Order Code RL33456
Brazil-U.S. Relations
Updated September 18, 2008
Clare Ribando Seelke
Analyst in Latin American Affairs
Foreign Affairs, Defense, and Trade Division
Alessandra Durand
Research Associate
Foreign Affairs, Defense, and Trade Division

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Brazil-U.S. Relations
Summary
On January 1, 2007, Luis Inácio “Lula” da Silva, of the leftist Workers’ Party
(PT), was inaugurated for a second four-year term as President of Brazil. Lula was
re-elected in the second round of voting with fairly broad popular support. His
immediate tasks were to boost Brazil’s lagging economic growth and address the
issues of crime, violence, and poverty. Despite President Lula’s personal popularity,
many predicted that intra-party rivalries within his governing coalition would make
it hard for him to push his agenda through Brazil’s notoriously fractured legislature.

President Lula enjoys high approval ratings (72% in June 2008) and is
benefitting from a strong economy (GDP growth exceeded 5% in 2007). Ongoing
corruption investigations involving President Lula’s PT party have not diminished
the strength of his second term in office, and some are urging him to seek a third
presidential term, a move that would require a constitutional amendment. Some have
criticized President Lula, however, for thus far being unwilling or unable to use his
significant political capital to gain legislative approval for a more robust political and
economic reform agenda. Few predict that either President Lula or the Brazilian
Congress will take action on any major reform agenda until after the October 2008
municipal elections are held.
During the first Lula term, Brazil’s relations with the United States were
generally positive, although President Lula prioritized strengthening relations with
neighboring countries and expanding ties with nontraditional partners, including
India and China. Brazil-U.S. cooperation has increased during President Lula’s
second term, particularly on energy issues. Two presidential visits in March 2007
culminated in the signing of the U.S.-Brazil Memorandum of Understanding (MOU)
to promote greater ethanol production and use throughout Latin America. Some
predict that, given its recent deep-water petroleum discoveries, Brazil could
eventually become a major oil supplier to the United States.
th
During its second session, the 110 Congress has maintained an interest in
Brazil’s role as an ethanol producer and in the implementation of the U.S.-Brazil
biofuels agreement On October 9, 2007, the House passed H.Res. 651 (Engel),
recognizing the warm friendship and expanding relationship that exists between the
United States and Brazil and the importance of the U.S.-Brazil biofuels cooperation.
On July 29, 2008, the House passed H.R. 6560 (Rangel), which would, among other
things, provide a one-year extension of current trade preferences for Brazil and other
countries under the Generalized System of Preferences (GSP). Interest in Brazil also
centers on its role as a stabilizing force in Latin America, especially with respect to
Venezuela, Bolivia, and Haiti. In addition, Brazil’s cooperation may be sought on
issues of shared concern that include counternarcotics and counterterrorism efforts,
trafficking in persons, protection of the Amazon, and HIV/AIDS prevention. This
report, which will be updated periodically, analyzes Brazil’s political, economic, and
social conditions, and how those conditions affect its role in the region and its
relationship with the United States.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Political Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The First Lula Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
October 2006 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Second Lula Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Economic and Social Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Efforts to Boost Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Social Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Foreign and Trade Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Relations with the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Issues in U.S.- Brazil Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Counternarcotics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Counterterrorism and the Tri-Border Area . . . . . . . . . . . . . . . . . . . . . . . . . 11
Energy Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Ethanol and Other Biofuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Nuclear Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Doha Round of the World Trade Organization (WTO) talks . . . . . . . 14
WTO Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Generalized System of Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Violent Crime and Human Rights Abuses by Police . . . . . . . . . . . . . . 16
Race and Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trafficking in Persons for Forced Labor . . . . . . . . . . . . . . . . . . . . . . . 18
HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Amazon Deforestation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Figures
Figure 1. Map of Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Brazil-U.S. Relations
Background
Brazil is a considered a significant political and economic power in Latin
America, and an emerging global leader. A former Portuguese colony that achieved
independence in 1822, Brazil occupies almost half of the continent of South America
and boasts immense biodiversity, including the vast Amazon rainforest, and
significant natural resources. Brazil is the fifth most populous country in the world.
Brazil’s 191 million citizens are primarily of European, African, or mixed African
and European descent.1 With an estimated gross domestic product (GDP) of $1.8
trillion in 2007, Brazil’s diversified economy is the tenth largest in the world, the
largest in Latin America, and one of the largest in the developing world, but per
capita gross national income is only $5,910, and the country has an unequal income
distribution.2 Brazil has long held potential to become a world power, but its rise to
prominence has been curtailed by political setbacks, including twenty-one years of
military rule (1964-1985), social problems, and uneven economic growth.
Between World War II and 1990, both democratic and military governments
sought to expand Brazil’s influence in the world by pursuing a state-led industrial
policy and an independent foreign policy. Since the 1990s, Brazilian foreign policy
has focused on strengthening ties with other South American countries, engaging in
multilateral diplomacy, and acting at times as a countervailing force to U.S. influence
in Latin America. In recent years, for example, Brazil led other South American
countries in blocking the creation of a U.S.-backed Free Trade Area of the Americas
(FTAA). Under President Luis Inácio “Lula” da Silva, Brazil has aimed, with
varying degrees of success, to raise its global profile. Brazil has become a leader of
developing countries in the Doha round of the World Trade Organization (WTO)
talks. It has sought to increase trade ties with other emerging economies, such as
China, India and South Africa. Brazil is commanding a multinational United Nations
(U.N.) Stabilization Mission in Haiti. Brazil has recently become as a global leader
in biofuels production and promotion and may become an increasingly important
petroleum exporter.
Currently, relations between the United States and Brazil may be characterized
as warm and friendly. The United States has increasingly regarded Brazil as a
significant regional power, especially in its role as a stabilizing force in Latin
America. Despite periodic disagreements on trade and political issues, Brazil and the
1 Brazil has never had a large indigenous population. Today Brazil’s indigenous population
consists of roughly 460,000 persons, many of whom reside in the Amazon. U.S. Department
of State, Country Reports on Human Rights Practices 2007: Brazil, March 2008.
2 “Brazil at a Glance,” World Bank, October 1, 2007.

