing it would absolve rich countries from
cutting their own emissions. 143 Brazil has supported the rise of voluntary offset markets, however,
in which organizations and individuals not subject to mandatory emission reductions can buy
carbon offsets to contribute to conservation and clean energy projects.
Brazil believes Amazon conservation should be done through public funding rather than a carbon
market. Accordingly, it launched the “Amazon Fund” in August 2008. The fund is intended to
attract donations from countries, companies, and non-governmental organizations to assist in
Brazil’s Amazon conservation efforts. Brazil intends to raise $21 billion by 2021 to support forest
conservation, scientific research, and sustainable development. Norway has pledged $1 billion to
the fund through 2015 and Germany has pledged $26.8 million. The first projects funded by the
Amazon Fund were announced in December 2009. They include projects to regenerate degraded
land, monitor land registration titles, and pay rubber tappers and other forest dwellers to protect
the forest.144
U.S. environment programs 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, the U.S. Agency for International Development (USAID) initiated the
Amazon Basin Conservation Initiative, which supports community groups, governments, and
public and private organizations working throughout the Amazon Basin in their efforts to
conserve the Amazon’s globally important biodiversity. USAID provided $5.2 million for
environmental programs in Brazil in FY2007, $9.5 million in FY2008, and $10 million in
FY2009. The Conference Report (H.Rept. 111-366) to the FY2010 Consolidated Appropriations
Act (P.L. 111-117) asserts that, of the funds appropriated in the act for biodiversity programs, $25
million are to go to the Amazon Basin Conservation Initiative, $10 million of which is directed to
activities in Brazil. 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), which will reduce
Brazil’s debt payments by $21 million over the next five years. In exchange, the Brazilian
government will commit these funds to activities to conserve protected areas, improve natural
resource management, and develop sustainable livelihoods in the Atlantic Rainforest, Caatinga,
and Cerrado ecosystems. 145
Author Contact Information
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
143
“Rich, poor in dispute over rainforest cash,” Reuters, December 4, 2008. For more information on Forest Carbon
Markets, see CRS Report RL34560, Forest Carbon Markets: Potential and Drawbacks, by Ross W. Gorte and
Jonathan L. Ramseur.
144
“Brazil unveils first foreign-funded Amazon projects,” Reuters, December 4, 2009.
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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Acknowledgments
Clare Ribando Seelke, Specialist in Latin American Affairs, contributed to this report.
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