Brazil-U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
October 11, 2012
Congressional Research Service
7-5700
www.crs.gov
RL33456
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Brazil-U.S. Relations
Summary
As its economy has grown to be the sixth largest in the world, Brazil has consolidated its power
in South America and become increasingly prominent on the world stage. The Obama
Administration regards Brazil as an emerging center of influence, whose leadership it welcomes
“to pursue progress on bilateral, hemispheric, and global issues.” In recent years, U.S.-Brazil
relations have generally been positive despite Brazil’s prioritization of strengthening relations
with neighboring countries and expanding ties with nontraditional partners in the “developing
South.” Although some disagreements have emerged, Brazil and the United States continue to
engage on issues such as security, energy, trade, human rights, and the environment.
Political Situation
Dilma Rousseff of the ruling center-left Workers’ Party was inaugurated to a four-year
presidential term on January 1, 2011. She inherited a country that had benefited from 16 years of
stable and capable governance under Presidents Fernando Henrique Cardoso (1995-2002) and
Luis Inácio Lula da Silva (2003-2010). Rousseff’s multiparty coalition holds significant
majorities in both houses of Brazil’s legislature; however, keeping the unwieldy coalition together
to advance her policy agenda has proven challenging. Although she has won approval for a
federal worker pension reform, regulations for the 2014 World Cup, and a truth commission to
investigate abuses during the military regime (1964-1985), other important initiatives have yet to
advance. Rousseff has also lost several administration officials to corruption scandals but her
efforts to clean up her cabinet have won popular support. In September 2012, 62% of Brazilians
evaluated her administration as “good” or “very good.”
Economic Conditions
With a gross national income of $2.1 trillion, Brazil is the largest economy in Latin America.
Over the past five years, the country has enjoyed average annual growth of over 4%. This growth
has been driven by a boom in international demand for its commodity exports and the increased
purchasing power of Brazil’s fast-growing middle class. The country has also benefitted from a
series of policy reforms implemented over the course of two decades that have reduced inflation,
fostered growth, and enabled Brazil to better absorb international shocks like the recent global
financial crisis. After contracting by 0.3% in 2009, the Brazilian economy quickly bounced back
with 7.6% growth in 2010. The economy has since slowed; it grew by 2.7% in 2011 and is
expected to grow by just 1.5% in 2012. Unemployment remains near a record low, however, and
the Rousseff Administration is implementing several policies designed to stimulate the economy.
Congressional Action
The 112th Congress has maintained interest in U.S.-Brazil relations, with energy and trade issues
receiving particular attention. Congress allowed a duty on imported ethanol to expire at the end of
2011, removing a long-standing barrier to U.S.-Brazil biofuels cooperation. A bill introduced in
April 2012, H.R. 4621, would authorize the President to enter into negotiations with Brazil to
obtain open and reciprocal market access for trade in ethanol products. H.R. 6539, introduced in
September 2012, would create a U.S.-Brazil Joint Commission on Commerce and Trade to
address bilateral trade issues and promote commercial opportunities in both countries. Several
bills with implications for the long-standing U.S.-Brazil cotton dispute have also been introduced
in the second session. H.R. 5143 would prohibit payments to the Brazil Cotton Institute and
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thereby prevent the United States from complying with the terms of a temporary bilateral
agreement. Additionally, both versions of the 2012 farm bill, S. 3240 and H.R. 6083, include
potential modifications of the U.S. cotton program.
This report analyzes Brazil’s political, economic, and social conditions, and how those conditions
affect its role in the world and its relationship with the United States.
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Contents
Political Situation............................................................................................................................. 1
Background................................................................................................................................ 1
2010 Elections ........................................................................................................................... 3
Rousseff Administration............................................................................................................ 4
Economic Conditions....................................................................................................................... 6
Background: Reform and Stabilization ..................................................................................... 7
Global Financial Crisis and Current Challenges ....................................................................... 7
Social Conditions....................................................................................................................... 9
Foreign Policy................................................................................................................................ 10
Regional Policy ....................................................................................................................... 10
South American Integration .............................................................................................. 10
Expansion of Influence into the Caribbean and Central America ..................................... 12
Emerging Global Role............................................................................................................. 13
South-South Ties ............................................................................................................... 13
Democratization of Global Governance............................................................................ 14
U.S.-Brazil Relations ..................................................................................................................... 15
Security Cooperation............................................................................................................... 16
Counternarcotics................................................................................................................ 17
Counterterrorism and the Tri-Border Area ........................................................................ 18
Defense.............................................................................................................................. 19
Energy Cooperation................................................................................................................. 20
Ethanol and Other Biofuels ............................................................................................... 20
Oil...................................................................................................................................... 21
Trade Relations........................................................................................................................ 22
Cotton Dispute .................................................................................................................. 23
Intellectual Property Rights............................................................................................... 24
Human Rights.......................................................................................................................... 25
Trafficking in Persons ....................................................................................................... 26
Violent Crime and Abuses by Police................................................................................. 27
Race and Discrimination ................................................................................................... 28
Amazon Conservation ............................................................................................................. 29
Figures
Figure 1. Map of Brazil.................................................................................................................... 3
Contacts
Author Contact Information........................................................................................................... 31
Acknowledgments ......................................................................................................................... 31
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Political Situation
Dilma Rousseff of the center-left1 Workers’ Party (Partido dos Trabalhadores, PT) is approaching
the halfway point of her four-year presidential term that began on January 1, 2011. She inherited a
country that had benefited from 16 years of capable governance under Presidents Fernando
Henrique Cardoso (1995-2002) and Luis Inácio Lula da Silva (2003-2010), during whose terms
Brazil made significant advances in economic stabilization and social inclusion.2 Rousseff has
primarily focused on domestic challenges during her first two years in office, seeking to boost
growth and protect employment in the near-term while implementing policies designed to
strengthen Brazil’s mid- and long-term economic competitiveness. Rousseff has also taken a
stronger stand against corruption than previous presidents, dismissing several cabinet officials
accused of abusing the public’s trust. This has caused some tensions in her multiparty governing
coalition, which holds significant majorities in both houses of Brazil’s legislature but has proven
difficult to control. Rousseff’s efforts to strengthen the economy and clean up her cabinet have
won her significant popular support. In September 2012, 62% of Brazilians rated the Rousseff
Administration as “good” or “very good.”3
Background
Brazil occupies almost half of the continent of South America and is the fifth most populous
country in the world with 191 million (2010) citizens.4 The country has a federal structure,
comprising 26 states, a federal district, and some 5,568 municipalities. Given its size and
resources, Brazil has long held potential to become a world power. However, its rise to
prominence has been hindered by setbacks, including 21 years of military rule, political
instability, and uneven economic growth. Brazil’s military governments ruled from 1964-1985
and, while repressive, were not as brutal as those in some other South American countries.
Although it nominally allowed the judiciary and Congress to function during its tenure, the
Brazilian military stifled representative democracy and civic action, carefully preserving its
influence during one of the most protracted transitions to democracy to occur in Latin America.
During the first decade after the country’s return to civilian democratic rule, Brazil experienced
economic recession and political uncertainty as numerous efforts to control runaway inflation
failed and two elected presidents did not complete their terms; one died before taking office and
the other was impeached on corruption charges. The political and economic situation only began
to stabilize in the 1990s under President Fernando Henrique Cardoso.
1 Although the PT was founded as a leftist party, it moved toward the ideological center upon taking office in 2002.
Timothy J. Power and Cesar Zucco Jr., "Estimating Ideology of Brazilian Legislative Parties, 1990-2005," Latin
American Research Review, vol. 44, no. 1, 2009.
2 See, for example, “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; Juan Forero,
“Cardoso vs. Lula: Two Brazilian Presidents Vie Over Who Turned Country Around,” Washington Post, October 30,
2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
3 Jefferson Ribeiro, “Aprovação do Governo Dilma Sobe com Medidas Econômicas—CNI/Ibope,” Reuters Brasil,
September 26, 2012
4 Instituto Brasileiro de Geografia e Estatística (IBGE), Censo Demográfico 2010, November 2010.
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Cardoso, a prominent sociologist of the centrist5 Brazilian Social Democracy Party (Partido da
Social Democracia Brasileira, PSDB), was elected president in 1994. His victory was largely the
result of the success of the anti-inflation “Real Plan” that he implemented as finance minister
under President Itamar Franco (1992-1994). During his two terms in office, Cardoso brought
inflation under control, gradually opened the Brazilian economy to trade and investment, and
privatized a number of state-owned enterprises (see “Background: Reform and Stabilization”
below). He also established several conditional cash transfer programs designed to improve social
conditions in the country. Although Cardoso’s popularity declined considerably during his second
term as Brazil struggled with a series of financial crises and economic growth remained weak,
most analysts credit him with laying the foundation for the macroeconomic stability that Brazil
has enjoyed since he left office.6
Luis Inácio Lula da Silva—known as Lula—was elected president of Brazil in 2002. The election
was Lula’s fourth attempt at the presidency as the candidate of the PT, which he helped found as a
metalworker and union leader in the 1980s. During his first term, Lula maintained the market-
oriented economic policies associated with his predecessor while placing a greater emphasis on
reducing poverty. He tightly controlled expenditures, raised the primary budget surplus, granted
additional autonomy to the Central Bank, and enacted social security and tax reforms. At the
same time, he reorganized and expanded some of the social programs initiated under Cardoso.