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United States have worked closely on a wide range of bilateral and regional issues.
U.S. officials have responded positively to Brazil’s recent efforts to reassert its
regional leadership, which has been challenged by the rise of oil-rich Hugo Chávez
in Venezuela.3 Early in 2007, two high-level meetings between Presidents Bush and
Lula strengthened U.S.-Brazilian relations. The latter meeting culminated in the
March 2007 signing of a U.S.-Brazil Memorandum of Understanding (MOU) to
promote bio-fuels development in the Western Hemisphere.4
This report analyzes Brazil’s political, economic, and social conditions, and how
those conditions affect its role in the region and its relationship with the United
States. It then discusses a number of key issues in Brazil-U.S. relations.
Political Situation
The Brazilian political system has several unique characteristics that distinguish
it from other countries in Latin America. The country’s federal structure,
comprising 26 states, a Federal District, and some 5,581 municipalities, evolved from
the decentralized colonial structure devised by the Portuguese in an attempt to control
Brazil’s sizable territory. Even during the centralizing government of Getúlio Vargas
and the Estado Novo, or New State (1937-1945), landowning remained the source
of local power in Brazil and states retained considerable autonomy. Brazil’s military
governments ruled from 1964-1985 and, while repressive, were not as brutal as those
in other South American countries. Although nominally allowing the judiciary and
Congress to function during its tenure, the Brazilian military stifled representative
democracy and civic action in Brazil, carefully preserving its influence during one
of the most protracted transitions to democracy to occur in Latin America. Brazil
was also one of the last countries in the region to abandon state-led economic policies
in favor of market reforms. Significant pro-market reforms did not occur until the
government of Fernando Henrique Cardoso (1994-2002).5
During the first decade after its return to democracy in 1985, Brazil experienced
economic recession and political uncertainty as numerous efforts to control runaway
inflation failed and two elected presidents did not complete their terms. One elected
president died before taking office; the other was impeached on corruption charges.
In 1994, Cardoso, a prominent sociologist of the center-left Brazilian Social
Democratic Party (PSDB), was elected by a wide margin over Luis Inácio “Lula” da
Silva of the Worker’s Party (PT), a former metalworker and union leader who had
led the PT since the early 1980s. Cardoso was elected largely on the basis of the
3 Monte Reel, “U.S. Seeks Partnership with Brazil on Ethanol; Countering Oil-rich
Venezuela is Part of Aim,” Washington Post, February 8, 2007.
4 For more information, see CRS Report RL34191, Ethanol and Other Biofuels: Potential
for U.S.-Brazil Energy Cooperation, by Clare Ribando Seelke and Brent D. Yacobucci.
5 For a historical overview of Brazil’s political development, see Bolivar Lamounier,
“Brazil: Inequality Against Democracy,” in Larry Diamond, Jonathan Hughes, Juan J. Linz,
and Seymour Martin Lipset, eds., Democracy in Developing Countries: Latin America,
Boulder, CO: Lynne Reiner, 1999.

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success of the anti-inflation “Real Plan” that he implemented as Finance Minister,
which resulted in a new currency (the real) pegged to the dollar in July of 1994.
During his first term, Cardoso achieved macroeconomic stability, opened the
Brazilian economy to trade and investment, and furthered privatization efforts.
Despite those achievements, the Cardoso government was unable to enact much-
needed political and social changes, such as social security, tax, or judicial reforms.
President Cardoso sought a second presidential term after a constitutional
reform was passed in 1997 to allow for reelection, and he defeated Lula da Silva in
the first round of voting in October 1998 with 53% of the vote. President Cardoso’s
popularity fell towards the end of his second term, however, as Brazil faced a series
of financial crises. Most analysts credit Cardoso with restoring macroeconomic
stability to Brazil’s economy and solidifying its role as leader of the Southern
Common Market (Mercosur)6, but fault him for failing to implement more aggressive
political reforms and social reforms.7
The First Lula Administration
In 2002, Lula da Silva ran in his fourth campaign for the presidency of Brazil.
Unlike in his previous failed campaigns, he moderated his leftist rhetoric and, while
still advocating greater attention to social issues, promised to maintain the fiscal and
monetary policies associated with Brazil’s standing International Monetary Fund
(IMF) agreements. The 2002 presidential election proved to be a referendum on
eight years of “neo-liberal” policies enacted by Cardoso. High unemployment rates
and economic stagnation led voters to support Lula, a critic of neoliberalism. Lula
was elected decisively in the second round of voting with a significant majority of the
vote compared to Cardoso’s designated successor, José Serra, the Minister of Health
and Senator from São Paulo.
During his first term, President Lula maintained the restrained economic
policies associated with his predecessor. In 2003, the Lula government enacted
social security and tax reforms, and in 2004, a law to allow more private investment
in public infrastructure projects. President Lula launched several social programs,
some of which have been more successful than others. The Bolsa Familia (Family
Stipend) program, which provides monthly stipends to 11.1 million poor families in
exchange for compulsory school attendance for all school-age children, has been
credited with reducing poverty, but some critics argue that it has made poor
households too dependent on government handouts.8 By 2005, legislative initiatives
had stalled, and President Lula was increasingly criticized for failing to develop
effective programs to address land distribution and crime. Critics argued that,
6 Mercosur is a common market composed of Brazil, Argentina, Paraguay, and Uruguay that
was established in 1991. See CRS Report RL33620: Mercosur: Evolution and Implications
for U.S. Trade Policy, by J.F. Hornbeck.
7 Susan Kaufman Purcell and Riordan Roett, eds., Brazil Under Cardoso, Boulder, CO:
Lynne Reiner Publishers, 1997; Mauricio A. Font and Anthony Peter Spanakos, Reforming
Brazil, New York: Lexington Books, 2004.
8 Anthony Hall, “From Fome Zero to Bolsa Familia: Social Policies and Poverty Alleviation
Under Lula,” Journal of Latin American Studies, vol. 38, November 2006.

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CRS-4
ironically, one of the Lula government’s only major achievements in the first term
was to maintain the orthodox economic policies of the Cardoso administration. In
2006, some analysts began to dismiss President Lula’s efforts to expand Brazil’s
international profile as a leader among developing countries as “a relatively
inexpensive [tactic] to shore up domestic support”9 that had failed to yield many
concrete results. Criticism of Lula further escalated with the onset of several
corruption scandals involving top PT officials that occurred during the latter half of
Lula’s first term.10 A congressional inquiry in April 2006 cleared President Lula of
any direct responsibility for the scandals.
October 2006 Elections. President Lula captured 61% of the votes to the
PSDB’s Gerardo Alckmin’s 39% in the second round of presidential elections held
in late October 2006. President Lula won handily in the poorer north and
northeastern regions of the country, but failed to carry the more prosperous southern
and western states or São Paulo. Observers have assessed that Brazilians, though
divided by class and region, effectively voted in favor of continuing macroeconomic
stability under a second Lula Administration despite the corruption scandals that had
involved Lula’s party during the first term.
The PT did not fare as well as President Lula in the legislative elections,
suffering a loss of 9 seats in the Chamber of Deputies and losing 4 Senate seats.
Some assert that the election outcome shows that President Lula successfully
distanced himself from the PT and its corruption scandals, relying on his personal
popularity rather than his party affiliation to win. Others attribute his win to the
success of the Bolsa Familia program and the country’s macroeconomic stability,
which led voters in poorer income brackets to overwhelmingly support him.11
The Second Lula Administration
Despite enjoying high approval ratings (72% in June 2008) and benefitting from
an expanding economy, President Lula’s second administration has been periodically
hindered by corruption scandals and a lack of support from members of his coalition.
For example, legislative progress stalled throughout 2007 as the president of the
Brazilian Senate, Renan Calheiros, a key Lula ally, refused to resign his position after
being accused of corruption. In December 2007, senators voted to acquit Calheiros
of all wrongdoing even though a congressional ethics panel had recommended that
he be impeached. Lacking strong leadership to hold governmental-allied senators in
line, President Lula suffered a major setback as senators voted not to extend the
provisional tax on financial transactions (CPMF) in December. Without CPMF
9 Jeffrey Cason, “Hopes Dashed? Lula’s Brazil,” Current History, February 2006.
10 Wendy Hunter, “The Normalization of An Anomaly: The Worker’s Party in Brazil,” Paper
Presented at the Latin American Studies Association Conference, March 2006.
11 Matt Moffett and Geraldo Samor, “In Brazil Campaign, A Barroom Brawl and a Class
War,” Wall Street Journal, October 27, 2006; Wendy Hunter and Timothy J. Power,
“Rewarding Lula: Executive Power, Social Policy, and the Brazilian Elections of 2006,”
Latin American Politics and Society, Spring 2007.

