Brazil-U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
July 29, 2011
Congressional Research Service
7-5700
www.crs.gov
RL33456
CRS Report for Congress
P
repared for Members and Committees of Congress

Brazil-U.S. Relations

Summary
As its economy has grown to be the eighth 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, Brazil and the United States continue to engage on a number of
issues, including counternarcotics, counterterrorism, energy security, trade, human rights, and the
environment.
Dilma Rousseff of the ruling center-left Workers’ Party was inaugurated to a four-year
presidential term on January 1, 2011. She is Brazil’s first female president. Rousseff inherits a
country that has benefited from what many analysts consider 16 years of stable and capable
governance under Presidents Cardoso (1995-2002) and Lula (2003-2010). Since taking office, she
has maintained generally orthodox economic policies while continuing to assert a role for the
state in development. Her 10-party electoral coalition holds significant majorities in both houses
of Brazil’s legislature; however, keeping the unwieldy coalition together has already proven
challenging. Elements of the governing coalition have criticized Rousseff and even voted with the
opposition on key pieces of legislation to express displeasure over her attempts to constrain
spending and her quick dismissal of a number of officials accused of corruption. Nonetheless,
Rousseff remains relatively popular among the general population, with 49% of Brazilians
considering her performance good or excellent in June 2011.
With a gross national income (GNI) of $1.6 trillion, Brazil is the largest economy in Latin
America. Over the past eight years, the country has enjoyed average annual growth of over 4%.
This growth has been driven by a boom in international demand for its commodity exports and
the increased purchasing power of Brazil’s fast-growing middle class. In 2010, the value of
Brazil’s exports reached some $202 billion, contributing to a trade surplus of $20.3 billion. The
country’s current economic strength is the result of a series of policy reforms implemented over
the course of two decades that reduced inflation, established stability, and fostered growth. These
policies have also enabled Brazil to better absorb international shocks like the recent global
financial crisis, from which Brazil emerged relatively unscathed. Although current conditions and
Brazil’s recent performance suggest the country will sustain solid economic growth rates in the
near term, several constraints on mid- and long-term growth remain.
The 112th Congress has maintained interest in U.S.-Brazil relations. Several pieces of legislation
have been introduced, including bills that would suspend foreign assistance to Brazil (H.R. 2246)
and the issuance of visas to Brazilian nationals (H.R. 2556) until the country amends its
constitution to allow for the extradition of its citizens. Additionally, the House adopted legislation
(H.R. 2112) that includes a provision (H.Amdt. 454) that would prevent any funds made available
under the Act from being used to provide payments to the Brazil Cotton Institute.
This report analyzes Brazil’s political, economic, and social conditions, and how those conditions
affect its role in the world and its relationship with the United States.

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Contents
Background ................................................................................................................................ 1
Political Situation........................................................................................................................ 3
The Lula Administration (2003-2010) ................................................................................... 3
2010 Elections ...................................................................................................................... 5
The Rousseff Administration................................................................................................. 5
Economic Conditions .................................................................................................................. 7
Background on Reform and Stabilization .............................................................................. 7
Global Financial Crisis.......................................................................................................... 8
Potential Constraints on Growth............................................................................................ 9
Social Indicators ................................................................................................................. 10
Foreign Policy........................................................................................................................... 11
Regional Policy................................................................................................................... 12
South American Integration........................................................................................... 12
Expansion of Influence into Central America and the Caribbean.................................... 13
Emerging Global Role......................................................................................................... 14
South-South Ties........................................................................................................... 15
Democratization of Global Governance......................................................................... 15
Relations with the United States ................................................................................................ 17
Selected Issues in U.S.-Brazil Relations .................................................................................... 18
Counternarcotics ................................................................................................................. 18
Counterterrorism and the Tri-Border Area ........................................................................... 19
Energy Security .................................................................................................................. 20
Ethanol and Other Biofuels ........................................................................................... 20
Nuclear Energy ............................................................................................................. 22
Oil ................................................................................................................................ 22
Trade Issues ........................................................................................................................ 23
Doha Round of the World Trade Organization Talks ..................................................... 24
World Trade Organization Cotton Dispute ..................................................................... 24
Intellectual Property Rights ........................................................................................... 25
Human Rights ..................................................................................................................... 26
Violent Crime and Human Rights Abuses by Police....................................................... 26
Race and Discrimination ............................................................................................... 28
Trafficking in Persons for Forced Labor ........................................................................ 29
Amazon Conservation......................................................................................................... 30
Domestic Efforts ........................................................................................................... 31
International Initiatives ................................................................................................. 32

Figures
Figure 1. Map of Brazil ............................................................................................................... 2

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Contacts
Author Contact Information ...................................................................................................... 32
Acknowledgments .................................................................................................................... 33

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Background
A former Portuguese colony that achieved independence in 1822, Brazil occupies almost half of
the continent of South America and boasts immense biodiversity—including 60% of the 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 with 201 million citizens, primarily of European,
African, or mixed descent.1 With a gross national income (GNI) of $1.6 trillion in 2009, Brazil’s
diversified economy is the eighth largest in the world and the largest in Latin America. Per capita
GNI is only $8,040, however, and the country has an unequal income distribution.2
Brazil has long held potential to become a
Brazil in Brief
world power, but its rise to prominence has
been curtailed by setbacks, including 21
Population: 201 Million
years of military rule, political instability,
Ethnic Groups: African, Portuguese, Italian, German,
and uneven economic growth.3 Brazil’s
Spanish, Japanese, Indigenous peoples, and people of Middle
military governments ruled from 1964-1985
Eastern descent.
and, while repressive, were not as brutal as
Religion: 74% Roman Catholic
those in some other South American
Official Language: Portuguese
countries. Although nominally allowing the
Life Expectancy: 72.6 years
judiciary and Congress to function during its
tenure, the Brazilian military stifled
Literacy Rate: 88%
representative democracy and civic action in
Poverty Rate: 22.9%
Brazil, carefully preserving its influence
Approximate Size: Slightly Smaller than the United States
during one of the most protracted transitions
to democracy to occur in Latin America.
GNI (2009, Atlas Method): $1.6 Trillion
During the first decade after its return to
GNI per Capita (2009, Atlas Method): $8,040
democracy, Brazil experienced economic
Sources: State Department Background Note, Oxford
recession and political uncertainty as
Analytica, World Bank
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
administration of Fernando Henrique Cardoso (1995-2002).


1 Brazil has never had a large indigenous population. Today, Brazil’s indigenous population consists of between
700,000 and 800,000 persons, the majority of whom reside on indigenous lands in the Amazon and the center-west of
the country. U.S. Department of State, Country Reports on Human Rights Practices 2010: Brazil, April 8, 2011.
2 World Bank, “World Development Indicators,” available at http://data.worldbank.org/data-catalog/world-
development-indicators.
3 For a historical overview of Brazil’s political development, see Riordan Roett, The New Brazil (Washington, DC:
Brookings Institution, 2010).
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Cardoso, a prominent sociologist of the centrist4 Brazilian Social Democracy Party (Partido da
Social Democracia Brasileira
, PSDB), was elected in 1994 as a result of the success of the anti-
inflation “Real Plan” that he implemented as finance minister under President Itamar Franco
(1992-1994). During his two terms in office, Cardoso brought inflation under control, opened the
Brazilian economy to trade and investment, and furthered privatization efforts. Although
Cardoso’s popularity declined considerably during his second term as Brazil dealt with a series of
financial crises, most analysts credit him with laying the foundation for the macroeconomic
stability that Brazil has enjoyed over the past decade.5
Figure 1. Map of Brazil

Source: Map Resources. Adapted by CRS Graphics.


4 The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB); however, it has steadily
moved to the right since implementing market-oriented economic reforms during the Cardoso Administration. Timothy
J. Power and Cesar Zucco Jr., "Estimating Ideology of Brazilian Legislative Parties, 1990-2005," Latin American
Research Review
, vol. 44, no. 1, 2009.
5 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.
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Political Situation
Dilma Rousseff of the ruling center-left6 Workers’ Party (Partido dos Trabalhadores, PT) was
inaugurated to a four-year presidential term on January 1, 2011. She inherited a country that has
benefited from what many analysts consider 16 years of stable and capable governance under
Presidents Cardoso (1995-2002) and Lula (2003-2010), during whose administrations the
foundations for the country’s current levels of economic growth and social inclusion were laid
and built upon.7 Rousseff has pledged to consolidate and expand the economic and social gains
made under her predecessor.
Her multiparty electoral coalition—composed of 10 parties of varying sizes and ideologies—
holds significant majorities in both houses of Brazil’s legislature. Although this legislative
strength should enable Rousseff to pursue portions of her policy agenda, keeping the unwieldy
coalition together has already proven challenging. Several parties in the coalition have expressed
displeasure with Rousseff’s attempts to constrain spending and her quick dismissal of a number
of officials accused of corruption. Some have even voted with the political opposition on key
pieces of legislation. Nonetheless, Rousseff remains relatively popular among the general
population, with 49% of Brazilians considering her performance good or excellent and only 10%
considering her performance bad or terrible.8
The Lula Administration (2003-2010)
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 PT, which he helped
found as a metalworker and union leader in the 1980s. Although Lula continued to advocate for
stronger state support for Brazil’s poor during the campaign, he moderated his earlier leftist
rhetoric and promised to maintain the fiscal and monetary policies associated with Brazil’s
standing International Monetary Fund (IMF) agreements. In doing so, Lula was able to calm
international investors and win over portions of the Brazilian electorate that were disenchanted by
economic stagnation and high unemployment at the conclusion of President Fernando Henrique
Cardoso’s eight years in power. After failing to win an absolute majority of the vote in the first
round, Lula easily defeated the PSDB’s José Serra—who served in Cardoso’s cabinet—in the
second round runoff election with over 61% of the vote.9


6 Although the PT was founded as a leftist party, it moved toward the ideological center upon taking office in 2002.
Timothy J. Power and Cesar Zucco Jr., "Estimating Ideology of Brazilian Legislative Parties, 1990-2005," Latin
American Research Review
, vol. 44, no. 1, 2009.
7 See, for example, “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; Juan Forero,
“Cardoso vs. Lula: Two Brazilian Presidents Vie Over Who Turned Country Around,” Washington Post, October 30,
2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
8 “Popularidade do Governo Dilma Fica Estável,” Datafolha, June 13, 2011.
9 “Brazil: Lula Elected President of Brazil,” Latin News Daily, October 28, 2002.