Lula’s most high profile program, Bolsa Familia (Family Grant), provides monthly cash transfers
to some 13 million poor families (52 million people)7 in exchange for ensuring that their children
attend school and receive proper medical care. Lula’s agenda stalled toward the end of his first
term as several top PT officials were implicated in corruption scandals. A congressional inquiry
eventually cleared the president of any direct responsibility, however, and Lula was elected to a
second term in 2006.
After primarily focusing on maintaining economic stability during his first term, Lula established
a larger role for the Brazilian state in economic development during his second term. He
implemented several stimulus measures to accelerate economic growth and counteract the effects
of the global financial crisis. He also expanded social programs like Bolsa Familia and launched
new programs, such as My House, My Life (Minha Casa, Minha Vida)—an attempt to increase
formal housing for low-income Brazilians.8 Just before leaving office, Lula won legislative
approval for a new regulatory framework that will increase the state’s role in the exploitation of
Brazil’s considerable offshore oil reserves in hopes of using the resources to fuel long-term
economic and social development.9 (For more information, see “Oil” below.) Although some
analysts have criticized Lula for allegedly protecting corrupt officials and not doing more to
advance what they view as crucial economic, political, and social reforms,10 he won the support
5 The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB); however, it has steadily
moved to the right since implementing market-oriented economic reforms during the Cardoso Administration. Power
and Zucco, 2009, op.cit.
6 See, for example, Riordan Roett, "How Reform Has Powered Brazil’s Rise," Current History, February 2010.
7 "Brazil Anti-Poverty Plan Fails to Tackle Causes," Oxford Analytica, June 15, 2011.
8 Andrew Downie, “Brazil’s Stimulus with a Ceiling (and Four Walls),” Time, April 22, 2009; “Brazil: Lula Raises
Subsidies to Poorest Families,” Oxford Analytica, August 3, 2009; “Lula’s Legacy to Brazil,” Latin American Regional
Report: Brazil & Southern Cone, April 2010.
9 “Brazil Congress Approves Oil Law,” Latin News Daily, December 2, 2010.
10 See, for example, Daniel Bramatti, “Lula, Sarney, Collor e Renan...por Lula, Sarney, Collor e Renan,” Estado de São
Paulo, August 9, 2009; “Brazil’s Presidential Election – Lula’s Legacy,” Economist, September 30, 2010; and Paulo
(continued...)
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of the vast majority of the Brazilian public during his two terms, leaving office with an 87%
approval rating.11
Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS Graphics.
2010 Elections
On October 31, 2010, Dilma Rousseff of the ruling PT won 56% of the vote to defeat José Serra
of the PSDB in a second round presidential runoff election.12 The second round was necessary
since Rousseff had fallen just short of an absolute majority—with 46.9% of the vote—in the first
round election held on October 3, 2010.13 Given the strength of the Brazilian economy and Lula’s
(...continued)
Kliass, “Lula’s Political Economy: Crisis and Continuity,” North American Congress on Latin America (NACLA),
March/April 2011.
11 Bradley Brooks, “Lula’s Legacy, Leaving Behind a Transformed Brazil,” Associated Press, December 27, 2010.
12 “Brazil: Lula Will Bolster—and May Hinder—Rousseff,” Oxford Analytica, November 1, 2010.
13 Marina Silva, a former Lula Administration environment minister who ran for president as the candidate of the Green
Party (Partido Verde, PV), outperformed the pre-election polls by taking 19.3% of the first round vote. Her
(continued...)
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overwhelming popularity, both major candidates had largely promised continuity during the
campaign. Rousseff pledged to consolidate gains made during the Lula Administration and Serra
proposed only relatively minor policy changes. Rousseff had never been elected to public office
previously but was chosen by Lula to run as his successor. She served as minister of mines and
energy from 2003-2005 and chief of staff from 2005-2010, during which time she was in charge
of strategic projects such as the government’s housing program, investments in infrastructure, and
coordination of the design of a new regulatory framework for developing Brazil’s offshore oil
reserves. Rousseff headed a multiparty electoral coalition with a running-mate from the
ideologically heterogeneous Party of the Brazilian Democratic Movement (Partido do Movimento
Democrático Brasileiro, PMDB).
In legislative elections conducted concurrently with the first round presidential election,
Rousseff’s coalition made significant gains in both houses of the Brazilian Congress. The PT now
holds 88 of the 513 seats in the Chamber of Deputies and 14 of the 81 seats in the Senate, making
it the largest party in the lower house and the second-largest party in the upper house. Rousseff’s
multiparty coalition holds over 60% of the seats in both houses of Congress, which are large
enough majorities to amend the constitution.14
Rousseff Administration
President Rousseff has primarily focused on domestic economic challenges since taking office.
Early in her term, she sought to constrain spending in order to ease inflationary pressures and
maintain a primary budget surplus of 3.1% of gross domestic product (GDP). She cut about $25
billion (R$50 billion) from the 2011 budget and limited the increase in the minimum wage (which
is linked to public sector wages and pensions).15 As Brazil’s economy has slowed, however,
Rousseff has favored more expansionary fiscal policies. She has maintained a strong role for the
state in the economy, launching a series of short-term stimulus packages and increasing import
tariffs to protect certain industries. At the same time, Rousseff has sought to encourage private
investment in the country’s overburdened infrastructure, selling licenses to build and operate
roads, railways, ports, and airports.16 Partially as a result of these measures, unemployment has
remained below 6%—a historic low.17
Although Rousseff’s governing coalition enjoys significant majorities in Congress, it has
presented her with a number of challenges. The seven parties in her cabinet are ideologically
diverse, and while some support the policies of the PT, others—including the large PMDB—have
demonstrated more interest in the distribution of government resources and the control of
ministries and state enterprises.18 Almost immediately, some sectors of the coalition voiced
discontent as a result of Rousseff’s cabinet appointments and her attempt to slow the growth of
(...continued)
unexpectedly strong finish kept Rousseff under 50% and forced a second round runoff. Serra won 32.6% of the first
round vote. “Brazil’s ‘Green Wave’ Shocker,” Latin News Daily, October 4, 2010.
14 Tribunal Superior Eleitoral (TSE), January 5, 2010, http://www.tse.gov.br/internet/index.html.
15 “Brazil: Rousseff’s Strong Start Boosts Confidence,” Oxford Analytica, April 7, 2011.
16 “Stimulus Measures Unlikely to Boost Brazilian Growth,” Oxford Analytica, July 9, 2012; Raymond Colitt, “Ex-
Guerilla Rousseff Adopts Business Agenda to Spur Brazil,” Bloomberg, September 20, 2012.
17 “Country Report: Brazil,” Economist Intelligence Unit, September 2012.
18 Marco Antonio Villa, “PMDB Será Pedra no Sapato da Presidente,” Folha de São Paulo, November 20, 2010;
Otávio Cabral, “A Digestão do Poder,” Veja; July 29, 2009.
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government spending.19 Rousseff’s unwillingness to throw her full support behind officials
accused of corruption has exacerbated these intra-coalition differences. Seven of her cabinet
ministers have been forced out by corruption allegations.20 In protest, some allied legislators have
obstructed administration initiatives or even voted with the political opposition on key issues.21
Intra-coalition struggles may increase once again in the aftermath of the October 2012 municipal
elections, with the parties that demonstrated greater political strength pushing for more influence
in the government.
Despite these economic and coalition challenges, President Rousseff has been able to advance
portions of her policy agenda. In November 2011, Rousseff—who was imprisoned and tortured
by the country’s military government as a result of her participation in a leftist guerilla
organization—signed a law establishing a truth commission to investigate human rights abuses
committed during the authoritarian period (1964-1985). Unlike many South American countries,
Brazil has never taken steps to address human rights violations committed by the military. The
truth commission will have subpoena power and complete access to government documents, but
will not result in prosecutions since a 1979 amnesty law remains in place.22 Rousseff has also
won approval for a federal worker pension reform and regulations for the 2014 World Cup.23
Several other controversial issues remain on the Rousseff Administration’s agenda, however,
including a new revenue sharing framework that must be passed in order to begin developing the
majority of the country’s recently discovered offshore oil reserves (see “Oil” below).
Rousseff has maintained considerable popular support since taking office. In September 2012,
62% of Brazilians rated her administration as “good” or “very good” while just 7% rated it as
“bad” or “terrible.” Moreover, President Rousseff received a personal approval rating of 77%.
Rousseff’s strong public standing is largely the result of her efforts to improve economic
conditions. According to the September poll, her administration receives its highest marks for
reducing poverty and combating unemployment.24 Rousseff’s high approval rating also appears to
have benefitted her party in the first round of the October 2012 municipal elections. The PT
received the largest number of mayoral votes nationwide, and increased its total number of
mayoral seats by 14% to 627.25 Many analysts expected the PT to lose support in the elections as
a result of a high profile corruption case in front of the Supreme Court that has convicted a
number of former party officials for their involvement in a Lula-era vote-buying scheme.26
Rousseff’s anti-corruption efforts appear to have helped shield the PT from the fallout.
19 Vera Rosa and Rafael Moraes Moura, “Ministério de Dilma Mantém Fatia de Poder do PT e Desagrada a Aliados,”
Estado de São Paulo Digital, December 22, 2010.
20 “Coming Into Her Own,” Economist, February 18, 2012.