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CRS-5
resources, President Lula will have to cut spending and raise other taxes in order to
make up for an estimated $21.7 billion budget shortfall.12
Preparations for the upcoming October municipal elections have begun to
increasingly dominate the political scene. While some claim that the outcome of the
municipal ballot will have a significant impact on the 2010 presidential election
through a replication of strategic political alliances, others maintain that its influence
will not be decisive on who will be the next president.13 New polls suggest that the
PT is taking the lead in key cities such as São Paulo. According to those polls, PT
candidates are ahead in 20 of the 26 mayoral races being held in state capitals across
Brazil.14

Economic and Social Conditions
Throughout the last two decades, Brazil’s fiscal and monetary policies have
focused primarily on inflation control. When President Lula took office in 2003,
Brazil had an extremely high level of public debt, virtually necessitating that he adopt
austere economic policies. Despite his leftist political origins, President Lula has
maintained restrained economic policies, even surpassing the IMF’s fiscal and
monetary targets. As a result, Brazil has begun to experience some benefits,
including lower inflation and a lower credit risk rating. In December 2005, the Lula
government repaid its $15.5 billion debt to the IMF ahead of schedule. The
government’s overall foreign debt was reduced by 19.9% between 2003 and 2006.15
Fiscal discipline has also been accompanied by record exports that enabled Brazil to
post GDP growth of 5.4% in 2007 and record trade surpluses in each of the last four
years. But, Brazil still suffers from high real interest rates, which have dampened
investment and economic growth. In addition, rising inflation rates, largely attributed
to high food prices and swelling domestic demand, are of increasing concern to
Brazilian consumers.
Brazil is a major exporter of agricultural and industrial products and plays a
significant role in the world trading system. Since 2002, Brazil has been the world’s
third largest exporter of agricultural products after the United States and the
European Union. In 2007, Brazil was the world’s leading exporter of coffee, orange
juice, sugar, chicken, beef, soy, and tobacco. Demand for Brazilian commodity
exports in Asia is strong, as is global demand for Brazil’s manufactured goods and
services. Brazil is the world’s second largest producer of ethanol (after the United
States) and its state-run oil company, Petrobras, a leader in deep-water oil drilling,
12 “CPMF Failure May be Beginning of “Second Term Curse” for Lula,” Latin American
Regional Report, December 2007.
13 “O Verdadeiro Peso das Eleições Municipais,” Epoca, January 21, 2008; “Country
Report: Brazil,” Economist Intelligence Unit, July 2008.
14 “Suplicy Pulls Away in São Paulo,” LatinNews Daily, September 8, 2008.
15 “Brazil Foreign Debt at $168.9 Billion End-2006,” Latin America News Digest, January
26, 2007.

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has recently announced the discovery of what may be the world’s largest oil field find
in 25 years.16
Brazil also has a relatively balanced trade regime. Its main trading partners in
2007 were the European Union (25% of exports and 22% of imports), Asia (20% of
exports, 29% of imports, with China alone accounting for 7% of exports and 9% of
imports), Latin America (26% of exports, 18% of imports), the United States (16%
of exports, 16% of imports), Africa (5% of exports, 9% of imports), and the Middle
East (4% of exports and 3% of imports). In 2007, the value of Brazil’s exports
reached some $159 billion and the country’s trade surplus was $45 billion.17
Efforts to Boost Economic Growth
One of President Lula’s goals for his second term has been to boost Brazil’s
lagging economic growth. Between 2000 and 2006, Brazil’s annual growth rates
averaged roughly 2.7%. In 2006, Brazil posted GDP growth of about 2.8%, the
second lowest recorded in Latin America. In 2007, President Lula launched a
Program to Accelerate Growth (PAC) aimed at boosting Brazil’s growth rates to 5%
per year through increased public and private investment in infrastructure. The PAC
provides tax breaks and incentives to spur investment and includes measures to
improve and simplify Brazil’s regulatory framework. While some have praised the
PAC’s focus on boosting government investment in much-needed infrastructure
projects, others have criticized it for failing to curb excessive public spending or to
promote labor reform. GDP growth in Brazil reached 5.4% in 2007.18
Some predict that the Brazilian economy will continue expanding over the next
few years, but several factors could constrain the country’s long-term growth
potential. Those include a significant public debt burden, excessive government
spending, inflation, high tax and interest rates, and low investment and savings rates.
President Lula has thus far not elected to use his political capital to enact much-
needed structural reforms to deal with those and other issues, such as the country’s
unwieldy pension system.19 A 2006 report by the Organization for Economic Co-
operation and Development (OECD) asserted that reforming Brazil’s overly generous
public pension system was crucial in order for the country to experience sustained
economic growth.20
16 “Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
17 Trade data available from World Trade Atlas, Global Trade Atlas. See also: “Prospects
2008: Brazil May Reach Investment Grade,” Oxford Analytica, December 10, 2007.
18 “Brazil: Country Profile 2008,” Economist Intelligence Unit.
19 Mac Margolis, “The Free-Spending Lula,” Newsweek International, January 7, 2008.
20 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.

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Social Indicators
Despite its well-developed economy and large resource base, Brazil has had
problems solving deep-seated social problems like poverty and income inequality.
Brazil has had one of the most unequal income distributions in Latin America, a
region with the highest income inequality in the world. A 2004 World Bank study
reported that some 50 million Brazilians live in poverty.21 The United Nations
Development Program (UNDP) has identified 600 Brazilian municipalities, many in
the north and northeastern part of the country, in which poverty levels are similar to
those present in poor African countries. One major cause of poverty and inequality
in Brazil has been the extreme concentration of land ownership among the country’s
elites. A 2004 study found that 1% of the Brazilian population controlled 45% of the
farmland.22 The Brazilian government has also acknowledged that there is a racial
component to poverty in Brazil. People of African descent in Brazil, also known as
Afro-Brazilians, represent roughly 45% of the country’s population, but constitute
64% of the poor and 69% of the extreme poor.23 Other factors that inhibit social
mobility in Brazil include a lack of access to quality education and job training
opportunities for the country’s poor.
Brazil’s endemic poverty and inequality have, until recently, not been
significantly affected by the government’s social programs. A March 2005 OECD
study found that, even though Brazil has spent the same level or more of public
spending on social programs as other countries with similar income levels, it has not
achieved the same social indicators as those countries.24 There has been more recent
evidence, however, that the Lula government’s Bolsa Familia (Family Stipend)
program, combined with relative macroeconomic stability and growth over the past
few years, has reduced poverty rates, particularly in the north and northeast of
Brazil.25 According to the Getulio Vargas Foundation, the level of poverty in Brazil
during Lula’s first term in government fell by 27.7%. Since 2002, the proportion of
the Brazilian population who define themselves as middle-class has risen from 44%
to 52%.26
21 David De Ferranti et al., Inequality in Latin America: Breaking with History?
Washington, DC: The World Bank, 2004.
22 “Special Report: Land Report Dilemma,” Latin America Regional Report, December 21,
2004.
23 Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa
Econômica Aplicada (IPEA), 2001.
24 “Economic Survey of Brazil 2005,” Organization for Economic Cooperation and
Development, March 2005.
25 Hall, “From Fome Zero to Bolsa Familia,” November 2006; “Human Development
Report 2007/8,” United Nations Development Program, November 2007.
26 Nilson Brandão Junior and Marianna Aragão, “Miséria no Brasil Cai 27,7% no 1º
Mandato de Lula,” O Estado de S.Paulo, September 20, 2007; “Brazil: Half the Nation, a
Hundred Million Citizens Strong,” Economist, September 13, 2008.