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During his first term, Lula maintained the market-oriented economic policies associated with his
predecessor while placing a greater emphasis on reducing poverty. By the end of his term,
President Cardoso had established a three-pronged macroeconomic policy consisting of a primary
fiscal surplus, an inflation target, and a floating exchange rate. Lula built upon the policy by
raising the primary budget surplus, granting additional autonomy to the Central Bank, and
enacting social security and tax reforms. 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 Grant),
provides monthly stipends to poor families in exchange for ensuring that their children attend
school and receive proper medical care. Lula’s agenda stalled toward the end of his first term as
several top PT officials were implicated in corruption scandals. A congressional inquiry
eventually cleared the president of any direct responsibility, however, and Lula was elected to a
second term in October 2006, defeating the PSDB’s Gerardo Alckmin in a second round runoff
with 61% of the vote.10
After primarily focusing on economic stability during his first term, Lula established a larger role
for the Brazilian state in the economy during his second term. He implemented several stimulus
measures to accelerate economic growth and counteract the effects of the global financial crisis.
He also expanded social programs like Bolsa Familia and launched new programs, such as Minha
Casa, Minha Vida
(My House, My Life)—an attempt to increase formal housing for low-income
Brazilians.11 Over the course of Lula’s eight years in office, Brazil’s per capita gross national
income nearly tripled, and some 24.6 million people escaped poverty.12 Just before leaving office,
Lula won legislative approval for a new regulatory framework that will increase the state’s role in
the exploitation of Brazil’s considerable offshore oil reserves in hopes of using the resources to
fuel long-term economic and social development.13 (For more information, see “Oil” below).
Although some analysts have criticized Lula for allegedly protecting corrupt officials and not
doing more to pass what they view as crucial economic, political, and social reforms,14 he won
the support of the vast majority of the Brazilian public during his two terms, leaving office with
an 87% approval rating.15


10 "Lula Wins Re-election by Landslide," Latin News Daily, October 30, 2006.
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 World Bank, “World Development Indicators,” available at http://data.worldbank.org/data-catalog/world-
development-indicators; 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.
13 “Brazil Congress Approves Oil Law,” Latin News Daily, December 2, 2010.
14 See, for example, Daniel Bramatti, “Lula, Sarney, Collor e Renan...por Lula, Sarney, Collor e Renan,” Estado de São
Paulo
, August 9, 2009; “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; and Paulo
Kliass, “Lula’s Political Economy: Crisis and Continuity,” North American Congress on Latin America (NACLA),
March/April 2011.
15 Bradley Brooks, “Lula’s Legacy, Leaving Behind a Transformed Brazil,” Associated Press, December 27, 2010.
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2010 Elections
On October 31, 2010, Dilma Rousseff of the ruling center-left Workers’ Party (PT) won 56% of
the vote to defeat José Serra of the centrist Brazilian Social Democracy Party (PSDB) in a second
round presidential runoff election.16 The second round was necessary since Rousseff had fallen
just short of an absolute majority—with 46.9% of the vote—in the first round election held on
October 3, 2010.17 Given the strength of the Brazilian economy and Lula’s overwhelming
popularity, both major candidates had largely promised continuity during the campaign, with
Rousseff pledging to consolidate gains made during the Lula Administration and Serra proposing
only relatively minor policy changes. Rousseff had never been elected to public office previously
but was chosen by Lula to run as his successor. She served as minister of mines and energy from
2003-2005 and minister of the presidency from 2005-2010, before resigning to seek the
presidency. Rousseff headed a 10-party coalition with a running-mate from the centrist Party of
the Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB).
In legislative elections conducted concurrently with the first round presidential election,
Rousseff’s coalition made significant gains in both houses of Congress. The PT now holds 88 of
the 513 seats in the Chamber of Deputies and 14 of the 81 seats in the Senate, making it the
largest party in the lower house and the second-largest party in the upper house. Together, the 10
parties of Rousseff’s electoral coalition hold over 60% of the seats in both houses of Congress,
large enough majorities to amend the constitution.18
The Rousseff Administration
Since taking office, President Rousseff has reiterated her pledge to consolidate and build upon the
policies of the previous administration. On economic policy, she has maintained generally
orthodox policies while continuing to assert a key role for the state in development. Rousseff has
sought to constrain spending, cutting about $32 billion (R$50 billion) from the budget and
limiting the increase in the minimum wage in hopes of easing inflationary pressures.19 At the
same time, the National Economic and Social Development Bank (Banco Nacional de
Desenvolvimento Econômico e Social
, BNDES) has continued to provide extensive subsidized
financing to Brazilian industry, and Rousseff has launched an anti-poverty plan designed to
eradicate extreme poverty by 2014.20 Going forward, issues likely to require Rousseff’s attention
include attracting investment to develop the country’s infrastructure, improving the quality of
public education and health services, and reducing high rates of crime and violence in Brazil’s
urban centers.


16 “Brazil: Lula Will Bolster—and May Hinder—Rousseff,” Oxford Analytica, November 1, 2010.
17 Marina Silva, a former Lula Administration environment minister who ran for president as the candidate of the Green
Party (Partido Verde, PV), outperformed the pre-election polls by taking 19.3% of the first round vote. Her
unexpectedly strong finish kept Rousseff under 50% and forced a second round runoff. Serra won 32.6% of the first
round vote. “Brazil’s ‘Green Wave’ Shocker,” Latin News Daily, October 4, 2010.
18 Tribunal Superior Eleitoral, accessed on January 5, 2010, available at http://www.tse.gov.br/internet/index.html.
19 “Brazil: Rousseff’s Strong Start Boosts Confidence,” Oxford Analytica, April 7, 2011.
20 Paulo Prada, “The Easy Credit That Fueled Brazil’s Boom Now Imperils It,” Wall Street Journal, June 13, 2011;
“Rousseff Launches Anti-Poverty Plan in Brazil,” Agence France Presse, June 2, 2011.
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President Dilma Rousseff
• She was born in 1947 to a Bulgarian immigrant father and a Brazilian mother.
• She joined various clandestine leftist groups following the installation of a military government in 1964. She was
arrested in 1970 and tortured and imprisoned by the military regime until 1972.
• Upon her release, she completed a degree in economics.
• She returned to politics in the late 1970s, taking part in the amnesty campaign for political prisoners and the
founding of a center-left political party.
• During the 1980s and 1990s, she worked as a consultant to political leaders and served in various positions in
the state of Rio Grande do Sul, including president of the Economy and Statistics Foundation and State Secretary
of Mines, Energy, and Communication.
• She joined President Lula’s transition team in 2002 and served as Brazil’s minister of mines and energy from
2003-2005.
• In 2005, Lula named her his chief of staff, where she was put in charge of strategic projects such as the
government’s housing program, investments in infrastructure through the Growth Acceleration Program, and
coordination of the design of a new regulatory framework for developing Brazil’s recently discovered offshore oil
reserves.
• She resigned as chief of staff to run for president in 2010.
• In January 2011, she was inaugurated to a four-year presidential term.
Source: Presidência da República Federativa do Brasil. Available at http://www.presidencia.gov.br/presidenta/view.

Although Rousseff’s electoral coalition enjoys significant majorities in Congress, she will need to
overcome a number of challenges in order to implement her agenda. The 10 parties that backed
her candidacy are ideologically diverse, and while some support the policies of the PT, others—
including the large PMDB—have demonstrated more interest in the distribution of government
resources through the federal budget and the control of ministries and state enterprises.21 Lula
often struggled to hold together a similarly unwieldy coalition despite his considerable political
acumen and public support, and intra-coalition negotiations have already proven challenging for
the less experienced and less charismatic Rousseff. Almost immediately, some sectors of the
coalition voiced discontent as a result of Rousseff’s cabinet appointments.22 Rousseff’s attempts
to constrain spending and her quick dismissal of more than a dozen officials accused of
corruption have exacerbated these intra-coalition differences. Some legislators have even voted
with the political opposition on key pieces of legislation, such as a bill that would weaken
environmental protections, to demonstrate their displeasure.23 Although the general public


21 Marco Antonio Villa, “PMDB Será Pedra no Sapato da Presidente,” Folha de São Paulo, November 20, 2010;
Otávio Cabral, “A Digestão do Poder,” Veja; July 29, 2009.
22 Vera Rosa and Rafael Moraes Moura, “Ministério de Dilma Mantém Fatia de Poder do PT e Desagrada a Aliados,”
Estado de São Paulo Digital, December 22, 2010.
23 Juan Arias, “El Ala Izquierda del PT Critica la Política de Austeridad de Rousseff,” El País (Argentina), March 1,
2011; “Deep Differences Surface in Brazil’s Dilma Rousseff Ruling Coalition,” MercoPress, May 30, 2011; “Brazil
Politics: Another Scandal, Another Casualty,” Economist Intelligence Unit, July 14, 2011.
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appears to support Rousseff’s efforts, many analysts think her unwillingness to engage in the
bargaining over government offices and resources typical of Brazilian coalition politics will likely
inhibit the implementation of her policy agenda.24
Economic Conditions
With a gross national income (GNI) of $1.6 trillion, Brazil is the largest economy in Latin
America and the eighth largest in the world.25 Over the past eight years, the country has enjoyed
macroeconomic stability and average annual growth of over 4%. This growth has been driven by
a boom in international demand—particularly in Asia—for its commodity exports, and the
increased purchasing power of Brazil’s fast-growing middle class, which has added some 40
million people since 2003 and now accounts for a majority of the population.26 In 2010, the value
of Brazil’s exports reached some $202 billion, with top exports including commodities such as
iron ore, oil, sugar, soy, chicken, and beef, as well as manufactured goods such as automobiles
and aircraft. Brazil’s 2010 trade surplus amounted to $20.3 billion.27 The country’s current
economic strength is the result of a series of policy reforms implemented over the course of two
decades that reduced inflation, established stability, and fostered growth. These policies have also
enabled Brazil to better absorb international shocks like the recent global financial crisis, from
which Brazil emerged relatively unscathed.28 Although current conditions and Brazil’s recent
performance suggest the country will sustain solid economic growth rates in the near term,
several constraints on mid- and long-term growth remain.
Background on Reform and Stabilization
Following the return to democracy in the late 1980s and early 1990s, Brazil struggled with
persistently high inflation and slow growth. In order to address these issues, the Brazilian
government launched the “Real Plan” in 1994. The plan consisted of a new currency (the real)
pegged to the U.S. dollar, a more restrictive monetary policy, and a severe fiscal adjustment that
included a 9% reduction in federal spending and an across-the-board tax increase of 5%. Prices
immediately began to stabilize, with inflation falling from 2,730% in 1993 to 17.8% in 1995.
Fernando Henrique Cardoso, who had been in charge of the Real Plan as finance minister, took
office as president in 1995 and continued the economic reform push by privatizing state-owned
enterprises and gradually opening the Brazilian economy to foreign trade and investment.