21 Juan Arias, “El Ala Izquierda del PT Critica la Política de Austeridad de Rousseff,” El País (Argentina), March 1,
2011; “Brazil’s Congress Calls ‘Go-Slow’ Strike,” Latin News Daily, August 11, 2011.
22 “Brazilian President Signs Truth Commission Law,” Associated Press, November 18, 2011.
23 Raymond Colitt, “Brazil Finds It Takes a Woman to Confront Congress without Fear,” Bloomberg, April 4, 2012.
24 Jefferson Ribeiro, “Aprovação do Governo Dilma Sobe com Medidas Econômicas—CNI/Ibope,” Reuters Brasil,
September 26, 2012; Diogo Alcântara, “CNI/Ibope: Aprovação do Governo Dilma Sobe para 62%,” Terra (Brazil),
September 26, 2012.
25 “PMDB é Campeão em Número de Prefeitos, PT Vence em Total de Votos,” Folha de São Paulo, October 8, 2012.
26 See, for example, Raymond Colitt, “Brazil Corruption Trial Chills Lula Legacy as Party Vote Suffers,” Bloomberg,
August 1, 2012.
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Economic Conditions
With a gross national income (GNI) of $2.1
Brazil in Brief
trillion,27 Brazil is the largest economy in
Latin America and the sixth largest in the
Approximate Size: Slightly Smaller than the United States
world.28 Over the past five years, the
Population: 191 Million (2010)
country has enjoyed relative macroeconomic
Ethnic Groups: African, Portuguese, Italian, German,
stability and average annual growth of
Spanish, Japanese, Indigenous peoples, and people of Middle
nearly 4.3%.29 This growth has been driven
Eastern descent.
by a boom in international demand—
Religion: 74% Roman Catholic
particularly in Asia—for its commodity
Official Language: Portuguese
exports, and the increased purchasing power
of Brazil’s fast-growing middle class, which
GNI (Atlas Method): $2.1 Trillion (2011)
has added some 40 million people since
GNI per Capita (Atlas Method): $10,720 (2011)
2003 and now accounts for a majority of the
Life Expectancy: 73 years (2011)
population.30 In 2011, Brazil had a trade
surplus of $29.8 billion, or 1.2% of GDP.
Infant Mortality Rate: 14 per 100,000 live births (2011)
The total value of its exports reached $256
Adult Literacy Rate: 90% (2008)
billion (10.1% of GDP), with top exports
Poverty Rate: 24.9% (2009)
including commodities such as iron ore, oil,
soy, sugar, chicken, and beef, as well as
Indigence Rate: 7% (2009)
manufactured goods such as automobiles
Sources: Instituto Brasileiro de Geografia e Estatística,
and machinery.31 The country’s current
U.S. State Department, World Bank, U.N. Economic
Commission for Latin America and the Caribbean
economic strength is at least partially the
result a series of policy reforms
implemented over the course of two decades that have reduced inflation, fostered growth, and
enabled Brazil to better absorb international shocks like the recent global financial crisis.32 After
contracting by 0.3% in 2009, the Brazilian economy quickly bounced back with 7.6% growth in
2010. Economic growth has since slowed, however, with GDP expanding by 2.7% in 2011 and
private analysts forecasting an expansion of just 1.5% in 2012.33 The Rousseff Administration is
currently implementing several measures designed to boost growth in the short-run and make the
Brazilian economy more competitive in the future.
27 World Bank, “World Development Indicators,” http://data.worldbank.org/data-catalog/world-development-
indicators.
28 “Brazilian Economy Overtakes UK’s, Says CEBR,” BBC News, December 26, 2011.
29 “Country Report: Brazil,” Economist Intelligence Unit, March 2012.
30 The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn between approximately $590 and $2,544 (R$1,200-5,174) per month, now account for over half of the
Brazilian population. Marcelo Cortes Neri, Os Emergentes dos Emergentes: Reflexões Globais e Ações para a Nova
Classe Média Brasileira, Fundação Getulio Vargas, Rio de Janeiro, June 27, 2011.
31 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, January 2011.
32 “Brazil Takes Off,” Economist, November 12, 2009.
33 “Country Report: Brazil,” Economist Intelligence Unit, September 2012.
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Background: Reform and Stabilization
Following the return to democracy in the late 1980s and early 1990s, Brazil struggled with
persistent high inflation and slow growth. In order to address these issues, the Brazilian
government launched the “Real Plan” in 1994. The plan consisted of a new currency (the real)
pegged to the U.S. dollar, a more restrictive monetary policy, and a severe fiscal adjustment that
included a 9% reduction in federal spending and an across-the-board tax increase of 5%. Prices
immediately began to stabilize, with annual inflation falling from 2,730% in 1993 to 17.8% in
1995. Fernando Henrique Cardoso, who had been in charge of the Real Plan as finance minister,
took office as president in 1995 and continued the economic reform push by privatizing state-
owned enterprises and gradually opening the Brazilian economy to foreign trade and investment.
Although Brazil enjoyed stronger growth rates for a few years following the Real Plan,
macroeconomic stability remained elusive. In order to take advantage of the improved economic
situation and high real interest rates, foreign investors began flooding Brazil with large capital
inflows. The increase in foreign capital contributed to currency appreciation and the eventual
overvaluation of the real. Following the 1997 East Asian and 1998 Russian financial crises,
international investors began to worry about Brazil’s overvalued exchange rate and substantial
fiscal deficits. The Brazilian government’s inability to pass legislation capable of addressing these
issues sparked a massive capital flight. Brazil was forced to adopt a floating exchange rate, and
the real lost 40% of its value.34
In the aftermath of the 1998-1999 financial crisis, Brazil adopted the three main pillars of its
current macroeconomic policy: a floating exchange rate, a primary budget surplus, and an
inflation-targeting monetary policy. Although these policies were introduced toward the end of
the Cardoso Administration, they were maintained and strengthened under President Lula and
now have support across the political spectrum. Under the current policy mix, inflation has
remained relatively low and economic growth has accelerated. Likewise, public debt has
declined, with Brazil repaying its $15.5 billion debt to the International Monetary Fund (IMF)
ahead of schedule in 2005, and becoming a net IMF creditor in 2009.35
Global Financial Crisis and Current Challenges
Brazil weathered the global financial crisis much better than previous international shocks. The
country experienced a brief recession in 2009, with an economic contraction of 0.3%, before
rebounding quickly with growth of 7.6% in 2010.36 Most analysts credit Brazil’s strong
macroeconomic framework and the Lula Administration’s timely policy response for successfully
mitigating the effects of the crisis.37 As the fallout of the financial crisis spread around the world,
the Brazilian government injected additional liquidity into the local economy, provided support
packages to productive sectors, and cut the key interest rate. President Lula also acted to boost
34 Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010; CRS Report 98-987,
Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
35 Antonio Rodriguez, “Brazil Switches Roles with Helping Hand for IMF,” Agence France Presse, October 5, 2009.
36 “Country Report: Brazil,” Economist Intelligence Unit, September 2012.
37 See, for example, “IMF Executive Board Concludes 2010 Article IV Consultation with Brazil,” International
Monetary Fund, August 5, 2010; and Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil),
December 29, 2010.
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domestic consumption in hopes of partially offsetting declines in global demand. The government
mandated above-inflation increases to the minimum wage, provided temporary tax reductions,
increased investments in its signature infrastructure program, and maintained its spending on
social programs like Bolsa Familia.38
Although Brazil recovered quickly from the financial crisis, the lingering effects of the global
downturn have presented challenges for the country’s economy. Slow growth rates and
expansionary monetary policies have kept interest rates low in Europe and the United States, and
have encouraged investors looking for higher returns to flood Brazil and other developing nations
with foreign capital. These policies have contributed to considerable appreciation of the Brazilian
real,39 and have hurt the competitiveness of Brazilian industry.40 The Brazilian government has
responded by accusing the United States and others of fueling “currency wars” through
“competitive devaluations,”41 and by instituting measures designed to discourage inflows of
foreign capital. It has imposed a financial operations tax, and the Brazilian Central Bank has been
willing to tolerate inflation at the high end of its target range in order to reduce interest rates to a
record low. As noted above, the Rousseff Administration has also implemented temporary
policies designed to support local industry and stimulate growth, such as raising import tariffs on
certain products and providing temporary tax cuts. Brazil’s economy, which grew by 2.7% in
2011, is forecast to grow by just 1.5% in 2012.42
A number of analysts maintain that Brazil’s slowing economic growth is the result of the
country’s structural challenges, and that the government should implement policies designed to
boost investment rather than domestic demand.43 While the Rousseff Administration has
continued to support short-term stimulus policies, as noted above, it has also taken a number of
actions in recent months to reduce business costs. It has cut payroll taxes, reduced energy costs,
and encouraged private investment in the country’s overburdened infrastructure by selling
licenses to build and operate roads, railways, ports, and airports.44 Rousseff has also announced
her Administration’s intention to use new royalties from the oil industry to invest in education.45
Although significant structural challenges remain, it appears as though the Rousseff
Administration recognizes the need to address them in order to foster Brazil’s long-term
economic development.
38 “Brazil Economy: Bottoming Out?” Economist Intelligence Unit, May 7, 2009; “Will the Economy Grow in 2009?”
Latin American Economy & Business, February 2009; “Tax Relief for the Middle Classes,” Latin American Weekly
Report, December 18, 2008.
39 Ian Talley, “IMF Says Capital Controls Can Slow Investment Flows in India, Brazil,” Wall Street Journal, January 6,
2011.