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Foreign and Trade Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a
regional power in Latin America, a leader among developing countries in economic
cooperation and collective security efforts, and an emerging world power. Brazilian
foreign policy has generally been based on the principles of multilateralism, peaceful
dispute settlement, and nonintervention in the affairs of other countries.27 Brazil
engages in multilateral diplomacy through the U.N. and the Organization of America
States (OAS). It is currently commanding a multinational U.N. stabilization force of
some 9,000 police and military personnel in Haiti. Brazilian foreign policy has
tended to emphasize regional integration, first through the Common Market of the
South (Mercosur) and now the South American Community of Nations. Brazil’s role
as a leader in South America has been challenged by Hugo Chávez in Venezuela,
who has used his country’s vast oil wealth to gain influence in the region, particularly
in Bolivia and Ecuador. Whereas Lula emphasized forging relations with other
emerging economies during his first term, he appears to have adopted a more
pragmatic foreign policy for his second, including a focus on improving Brazil-U.S.
relations.
Since the mid-1990s, Brazil has had much more success in developing political
cohesion than true economic integration amongst its neighbors in the Southern Cone.
Mercosur was established in 1991 by Brazil, Argentina, Paraguay, and Uruguay. In
1996, Chile and Bolivia became “associate members”; Peru followed in 2003 (not
implemented) and Venezuela and Mexico in 2004.28 Associate members have no
voting rights and need not observe the common external tariff. In October 2004,
after years of talks, Mercosur and the Andean Community of Nations signed a trade
pact, giving all Andean countries — Bolivia, Colombia, Ecuador, Peru, and
Venezuela — the equivalent of associate membership. This breakthrough led to the
creation of the South American Community of Nations two months later in a pact
that included 12 countries (those in Mercosur, the Andean Community, along with
Chile, Guyana, and Suriname). In December 2005, Mercosur agreed to the accession
of Venezuela as a full member, which some say could add a decidedly anti-American
factor to the pact. The Brazilian and Paraguayan Congresses have yet to approve
Venezuela’s accession. In December 2006, Bolivia expressed its intention to join
Mercosur as a full member, but critics say that its accession would politicize the
union unnecessarily.
Recent events have not boded well for the future of Mercosur. In 2006, the
Mercosur’s internal dispute resolution process proved unable to resolve a dispute
between Argentina and Uruguay over whether to allow European companies to
construct two paper mills along the river that demarcates their border. At the same
time, Uruguay diversified its trade with the United States and even threatened to
withdraw from Mercosur, arguing that it seems to serve only the needs of Argentina
27 Georges D. Landau, “The Decisionmaking Process in Foreign Policy: The Case of Brazil,”
Center for Strategic and International Studies: Washington, DC: March 2003.
28 For more information on Mercosur, see CRS Report RL33620: Mercosur: Evolution and
Implications for U.S. Trade Policy, by J.F. Hornbeck.

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and Brazil. Trade asymmetries among the members have been left unaddressed at
recent Mercosur summits, as has the need to draft a common customs code.29
In addition to trying to expand its regional profile through established political
and economic channels, Brazilian government and business officials have worked
together to expand the country’s commercial interests in the region. Some of those
efforts have been more successful than others. One relatively successful initiative
has involved the use of so-called “ethanol diplomacy.” Brazil has reasserted regional
leadership vis-à-vis oil-rich Venezuela by signing bio-fuels partnership agreements
with countries that would otherwise be dependent on expensive oil imports.30 A not-
so-successful endeavor has involved trying to use Petrobras’ investments in Bolivia
to influence the populist government of Evo Morales. Even though Petrobras had
made extensive investments in Bolivia, the Lula government was caught off guard
by Morales’s May 2006 nationalization of his country’s natural gas industry.
President Lula has since acceded to several of Morales’s demands — including
cutting tariffs for Bolivian exports to Brazil and stepping up investments in Bolivia
— in order to secure access to Bolivian gas.31
Brazil’s political, business, and military ventures are complemented by the
country’s trade policy. In Brazil, the Ministry of Foreign Relations continues to
dominate trade policy, causing the country’s commercial interests to be (at times)
subsumed by a larger foreign policy goal, namely, enhancing Brazil’s influence in
Latin America and the world.32 For example, while concluding meaningful trade
agreements with developed economies (such as the United States and the European
Union) would probably be beneficial to Brazil’s long-term economic self-interest, the
Brazilian government has instead prioritized its leadership role within Mercosur and
expanded trade ties with countries in Africa, Asia and the Middle East.
Some analysts assert that these “south-south” initiatives have enhanced Brazil’s
international profile, but others have noted that they have yielded few concrete results
for the country, and that they have come at the expense of Brazil-U.S. relations.
Roberto Abdenur, the former Brazilian Ambassador to Washington, criticized the
“south-south” approach of the Brazilian Foreign Ministry for indoctrinating Brazilian
diplomats with “anti-imperialist” and “anti-American” attitudes.33
29 “More Polite Rhetoric in the Mercosur,” Latinnews Daily, December 19, 2007.
30 “Chávez, Lula Promote Competing Visions,” Miami Herald, August 10, 2007.
31 “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.
32 See CRS Report RL33258, Brazilian Trade Policy and the United States, by J.F.
Hornbeck.
33 Otávio Cabral, “Nem na Ditadura,” Veja, February 7, 2007.

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Relations with the United States
Currently, relations between the United States and Brazil may be characterized
as warm and friendly. The United States has increasingly regarded Brazil as a
significant power, especially in its role as a stabilizing force in Latin America. U.S.
officials tend to describe Brazil as a friendly country, similar to Chile, governed by
a moderate leftist government. They assert that the United States seeks to increase
cooperation with moderate leftist governments in Latin America in order to ease
mounting tensions among the countries in South America, and to deal with populist
governments in the region. Brazil under President Lula has helped diffuse potential
political crises in Venezuela, Ecuador, and Bolivia, and supported Colombia’s
ongoing struggle against terrorist organizations and drug traffickers. Brazil is also
commanding the U.N. stabilization force in Haiti.
Although Brazil and the United States share common goals for regional
stability, Brazil’s independent approach to foreign policy has led to periodic disputes
with the United States on trade and political issues, including how (and whether) to
create a Free Trade Area of the Americas (FTAA) and Brazil’s vocal opposition to
the war in Iraq. Despite these disagreements, Brazil and the United States have
worked closely on a wide range of bilateral and regional issues. Brazil-U.S.
cooperation has increased in the past year or so, as reflected in the continuing high-
level contacts between the two governments, particularly on energy issues.
Brazil is considered a middle-income country and does not receive large
amounts of U.S. foreign assistance. In FY2007, Brazil received $16 million in U.S.
aid. In FY2008, Brazil received an estimated $14.8 million. The FY2009 request for
Brazil was for $8.6 million, substantially lower than in previous years. U.S.
assistance priorities in Brazil include supporting environmental programs and the
strengthening of local capacity to address threats to the Amazon, deterring and
preventing illicit activities, and reducing the transmission of communicable diseases.
Selected Issues in U.S.- Brazil Relations
The Bush Administration has come to view Brazil as a strong partner whose
cooperation must be sought in order to solve regional and global problems. Current
issues of concern to both Brazil and the United States include counternarcotics and
terrorism, energy security, trade, environmental issues, human rights, and HIV/AIDS.
Counternarcotics
Brazil is not a significant drug producing country, but is a major conduit for the
transit of cocaine, marijuana, and some heroin from neighboring Andean countries
destined primarily for Europe, the United States, and local markets. It is the second
largest consumer (after the United States) of cocaine in the Western Hemisphere.
The Bush Administration includes Brazil on a list of major drug-producing or drug-