24 See, for example, “É Dilma Quem tem que Assumir a Coordenação Política, Diz Lessa,” Valor Online (Brazil), June
13, 2011; “Rousseff Refuses to Bend to Political Pressure,” Latin News Daily, July 12, 2011; and Alexander Ragir,
“Rousseff Corruption Crackdown Risks Brazil Inflation Fight as Allies Balk,” Bloomberg, July 26, 2011.
25 World Bank, “World Development Indicators,” available at http://data.worldbank.org/data-catalog/world-
development-indicators.
26 The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn between approximately $770 and $3,300 (R$1,200-5,174) per month, now account for over half of the
Brazilian population. Marcelo Cortes Neri, Os Emergentes dos Emergentes: Reflexões Globais e Ações para a Nova
Classe Média Brasileira
, Fundação Getulio Vargas, Rio de Janeiro, June 27, 2011.
27 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, January 2011.
28 “Brazil Takes Off,” Economist, November 12, 2009.
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Although Brazil enjoyed stronger growth rates for a few years following the Real Plan,
macroeconomic stability remained elusive. In order to take advantage of the improved economic
situation and high real interest rates, foreign investors began flooding Brazil with large capital
inflows. The increase in foreign capital contributed to currency appreciation and the eventual
overvaluation of the real. Following the 1997 East Asian and 1998 Russian financial crises,
international investors began to worry about Brazil’s overvalued exchange rate and substantial
fiscal deficits. The Brazilian government’s inability to pass legislation capable of addressing these
issues sparked a massive capital flight. Brazil was forced to adopt a floating exchange rate, and
the real lost 40% of its value.29
In the aftermath of the 1998-1999 financial crisis, Brazil adopted the three main pillars of its
current macroeconomic policy: a floating exchange rate, a primary budget surplus, and an
inflation-targeting monetary policy. Although these policies were introduced toward the end of
the Cardoso Administration, they were maintained and strengthened under President Lula and
now have support across the political spectrum. Under the current policy mix, inflation has
remained low and economic growth has accelerated. Likewise, public debt has declined, with
Brazil repaying its $15.5 billion debt to the International Monetary Fund (IMF) ahead of schedule
in 2005, and becoming a net IMF creditor in 2009.30
Global Financial Crisis
In stark contrast to previous international shocks, the recent global economic downturn has had
only a limited effect on Brazil. The country experienced a brief recession in 2009, causing an
economic contraction of 0.6%, before rebounding quickly with estimated growth of 7.7% in
2010.31 Most analysts credit Brazil’s strong macroeconomic framework and the Lula
Administration’s timely policy response for successfully mitigating the effects of the crisis.32 As
the fallout of the financial crisis spread around the world, the Brazilian 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. President Lula also acted to boost domestic
consumption in hopes of partially offsetting declines in global demand. The government
mandated above-inflation increases to the minimum wage, provided temporary tax reductions,
increased investments in its signature infrastructure program, and maintained its spending on
social programs like Bolsa Familia.33
Although Brazil recovered quickly from the financial crisis, the lingering effects of the global
downturn are now presenting challenges for the country’s economy. Slow growth rates have kept


29 Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010; CRS Report 98-987,
Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
30 Antonio Rodriguez, “Brazil Switches Roles with Helping Hand for IMF,” Agence France Presse, October 5, 2009.
31 “Country Report: Brazil,” Economist Intelligence Unit, January 2011.
32 See, for example, “IMF Executive Board Concludes 2010 Article IV Consultation with Brazil,” International
Monetary Fund
, August 5, 2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil),
December 29, 2010.
33 “Brazil Economy: Bottoming Out?” Economist Intelligence Unit, May 7, 2009; “Will the Economy Grow in 2009?”
Latin American Economy & Business, February 2009; “Tax Relief for the Middle Classes,” Latin American Weekly
Report
, December 18, 2008.
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interest rates low in Europe and the United States, which has encouraged investors looking for
higher returns to flood Brazil and other developing nations with foreign capital. In addition to
fueling growth, these inflows are causing excessive appreciation of local currencies.34 The value
of the Brazilian real has gained 48% against the U.S. dollar since 2009.35 While this steep
increase in value has boosted domestic purchasing power, it is putting inflationary pressure on the
economy and hurting the competitiveness of Brazilian exports. In addition to accusing China, the
United States, and others of fueling “currency wars” by engaging in monetary interventions that
amount to “competitive devaluation” of their currencies,36 the Brazilian government has taken a
number of steps to discourage inflows of foreign capital. These include instituting a financial
operations tax on foreign capital inflows, imposing reserve requirements on domestic banks’
foreign exchange positions, and taxing foreign exchange derivatives. Despite these measures, the
real remains at a 12-year high against the U.S. dollar. Some analysts maintain that large flows of
foreign capital will continue until the country brings down interest rates, which would require
reducing public expenditures and reforming its fiscal system. 37
Potential Constraints on Growth
Brazil’s current conditions and recent economic performance suggest the country will sustain
solid growth rates in the near term; however, many analysts assert that several constraints on mid-
and long-term growth remain.38 These include a sizeable public debt burden and fast growing
private debt burden, high taxes and interest rates, low investment and savings rates, rigid labor
laws, and overburdened transportation and energy infrastructure. Net public debt has been falling
in recent years, but remains at 41% of gross domestic product (GDP).39 At the same time, the
Brazilian government has slowed the rate of debt reduction by reducing its primary fiscal
surplus—the budget surplus before debt payments—to enable increased government spending.40
According to some analysts, public expenditure is now growing faster than GDP and the quality
of spending is declining. They assert that a greater percentage of public expenditure needs to be
dedicated to long-term investments such as infrastructure, education, and research and


34 Ian Talley, “IMF Says Capital Controls Can Slow Investment Flows in India, Brazil,” Wall Street Journal, January 6,
2011.
35 Matthew Bristow, “Brazil Central Bank Moves to Curb Short Dollar Bets and Rein in Real Rally,” Bloomberg, July
10, 2011.
36 Brazil was critical of the U.S. Federal Reserve’s policy of quantitative easing (QE2). For more information on the
policy, see CRS Report R41540, Quantitative Easing and the Growth in the Federal Reserve’s Balance Sheet, by Marc
Labonte; Ed Dolan, “Why Latin America Hates QE2,” Business Insider, January 20, 2011; “Brazil: Currency War
Begins to Exact Toll,” Latin American Weekly Report, January 6, 2011.
37 “Brazil: Reserve Requirements Will Not Weaken Real,” Oxford Analytica, January 11, 2011; Matthew Bristow,
“Brazil Central Bank Moves to Curb Short Dollar Bets and Rein in Real Rally,” Bloomberg, July 10, 2011; “Brazil
Taxes Derivatives to Brake Currency Rally,” Reuters, July 27, 2011.
38 See, for example, “Prospects 2011: Brazil,” Oxford Analytica, November 26, 2010; World Economic Forum, The
Global Competitiveness Report 2010-2011
, Geneva, 2010; National Confederation of Industry (CNI), Industry and
Brazil: An Agenda to Grow More and Better
, Brasilia, 2010; and “Brazil: Consumer Credit Boom Raises Debt
Concerns,” Oxford Analytica, February 10, 2011.
39 “Prospects 2011: Brazil,” Oxford Analytica, November 26, 2010.
40 Maria Luiza Rabello and Iuri Dantas, “IMF View of Brazil Finances is ‘Stupid,’ Mantega Says,” Business Week,
January 28, 2011; “Brazil – Mantega’s Clever Accounting,” Latin News Daily, January 25, 2011.
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development.41 President Rousseff has acknowledged the need for greater public investment. She
intends to increase funding for education, implement a second phase of the Growth Acceleration
Program—an infrastructure investment program introduced under President Lula—and offer
incentives to attract significant private sector investment in roads, ports, and airports in
preparation for hosting the 2014 World Cup and 2016 Olympics.42
Social Indicators
Despite its fast-growing economy and large resource base, Brazil has had problems solving deep-
seated social problems. The country has one of the most unequal income distributions in Latin
America, a region with the highest income inequality in the world. The wealthiest 5% of the
population account for some 40% of the country’s wealth.43 Like elsewhere in Latin America,
Brazil’s high inequality is partially a legacy of extreme land concentration among the country’s
elite. A 2004 study found that 1% of the Brazilian population controlled 45% of the farmland.44
The Brazilian government has also acknowledged that there is a racial component to inequality.
71% of Brazilians living in extreme poverty are people of African descent, or Afro-Brazilians.45
Other factors that inhibit social mobility in Brazil include a lack of access to quality education
and job training opportunities.
The Brazilian government’s efforts to reduce social disparities have recently begun to
demonstrate results. As late as 2005, the Organization for Economic Cooperation and
Development (OECD) asserted that Brazil had not achieved the same social indicators as
countries with similar income levels despite having spent the same amount or more on social
programs.46 More recent evidence, however, indicates that Brazil has made substantial progress in
the last few years as a result of the country’s social policies and steady economic growth. Since
2003, the percentage of the population below the poverty line has fallen from 33.2% to 22.9%,
and the gap between the wealthiest 10% and poorest 10% has fallen from 23 times to 18 times.47
Likewise, infant mortality has fallen below 23 deaths per 1,000 live births and the proportion of
underweight children has fallen below 2%.48 Transfer programs like Bolsa Familia, which
provides monthly stipends to some 13 million poor families (52 million people) 49 in exchange for


41 Paulo Vieira da Cunha and Vinod Thomas, “The Brazilian Economy: The Choices for Dilma,” Remarks at the Inter-
American Dialogue, Washington, DC, November 10, 2010.
42 “Pronunciamento da Presidenta da República, Dilma Rousseff, à Nação Brasileira, no Parlatório do Palácio do
Planalto,” Ministério das Relações Exteriores, January 1, 2011; Brian Ellsworth, “Brazilian Infrastructure Lags Behind
the Boom,” Reuters, November 24, 2010; “World Cup Pushes Public-Private Partnerships in Brazil,” Oxford Analytica,
April 28, 2011.
43 “Brazil: Middle Class Expands but Inequality Persists,” Oxford Analytica, February 8, 2010.
44 “Special Report: Land Report Dilemma,” Latin America Regional Report: Brazil & Southern Cone, December 21,
2004.
45 Governo Federal do Brasil, Ministério do Desenvolvimento Social e Combate à Fome, Plano Brasil Sem Miséria,
http://www.brasilsemmiseria.gov.br/wp-content/themes/bsm2nd/caderno_brasil_sem_miseria.pdf.
46 Organization for Economic Cooperation and Development, Economic Survey of Brazil 2005, March 2005.
47 “Brazil: Poverty Falls, but Regional Inequities Remain,” Oxford Analytica, June 21, 2010.
48 “Brazil Claims it has Eradicated Extreme Poverty,” EFE News Service, December 14, 2010.
49 Some four million poor families exited the Bolsa Familia program between 2008 and 2010. 80% of those who left
did so as a result of securing higher incomes and living standards and effectively graduating from the program. "Brazil
(continued...)