40 “Brazil: Reserve Requirements Will Not Weaken Real,” Oxford Analytica, January 11, 2011; Matthew Bristow,
“Brazil Central Bank Moves to Curb Short Dollar Bets and Rein in Real Rally,” Bloomberg, July 10, 2011; “Brazil
Taxes Derivatives to Brake Currency Rally,” Reuters, July 27, 2011.
41 Ed Dolan, “Why Latin America Hates QE2,” Business Insider, January 20, 2011; “Brazil: Currency War Begins to
Exact Toll,” Latin American Weekly Report, January 6, 2011.
42 “Country Report: Brazil,” Economist Intelligence Unit, September 2012.
43 Paulo Vieira da Cunha and Vinod Thomas, “The Brazilian Economy: The Choices for Dilma,” Remarks at the Inter-
American Dialogue, Washington, DC, November 10, 2010; Arthur Carvalho and Gray Newman, “Brazil: Dismantling
the Policy Mismatch?,” Morgan Stanley Research, August 10, 2012.
44 “Stimulus Measures Unlikely to Boost Brazilian Growth,” Oxford Analytica, July 9, 2012; Raymond Colitt, “Ex-
Guerilla Rousseff Adopts Business Agenda to Spur Brazil,” Bloomberg, September 20, 2012.
45 “Brazil: Rousseff Pledges 100% of Offshore Oil Royalties to Education,” Latin American Weekly Report, August 23,
2012.
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Social Conditions
Despite its fast-growing economy and large resource base, Brazil has had problems solving 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 10% of the
population control about 45% of the country’s wealth while the poorest 10% control just 1.1% of
the wealth.46 Like elsewhere in Latin America, Brazil’s high inequality is partially a legacy of
extreme land concentration among the country’s elite. The Brazilian government has also
acknowledged that there is a racial component to inequality. While over 50% of Brazilians
identify themselves as black or mixed race, afro-Brazilians account for just 18% of the wealthiest
section of society (the so-called “Class A”) and over 76% of the poorest section of society (the
so-called “Class E”).47 Other factors that inhibit social mobility in Brazil include a lack of access
to quality education and job training opportunities.
The Brazilian government’s efforts to reduce social disparities have recently begun to
demonstrate results. As late as 2005, the Organization for Economic Cooperation and
Development (OECD) asserted that Brazil had not achieved the same social indicators as
countries with similar income levels despite having spent the same amount or more on social
programs.48 More recent evidence, however, indicates that Brazil has made substantial progress in
the last several years as a result of the country’s social policies and steady economic growth.
Between 1999 and 2009, the percentage of the population living in poverty fell from 37.5% to
24.9%, and the percentage living in extreme poverty fell from 12.9% to 7%.49 Inequality was also
reduced, with the Gini coefficient50 falling from 0.52 to 0.47.51 According to a recent study, these
changes are mostly attributable to increased earnings, though increased government transfers
through social security benefits and the Bolsa Familia program have also played a significant
role.52
In June 2011, President Rousseff launched an anti-poverty program known as Brazil Without
Poverty (Brasil Sem Miséria). The program is designed to eradicate extreme poverty by 2014. It
will increase transfer payments provided through existing programs such as Bolsa Familia;
increase access to public services such as education, electricity, health care, housing, and
sanitation; and increase economic opportunities in urban and rural areas by providing access to
microcredit, skills training, technical assistance, and new markets.53
46 “Brazil’s Income Gap Continues Wide in Brazil,” Associated Press, November 16, 2011.
47 Tom Phillips, “Brazil Census Shows African-Brazilians in the Majority for the First Time,” Guardian, November 17,
2011.
48 OECD, Economic Survey of Brazil 2005, March 2005.
49 United Nations, Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin
America, 2011, November 2011, http://www.eclac.cl/publicaciones/xml/5/45175/2011-819_PSI-Summary-WEB.pdf.
50 The Gini coefficient is a value between zero and one where zero represents complete equality and one represents
complete inequality.
51 Clóvis Rossi, “Desigualdade, o Fracaso da Esquerda,” Folha de São Paulo, August 26, 2012.
52 Instituto de Pesquisa Econômica Aplicada (IPEA), A Década Inclusiva (2001-2011): Desigualdade, Pobreza e
Políticas de Renda, Comunicados do Ipea N° 155, September 25, 2012.
53 Governo Federal do Brasil, Ministério do Desenvolvimento Social e Combate à Fome, Plano Brasil Sem Miséria,
http://www.brasilsemmiseria.gov.br/wp-content/themes/bsm2nd/caderno_brasil_sem_miseria.pdf.
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Foreign Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a regional power in
Latin America, a leader among developing countries in economic cooperation and collective
security efforts, and an emerging center of global influence. Brazilian foreign policy has
traditionally been based on the principles of multilateralism, peaceful dispute settlement, and
nonintervention in the affairs of other countries.54 Adherence to these principles has enabled
Brazil to maintain peaceful relations with all 10 of its neighbors55 and to play a larger role in
global affairs than its economic and geopolitical power would otherwise allow. Building on its
traditional principles, Brazilian foreign policy under the PT administrations of Presidents Lula
and Rousseff has emphasized three areas of action: (1) reinforcing relations with traditional
partners such as its South American neighbors, the United States, and Europe; (2) diversifying
relations by forging stronger economic and political ties with other nations of the developing
world; and (3) supporting multilateralism by pushing for the democratization of global
governance.56
Regional Policy
Over the past decade, Brazil has firmly established itself as a regional power. Within South
America, Brazilian foreign policy supports economic and political integration efforts in order to
reinforce long-standing relationships with its neighbors. Although integration is the primary
purpose of organizations like the Common Market of the South (Mercosur) and the Union of
South American Nations (Unasur), they also serve as forums in which Brazil can exercise its
leadership and develop consensus around its positions on regional and global issues. Brazil’s
emphasis on forging new ties has led to increased engagement with countries in Central America
and the Caribbean, areas where Brazil has not traditionally had much influence. Brazil engages in
multilateral regional diplomacy through the Organization of American States (OAS);57 however, it
has demonstrated a preference for resolving issues, when possible, through regional forums that
do not include the United States.
South American Integration
In 1991, Brazil joined with Argentina, Paraguay, and Uruguay to establish the Common Market of
the South (Mercosur),58 an organization intended to promote economic integration and political
cooperation among the countries. Although member states have been able to achieve consensus
on a number of political issues, progress on the economic front has been slow. The Mercosur pact
54 Georges D. Landau, “The Decision Making Process in Foreign Policy: The Case of Brazil,” Center for Strategic and
International Studies: Washington, DC: March 2003.
55 In addition to bordering nine of the eleven other independent countries in South America, Brazil borders French
Guiana—a territory of France (see Figure 1, for a map of Brazil and its neighbors).
56 “Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
“Brazil has Become the ‘Unavoidable Partner’ in the Global Decision-Making Process,” MercoPress, December 14,
2010.
57 For more information on the OAS, see CRS Report R42639, Organization of American States: Background and
Issues for Congress, by Peter J. Meyer.
58 For more information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade
Policy, by J. F. Hornbeck.
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calls for an incremental path to full economic integration, yet only a limited customs union has
been achieved thus far. Member states finally agreed on a common customs code and the
elimination of double tariffs on non-Mercosur goods transported between countries in August
2010;59 however, progress on other crucial issues has since stalled.60 In July 2012, Argentina,
Brazil, and Uruguay suspended Paraguay from Mercosur as a result of the express impeachment
of the Paraguayan president, which they maintain was undemocratic. At the same time, they
agreed to admit Venezuela, whose accession had been blocked by the Paraguayan legislature. A
number of analysts argue that these actions reflect the transformation of Mercosur into a political
bloc with few prospects for further economic integration.61
The ongoing problems with Mercosur have not prevented Brazil from pushing for broader
regional integration. In 2008, all 12 independent countries of South America joined together to
form the Union of South American Nations (Unasur).62 Primarily a political body, Unasur has
served as a forum for dispute resolution and the formation of common policy positions. With
Brazil playing an influential role, the organization helped resolve political conflicts in Bolivia in
2008 and Ecuador in September 2010, and took a strong stance against the ouster of the president
of Honduras in 2009.63 Brazilian diplomacy played an important role in convincing each of the
Unasur member states to also join the associated South American Defense Council, designed to
boost regional cooperation on security policies.64 Within the council, South American countries
have discussed defense spending and reviewed defense agreements with extra-regional powers.65
Notwithstanding its many successes, Unasur’s capacities are currently rather limited. Member
states are reluctant to cede authority to the organization, it has largely been unable to mediate
disputes when there is no regional consensus, and it is heavily reliant on presidential diplomacy
since it lacks strong formal institutions.66
By promoting integration through organizations like Mercosur and Unasur, Brazil has been able
to solidify its standing as a regional power. These organizations provide forums in which Brazil
can exercise leadership and build broad support for its positions on regional and global issues.
The successes of Mercosur and Unasur have instilled a confidence in South American nations that
the region can resolve internal problems without having to turn to extra-regional powers, such as
the United States. Some South American countries, however, are uncomfortable with Brazil’s
growing economic and political influence in the region. This has already generated backlash
against Brazilian companies in several cases, and led to tensions between Brazil and some of its
59 “Mercosur Wraps Up Successful Summit,” EFE News Service, August 3, 2010; “Las Reglas Comerciales Comunes
Tendran que ser Ratificadas por el Congreso de Cada Socio; Aprobaron el Código que Regirá el Comercio Dentro del
Mercosur,” Clarín, August 4, 2010.