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transit countries.34 In FY2007, Brazil received $4.0 million in U.S. counternarcotics
assistance through the Andean Counterdrug Program (ACP). For FY2008, Brazil
received close to $1 million in ACP assistance, mainly for interdiction and law
enforcement activities. In FY2009, the Administration requested $1 million in ACP
funding for Brazil.
In recent years, Brazil has cooperated extensively with neighboring countries in
counternarcotics activities and implemented a law permitting the shooting down of
civilian aircraft (with adequate safeguards) suspected of being engaged in the
trafficking of illicit narcotics. Brazil has also constructed a $1.4 billion sensor and
radar project called the Amazon Vigilance System (SIVAM from its acronym in
Portuguese) in an attempt to control illicit activity in its Amazon region. A new anti-
money laundering law was drafted in 2005, but still has not been considered by the
Brazilian Congress. In 2007, Brazil’s federal police, which generally are responsible
for about 75% of total Brazilian drug seizures and detentions, captured 13.1 metric
tons of cocaine, 488 kilograms of crack cocaine, and 16 kilograms of heroin.35 In
2007, Brazilian police arrested a major Colombian-born drug trafficker and leader
of the Norte del Valle cartel. He was extradited to the United States in August 2008
to face charges of drug trafficking, money laundering, and murder.36
Counterterrorism and the Tri-Border Area37
In its April 2008 State Department Country Reports on Terrorism, the State
Department highlights threats in the Tri-Border Area (TBA) of Brazil, Paraguay, and
Argentina, a region with a large Muslim population. The TBA has long been used
for arms and drug trafficking, contraband smuggling, document and currency fraud,
money laundering, and the manufacturing of pirated goods. According to the report,
the United States remains concerned that Hezbollah and Hamas are receiving
financial, logistical, and moral support from Muslims in the TBA, although the report
also stated that there were no corroborated reports that these or any other Islamic
groups had an operational presence in the area. The section on Brazil states that the
government has “diligently worked with their U.S. counterparts” and has become
“increasingly capable of monitoring domestic financial operations.” On the other
hand, it notes that two key legislative initiatives that have been pending since 2005,
an anti-money laundering law and an antiterrorism law, have yet to be introduced in
the Brazilian Congress.
34 “Major Illicit Drug-Producing and Drug-Transit Countries for FY2008,” September 17,
2007, White House statement, [http://usinfo.state.gov].
35 U.S. Department of State, International Narcotics Control Strategy Report, February
2008.
36 Marion Barbel, “Brazil Extradites Colombian Drug Trafficker to the United States,”
Global Insight Daily Analysis, August 25, 2008.
37 For more information, see CRS Report RS21048, Latin America: Terrorism Issues, by
Mark P. Sullivan.

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Energy Security
In the few years, there has been significant congressional interest in issues
related to Western Hemisphere energy security. Brazil is widely regarded as a country
that has successfully reduced its reliance on foreign oil by using alternative energies.
At the same time, Brazil has attained the ability to produce large amounts of
enriched uranium as part of its nuclear energy program. And, more recently, Brazil’s
state-run oil company, Petrobras, a leader in deep-water oil drilling, has discovered
what may be the world’s largest oil field find in 25 years.38
Oil. On September 2, 2008, President Lula celebrated the first oil output to be
extracted from the new undersalt offshore fields. The discovery of the Tupi field in
November 8, 2007, located in the Santos Basin 350 miles off the coast of Rio de
Janeiro, has the potential to turn Brazil into a major oil and gas producer and an oil
exporter. The field alone may hold up to 50 billion barrels of oil, worth an estimated
US$6 trillion at current prices. The government is considering new measures that
may pave the way for a heavy state hand in the country’s energy markets, such as the
creation of a new 100% state-owned company to manage the exploration blocks,
which has raised concerns among some foreign investors.39
Ethanol and Other Biofuels.40 Brazil stands out as an example of a country
that has become a net exporter of energy, partially by increasing its use and
production of ethanol. On March 9, 2007, the United States and Brazil, the world’s
two largest ethanol producing countries, signed a Memorandum of Understanding to
promote greater cooperation on ethanol and biofuels in the Western Hemisphere. The
agreement involves: (1) technology-sharing between the United States and Brazil; (2)
feasability studies and technical assistance to build domestic biofuels industries in
third countries; and, (3) multilateral efforts to advance the global development of
biofuels. The first countries to receive U.S.-Brazilian assistance are: the Dominican
Republic, El Salvador, Haiti, and St. Kitts and Nevis.41 On October 9, 2007, the
House passed H.Res. 651 (Engel), recognizing the warm friendship and expanding
relationship that exists between the United States and Brazil and the importance of
the U.S.-Brazil biofuels cooperation.
Since March 2007, the United States and Brazil have moved forward on all three
facets of the agreement. On the bilateral front, several high-level visits have taken
place aimed at boosting bilateral cooperation on biofuels. U.S. and Brazilian
consultants carried out feasibility studies that identified short-term technical
assistance opportunities in Haiti, the Dominican Republic, and El Salvador. The
38 “Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
39 “Brazil’s Golden Times Start to Roll,” LatinNews Daily, September 3, 2008;
“Hydrocarbons Potential Poses Major Challenges,” Oxford Analytica, November, 20, 2007.
40 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.
41 “Memorandum of Understanding Between the United States and Brazil to Advance
Cooperation on Biofuels,” U.S. Department of State, Office of the Spokesman, March 9,
2007.