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ensuring that their children attend school and receive proper medical care, have been credited for
much of this progress. Although such efforts likely will continue to play a major role in Brazilian
social policy, many observers assert that improving the quality of social services—especially in
education and healthcare—is crucial for reducing social disparities and fostering development in
the long run.50
In June 2011, President Rousseff launched an anti-poverty program known as Brasil Sem Miséria
(Brazil Without Poverty). The program is designed to eradicate extreme poverty, which currently
afflicts 16 million Brazilians, by 2014. It will increase transfer payments provided through
existing programs such as Bolsa Familia; increase access to public services such as education,
electricity, health care, housing, and sanitation; and increase economic opportunities in urban and
rural areas by providing access to microcredit, skills training, technical assistance, and new
markets.51
Foreign Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a regional power in
Latin America, a leader among developing countries in economic cooperation and collective
security efforts, and an emerging world power. Brazilian foreign policy has traditionally been
based on the principles of multilateralism, peaceful dispute settlement, and nonintervention in the
affairs of other countries.52 Adherence to these principles has enabled Brazil to maintain peaceful
relations with all 10 of its neighbors53 and to play a larger role in global affairs than its economic
and geopolitical power would otherwise allow. Building on its traditional principles, Brazilian
foreign policy under the PT administrations of Presidents Lula and Rousseff has emphasized three
areas of action: (1) reinforcing relations with traditional partners such as its South American
neighbors, the United States, and Europe; (2) diversifying relations by forging stronger economic
and political ties with other nations of the developing world; and (3) supporting multilateralism
by pushing for the democratization of global governance.54

(...continued)

Anti-Poverty Plan Fails to Tackle Causes," Oxford Analytica, June 15, 2011.
50 See, for example, “How to get Children out of Jobs and into School: The Limits of Brazil’s Much Admired and
Emulated Anti-Poverty Programme,” Economist, July 29, 2010; Alexei Barrionuevo, “Educational Gaps Limit Brazil’s
Reach,” New York Times, September 4, 2010; and “Resuscitating Brazil’s Health,” Latin News Daily, November 8,
2010.
51 Governo Federal do Brasil, Ministério do Desenvolvimento Social e Combate à Fome, Plano Brasil Sem Miséria,
http://www.brasilsemmiseria.gov.br/wp-content/themes/bsm2nd/caderno_brasil_sem_miseria.pdf.
52 Georges D. Landau, “The Decision Making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and
International Studies
: Washington, DC: March 2003.
53 In addition to bordering nine of the eleven other independent countries in South America, Brazil borders French
Guiana—a territory of France (see Figure 1, for a map of Brazil and its neighbors).
54 “Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
“Brazil has Become the ‘Unavoidable Partner’ in the Global Decision-Making Process,” MercoPress, December 14,
2010.
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Regional Policy
Over the past decade, Brazil has firmly established itself as a regional power. Within South
America, Brazilian foreign policy supports economic and political integration efforts in order to
reinforce long-standing relationships with its neighbors. Although integration is the primary
purpose of organizations like the Common Market of the South (Mercosur) and the Union of
South American Nations (Unasur), they also serve as forums in which Brazil can exercise its
leadership and develop consensus around its positions on regional and global issues. Brazil’s
emphasis on forging new ties has led to increased engagement with countries in Central America
and the Caribbean, areas where Brazil has not traditionally had much influence. Brazil engages in
multilateral regional diplomacy through the Organization of American States (OAS); however, it
has demonstrated a preference for resolving issues, when possible, through regional forums that
do not include the United States.
South American Integration
In 1991, Brazil joined with Argentina, Uruguay, and Paraguay to establish the Common Market of
the South (Mercosur), an organization intended to promote economic integration and political
cooperation among the countries.55 Although the member states have been able to achieve
consensus on a number of political issues, progress on the economic front has been slow. The
Mercosur pact calls for an incremental path to full economic integration, yet only a limited
customs union has been achieved in its 20-year existence. The member states finally agreed on
long-stalled issues such as a common customs code and the elimination of double tariffs on non-
Mercosur goods transported between countries in August 2010; 56 however, a number of other
issues like the dispute resolution process and trade asymmetries still need to be addressed.57
Chile, Bolivia, Colombia, Ecuador, Peru, and Venezuela have all become associate members58 of
Mercosur, and Brazil has advocated full membership for each country.59
The ongoing problems with Mercosur have not prevented Brazil from pushing for broader
regional integration. In 2008, all 12 independent countries of South America joined together to
form the Union of South American Nations (Unasur).60 Primarily a political body, Unasur has
served as a forum for dispute resolution and the formation of common policy positions. With
Brazil playing an influential role, the organization helped resolve political conflicts in Bolivia in


55 For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade
Policy
, by J. F. Hornbeck.
56 “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.
57 “Deathknell Sounds,” Latin American Regional Report: Brazil & Southern Cone, January 2009.
58 Associate members have no voting rights and need not observe Mercosur’s common external tariff. Venezuela will
be a full member once its accession is ratified by the Paraguayan legislature.
59 Juliana Rocha, “Colômbia Negocia Sua Adesão ao Mercosul,” Folha de São Paulo, January 20, 2011; “Lula
Defiende Adhesión de Bolivia, Chile, Colombia, Ecuador y Perú a Mercosur,” EFE News Service, December 20, 2010.
60 The treaty establishing Unasur entered into force on November 30, 2010, when Uruguay became the ninth country to
approve its ratification. “Uruguay Ratificó Tradatdo de la Unasur, que Completa Nueve Adhesiones,” Agence France
Presse
, November 30, 2010.
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2008 and Ecuador in September 2010, and took a strong stance against the ouster of the president
of Honduras in 2009.61 Brazilian diplomacy also successfully convinced each of the Unasur
member states to join the associated South American Defense Council, designed to boost regional
cooperation on security policies.62 Within the council, South American countries have discussed
defense spending and reviewed defense agreements with extra-regional powers, such as a
proposal to provide the United States access to seven Colombian military bases.63
Notwithstanding its many successes, Unasur’s capacities are limited. Member states are reluctant
to cede authority to the organization, it has largely been unable to mediate disputes when there is
no regional consensus, and it is heavily reliant on presidential diplomacy since it lacks strong
formal institutions.64
By promoting integration through organizations like Mercosur and Unasur, Brazil has been able
to solidify its role as a regional power. These organizations provide forums in which Brazil can
exercise leadership and build broad support for its positions on regional and global issues.
Likewise, the successes of Mercosur and Unasur have instilled a confidence in South American
nations that the region can resolve internal problems without having to turn to extra-regional
powers, such as the United States. Nonetheless, it is unclear if Brazil is willing to accept the costs
and responsibilities associated with regional leadership. Although the country has shouldered the
burden for multilateral integration efforts, such as providing 70% of the annual budget for
Mercosur’s Structural Convergence and Institutional Strengthening Fund,65 it has been less
willing to make unilateral concessions to foster development and good will among its neighbors.
For example, when Lula agreed to pay Paraguay a higher price for energy generated by a jointly
owned hydroelectric plant in July 2009, he was heavily criticized by some within Brazil and the
Brazilian Congress blocked the agreement until May 2011.66 Given that the country is still
resolving its own economic and social problems, it may be difficult to convince the Brazilian
population that the somewhat intangible benefits of regional leadership outweigh the very visible
costs.67
Expansion of Influence into Central America and the Caribbean
In addition to consolidating its power within South America, Brazil has sought to expand its
influence in the broader region by increasing its engagement in the Caribbean and Central
America. Brazil has taken on considerable responsibilities in Haiti, where it has commanded the
U.N. Stabilization Mission (MINUSTAH) since 2004. Some 10,000 Brazilian military personnel