60 “Deathknell Sounds,” Latin American Regional Report: Brazil & Southern Cone, January 2009.
61 See, for example, Guido Nejamkis, “Analysis: Venezuela Joins Trade Bloc Big on Politics, Protectionism,” Reuters,
July 30, 2012.
62 The treaty establishing Unasur entered into force on November 30, 2010, when Uruguay became the ninth country to
approve its ratification. “Uruguay Ratificó Tradatdo de la Unasur, que Completa Nueve Adhesiones,” Agence France
Presse, November 30, 2010.
63 “Unasur Assigns Itself Some Authority,” Latin News Daily, November 26, 2010.
64 “South American Defence Council,” Latin American Regional Report: Brazil & Southern Cone, April 2009.
65 “Brasil Propondrá Creación de un Consejo de Paz y Seguridad de la Unasur,” EFE News Service, January 13, 2010.
66 Andrés Serbin and Peter Hakim, “The Union of South American Nations (UNASUR),” Remarks at the Inter-
American Dialogue, Washington, DC, November 23, 2009; “Latin America: Regional Tensions Challenge UNASUR,”
Oxford Analytica, August 21, 2009.
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neighbors.67 Anxieties about Brazil’s intentions and role are likely to grow as Brazil continues to
pursue its regional and global interests.
Moreover, it is unclear if Brazil is willing to accept the costs and responsibilities associated with
regional leadership. Although the country has shouldered the burden for multilateral integration
efforts, such as providing 70% of the annual budget for Mercosur’s Structural Convergence and
Institutional Strengthening Fund,68 it has been less willing to make unilateral concessions to
foster development and good will among its neighbors. For example, when Lula agreed to pay
Paraguay a higher price for energy generated by a jointly owned hydroelectric plant in July 2009,
he was heavily criticized by some within Brazil and the Brazilian Congress blocked the
agreement until May 2011.69 Given that the country is still resolving its own economic and social
problems, it may be difficult to convince the Brazilian population that the somewhat intangible
benefits of regional leadership outweigh the very visible costs.
Expansion of Influence into the Caribbean and Central America
In addition to consolidating its power within South America, Brazil has sought to expand its
influence in the broader region by increasing its engagement in the Caribbean and Central
America. Brazil has taken on considerable responsibilities in Haiti, where it has commanded the
U.N. Stabilization Mission (MINUSTAH) since 2004. Some 10,000 Brazilian military personnel
have rotated through the country since the start of MINUSTAH, and with nearly 1,900 police and
troops currently on the ground, Brazil is the largest peacekeeping contingent in Haiti.70 Brazil is
also increasingly providing Caribbean and Central American nations with humanitarian and
technical assistance. Between 2005 and 2009, Cuba, Haiti, and Honduras were three of the top
four recipients of Brazilian humanitarian assistance, receiving over $50 million (R$79 million)
combined.71 Technical assistance has taken many forms, such as so-called “ethanol diplomacy,”
in which Brazil has signed bio-fuels partnership agreements with countries that would otherwise
be dependent on expensive oil imports.72 Moreover, Brazil has become a regional observer of the
Central American Integration System (SICA), promoted a trade agreement between SICA and
Mercosur, and supported the creation of a regional group known as the Community of Latin
American and Caribbean States, which includes all of the countries of the hemisphere except
Canada and the United States. Although Brazil has become much more visible as a result of these
efforts, most analysts assert that country’s influence in Central America and the Caribbean
remains limited.73
67 Simon Romero, “Brazil’s Long Shadow Vexes Some Neighbors,” New York Times, November 4, 2011.
68 “Brazil Invested 1.7bn Dollars in International Cooperation 2005-2009,” BBC Monitoring, January 14, 2011.
69 “Lula Criticised for ‘Partisan’ Foreign Policy,” Latin American Weekly Report, January 22, 2009; Pedro Servin,
“Paraguay-Brazil Energy Treaty Going Nowhere Fast,” Associated Press, December 16, 2009; Juliette Kerr, “Brazil –
Paraguay: Brazilian Congress Concludes Voting on Accord Altering Payment Terms for Itaipu Hydroelectric Plant,”
IHS Global Insight, May 12, 2011.
70 “Brasil Pide Compromiso Renovado de Comunidad Internacional con Haití,” Agence France Presse, January 12,
2011; Wilson Tosta and Glauber Goncalves, “Ex-Comandante Defende que Exército Continue no Haiti,” Estado de
São Paulo, November 5, 2010; United Nations, “UN Mission’s Summary Detailed by Country,” August 31, 2012.
71 IPEA, Cooperação Brasileira Para o Desenvolvimento Internacional: 2005-2009, Brasília, December 2010.
72 "Chávez, Lula Promote Competing Visions," Miami Herald, August 10, 2007.
73 See, for example, Peter Hakim, “Rising Brazil: the Choices Ahead,” Cuadernos de la Fundacion M.Botin, February
22, 2010; “Brazil is Challenging Mexico and U.S. Domination of Isthmus,” Latin America Data Base, NotiSur, June
11, 2009; and Andres Oppenheimer, “Brazil Stretching Clout to Central America,” Miami Herald, June 7, 2009.
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Emerging Global Role
As Brazil’s economy has grown to be the sixth largest in the world, the country has utilized its
growing economic clout to assert Brazilian influence on a range of global matters. On global
trade and financial issues, where Brazil’s economic weight ensures the country a principal role in
policy discussions, Brazil has sought to coordinate with, and represent, other developing nations.
This has coincided with a broader focus on “South-South” cooperation, in which Brazil has
expanded diplomatic and commercial ties with countries throughout the developing world. With
its increasing international prominence, Brazil has pushed for a democratization of global
governance institutions and a greater role for emerging powers in resolving issues of geopolitical
importance. Although few analysts deny that Brazil’s international stature has risen significantly
over the past decade, many believe that the country must overcome considerable challenges to be
considered a world power. These include undertaking reforms to maintain its current economic
trajectory, addressing long-standing domestic security challenges, and modernizing and
expanding its military capacity.74
South-South Ties
Brazilian foreign policy under the PT administrations of Presidents Lula and Rousseff has
prioritized relations with nontraditional partners in the developing world, or “South-South” ties.
During the Lula Administration, the country significantly expanded its diplomatic presence in the
developing world, opening 37 new embassies and 25 new consulates.75 Brazil also increased its
international development assistance, which totaled $362 million (0.02% of GDP) in 2009. The
majority of Brazil’s aid has gone to Latin America, the Caribbean, and Africa—with a special
emphasis on fellow Portuguese-speaking nations. It includes humanitarian assistance and
technical cooperation focused in sectors where Brazil has been particularly effective domestically,
such as poverty reduction, tropical agriculture and biofuels production, and the prevention and
treatment of HIV/AIDS and tropical diseases.76 These diplomatic and development ties have
coincided with increased commercial relations. While Brazil’s total world trade grew by nearly
350% between 2002 and 2011, trade with Latin America and the Caribbean grew by 380%; trade
with Africa grew by nearly 450%; trade with India grew by over 650%; and trade with China
grew by nearly 1,800%. China is now Brazil’s top trading partner, with total trade valued at $77.1
billion.77
Brazil’s focus on forging South-South ties under the PT has been criticized by a number of
analysts within and outside the country. Former Brazilian Ambassador to the United States
Roberto Abdenur claimed that the South-South approach of the Brazilian Foreign Ministry
indoctrinates Brazilian diplomats with “anti-imperialist” and “anti-American” attitudes. He also
criticized Lula for embracing autocratic leaders and failing to speak up for democracy and human
rights.78 Another former Ambassador to Washington, Rubens Barbosa, has argued that while the
74 See, for example, Julia Sweig, “A New Global Player,” Foreign Affairs, November/December 2010; Hal Brands,
Dilemmas of Brazilian Grand Strategy, U.S. Army War College, Strategic Studies Institute, Carlisle, PA, August 2010;
Peter Hakim, “Rising Brazil: The Choices of a New Global Power,” Política Externa, July 1, 2010; and “Geopolitical
Diary: A Boost for Brazil’s Military,” STRATFOR, December 24, 2008.
75 Larry Luxner, “Basking in Global Clout, Brazil Ponders Life After Lula,” Washington Diplomat, September 2010.
76 IPEA, December 2010, op.cit.
77 Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas, March 2012.
78 Diego Schelp, “Diplomacia de Palanque,” Veja, September 8, 2010; Otávio Cabral, “Nem na Ditadura,” Veja,
(continued...)
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PT’s foreign policy has increased Brazil’s international influence, it has not been very 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.79
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.80
Democratization of Global Governance
Building off its traditional support for multilateralism and its more recent focus on South-South
ties, Brazil has sought to reinvigorate multilateral institutions by making them more
representative of the current geopolitical situation. Brazilian officials assert that the world is
becoming multipolar, and global governance institutions—including the International Monetary
Fund (IMF), the Group of Eight (G8), and the U.N. Security Council—lack legitimacy and
efficacy since they are no longer representative of the global balance of power.81 In order to
address these issues, Brazil has joined with other emerging and developing nations to push for
reform. These coalitions include more formal organizations, like the Brazil-Russia-India-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.82 Efforts to enlarge and
reform the U.N. Security Council, however, have been unsuccessful thus far.83 Some observers
have expressed concerns that, by pushing for greater decision-making authority without being
prepared for the corresponding responsibilities of leadership, the actions of Brazil and other
emerging powers could create instability within the world system.84
In addition to seeking greater influence within global governance institutions, Brazil has pushed
for a greater role in resolving issues of geopolitical importance. During the Lula Administration,
Brazil was somewhat critical of the U.S. role in the Middle East, arguing that the U.N. should
(...continued)
February 7, 2007.