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government of St. Kitts and Nevis has agreed to implement the U.S.-Brazil-
Organization of American States (OAS) recommendation that it should dedicate land
to bioenergy crops that will be used to produce electricity. On the multilateral front,
the United States and Brazil are working with other members of the International
Biofuels Forum (IBF) to make biofuels standards and codes more uniform. Despite
this progress, several potential obstacles to increased U.S.-Brazil cooperation on
biofuels exist, including current U.S. tariffs on most Brazilian ethanol imports.
The United States currently allows duty-free access on sugar-based ethanol
imports from many countries through the Caribbean Basin Initiative, Central
American Free Trade Agreement, and the Andean Trade Preferences Act, among
others.42 Some Brazilian ethanol is processed at plants in the Caribbean for duty-free
entry into the United States, but exports arriving directly from Brazil are currently
subject to a 54-cent-per-gallon tax, plus a 2.5% tariff.
In the 110th Congress, legislation has been introduced that would eliminate
additional tariffs on foreign ethanol: H.R. 6137 (Shadegg). Another bill, H.R. 6183
(Brown-Waite), would amend the harmonized tariff schedule of the United States to
provide duty-free treatment of ethanol used as fuel.
Nuclear Energy. Between the mid-1970s and the mid-1980s, Brazil sought
to develop nuclear weapons as it competed with Argentina for political and military
dominance of the Southern Cone. In 1991, Brazil and Argentina reached an
agreement to use nuclear energy for peaceful purposes only. Brazil joined the
Nuclear Nonproliferation Treaty (NPT) in 1998 and since then has participated in
several multilateral nonproliferation regimes, including the Missile Technology
Control Regime and the Nuclear Suppliers Group (NSG). It is also a party to the
Treaty of Tlatelolco, which establishes Latin America as a nuclear-weapon-free zone.
Despite its nonproliferation credentials, some international observers were
concerned when Brazil commissioned a uranium enrichment plant in 2004 to be
located at the Resende nuclear facility outside Rio de Janeiro. Uranium enrichment
can be used for peaceful purposes (such as fuel for nuclear power plants) or for
military purposes (nuclear weapons). The Brazilian government asserts that it needs
to enrich uranium in order to produce its own fuel for power reactors, thereby
increasing its energy independence. In 2005, Brazilian officials refused to give
International Atomic Energy Agency (IAEA) inspectors full access to the centrifuge
plant, citing security concerns and proprietary aspects of the country’s nuclear
technology. Negotiations between Brazil and the IAEA ended in October 2005 when
the Bush Administration lent its support to Brazil by asserting that limited
inspections should be enough for Brazil to comply with its international obligations.43
42 For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean
Basin Initiative, by Brent D. Yacobucci.
43 “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
(continued...)

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President Lula has stated that Brazil is going to spend about $540 million over the
next eight years in order to build a third nuclear power plant and a nuclear-powered
submarine. In February 2008, Brazil and Argentina agreed to establish a bi-national
commission to explore future nuclear cooperation between the two countries,
including the possible development of a joint nuclear reactor.44
Trade Issues
Trade issues are central to the bilateral relationship between Brazil and the
United States, with both countries being heavily involved in subregional, regional,
and global trade talks. Brazil has sought to strengthen Mercosur and to establish free
trade agreements with most of the countries in South America, while also pursuing
efforts to negotiate a Mercosur-European Union free trade agreement. The United
States has been actively involved in the Doha negotiations and, until late 2005,
pressed for action on the region-wide Free Trade Agreement of the Americas
(FTAA). Since negotiations for the FTAA have been largely abandoned, the United
States has continued to sign bilateral and subregional agreements with countries
throughout Latin America.
Doha Round of the World Trade Organization (WTO) talks.45 Brazil
has had a leading role in the Doha round of the World Trade Organization (WTO)
talks. In 2003, Brazil led the G-20 group of developing countries’ efforts to insist
that developed countries agree to reduce and eventually eliminate agricultural
subsidies as part of any settlement. In late July 2004, WTO members agreed on the
framework for a possible Doha round agreement, but formal talks were suspended
indefinitely in July 2006 after key negotiating groups failed to break a deadlock on
the issue of agricultural tariffs and subsidies. In June 2007, negotiators from India
and Brazil walked out of a round of informal talks with representatives from the
United States and the European Union (EU), refusing to open their markets further
unless U.S. and EU subsidies were substantially reduced. Trade ministers again failed
to reach a breakthrough at an eight day negotiating ministerial held in July 2008.46
WTO Disputes. Brazil won a WTO dispute settlement case against U.S.
cotton subsidies in September 2004, which the United States appealed, but Brazil’s
position was reaffirmed by the WTO appellate body in March 2005. In keeping with
the requirement that the United States modify its policies or negotiate a mutually
satisfactory settlement with Brazil, the Bush Administration in early July 2005 asked
Congress to modify the cotton subsidy program and Brazil agreed to temporarily
suspend retaliatory action. In December 2007, a WTO dispute panel ruled in support
43 (...continued)
2005.
44 Jessica Lasky-Fink, “Brazil, Argentina Pursue Nuclear Cooperation,” Arms Control
Today, April 1, 2008.
45 For more information on the Doha Round, see CRS Report RL32060, World Trade
Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson.
46 “Uncertainty Lies Ahead for WTO,” Oxford Analytica. July 31, 2008.

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of Brazil’s claim that the United States is not moving quickly enough to comply with
the 2005 ruling that it should remove some of its cotton subsidies.47
In a separate decision, in December 2007 the WTO decided to investigate Brazil
and Canada’s claims that U.S. agriculture support programs have exceeded allowed
levels.48 Brazil has asserted that the United States has exceeded its annual
commitment levels for the total aggregate measure of support (AMS) in each of the
years 1999, 2000, 2001, 2002, 2004, and 2005. It also has complained that the U.S.
export credit guarantee program operates as a WTO-legal export subsidy. Canada
is pursuing a similar case against the United States.
Generalized System of Preferences.49 The Generalized System of
Preferences (GSP) provides duty-free tariff treatment to certain products imported
from developing countries. The U.S. program (as established by Title V of the Trade
Act of 1974) was extended until December 31, 2008, in section 8002 of P.L. 109-432
for all GSP beneficiary countries not covered by the African Growth and Opportunity
Acceleration Act (AGOA) of 2004 (P.L. 108-274, extended GSP benefits for AGOA
beneficiary countries through September 30, 2015). In the 109th Congress, renewal
of the preference was somewhat controversial, owing, in part, to concerns of some
that some of the more advanced developing countries (such as Brazil and India) were
contributing to the impasse in the Doha round of WTO talks. Compromise language
worked out between the House and Senate extended GSP for two years for all
countries, while directing the President “should” revoke “competitive need limitation
(CNL)” waivers for products from certain countries, based on the criteria specified.
In June 2007, the Bush Administration decided to revoke the CNL waivers on
Brazilian brake parts and ferrozirconium.50 On July 29, 2008, the House passed H.R.
6560 (Rangel), which would provide a one-year extension of current trade
preferences for Brazil and other countries under the GSP.
Intellectual Property Rights. In the last few years, Brazil has taken steps
to improve its record on protecting intellectual property rights (IPR). The Brazilian
government has created a national action plan to address piracy and intellectual
property crimes, which has included increased police actions. Brazil and the United
States continue to work together to address intellectual property issues, primarily
through the U.S.-Brazil Bilateral Consultative Mechanism and the U.S.-Brazil
Commercial Dialogue. In recognition of this progress, the United States Trade
Representative lowered Brazil from the Priority Watch List of countries with
significant IPR violations to the Watch List in 2007. Brazil remained on the Watch
47 “WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19,
2007. For more information, see CRS Report RL32571, Background on the U.S.-Brazil
WTO Cotton Subsidy Dispute, by Randy Schnepf.
48 See CRS Report RS22728, Brazil’s WTO Case Against U.S. Agricultural Support: A Brief
Overview, by Randy Schnepf.
49 This section was drawn from CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones.
50 “USTR Revokes GSP Waivers for India, Brazil Despite Rangel Objections,” Inside U.S.
Trade, June 29, 2007.