61 “Unasur Assigns Itself Some Authority,” Latin News Daily, November 26, 2010.
62 “South American Defence Council,” Latin American Regional Report: Brazil & Southern Cone, April 2009.
63 “Brasil Propondrá Creación de un Consejo de Paz y Seguridad de la Unasur,” EFE News Service, January 13, 2010.
64 Andrés Serbin and Peter Hakim, “The Union of South American Nations (UNASUR),” Remarks at the Inter-
American Dialogue, Washington, DC, November 23, 2009; “Latin America: Regional Tensions Challenge UNASUR,”
Oxford Analytica, August 21, 2009.
65 “Brazil Invested 1.7bn Dollars in International Cooperation 2005-2009,” BBC Monitoring, January 14, 2011.
66 “Lula Criticised for ‘Partisan’ Foreign Policy,” Latin American Weekly Report, January 22, 2009; Pedro Servin,
“Paraguay-Brazil Energy Treaty Going Nowhere Fast,” Associated Press, December 16, 2009; Juliette Kerr, “Brazil –
Paraguay: Brazilian Congress Concludes Voting on Accord Altering Payment Terms for Itaipu Hydroelectric Plant,”
IHS Global Insight, May 12, 2011.
67 “Brazil Eager to be a Force of Change and Moderation,” Deutsche Welle, December 30, 2010.
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have rotated through the country since the start of MINUSTAH, and with 2,200 officers and
soldiers currently on the ground, Brazil is the largest peacekeeping contingent in Haiti.68 Brazil is
also increasingly providing Caribbean and Central American nations with humanitarian and
technical assistance. Between 2005 and 2009, Cuba, Haiti, and Honduras were three of the top
four recipients of Brazilian humanitarian assistance, receiving over $50 million (R$79 million)
combined.69 Technical assistance has taken many forms, such as so-called “ethanol diplomacy,”
in which Brazil has signed bio-fuels partnership agreements with countries that would otherwise
be dependent on expensive oil imports.70 Moreover, Brazil has become a regional observer of the
Central American Integration System (SICA), promoted a trade agreement between SICA and
Mercosur, and supported the creation of a regional group known as the Community of Latin
American and Caribbean States, which includes all of the countries of the hemisphere except
Canada and the United States. Although Brazil has certainly become much more visible as a
result of these efforts, most analysts assert that country’s influence in Central America and the
Caribbean remains limited.71
Emerging Global Role
As Brazil’s economy has grown to be the eighth largest in the world, the country has utilized its
growing economic clout to assert Brazilian influence on a range of global matters. On global
trade and financial issues, where Brazil’s economic weight ensures the country a principal role in
policy discussions, Brazil has sought to coordinate with, and represent, other developing nations.
This has coincided with a broader focus on “South-South” cooperation, in which Brazil has
expanded diplomatic and commercial ties with countries throughout the developing world. With
its increasing international prominence, Brazil has pushed for a democratization of global
governance institutions and a greater role for emerging powers in resolving issues of geopolitical
importance. Although few analysts deny that Brazil’s international stature has risen significantly
over the past decade, many believe that the country must overcome considerable challenges to be
considered a world power.72 These include undertaking reforms to maintain its current economic
trajectory, addressing long-standing domestic security challenges, and modernizing and
expanding its military capacity.


68 Brazil lost 18 soldiers and two civilians in the January 2010 Haitian earthquake. “Brasil Pide Compromiso Renovado
de Comunidad Internacional con Haití,” Agence France Presse, January 12, 2011; Wilson Tosta and Glauber
Goncalves, “Ex-Comandante Defende que Exército Continue no Haiti,” Estado de São Paulo, November 5, 2010.
69 Instituto de Pesquisa Econômica Aplicada (IPEA), Cooperação Brasileira Para o Desenvolvimento Internacional:
2005-2009
, Brasília, December 2010.
70 "Chávez, Lula Promote Competing Visions," Miami Herald, August 10, 2007.
71 See, for example, Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February
22, 2010; “Brazil is Challenging Mexico and U.S. Domination of Isthmus,” Latin America Data Base, NotiSur, June
11, 2009; and Andres Oppenheimer, “Brazil Stretching Clout to Central America,” Miami Herald, June 7, 2009.
72 See, for example, Julia Sweig, “A New Global Player,” Foreign Affairs, Nov/Dec. 2010; Hal Brands, Dilemmas of
Brazilian Grand Strategy
, U.S. Army War College, Strategic Studies Institute, Carlisle, PA, August 2010; Peter Hakim,
“Rising Brazil: The Choices of a New Global Power,” Política Externa, July 1, 2010; and “Geopolitical Diary: A Boost
for Brazil’s Military,” STRATFOR, December 24, 2008.
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South-South Ties
Brazilian foreign policy under the PT administrations of Presidents Lula and Rousseff has
prioritized relations with nontraditional partners in the developing world, or “South-South” ties.
During the Lula Administration, the country significantly expanded its diplomatic presence in the
developing world, opening 37 new embassies and 25 new consulates.73 Brazil also increased its
international development assistance, which totaled $362 million (0.02% of GDP) in 2009. The
majority of Brazil’s aid has gone to Latin America, the Caribbean, and Africa—with a special
emphasis on fellow Portuguese-speaking nations. It includes humanitarian assistance and
technical cooperation focused in sectors where Brazil has been particularly effective domestically,
such as poverty reduction, tropical agriculture and biofuels production, and the prevention and
treatment of HIV/AIDS and tropical diseases.74 These diplomatic and development ties have
coincided with increased commercial relations. While Brazil’s total world trade expanded by over
350% between 2002 and 2010, trade with Africa and Latin America and the Caribbean expanded
by nearly 400%; trade with India grew by over 600%; and trade with China grew by nearly
1,400%. China is now Brazil’s top trading partner, with total trade valued at $56.4 billion.75
Brazil’s focus on forging South-South ties under the PT has been criticized by a number of
analysts within and outside the country. Former Brazilian Ambassador to the United States
Roberto Abdenur claimed that the South-South approach of the Brazilian Foreign Ministry
indoctrinates Brazilian diplomats with “anti-imperialist” and “anti-American” attitudes. He also
criticized Lula for embracing autocratic leaders and failing to speak up for democracy and human
rights.76 Another former Ambassador to Washington, Rubens Barbosa, has argued that while the
PT’s foreign policy has increased Brazil’s international influence, it has not been very cost-
effective in delivering concrete results. He also maintains that Brazil should devote the same
amount of attention to relations with developed nations as it has devoted to South-South ties.77
Officials from the current and previous Brazilian administrations assert that increased South-
South ties have not come at the expense of relations with the developed world. Moreover, they
assert that while Brazil supports the spread of democracy and human rights, it believes singling
out countries with confrontational declarations and policies is counterproductive.78
Democratization of Global Governance
Building off its traditional support for multilateralism and its more recent focus on South-South
ties, Brazil has sought to reinvigorate multilateral institutions by making them more
representative of the current geopolitical situation. Brazilian officials assert that the world is
becoming multipolar, and global governance institutions—including the International Monetary


73 Larry Luxner, “Basking in Global Clout, Brazil Ponders Life After Lula,” Washington Diplomat, September 2010.
74 Instituto de Pesquisa Econômica Aplicada (IPEA), Cooperação Brasileira Para O Desenvolvimento Internacional:
2005-2009
, Brasília, D.F., December 2010.
75 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, February 2011.
76 Diego Schelp, “Diplomacia de Palanque,” Veja, September 8, 2010; Otávio Cabral, “Nem na Ditadura,” Veja,
February 7, 2007.
77 Rubens Barbosa, “Sobre uma Nova Política,” O Globo (Brazil), October 26, 2010.
78 “Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
Susan Glasser, “The Soft-Power Power,” Foreign Policy, December 2010.
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Fund (IMF), the Group of Eight (G8), and the U.N. Security Council—lack legitimacy and
efficacy since they are no longer representative of the global balance of power.79 In order to
address these issues, Brazil has joined with other emerging and developing nations to push for
reform. These coalitions include more formal organizations, like the Brazil-Russia-India-China-
South Africa (BRICS) group and the India-Brazil-South Africa (IBSA) forum, as well as ad hoc
arrangements.
Brazil’s efforts have produced mixed results. On the one hand, the country has been successful in
securing agreements to redistribute voting power within the IMF and replace the G8 with the
more representative G20 as the premier forum for international economic coordination. Likewise,
emerging nation coalitions have succeeded in blocking U.S. and European Union attempts to
conclude international agreements, such as the Doha trade negotiations and the Copenhagen
climate negotiations, without addressing developing nation demands.80 Efforts to enlarge and
reform the U.N. Security Council, however, have been unsuccessful.81 Some observers have
expressed concerns that, by pushing for greater decision-making authority without being prepared
for the corresponding responsibilities of leadership, the actions of Brazil and other emerging
powers could create instability within the world system.82
In addition to seeking greater influence within global governance institutions, Brazil has pushed
for a greater role in resolving issues of geopolitical importance. During the Lula Administration,
Brazil was somewhat critical of the U.S. role in the Middle East, arguing that the U.N. should
oversee negotiations between Israel and the Palestinians and emerging powers should be more
involved.83 Brazil hosted the presidents of Israel and the Palestinian National Authority, and
suggested that it might be able to act as a mediator in the conflict. Brazil also recognized
Palestine as an independent state within its 1967 borders, setting off a wave of similar
recognitions throughout South America.84 The country has continued to play an active role under
President Rousseff, who has designated Lula as Brazil’s special envoy to negotiate the official
recognition of Palestine at the U.N. among the Group of 77 developing and emerging countries.85
Additionally, Brazil became involved in discussions regarding Iran’s nuclear program. 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 confidence-


79 Meeting with official from Brazil's Ministry of External Relations, Financial Affairs Office, December 8, 2010;
Celso Amorim, “Governance Must Reflect Global Reality,” Financial Times, November 15, 2010.
80 Celso Amorim, “The New Geopolitics: Emerging Powers and the Challenges of a Multipolar World,” Remarks at the
Carnegie Endowment for International Peace, Washington, DC, November 30, 2010; “Voting Power Shift Just Start of
IMF Reform, Says Chinese Official,” BBC Monitoring, November 5, 2010.
81 William Maclean, “Brazil Says US Spat Signals Tough Security Reform,” Reuters, September 11, 2010.
82 Jorge G. Castañeda, “Not Ready for Prime Time,” Foreign Affairs, vol. 89, no. 5 (September/October 2010); Andrew
F. Hart and Bruce D. Jones, “How Do Rising Powers Rise?,” Survival, vol. 52, no. 6 (November 29, 2010).
83 Iuri Dantas and Fabiola Moura, “Lula Says U.S. Shouldn’t Broker Middle East Talks,” Bloomberg, November 20,
2009.
84 “Brazilian Minister on Middle East Role,” BBC Monitoring, January 4, 2010; Sean Goforth, “Brazil’s Middle East
Roadmap,” World Politics Review, January 20, 2011.
85 “Brazil Negotiates Palestine UN Recognition Endorsement within the Group of 77,” Palestine News Network, July
26, 2011.
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building measure to bring Iran back to the negotiating table; however, the Obama Administration
and European nations dismissed 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.”86 Nonetheless, Brazil has agreed to abide by the sanctions.87
Relations with the United States
Relations between Brazil and the United States are generally friendly. The United States
increasingly regards Brazil as a significant power, especially in its role as a stabilizing force in
Latin America. The Obama Administration’s National Security Strategy states that the United
States “welcome[s] Brazil’s leadership and seek[s] to move beyond dated North-South divisions
to pursue progress on bilateral, hemispheric, and global issues.”88 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.
Although Brazil and the United States share a number of common goals, the countries’
independent foreign policies have led to periodic disputes on trade and political matters. Some
long-running disputes include Brazil’s opposition to the U.S. tariff on Brazilian ethanol and the
stalled Doha Round of World Trade Organization negotiations. Additional differences have
emerged in recent years, perhaps the most high profile of which centered on policy toward Iran.
After Brazil and Turkey negotiated a nuclear swap agreement with Iran in May 2010, the United
States rejected it as insufficient and pushed ahead with a new round of sanctions.89 Leaders in
both countries have sought to improve relations since President Rousseff’s inauguration, with
Rousseff indicating that building stronger relations with the United States will be one of the
priorities of her administration, and President Obama visiting Brazil on his first trip to South
America in March 2011.90Some analysts assert that Brazil’s increasing global prominence and
involvement on an array of issues will inevitably lead to disputes with the United States and that
managing those disputes in a transparent and respectful manner will be key to maintaining
friendly relations moving forward.91