79 Rubens Barbosa, “Sobre uma Nova Política,” O Globo (Brazil), October 26, 2010.
80 “Ministro Patriota Faz Seu Primeiro Discurso no Itamaraty,” Ministério das Relações Exteriores, January 2, 2011;
Susan Glasser, “The Soft-Power Power,” Foreign Policy, December 2010.
81 Meeting with official from Brazil's Ministry of External Relations, Financial Affairs Office, December 8, 2010;
Celso Amorim, “Governance Must Reflect Global Reality,” Financial Times, November 15, 2010.
82 Celso Amorim, “The New Geopolitics: Emerging Powers and the Challenges of a Multipolar World,” Remarks at the
Carnegie Endowment for International Peace, Washington, DC, November 30, 2010; “Voting Power Shift Just Start of
IMF Reform, Says Chinese Official,” BBC Monitoring, November 5, 2010.
83 William Maclean, “Brazil Says US Spat Signals Tough Security Reform,” Reuters, September 11, 2010.
84 Jorge G. Castañeda, “Not Ready for Prime Time,” Foreign Affairs, vol. 89, no. 5 (September/October 2010); Andrew
F. Hart and Bruce D. Jones, “How Do Rising Powers Rise?,” Survival, vol. 52, no. 6 (November 29, 2010).
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oversee negotiations between Israel and the Palestinians and emerging powers should be more
involved.85 Brazil hosted the presidents of Israel and the Palestinian National Authority, and
suggested that it might be able to act as a mediator in the conflict. Brazil also recognized
Palestine as an independent state within its 1967 borders, setting off a wave of similar
recognitions throughout South America.86 At the September 2011 U.N. General Assembly,
President Rousseff called for Palestine’s full membership in the United Nations.87
Additionally, Brazil has been involved in discussions regarding Iran’s nuclear program. In May
2010, Lula worked with his Turkish counterpart to negotiate a deal with Iran under which Iran’s
enriched uranium would be reprocessed outside the country. The so-called “Tehran Declaration”
was similar to a deal put forward in October 2009 by the United States, France, and Russia that
had been supported by the International Atomic Energy Agency (IAEA). The Brazilians saw the
agreement as a confidence-building measure to bring Iran back to the negotiating table; however,
the Obama Administration and European nations viewed the agreement as a delaying tactic, noted
that the October 2009 deal was no longer sufficient since Iran had continued to enrich uranium,
and pushed ahead with sanctions.88 Brazil voted against U.N. Security Resolution 1929 (June
2010), saying the council had “lost a historic opportunity to peacefully negotiate the Iranian
nuclear program,” but agreed to abide by the sanctions.89 While some analysts dismissed Brazil’s
efforts as naive and unhelpful,90 others argued that the negotiation attempt demonstrated Brazil’s
growing prominence and the potential for new states to play important roles in resolving issues of
geopolitical importance.91
U.S.-Brazil Relations
Relations between Brazil and the United States are generally friendly. According to U.S. officials,
“as two of the world’s largest economies and democracies, with shared values and increasingly
converging goals, Brazil and the United States are natural partners in a rapidly changing world.”92
The Obama Administration’s National Security Strategy states that the United States “welcome[s]
Brazil’s leadership and seek[s] to move beyond dated North-South divisions to pursue progress
85 Iuri Dantas and Fabiola Moura, “Lula Says U.S. Shouldn’t Broker Middle East Talks,” Bloomberg, November 20,
2009.
86 “Brazilian Minister on Middle East Role,” BBC Monitoring, January 4, 2010; Sean Goforth, “Brazil’s Middle East
Roadmap,” World Politics Review, January 20, 2011.
87 “Statement by H.E. Dilma Rousseff, President of the Federative Republic of Brazil, at the Opening of the General
Debate of the 66th Session of the United Nations General Assembly,” September 21, 2011,
http://gadebate.un.org/sites/default/files/gastatements/66/BR_en_0.pdf.
88 Trita Parsi, “The Turkey-Brazil-Iran Deal: Can Washington Take 'Yes' for an Answer?” Foreign Policy, May 17,
2010; “Unexpected US Opposition Overshadows Lula's Successful Iran Nuclear Deal,” Latin American Security &
Strategic Review, May 2010.
89 "Brazil's Lula Says UN Sanctions a Mistake," Latin News Daily, June 10, 2010; “Brazil Will Back Iran Sanctions,”
Al Jazeera, August 11, 2010.
90 See, for example, Duda Teixeira, “Esperteza Atômica,” Veja, May 26, 2010; and “An Iranian Banana Skin,”
Economist, June 17, 2010.
91 See, for example, Erich Follath and Jens Glüsing, “Brazil’s Lula Vaults into Big League of World Diplomacy,”
Spiegel Online, May 25, 2010; Carlo Patti, "Brazil and the Nuclear Issues in the Years of the Luiz Inácio Lula da Silva
Government (2003-2010)," Revista Brasileira de Política Internacional, vol. 53, no. 2 (2010).
92 William J. Burns, Deputy Secretary of State, “Building a Deeper Partnership with Brazil,” Remarks in Rio de
Janeiro, Brazil, March 1, 2012.
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on bilateral, hemispheric, and global issues.”93 The United States and Brazil have established over
25 dialogues to enhance coordination and cooperation on a wide variety of issues. Among other
topics, the United States and Brazil engage on security, energy, trade, human rights, and the
environment.
Although Brazil and the United States share a number of common goals, the countries’
occasionally divergent national interests and independent foreign policies have led to
disagreements on trade and political matters. Some long-running disputes include the stalled
Doha trade negotiations and Brazilian opposition to U.S. support for cotton producers. Additional
differences have emerged in recent years, many of which have centered around the countries’
approaches to foreign policy. In 2010 and 2011, for example, Brazil used its temporary seat on the
U.N. Security Council to advocate engagement with internationally isolated regimes like Iran,
Libya, and Syria, rather than sanctions, which it views as a prelude to armed conflict. Some
analysts and policymakers assert that Brazil’s increasing global prominence and involvement on
an array of issues will inevitably lead to disputes with the United States and that managing those
disputes in a transparent and respectful manner will be key to maintaining friendly relations
moving forward.94
As a middle-income country, Brazil does not receive large amounts of U.S. foreign assistance.
Brazil received $25.1 million in U.S. aid in FY2010, $23.3 million in FY2011, and an estimated
$17.2 million in FY2012. The Obama Administration has requested just $6.1 million in foreign
assistance for Brazil in FY2013. U.S. assistance to the country is transitioning from supporting
development programs in Brazil to providing assistance designed to promote development in
third countries. About one-third of the FY2013 aid request would be used to strengthen the
Brazilian government's development agency (the Brazilian Cooperation Agency) and implement
jointly funded projects in other developing countries.95
On September 28, 2012, President Obama signed into law the Continuing Appropriations
Resolution, FY2013 (P.L. 112-175). The resolution funds regular foreign aid accounts at the same
level as in FY2012 plus 0.612%. The aid allocations for particular countries, such as Brazil, are
left to the discretion of the responsible agencies. Until a full year appropriation is approved,
however, the State Department and the U.S. Agency for International Development (USAID) plan
only to fund programs that are running out of resources or meet some urgent foreign policy
priority. The Continuing Appropriations Resolution expires on March 27, 2013.
Security Cooperation
Although U.S.-Brazilian cooperation on security issues has traditionally been limited, law
enforcement and military ties have increased in recent years. Areas of coordination include
counternarcotics, counterterrorism, and defense.
93 White House, National Security Strategy, May 2010, p. 44,
http://www.whitehouse.gov/sites/default/files/rss_viewer/national_security_strategy.pdf.
94 See, for example, Peter Hakim, “US-Brazil Relations: Expect More Conflict,” Infolatam, October 21, 2010; U.S.
Ambassador Thomas Shannon, “Prospects for U.S.-Brazil Bilateral Relations,” Remarks at Brazil-U.S. Business
Council Annual Plenary Meeting, December 7, 2010; and William J. Burns, Deputy Secretary of State, “Building a
Deeper Partnership with Brazil,” Remarks in Rio de Janeiro, Brazil, March 1, 2012.
95 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2013, April 3, 2012,
http://www.state.gov/documents/organization/185015.pdf.