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List in 2008. In order to build on progress that has been made, USTR recommends
that Brazil should consider strengthening its IPR enforcement legislation, more
vigorously addressing book and Internet piracy, and signing the World Intellectual
Property Organization Internet Treaties.51 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.52
Human Rights
The U.S. State Department’s Country Report on Human Rights on Brazil
covering 2007 states that while “the federal government generally respected the
human rights of its citizens ... there continued to be numerous, serious abuses, and
the record of several state [and municipal] governments was poor.” Three human
rights issues of particular concern include crime and human rights abuses by police,
race and discrimination, and trafficking in persons.
Violent Crime and Human Rights Abuses by Police. Most observers
agree that the related problems of urban crime, drugs, and violence, on the one hand,
and corruption and brutality in law enforcement and prisons, on the other, are
threatening citizens’ security in Brazil. Crime is most rampant in the urban shanty
towns (favelas) in Rio de Janeiro and São Paulo. In addition to rising crime rates,
human rights groups have identified extrajudicial killings by police and prison
authorities as Brazil’s most pressing human rights problem.53 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.”54 Prison conditions
range from “poor to extremely harsh and life threatening,” and the countrywide
prison system, which housed more than 400,000 inmates in 2007, had almost double
the system’s design capacity.55
The current weaknesses in Brazil’s criminal justice system became dramatically
apparent in 2006, when gangs launched violent attacks that destabilized the cities of
São Paulo and Rio de Janeiro. In May 2006, street combat and rioting organized by
a prison-based gang network, the First Capital Command (PCC), paralyzed the city
51 USTR, Special 301 Report, April 2008.
52 “Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters News, November 13, 2007.
53 Brazilian authorities report that, partially in response to violent gang attacks, São Paulo
state police killed 533 alleged criminals in 2006 compared to 300 in 2005. See “Police
Killings of Suspects Up in Brazil,” Associated Press, February 1, 2007. President Lula has
taken some steps to combat police brutality in Brazil.
54 “Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit
to Brazil,” States News Service, November 15, 2007.
55 U.S. Department of State, Country Reports on Human Rights Practices 2007: Brazil,
March 2008.

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of São Paulo for several days.56 Officially, the violent gang attacks, which were
followed by police reprisals, resulted in at least 186 deaths. Brazilian police have
been criticized for the brutal manner in which they responded to the gang violence.57
Violence in Rio de Janeiro has traditionally been linked to turf wars being
waged between rival drug gangs for control of the city’s drug industry or to clashes
between drug gangs and police officials. In late December 2006, drug gangs torched
buses and attacked police stations in Rio de Janeiro, leaving some 25 dead. Recent
clashes have also involved vigilante militias, composed of off-duty police and prison
guards, which are now charging citizens to “protect” them from the drug gangs. Rio
officials have identified the militias as criminal groups but have thus far been unable
to contain them.58
Many analysts have asserted that Brazilian politicians at all levels of
government have failed to devote the resources and political will necessary to
confront the country’s serious public security problems. In particular, they maintain
that there has been a lack of coordination between federal, state, and local officials,
and that political calculations have often prevented state governments, which have
been largely ineffective in responding to the recent violence, from seeking much-
needed assistance from the federal government. President Lula did not launch any
major anti-crime initiatives during his first term, but announced a $3 billion anti-
crime initiative in August 2007 that combines police reform, prison construction, and
other public security measures with significant investments in prevention, and
rehabilitation programs.59
Race and Discrimination.60 People of African descent in Brazil, also known
as Afro-Brazilians, represent 45% of the country’s population, but constitute 64% of
the poor and 69% of the extreme poor.61 During the Cardoso administration, the
Brazilian government began to collect better official statistics on Afro-Brazilians.
56 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.
57 “Brazil: Battle of São Paulo Leaves a Disquieting Balance,” Latin American Weekly
Report, May 23, 2006; “Police are Criticized in Wave of Gang Violence in Brazil,” New
York Times, May 30, 2006; “Attacks in São Paulo Prompt Fears of Renewed Gang
Offensive,” EFE, February 7. 2007.
58 “Troops Alone Will Not Solve State of Violence,” Latin American Brazil and Southern
Cone Report, January 2007; “Brazilian Slums Face a New Problem: Vigilante Militias,”
Christian Science Monitor, February 8, 2007.
59 “Brazil: Public Security Program Finally Launched,” Latin American Weekly Report,
August 23, 2007.
60 For more information, see CRS Report RL32713, Afro-Latinos in Latin America and
Considerations for U.S. Policy, by Clare Ribando Seelke.
61 Ricard Henriques, “Desigualdade racial no Brasil,” Brasilia: Instituto de Pesquisa
Econômica Aplicada (IPEA), 2001

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These statistics found significant education, health, and wage disparities between
Afro-Brazilians and Brazil’s general population.
Brazil now has the most extensive anti-discrimination legislation geared towards
Afro-descendants of any country in Latin America. In 2001, Brazil became the first
Latin American country to endorse quotas in order to increase minority representation
in government service. Since 2002, several state universities in Brazil have enacted
quotas setting aside admission slots for black students. Although most Brazilians
favor government programs to combat social exclusion, they disagree as to whether
the beneficiaries of affirmative action programs should be selected on the basis of
race or income.62 In 2003, Brazil became the first country in the world to establish
a Special Secretariat with a ministerial rank to manage Racial Equity Promotion
Policies. Afro-Brazilian activists, while acknowledging recent government efforts
on behalf of Afro-descendants, have noted that most universities have preferred not
to implement quota systems, and that the Special Secretariat lacks the funding, staff,
and clout necessary to advance its initiatives.63
Despite these limitations, Brazil has taken a leadership role in advancing issues
of race and discrimination within the Organization of American States, where it is
leading the drafting of an Inter-American Convention for the Prevention of Racism
and All Forms of Discrimination and Intolerance. In March 2008, Brazil and the
Untied States signed an agreement known as the United States-Brazil Joint Action
Plan Against Racial Discrimination to bilaterally promote racial equality in areas
such as education, health, housing, and labor.64
Trafficking in Persons for Forced Labor.65 Brazil is a source, transit, and
destination country for people, especially women and children, trafficked for forced
labor or sexual exploitation. In the State Department’s Trafficking in Persons (TIP)
report, June 2006, Brazil was listed as a Tier 2 Watch List country. In the report, the
Brazilian government was cited for making only limited progress in bringing
traffickers to justice and for failing to apply effective penalties for those who exploit
forced labor. In the 2007 and 2008 TIP reports, Brazil was placed on Tier 2,
reflecting some progress, but significant challenges remain, particularly in addressing
trafficking for forced labor.66
62 Livio Sansone, “Anti-Racism in Brazil,” NACLA Report on the Americas, September 1,
2004.
63 Dayanne Mikevis and Matthew Flynn, “Brazil’s Civil Rights Activists Achieving Overdue
Policy Reform,” Citizen Action in the Americas, No. 17, April 2005.
64 “Partnering with U.S. to Fight Racial Bias,” Miami Herald, September 8, 2008.
65 For more information, see CRS Report RL33200, Trafficking in Persons in Latin America
and the Caribbean, by Clare Ribando Seelke.
66 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
(continued...)