86 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.
87 “Brazil Will Back Iran Sanctions,” Al Jazeera English, August 11, 2010.
88 White House, National Security Strategy, May 2010, p. 44.
89 “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.
90 Lally Weymouth, “An Interview with Dilma Rousseff, Brazil’s President-Elect,” Washington Post, December 3,
2010; Natuza Nery, “Por Nova Relação, Obama Deve Visitar Brasil em Março,” Folha de São Paulo, January 25,
2011.
91 See, for example, Tom Shannon, “Prospects for U.S.-Brazil Bilateral Relations,” Remarks at Brazil-U.S. Business
Council Annual Plenary Meeting, December 7, 2010; and Peter Hakim, “US-Brazil Relations: Expect More Conflict,”
Infolatam, October 21, 2010.
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As a middle-income country, Brazil does not receive large amounts of U.S. foreign assistance.
Brazil received $21.5 million in U.S. aid in FY2009 and $25.1 million in FY2010. The Obama
Administration requested $20.9 million for Brazil in FY201192 and $18.3 million in FY2012. U.S.
assistance priorities in Brazil include supporting environmental programs and strengthening 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.93 In June 2011,
legislation (H.R. 2246, T. Ryan) was introduced that would suspend foreign assistance to Brazil
until the country amends its constitution to allow for the extradition of its citizens.
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 in U.S.-Brazil relations include counternarcotics and
counterterrorism efforts, energy security, trade, human rights, and the environment.
Counternarcotics
Although Brazil is not a major drug-producing country, it is the largest drug-consuming country
in South America and serves as a transit country for illicit drugs from neighboring Andean
countries destined primarily for Europe. Large and organized networks of violent criminal gangs
such as the First Capital Command (Primeiro Comando da Capital, PCC) and the Red Command
(Comando Vermelho, CV) control drug distribution in Brazilian cities and have a growing
presence in neighboring countries, such as the marijuana-producing regions along the
Paraguayan-Brazilian border. The gangs, which use drug proceeds to purchase weapons and
tighten their control over urban areas, have also taken on greater roles in weapons smuggling.94
Brazil has taken several steps to improve its counternarcotics capabilities. 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 increased its border presence, worked with its neighbors to
construct Joint Intelligence Centers at strategic points, 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 2010, Brazil’s federal police captured 22.2 metric tons of cocaine and crack, 138.3 metric tons
of marijuana, and 33,542 stamps of LSD (lysergic acid diethylamide).95


92 Although the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10) was signed
into law on April 15, 2011, country-specific funding levels are not yet available.
93 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2011, February 1,
2010; and Congressional Budget Justification for Foreign Operations, Fiscal Year 2012, April 8, 2011.
94 U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, 2011 International
Narcotics Control Strategy Report
, March 3, 2011; “Renewed Awareness of Brazilian Gang Threat,” Latin News Daily,
May 18, 2011.
95 U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, 2011 International
(continued...)

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The United States and Brazil cooperate on counternarcotics issues in a number of ways. U.S.
counternarcotics assistance provides training for Brazilian law enforcement, assists interdiction
programs at Brazil’s international airports, supports drug prevention programs, and is designed to
improve Brazil’s capacity to dismantle criminal organizations. Brazil received $1 million in U.S.
counternarcotics assistance in FY2009 and $1 million again in FY2010. Under the Obama
Administration’s requests, Brazil would receive $1 million in FY201196 and $3.9 million in
FY2012.97 Brazil has also served as a bridge between the United States and Bolivia, which
expelled the Drug Enforcement Agency (DEA) from its territory in 2008 as a result of alleged
interference in the country’s internal affairs. Under a proposed trilateral anti-drug cooperation
agreement, the United States and Brazil reportedly will provide training and purchase satellite
equipment to aid coca eradication efforts in Bolivia. The agreement also calls for the
establishment of a U.N. and Unasur-supported South American center for anti-narcotics training
in Bolivia.98
Counterterrorism and the Tri-Border Area99
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.100 Although it has been reported that al Qaeda’s
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.101 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. In 2010, Brazil

(...continued)

Narcotics Control Strategy Report, March 3, 2011.
96 Although the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10) was signed
into law on April 15, 2011, country-specific funding levels are not yet available.
97 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2011, February 1,
2010; and Congressional Budget Justification for Foreign Operations, Fiscal Year 2012, April 8, 2011.
98 “US to Fund Bolivia-Brazil Initiative,” Latin News Daily, April 21, 2011.
99 For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan.
100 Alain Rodier, “Notes D’Actualité N˚168: Les Trafics de Drogue du Hezbollah en Amérique Latine,” Centre
Français de Recherche sur le Rensignement
, April 14, 2009.
101 “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.
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and the United States signed a Defense Cooperation Agreement and gave initial approval to an
Open Skies agreement that would safeguard aviation security.102 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-
stalled anti-money laundering and counterterrorism bills.103 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.104 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.105
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 75% of its electricity through hydropower.106
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.107
Ethanol and Other Biofuels108
Brazil stands out as an example of a country that has become a net exporter of energy, partially by
increasing its use and production of ethanol. In response to sharp increases in oil prices, the
Brazilian government began a national program to promote the production and consumption of
sugarcane ethanol in 1975. Today, Brazil produces almost 27.8 billion liters (7.3 billion gallons)
of ethanol annually. About 17% of the ethanol produced in Brazil is exported, and the remainder


102 U.S. Department of State, Office of the Spokesman, “U.S.-Brazil Defense Cooperation Agreement,” April 12, 2010;
and “United States and Brazil Agree on Open Skies,” December 6, 2010.
103 U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism, August 5,
2010.
104 “Anti-Terrorism Law Project Scrapped,” Latin American Security & Strategic Review, January 2008.
105 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.
106 “Brazil: Electricity Faces Distribution Difficulties,” Oxford Analytica, March 24, 2011.
107 “Brazil’s Now a Hot Commodity,” Los Angeles Times, January 3, 2008.
108 For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues, by
Randy Schnepf and CRS Report RL34191, Ethanol and Other Biofuels: Potential for U.S.-Brazil Energy Cooperation,
by Clare Ribando Seelke and Brent D. Yacobucci.
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is consumed domestically.109 Within Brazil, pure ethanol is available at nearly every fueling
station and gasoline is required to include a 25% ethanol blend. About 90% of new cars sold in
Brazil each year are fitted with “flex-fuel” engines capable of running on fuel blends ranging
from pure ethanol to pure gasoline. As a result, ethanol now accounts for over half of all fuel
pumped in Brazil.110
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.111
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 short-
term technical assistance opportunities in the Dominican Republic, El Salvador, and Haiti. In
November 2008, the United States and Brazil announced an agreement to expand their biofuels
cooperation and form new partnerships with Guatemala, Honduras, Jamaica, Guinea-Bissau, and
Senegal.112 To build on these efforts, President Obama and President Rousseff agreed to commit
$3 million to support the development of legal regimes and domestic biofuels production in the
Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, and Senegal during
President Obama’s March 2011 trip to Brazil.113 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.
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.114 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% ad valorem tariff.


109 Brazilian Sugarcane Industry Association (UNICA), “Quotes & Stats,” available at
http://english.unica.com.br/dadosCotacao/estatistica/.
110 Katia Cortes, “Brazil to Raise Ethanol Mixed with Gasoline to 25%,” Bloomberg, April 29, 2010; Chris Kraul,
“Brazil Raises Cane Over U.S. Ethanol Barriers; Proponents Say Sugar-Based Fuel is a Better Choice than Corn,” Los
Angeles Times
, November 4, 2009; “Brazil: Long-term Ethanol Outlook Remains Bright,” Oxford Analytica, October
6, 2009.
111 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.
112 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.
113 White House, Office of the Press Secretary, “Fact Sheet: U.S.-Brazil Strategic Energy Dialogue,” March 19, 2011.
114 For more information, see CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI), by
Brent D. Yacobucci.
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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 International
Atomic Energy Association (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.115 Brazil remains opposed to signing the NPT Additional Protocol, which would grant
IAEA inspectors increased access to its nuclear program.116
Although Brazil currently has just two operational nuclear power plants, the industry is expected
to expand. Construction of a third nuclear plant was approved under the Lula Administration, and
the current minister of mines and energy and has announced plans to approve four additional
plants within the next year. The minister has asserted that the expansion of nuclear power is the
only way that Brazil can meet the fast-growing energy demand of its population while avoiding
massive carbon emissions.117 Brazil has 139,900-278,700 metric tons of indentified uranium
resources.118
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 5 billion and 8 billion barrels, and it is estimated that the
entire Santos Basin may hold 50 billion barrels of oil. In December 2010, the Brazilian Congress
approved a new regulatory framework for developing the offshore reserves that will increase the
state’s role in hopes of using the resources to fuel long-term economic and social development.
Among other provisions, the framework establishes state-owned Petróleo Brasileiro S.A.
(Petrobras) as the sole operator for all new offshore projects; replaces the existing concessionary