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Counternarcotics
While Brazil is not a major drug-producing country, it is the second largest consumer of cocaine
in the world and serves as a transit country for illicit drugs from neighboring Andean countries
destined primarily for Europe. In recognition of these challenges, Brazil has taken several steps to
improve its antidrug efforts. In 2004, it implemented an air bridge denial program, which
authorizes lethal force for air interdiction, and in 2006, Brazil passed an anti-drug law that
prohibits and penalizes the cultivation and trafficking of illicit drugs. Under its Strategic Border
Plan, introduced in June 2011, the Brazilian government has deployed inter-agency resources to
strengthen border security in high-risk locations, including unmanned aerial vehicles (UAVs) to
monitor illicit activity along its borders and in the remote Amazon region.96 As part of this effort,
Brazil has signed agreements and carried out joint operations with neighboring countries.97
According to the U.S. Department of State, “Brazil’s focus on inter-agency cooperation and
border security resulted in significantly improved interdiction efforts in 2011.” Through October
2011, the federal police seized 15.2 metric tons of cocaine, 87.4 metric tons of marijuana,
194,776 dosage units of ecstasy, 72,492 dosage units of LSD, and 42,000 dosage unites of
methamphetamine.98
The United States and Brazil cooperate on counternarcotics issues in a number of ways. U.S.
counternarcotics assistance provides training for Brazilian law enforcement, assists interdiction
programs at Brazil’s international airports, supports drug prevention programs, and is designed to
improve Brazil’s capacity to dismantle criminal organizations. Brazil received $1 million in U.S.
counternarcotics assistance in FY2010, $1 million in FY2011, and an estimated $2.9 million in
FY2012. Under the Obama Administration’s request for FY2013, Brazil would receive $1.9
million in counternarcotics assistance.99
Brazil has also served as a bridge between the United States and Bolivia, which expelled the Drug
Enforcement Administration (DEA) from its territory in 2008 as a result of alleged interference in
the country’s internal affairs. Under a trilateral anti-drug cooperation agreement signed in January
2012, the United States and Brazil are providing assistance to Bolivia in the monitoring and
eradication of coca crops. According to the agreement, the United States is responsible for
providing monitoring equipment, Brazil is responsible for obtaining and interpreting satellite
images, and Bolivia is responsible for conducting any necessary field work.100
96 U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, 2012 International
Narcotics Control Strategy Report (INCSR), March 7, 2012, http://www.state.gov/j/inl/rls/nrcrpt/2012/index.htm;
“Hermes 450: O Vigilante Das Fronteiras Brasileiras,” Terra (Brazil), August 25, 2011.
97 “Brazil-Region: Flying Start for the New ‘Border Strategy’,” Latin American Security & Strategic Review, July
2011.
98 INCSR, 2012, op.cit.
99 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2012, April 2011,
and Congressional Budget Justification for Foreign Operations, Fiscal Year 2013, April 3, 2012.
100 “Signing of Trilateral Agreement on the Integrated Monitoring System for Surplus Coca Cultivation Reduction Pilot
Project,” Joint Communiqué, January 20, 2012.
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Counterterrorism and the Tri-Border Area101
The Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay has long been used for arms
smuggling, money laundering, and other illicit purposes. According to the State Department’s
Country Reports on Terrorism, there are no known operational cells of al Qaeda or Hezbollah-
related groups in the hemisphere; however, the United States remains concerned that the proceeds
from legal and illegal goods flowing through the TBA could potentially be diverted to support
terrorist groups.102 The United States joined with the countries of the TBA in the “3+1 Group on
Tri-Border Area Security” in 2002 and the group built a Joint Intelligence Center to combat trans-
border criminal organizations in the TBA in 2007.
In December 2010, the U.S. Treasury Department sanctioned Hezbollah's chief representative in
South America, Bilal Mohsen Wehbe, for transferring funds collected in Brazil to Hezbollah in
Lebanon. According to the Treasury Department, Wehbe and an associate raised more than
$500,000 from Lebanese businessmen in the TBA following the 2006 conflict between Israel and
Hezbollah. Wehbe also reportedly has overseen Hezbollah’s counterintelligence activity in the
TBA and has worked for the office of Iranian Supreme Leader Ayatollah Ali Khamene'i.103
Beyond efforts in the TBA, the United States has worked bilaterally with Brazil to improve its
counterterrorism capabilities. The United States has worked with Brazil to implement the
Container Security Initiative (CSI) at the port of Santos, and U.S. authorities are currently
training Brazilian airline employees to identify fraudulent documents. The State Department’s
Country Reports on Terrorism for 2011 states “the Brazilian government continued to support
counterterrorism-related activities, including investigating potential terrorism financing,
document forgery networks, and other illicit activity.”104 Brazil has yet to adopt legislation,
however, to make terrorism and terrorism financing autonomous offenses. Like many other Latin
American nations, Brazil has been reluctant to adopt specific antiterrorism legislation as a result
of the difficulty of defining terrorism in a way that does not include the actions of social
movements and other groups whose actions of political dissent were condemned as terrorism by
repressive military regimes in the past.105 Nevertheless, some Brazilian officials have pushed for
antiterrorism legislation, asserting that the country will face new threats as a result of hosting the
2014 World Cup and the 2016 Olympics.106
101 For more information, see CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan and June S.
Beittel.
102 U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism 2011, July
31, 2012, http://www.state.gov/j/ct/rls/crt/2011/195546.htm.
103 U.S. Department of the Treasury, “Treasury Targets Hizballah Financial Network,” Press Release, December 9,
2010.
104 Country Reports on Terrorism 2011, 2012, op.cit.
105 “Anti-Terrorism Law Project Scrapped,” Latin American Security & Strategic Review, January 2008; Juliana
Barbassa, “Brazil Denies Terrorists Operate Within Borders,” Associated Press, September 3, 2011.
106 Guila Flint, “Jobim Alerta para Ameaça de Atentados e Diz que País Deve se Preparar para Problemas Durante
Copa e Olimpíadas,” O Globo (Brazil), January 26, 2010; “High Risk of Terror Attacks During 2014 World Cup:
Police,” Agence France Presse, November 17, 2011.
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Defense
According to the U.S. Department of Defense, cooperation with Brazil’s Ministry of Defense and
the Brazilian military is closer today than it has been at any point in over 30 years. The U.S. and
Brazilian militaries have worked together closely in Haiti, where Brazil commands the U.N.
Stabilization Mission (MINUSTAH). Joint efforts in the aftermath of Haiti’s January 2010
earthquake were the largest combined operations of U.S. and Brazilian military forces since
World War II. In April 2010, the United States and Brazil signed a Defense Cooperation
Agreement designed to promote cooperation in areas such as research and development,
technology security, and acquisition of defense products and services. This was followed by a
General Security of Military Information Agreement, signed in November 2010, which will
facilitate the sharing of classified defense and military information. In an effort to elevate bilateral
defense ties, President Rousseff joined with President Obama in April 2012 to launch a
presidential-level Defense Cooperation Dialogue. Additional areas of defense cooperation include
information exchanges, combined military training, and joint military exercises.107
Two pending defense procurement deals could impact future military ties between the United
States and Brazil. The Brazilian air force intends to purchase 36 new fighter jets, and the Boeing
F/A-18 Super Hornet is one of three finalists along with the Saab JAS-39 Gripen of Sweden and
the Dassault Rafale of France. Brazil’s National Defense Strategy places significant emphasis on
building the country’s domestic defense industry, and technology transfer is reportedly a top
consideration in the fighter deal. According to U.S. officials, the technology transfer package the
United States has offered is unprecedented in the U.S.-Brazil relationship and is the same type of
package that the United States provides its closest partners in the North Atlantic Treaty
Organization (NATO).108 Nevertheless, Brazilian officials remain wary of relying on U.S.
hardware as a result of past experiences109 in which the U.S. government blocked sales of
Brazilian arms containing U.S. technology.110 A final decision has been delayed for several years
and is reportedly now scheduled for mid-2013.111
The U.S. Air Force is currently considering purchasing 20 A-29 Super Tucano light attack
aircraft, produced by Brazil’s Embraer in partnership with U.S.-based Sierra Nevada, to be
provided to the Afghan military for counterinsurgency and training purposes. The Air Force
awarded the $355 million contract to Embraer in late December 2011, but the procurement
process was challenged by U.S.-based Hawker Beechcraft. After temporarily suspending the
contract in January 2012, the Air Force cancelled the order in late February 2012. Brazilian
officials expressed displeasure with the sudden cancellation, and asserted that the decision would
not be “conducive to strengthening relations between the two countries on defense affairs.” 112
Some reports have suggested that the cancellation was for political, rather than technical reasons,
and Sierra Nevada is suing the Air Force to have the original contract reinstated. A second
107 U.S. Department of Defense, Office of the Secretary of Defense, “Fact Sheet: U.S.-Brazil Defense Cooperation,”
March 14, 2011.
108 Jeb Blount and Guillermo Parra-Bernal, “US Jet Contract Decision ‘Surprised Brazil Gov’t,” Reuters, March 1,
2012.
109 In 2006, for example, the United States prevented Brazil from selling 24 Super Tucano light attack planes to
Venezuela.
110 “No Brazil Fighter Jet Decision Before Lula Leaves,” Agence France Presse, December 7, 2010.
111 Brian Winter, “Brazil Delays Jets Decision Until 2013; Boeing Ascendant,” Reuters, September 24, 2012.
112 Joe Leahy, “Brazil Warns US Over Cancelled Aircraft Deal,” Financial Times, March 2, 2012.
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bidding process between the two competitors is now closed and the Air Force expects to
announce the winner in early 2013.113
Energy Cooperation
Energy has been another important area of U.S-Brazilian cooperation in recent years. Brazil is
widely regarded as a world leader in energy policy for successfully reducing its reliance on
foreign oil through the development of alternative energy resources and increased domestic
production. In addition to being the world’s second-largest producer of ethanol, Brazil currently
generates 85% of its electricity through hydropower. Brazil also has recently discovered large
offshore oil deposits that have the potential to turn the country into a major oil and gas producer
and an important source of energy for the United States.114 To facilitate greater cooperation in the
development of safe, secure, and affordable energy, President Obama and President Rousseff
launched a Strategic Energy Dialogue in March 2011.