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In Brazil, between 25,000 and 100,000 men have reportedly been recruited to
labor in slave-like conditions, many in the country’s agribusiness industry. Roughly
half of the close to 6,000 people freed from slave labor in 2007 were found working
in sugarcane properties. Some have alleged that there are some 1,000 charcoal-
making camps in the Brazilian Amazon that are using slave labor to produce pig iron,
a key ingredient of steel, that is then purchased by major companies in the United
States. Child prostitution, child sex tourism, and the trafficking of foreign workers
into forced factory labor are also significant problems in Brazil.67
HIV/AIDS
Internationally recognized as having one of the world’s most successful
HIV/AIDS program, Brazil has made the fight against the spread of HIV/AIDS a
national priority. Initially focused on disease prevention, Brazil’s HIV/AIDS
program expanded to providing antiretroviral (ART) drugs on a limited basis by
1991, and later guaranteeing universal access by 1996. Currently some 172,000
Brazilians have access to free generic versions of ART drugs, some of which are
locally produced and financed by the Brazilian government. The incidence of
HIV/AIDS in Brazil has stabilized since 1997, and universal free access to ART has
increased average survival times from 18 months for those diagnosed in 1995, to 58
months for those diagnosed in 1996.68 HIV prevalence has been stable at 0.5% for
the general population in Brazil since 2000, so most government prevention efforts
are now targeted at high-risk groups where prevalence rates are still above 5%.
Brazil’s decision to develop generic ART drugs to treat HIV/AIDS under the
compulsory licensing provision of its patent law led to a subsequent 80% drop in the
cost of treatment there. That decision brought Brazil into conflict with the United
States and the international pharmaceutical industry. In May 2001, the United States
submitted a complaint to the WTO, which was later withdrawn, that Brazil’s
practices violated the Trade-Related Aspects of Intellectual Property Rights (TRIPS)
agreement and prevented companies from developing new products there. While the
pharmaceutical industry argued that TRIPS was an essential tool to protect
intellectual property rights, developing countries (like Brazil) countered that TRIPS
inhibited their ability to fight public health emergencies in a cost-effective manner.
66 (...continued)
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.
67 Michael Smith and David Voreacos, “The Secret World of Modern Slavery,” Bloomberg
Markets, December 2006; U.S. Department of State, Trafficking in Persons Report 2008,
June 4, 2008.
68 Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in
Resource-Limited Settings,” World Health Organization, February 2005.

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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 2005.69
Brazil currently manufactures older ART drugs locally both for domestic
consumption and for export to several African countries but has to import newer
medicines. According to Brazil’s ministry of health, tough negotiations with
pharmaceutical companies have resulted in $1.1 billion savings for the country’s
HIV/AIDS program.
Amazon Deforestation
The Amazon Basin contains over half of the world’s remaining tropical
rainforests and is the most biodiverse tract of tropical rainforest in the world. Some
22% of the world’s known plant species exist in Brazil and 20% of the world’s fresh
water lies in the Amazon basin. The Amazon is also thought to be home to one third
of all species in the world. Further, the Amazon rainforest is a sink for global carbon
dioxide, and is considered by many to be an important asset in moderating climate
change.
Throughout the last forty years, the Brazilian Amazon has been increasingly
deforested for development including roads, settlements, logging, subsistence and
commercial agriculture, as well as cattle ranching. In 1960, the Amazon was largely
undeveloped, but today approximately 15%-20% of the rainforest has been
deforested. Deforestation threatens the biodiversity of the Amazon region and is a
concern for climate change. In the 1980s, some predicted that deforestation would
decline if the Brazilian government stopped providing tax incentives and credit
subsidies to settlers and agricultural producers. Those predictions have not borne
out, however, as the complex and often interrelated causes of deforestation have
multiplied rather than decreased.70 Between 1990 and 2000, Brazil lost an area of
rainforest twice the size of Portugal. Deforestation rates, which have been fueled by
increases in cattle ranching, soybean farming, and road building, declined in 2005
and 2006. In the last 12 months through July, however, as much as 5,792 square
miles (15,000 square km), roughly half the size of Belgium, have been cut down —
the first rise in three years.71 Recent rises in deforestation rates combined with the
69 Mary Anastasia O’Grady, Wall Street Journal, December 16, 2005.
70 Some have suggested that access to pristine tracts of rainforests through roads is the
primary driver of deforestation in the Amazon. Regional roads constructed by the
government, as well as local roads created by logging operations, provide access to forested
areas. Using these roads, farmers clear remaining forests and practice slash and burn
agriculture until the land loses much of its soil fertility and it becomes more profitable to
move to other forested tracts rather than resuscitate their existing lands. After agriculture,
pastures grasses are generally planted and cattle are raised. Eventually, cattle grazing and
cyclical burning will alter the ecosystem sufficiently that forests cannot regenerate.
71 Raymond Colitt, “Brazil Seizes Cattle to Stem Amazon Destruction,” Reuters News, June
24, 2008; Raymond Colitt, “Brazil Seeks to Reign in Foreign Influence in Amazon,” Reuters
(continued...)

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May 2008 resignation of Environment Minister Marina Silva, widely seen as a strong
defender of the Amazon, has raised environmental fears.72
The Brazilian government has begun taking steps to crack down on
deforestation through greater policy and expansion of protected areas. The Lula
government created some 7 million hectares of new conservation reserves in 2004
and 2005. It also arrested more than 100 people for illegal logging between June
2005 and January 2006 and seized thousands of cattle.73 In March 2006, President
Lula signed the Public Forest Management Law, which allows companies access to
3% of the Amazon on the condition that they carry out sustainable operations.
Although some environmental groups have praised this progress, others fear that it
may be too little too late. Skeptics assert that the declining deforestation rates
recorded for the past two years did not occur because of any government initiatives,
but because declining soybean prices coupled with the strengthening of Brazil’s
currency made it less profitable to clear the forests. They point out that deforestation
rates began rising again in 2007 as cattle ranchers, soy producers and illegal loggers
increasingly used forest fires and chainsaws to clear large tracts of the rainforest.74
In order to combat further deforestation, most observers agree that cooperative efforts
will have to be made between the Brazilian government, private companies,
landowners, and the international community (including the United States).75 To that
end, President Lula launched an international fund in August 2008 to finance
conservation and sustainable development projects. The government hopes to raise
$1 billion within one year, according to Brazil’s National Development Bank
(BNDES), which will manage the fund.
USAID environment programs directly support the U.S.-Brazil Common
Agenda for the Environment. USAID environment programs seek to promote proper
land-use trends over large geographic areas while encouraging environmentally-
friendly income generation activities for the rural poor. USAID provided $5.2 million
for environmental programs in Brazil in FY2007 and an estimated $9.5 million in
FY2008. In FY2006, USAID initiated the Amazon Basin Conservation Initiative, a
regional program to support community groups, governments, and public and private
organizations working in Brazil and other countries in the Amazon Basin in their
efforts to conserve the Amazon’s globally important bio-diversity. The Consolidated
Appropriations Act for FY2008 (H.R. 2764/P.L. 110-161) stipulates that, in addition
to funding for country programs, no less than $15 million be made available in
FY2008 for the Amazon Basin Conservation Initiative.
71 (...continued)
News, July 16, 2008.
72 “Silva Resignation Raises Environmental Fears,” Oxford Analytica, May 19, 2008.
73 Cattle ranching is considered by some observers to be the number one culprit of
deforestation, occupying as much as 80 percent of deforested areas, according to the newly
appointed Environment Minister Carlos Minc.
74 “Brazil Gambles on Amazon Logging,” Chicago Tribune, January 15, 2007;
“Deforestation on the Rise Again in Amazon Region,” EFE News Service, October 16,
2007; “Deforestation: The Amazon Burns Once Again,” The Guardian, October 16, 2007.
75 Soares-Filho et al., “Modelling Conservation in the Amazon Basin,” Nature, March 2006.

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Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS.

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