115 “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.
116 Bernard Gwertzman, “Brazil’s Take on Iran and the NPT,” Council on Foreign Relations, May 19, 2010.
117 “Brazil Eletrobras Expects $2 Bln Loan for Nuclear,” Reuters, January 18, 2011; “Brazil’s Nuclear Ambitions
Expand,” Latin American Regional Report: Brazil & Southern Cone, November 2008.
118 Uranium 2009: Resources, Production and Demand, Organization for Economic Cooperation and Development
Nuclear Energy Agency & the International Atomic Energy Agency, 2010.
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model with a production sharing regime; guarantees Petrobras a minimum 30% stake in all new
joint ventures; creates a new public company—Petrosal—to manage the development of the
offshore reserves; and creates a new social fund overseen by Congress to direct offshore revenues
toward four key areas: education, infrastructure, science and technology, and poverty reduction.119
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. In July
2010, Petrobras announced a five-year, $225 billion investment plan, 57% of which is to be spent
on energy exploration.120 Some foreign investors have questioned whether the company will be
able to access sufficient finance given the enlarged role of the Brazilian government under the
new regulatory framework and increased concerns about offshore oil drilling as a result of the
2010 BP oil spill in the Gulf of Mexico.121 Other analysts maintain that the Brazilian reserves are
becoming ever-more attractive as a result of the rising price of oil and Brazil’s political stability at
a time of conflict in other oil producing nations.122
In April 2009, the Export-Import Bank of the United States formally offered to consider up to $2
billion in financing to secure the purchase of U.S. goods and services by Petrobras. According to
the Bank, $2 billion in purchases would help create and maintain over 16,000 U.S. jobs. The
Bank has approved $300 million in financing so far, and has told Petrobras that it would consider
increasing its offer above $2 billion if requested.123
Trade Issues
Trade issues are central to the bilateral relationship between Brazil and the United States. Both
countries have been heavily involved in subregional, regional, and global trade talks; however,
they have frequently disagreed on the substance of trade agreements. In 2005, opposition from
Brazil and other South American countries effectively killed the U.S.-backed Free Trade Area of
the Americas (FTAA). Since then, the United States has pushed for bilateral and subregional free
trade agreements while Brazil has focused its efforts on strengthening the Common Market of the
South (Mercosur). During President Obama’s March 2011 visit to Brazil, the United States and
Brazil concluded an Agreement on Trade and Economic Cooperation. The Agreement creates a
new bilateral trade dialogue designed to foster deeper cooperation on issues such as intellectual
property rights, trade facilitation, and technical barriers to trade.124


119 “Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long-
Term Perspective,” Oxford Analytica, May 2010.
120 “Brazil Needs $270 Bln Over 10-Yrs for Deepwater Oil,” Reuters, March 19, 2009.
121 “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.
122 Danielle Nogueira and Ramona Ordonez, “Conflitos no Oriente Médio Tornam Pré-Sal Mais Atraente,” O Globo
Online
(Brazil), March 2, 2011.
123 Export-Import Bank of the United States, “Facts About Ex-Im Bank Loans to Support Petrobras’s Purchases of
Goods and Services Made by American Workers,” May 27, 2011, http://www.exim.gov/brazil/petrobasfacts.cfm.
124 White House, Office of the Press Secretary, “Strengthening the U.S.-Brazil Economic Relationship,” March 19,
2011.
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Total trade between the United States and Brazil totaled $46.3 billion in 2010, an increase of
nearly 30% over 2009. U.S. exports to Brazil were valued at $27 billion while U.S. imports from
Brazil were valued at $19.3 billion. The United States is now Brazil’s second-largest trading
partner and Brazil is the 11th-largest trading partner of the United States.125 Brazil has traditionally
benefited from the Generalized System of Preferences (GSP), which provides duty-free tariff
treatment to certain products imported from developing countries; however, GSP expired on
December 31, 2010.126
Doha Round of the World Trade Organization Talks 127
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 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.128
World Trade Organization Cotton Dispute129
Over the past eight years, Brazil and the United States have been involved in a dispute over U.S.
subsidies 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.130 Following a ruling from
a WTO arbitration panel, Brazil announced in March 2010 that it intended to impose retaliatory
measures against the United States worth $829 million, including $591 million in higher tariffs on
a range of U.S. products and $239 million through suspension of certain intellectual property
rights obligations.


125 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, February 2011.
126 For more information on GSP, see CRS Report RL33663, Generalized System of Preferences: Background and
Renewal Debate
, by Vivian C. Jones
127 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda
, by Ian F. Fergusson.
128 “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.
129 For more information on the U.S.-Brazil WTO cotton dispute, see CRS Report RL32571, Brazil’s WTO Case
Against the U.S. Cotton Program
by Randy Schnepf.
130 “WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007.
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In order to avoid retaliatory measures, the United States reached an agreement with Brazil in June
2010. Under the agreement, the United States pledged to make some short-term changes to its
export credit guarantees and provide the Brazil Cotton Institute with $147 million annually for a
fund to assist Brazilian cotton farmers with technical assistance, marketing, and market research.
In exchange, Brazil agreed to temporarily suspend its retaliation with the intention of reaching a
permanent agreement with the United States after Congress has an opportunity to adjust the
subsidy program in the 2012 farm bill.131
In June 2011, the House passed the Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Act, 2012 (H.R. 2112). The Act includes a
provision (H.Amdt. 454) that would prevent any funds made available under the Act from being
used to provide payments to the Brazil Cotton Institute. If this provision were to become law, the
United States would be brought into noncompliance with the terms of the agreement signed by
both parties in June 2010.
Intellectual Property Rights
Brazil and the United States have periodically engaged in disputes over intellectual property
rights. One issue of particular concern to the U.S. government has been Brazil’s threats to issue
compulsory licenses for patented pharmaceutical products. Internationally recognized as having
one of the world’s most successful HIV/AIDS programs,132 Brazil has guaranteed its citizens
universal free access to antiretroviral therapy (ART) since 1996. In 2001, Brazil decided to
develop generic ART drugs under the compulsory licensing provision of its patent law, thereby
reducing treatment costs by 80%. In response, the United States submitted a complaint to the
WTO—which was later withdrawn—asserting that Brazil’s practices violated the Trade-Related
Aspects of Intellectual Property Rights (TRIPS) agreement. While the pharmaceutical industry
argued that TRIPS was an essential tool to protect intellectual property rights, developing
countries (like Brazil) countered that TRIPS inhibited their ability to fight public health
emergencies in a cost-effective manner. In 2003, the WTO 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). The waiver was made permanent in 2005.133
Since the public health exception to the TRIPS rules was made permanent, Brazil has issued, or
threatened to issue, compulsory licenses on patented pharmaceutical products on several
occasions. In 2007, Brazil broke a patent on a drug used to treat HIV/AIDS that is produced by
Merck & Co. in order to import a cheaper version from India. In 2009, Brazil suggested that
developing countries should be allowed to lift patent rights to produce more vaccine to battle the


131 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.
132 Universal free access to ART has increased average HIV/AIDS survival times from 18 months for those diagnosed
in 1995, to 58 months for those diagnosed in 1996. HIV prevalence has been stable at 0.5% for the general population
in Brazil since 2000. Daniel R. Hogan and Joshua A. Salomon, “Prevention and Treatment of HIV/AIDS in Resource-
Limited Settings,” World Health Organization, February 2005.
133 Mary Anastasia O’Grady, “Brazil Could Turn a Trade Victory into Defeat,” Wall Street Journal, December 16,
2005.
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A(H1N1) flu epidemic.134 According to Brazil’s Ministry of Health, tough negotiations with
pharmaceutical companies have saved the country over $1.1 billion.135
According to the U.S. Trade Representative, Brazil has improved its record on protecting
intellectual property rights in recent years. In recognition of this progress, the United States Trade
Representative lowered Brazil from the Priority Watch List of countries with significant
intellectual property rights violations to the Watch List in 2007. Brazil has remained on the Watch
List every year since 2007, however, as significant levels of piracy and counterfeiting persist and
stronger enforcement is still needed. The United States and Brazil intend to continue working
together on intellectual property rights issues under the Agreement on Trade and Economic
Cooperation signed in March 2011.136
Human Rights
According to the U.S. State Department’s Country Report on Human Rights the following
human rights problems were reported in Brazil in 2010: “unlawful killings; excessive force,
beatings, abuse, and torture of detainees and inmates by police and prison security forces;
inability to protect witnesses involved in criminal cases; harsh prison conditions; prolonged
pretrial detention and inordinate delays of trials; reluctance to prosecute as well as inefficiency in
prosecuting government officials for corruption; violence and discrimination against women;
violence against children, including sexual abuse; trafficking in persons; discrimination against
indigenous persons and minorities; failure to enforce labor laws; forced labor; and child labor in
the informal sector.” The report asserts that human rights violators often enjoyed impunity. 137
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.
The weaknesses in Brazil’s criminal justice system have become 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 prison-
based gang network, the First Capital Command (Primeiro Comando da Capital, PCC), paralyzed
the city of São Paulo for several days.138 Officially, the violent gang attacks, which were followed


134 “Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009.
135 “Haggling Saves Brazil $1 Billion on AIDS Drugs,” Reuters, November 13, 2007.
136 U.S. Trade Representative, Special 301 Report, April, 2011.
137 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, 2010 Country Reports on Human
Rights Practices
, April 8, 2011.
138 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
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by police reprisals, resulted in at least 186 deaths.139 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.140
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.”141 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.142 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.143
Although many analysts assert 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, there have been a number of efforts in recent years to improve the situation. During the
Lula Administration, federal government expenditures on public security more than tripled.144
State level efforts have also increased. One particularly noteworthy example is the State of Rio de
Janeiro’s “Favela Pacification Program” that was established in late 2008. Under the initiative,
elite police units enter favelas and clear them of drug gangs, allowing newly recruited Police

(...continued)

Hanson, “Brazil’s Powerful Prison Gang,” Council on Foreign Relations, September 26, 2006.
139 “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.
140 “Brazil: Rio Police Intervention in Gang War Leaves High Toll,” Latin American Security & Strategic Review,
October 2009.
141 “Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News
Service
, November 15, 2007.
142 Human Rights Watch, Lethal Force: Police Violence and Public Security in Rio de Janeiro and São Paulo,
December 2009.
143 “Human Rights: Police Violence Under Renewed Scrutiny,” Latin American Regional Report: Brazil & Southern
Cone
, January 2010.
144 “Recent Public Security Policies in Brazil,” Document provided in a meeting with officials from Brazil's Ministry of
External Relations, December 9, 2010.
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Pacification Units (Unidades de Polícia Pacificadora, UPPs) to set up a permanent security
presence and other governmental institutions to establish basic social services.145
This is a significant change from previous law enforcement efforts, which generally centered
around quick raids followed by long periods of government neglect. UPPs are now present in 17
favelas and the Rio de Janeiro government intends to extend their presence to 100 favelas by
2014 when Brazil hosts the World Cup. The initiative has moved ahead so quickly that the
Brazilian military has had to temporarily take on some law enforcement duties while additional
civilian personnel are trained. Although some have expressed concerns about the military taking
on civilian responsibilities, most observers have reacted positively to the increased security
cooperation between state and federal governments.146 Moreover, the new initiative appears to
have been successful thus far; in 2010, Rio de Janeiro saw a 22% decline in burglaries, a 19%
decline in vehicle theft, an 18% decline in homicides, an 18% decline in deaths resulting from
confrontations with police, and an 11% decline in street robbery.147 President Rousseff intends to
incorporate the UPPs into her national public security policy.148
Race and Discrimination149
People of African descent in Brazil, also known as Afro-Brazilians, have long been
disproportionately affected by the country’s high level of inequality. However, little concrete
information was available until the Brazilian government began to collect better official statistics
on Afro-Brazilians during the Cardoso Administration (1995-2002). These statistics—which
found significant education, health, and wage disparities between Afro-Brazilians and Brazil’s
general population—prompted the Brazilian government to enact antidiscrimination and
affirmative action legislation.
Brazil now has the most extensive antidiscrimination legislation geared towards Afro-descendants
of any country in Latin America. In 2001, Brazil became the first Latin American country to
endorse quotas to increase minority representation in government service. In 2003, Brazil became
the first country in the world to establish a Special Secretariat with a ministerial rank to manage
racial equity promotion policies. In 2010, Brazil enacted the Statute of Racial Equality, which
offers tax incentives for enterprises that undertake racial inclusion, stipulates that the government
shall adopt affirmative action programs to reduce ethnic inequalities, and reaffirms that African
and Brazilian black history should be taught in all elementary and middle schools, among other
provisions. Afro-Brazilian activists, while acknowledging government efforts on behalf of Afro-


145 Adam Isacson, “Rio de Janeiro’s Pacification Program,” Washington Office on Latin America, January 5, 2011;
Stuart Grudgings, "Rio Slums Open for Business as Gangs Ousted,” Reuters, December 22, 2010.
146 Ibid; “Brazil: Forty Rio Favelas Targeted for ‘Pacification,’” Latin American Security & Strategic Review, January
2010; Fabiana Frayssinet, “Police Occupation Hurts Improved Relations with Favelas,” Inter Press Service, December
1, 2010; Fabiana Frayssinet and Mario Osava, “Brasil: La Policía se Gana Corazones en Río de Janeiro,” Inter Press
Service
, November 29, 2010; Julia MIchaels, “Rio Real: Brazil Struggles with Next Phase of UPP Program,” InSight:
Organized Crime in the Americas
, June 2, 2011.
147 “Officials: Rio has Lowest Murder Rate in 20 Years,” Associated Press, February 2, 2011.
148 “Brazil: Rio on Alert After New Wave of Violence,” Latin American Weekly Report, November 25, 2010.
149 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.
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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.150 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.151
Of the 71% of public universities that have adopted some type of affirmative action program,
87% have programs that benefit students of all races coming from the public school system (a
proxy for low income).
In March 2008, Brazil and the United States signed an agreement known as the United States-
Brazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality.
The initiative seeks to promote equality of opportunity for the members of all racial and ethnic
communities of the United States and Brazil. Current areas of focus include health, environmental
justice, labor and employment, culture and communication, equal access to quality education, and
equal protection of the law and access to the legal system.152 Since the launch of the Joint Action
Plan, over $5.5 million in U.S. interagency funding has supported projects, conferences,
exchanges, grants, technical assistance, and other activities.153
Trafficking in Persons for Forced Labor154
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.155 Brazil is a source, transit, and
destination country for people, especially women and children, trafficked for commercial sexual
exploitation. Brazilian Federal Police estimate that upwards of 250,000 children are exploited in
domestic prostitution. Brazil is also a source country for men and children trafficked internally
for forced labor. More than 25,000 Brazilian men have reportedly been recruited to labor in slave-


150 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.
151 Livio Sansone, “Anti-Racism in Brazil,” North American Congress on Latin America (NACLA), September 1, 2004.
152 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” December 5, 2010.
153 CRS communication with the U.S. Department of State, Bureau of Western Hemisphere Affairs, Race, Ethnicity,
and Social Inclusion Unit, February 23, 2011.
154 For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando Seelke.
155 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.
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like conditions, typically on cattle ranches, logging and mining camps, sugar-cane plantations,
and large farms producing corn, cotton, soy, and charcoal.
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 2,617 victims, and forcing those
responsible to pay fines and restitution. The Brazilian government also continued prosecuting
traffickers, providing assistance to victims, and publically identifying individuals and corporate
entities determined to have been responsible for crimes under the slave labor law. Despite these
actions, Brazil has made only limited progress in bringing traffickers to justice.156
Amazon Conservation
The Amazon basin spans the borders of eight countries and is the most biodiverse tract of tropical
rainforest in the world. It holds 20% of the Earth’s fresh water and 10% of all known species. The
Amazon also holds 10% of the world’s carbon stores and absorbs nearly 2 billion tons of carbon
dioxide each year, making it a sink for global carbon emissions and an important asset in the
prevention of climate change. Approximately 60% of the Amazon falls within Brazilian borders,
making Brazil home to 40% of the world’s remaining tropical forests.157
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.158 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.159 Between 1990 and 2000, Brazil lost approximately 70,000 square miles
of forest; however, deforestation rates have generally declined since the peak year of 2004.160


156 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2011
, June 27, 2011.
157 “Brazil: Global Warming Risks Threaten Amazonia,” Oxford Analytica, March 16, 2009; Conor Foley, “The End of
the Amazon?,” Foreign Policy, June 2009; Lesley K. McAllister, “Sustainable Consumption Governance in the
Amazon,” Environmental Law Reporter, December 2008; “Amazon: World’s Largest Tropical Rainforest and River
Basin,” World Wildlife Fund, 2009.
158 Lesley K. McAllister, “Sustainable Consumption Governance in the Amazon,” Environmental Law Reporter,
December 2008.
159 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.
160 “Government Sets Targets to Cut Deforestation,” Latin American Regional Report: Brazil & Southern Cone,
December 2008.
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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 Brazilian government has expanded
protected areas and implemented new environmental policies.161 The Lula Administration created
over 60 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.162 Lula also signed a Public Forest Management Law to encourage sustainable
development and placed a moratorium on soybean plantings and cattle ranching in the Amazon.
The Brazilian government 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 on logging.163 Although
deforestation slowed to its lowest annual level since Brazil’s National Institute for Space Studies
began monitoring it in 1988 between August 2009 and July 2010, it spiked by 27% between
August 2010 and April 2011. Some analysts attribute the deforestation surge to rising demand for
agricultural commodities.164
Although some conservation groups praised the Brazilian government’s actions, a number of
environmentalists have questioned the country’s commitment to sustainable development.165
Critics assert that the Brazilian government favors agricultural interests over conservation. In
June 2009, Lula approved a law that granted nearly 260,000 square miles of the Amazon to illegal
squatters, 72% of which was directed to large land holders.166 Likewise, in May 2011, Brazil’s
Chamber of Deputies passed a revision to the forest code that would provide partial amnesties for
past deforestation, reduce the amount of forest that farmers must preserve, and relax conservation
requirements for environmentally sensitive areas like hilltops and river banks.167 While supporters
of these measures argue that they are necessary to bring farmers into compliance with the law and
make the laws more enforceable, opponents assert that farmers will engage in additional
deforestation in anticipation of future amnesties.168


161 “Brazil: The Land Cries for Amazonia,” Latin America Data Base, NotiSur, February 13, 2009.
162 “Brazil: Government Policy for Amazon Still Ambiguous,” Latin News Weekly Report, May 22, 2008.
163 “Government Sets Targets to Cut Deforestation,” Latin American Regional Report: Brazil & Southern Cone,
December 2008; “Brazil: Climate Credentials to the Fore in Copenhagen,” Oxford Analytica, November 19, 2009.
164 “Brazil: Deforestation Reaches 22-year Low,” Oxford Analytica, December 2, 2010; “Demand Drives Deforestation
Surge in Brazilian Amazon,” Oxford Analytica, May 19, 2011.
165 See, for example, Joshua Partlow, “Brazil’s Decision to Reduce Deforestation Praised,” Pittsburgh Post-Gazette,
December 7, 2008; and Ana Paula Paiva, “Brazil Environment Minister Says Lacks Support,” Reuters, May 28, 2009.
166 Jose Pedro Martins, “Brazil: Environmentalists and Church Protest Legalization of Fraudulently Obtained Lands in
the Amazon,” Latin America Data Base, NotiSur, June 25, 2009.
167 Raymond Colitt, “Farmers Gain, Forests at Risk from Brazil Land Bill,” Reuters, May 24, 2011.
168 Reese Ewing, “Interview-Brazil Land Use Bill to Make Forests Profitable,” Reuters, June 1, 2011; “Brasil: Ex
Ministros de Medio Ambiente Claman Contra Reforma de Ley Forestal,” Agence France Presse, May 23, 2011.
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International Initiatives
In August 2008, Brazil launched the “Amazon Fund” 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.169
U.S. environment programs in Brazil 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 biodiversity. USAID provided $9.5 million for environmental programs in
Brazil in FY2008, $10 million in FY2009, and $14 million in FY2010. The Obama
Administration requested $7 million for environmental programs in Brazil in FY2011170 and $5
million for FY2012.171 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 those funds to activities to conserve protected areas, improve natural
resource management, and develop sustainable livelihoods in the Atlantic Rainforest, Caatinga,
and Cerrado ecosystems.172

Author Contact Information

Peter J. Meyer

Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474




169 “Brazil Unveils First Foreign-Funded Amazon Projects,” Reuters, December 4, 2009.
170 Although the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10) was signed
into law on April 15, 2011, country-specific funding levels are not yet available.
171 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2011, February 1,
2010; and Congressional Budget Justification for Foreign Operations, Fiscal Year 2012, April 8, 2011.
172 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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