Ethanol and Other Biofuels115
Brazil stands out as an example of a country that has become a net exporter of energy, partially by
increasing its use and production of ethanol. In 1975, in response to sharp increases in global oil
prices, the Brazilian government began a national program to promote the production and
consumption of sugarcane ethanol. Brazil now produces some 390,000 barrels per day.116 Within
Brazil, pure ethanol is available at nearly every fueling station and gasoline is required to include
a 20% ethanol blend. About 90% of new cars sold in Brazil each year are fitted with “flex-fuel”
engines capable of running on fuel blends ranging from pure ethanol to pure gasoline. As a result,
ethanol accounts for over half of all fuel pumped in Brazil.117
On March 9, 2007, the United States and Brazil, the world’s two largest ethanol-producing
countries, signed a memorandum of understanding to promote greater cooperation on ethanol and
biofuels. The agreement involves (1) technology sharing between the United States and Brazil;
(2) feasibility studies and technical assistance to build domestic biofuels industries in third
countries; and (3) multilateral efforts to advance the global development of biofuels.118 Over the
past five years, the United States and Brazil have moved forward on all three facets of the
agreement. Presidents Obama and Rousseff signed onto a partnership agreement for the
development of aviation biofuels in March 2011,119 and in October 2011, Boeing and Brazil’s
113 Vinod Sreeharsha, “Embraer, Hawker Beechcraft Face Off Again Over Planes for Afghanistan,” McClatchy
Newspapers, June 15, 2012.
114 Energy Information Administration (EIA), “Country Analysis Briefs: Brazil,” February 28, 2012.
115 For more information on biofuels, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging
Issues, by Randy Schnepf .
116 EIA, 2012, op.cit.
117 Chris Kraul, “Brazil Raises Cane Over U.S. Ethanol Barriers; Proponents Say Sugar-Based Fuel is a Better Choice
than Corn,” Los Angeles Times, November 4, 2009; “Brazil: Long-term Ethanol Outlook Remains Bright,” Oxford
Analytica, October 6, 2009; Leonardo Goy, “Brazil to Cut Ethanol Blend in Gasoline from Oct. 1,” Reuters, August 30
2011.
118 U.S. Department of State, Office of the Spokesman, “Memorandum of Understanding Between the United States
and Brazil to Advance Cooperation on Biofuels,” March 9, 2007, http://www.state.gov/p/wha/rls/158654.htm.
119 The “Partnership for the Development of Aviation Biofuels” agreement is available at
http://www.whitehouse.gov/sites/default/files/uploads/Partnership_Development_Aviation_Biofuels.pdf.
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Embraer announced plans to build a joint research center.120 Brazil and the United States have
also worked together in a number of Latin American, Caribbean, and African countries. In March
2011, Presidents Obama and Rousseff agreed to commit $3 million to support the development of
legal regimes and domestic biofuels production in the Dominican Republic, El Salvador,
Guatemala, Haiti, Honduras, Jamaica, and Senegal.121 Additionally, the United States and Brazil
are working with other members of the International Biofuels Forum (IBF) to make biofuels
standards and codes more uniform.
Brazil and the United States have taken steps to liberalize trade in ethanol over the past year. In
December 2011, the Brazilian government issued a resolution to extend its duty-free treatment of
imported ethanol until December 31, 2015.122 Similarly, Congress allowed a 54-cent-per-gallon
duty on imported ethanol to expire at the end of 2011. Prior to its expiration, the duty served as a
significant barrier to direct imports of Brazilian ethanol in most years. Although some Brazilian
ethanol was allowed to enter the United States duty-free after being reprocessed in Caribbean
Basin Initiative (CBI) countries, such imports could only account for up to 7% of the U.S. ethanol
market. A 2.5% ad valorem tariff on ethanol imports to the United States remains in place
permanently unless the Harmonized Tariff Schedule code is changed. A bill introduced in April
2012, H.R. 4621 (Rangel), would authorize the President to enter into negotiations with Brazil to
obtain open and reciprocal market access for trade in ethanol products.
Oil
In recent years, Brazil has discovered substantial new oil fields off its coast that have the potential
to turn the country into one of the top five oil and gas producers in the world,123 and an important
source of energy for the United States. The new discoveries are so-called “pre-salt” reserves,
located beneath layers of rock and salt up to 23,000 feet below the ocean surface. Analysts have
estimated that the total recoverable reserves of pre-salt oil and natural gas may exceed 50 billion
barrels of oil equivalent.124
In December 2010, the Brazilian Congress approved a new regulatory framework for developing
the approximately 70% of pre-salt reserves that have not already been auctioned off.125 The new
framework will increase the state’s role in hopes of using the resources to fuel long-term
economic and social development. Among other provisions, the framework establishes state-
owned Petróleo Brasileiro S.A. (Petrobras) as the sole operator for all new offshore projects;
replaces the existing concessionary model with a production sharing regime; guarantees Petrobras
a minimum 30% stake in all new joint ventures; creates a new public company—Petrosal—to
manage the development of the offshore reserves; and creates a new social fund overseen by the
Brazilian Congress to direct offshore revenues toward four key areas: education, infrastructure,
science and technology, and poverty reduction.126 The development of these reserves may be
120 Brian Winter, “Insight-U.S. and Brazil: At Last, Friends on Ethanol,” Reuters, September 14, 2012.
121 White House, Office of the Press Secretary, “Fact Sheet: U.S.-Brazil Strategic Energy Dialogue,” March 19, 2011.
122 Ministério do Desenvolvimiento, Indústria e Comércio Exterior, Câmara de Comércio Exterior (CAMEX),
Resolução N° 94, de 8 de Dezembro de 2011.
123 Mark S. Langevin, Brazil's Hydrocarbon Bonanza: Can the State Manage Pre-Salt Production for National
Development and Geopolitical Power?, Brazil-Works, Discussion Paper, May 2012.
124 EIA, 2012, op.cit.
125 Langevin, 2012, op.cit.
126 “Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long-
(continued...)
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delayed, however, as there is currently considerable debate within the Brazilian Congress
regarding the distribution of oil royalties, and Petrobras is unable to auction the rights to the fields
until a new royalties framework is in place.127
Exploiting the new fields will be difficult and costly. Some foreign investors have questioned
whether Petrobras will be able to access sufficient finance to develop the pre-salt reserves given
the enlarged role of the Brazilian government under the new regulatory framework and increased
concerns about offshore oil drilling as a result of the 2010 BP oil spill in the Gulf of Mexico.128
Other analysts maintain that the Brazilian reserves are becoming ever-more attractive as a result
of the rising price of oil and Brazil’s political stability at a time of conflict in other oil producing
nations.129 Petrobras intends to invest $141.8 billion in exploration and production between 2012
and 2016, $67.1 billion of which will go toward developing the pre-salt reserves.130
Brazil and the United States are working together under the Strategic Energy Dialogue to foster
the safe and efficient development of oil reserves in both countries. Through technical workshops
and other activities, government regulators and private industry have exchanged best practices on
issues such as spill response, well integrity, subsea containment, the use of dispersants, and
national contingency plans. Brazil and the United States have also cooperated on financing. In
April 2009, the Export-Import Bank of the United States offered to consider up to $2 billion in
financing to secure the purchase of U.S. goods and services by Petrobras. The Bank has approved
$300 million in financing so far, and has told Petrobras that it would consider increasing its offer
above $2 billion if requested.131
Trade Relations
Trade issues play a central role in U.S.-Brazil relations. Although both countries have been
closely involved in global, regional, and sub-regional trade talks, they have frequently disagreed
on the substance of trade agreements. Within the World Trade Organization (WTO) Doha Round
of multilateral trade negotiations132 that began in 2001, for example, Brazil has led the G-20
group of developing countries in insisting that developed countries agree to reduce and eventually
eliminate agricultural subsidies as part of any settlement. Similarly, opposition from Brazil and
other South American countries effectively killed the U.S.-backed Free Trade Area of the
Americas (FTAA) in 2005.
(...continued)
Term Perspective,” Oxford Analytica, May 2010.
127 “Brazil: O Petróleo é Nosso,” Latin American Regional Report: Brazil & Southern Cone, November 2011; “No
Brazil Oil Royalty Vote Before 2012-Minister,” Reuters, November 17, 2011.
128 “Brazil’s Golden Times Start to Roll,” Latin News Daily, September 3, 2008; “Hydrocarbons Potential Poses Major
Challenges,” Oxford Analytica, November, 20, 2007; “Brazil Industry: Petrobras Under Pressure,” Economist
Intelligence Unit, August 26, 2010.
129 Danielle Nogueira and Ramona Ordonez, “Conflitos no Oriente Médio Tornam Pré-Sal Mais Atraente,” O Globo
Online (Brazil), March 2, 2011.
130 Janes Rocha, “Mesmo com Incertezas, Pré-sal Estimula Projetos,” Valor Online (Brazil), September 25, 2012.
131 Export-Import Bank of the United States, “Facts About Ex-Im Bank Loans to Support Petrobras’s Purchases of
Goods and Services Made by American Workers,” May 27, 2011.
132 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
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During President Obama’s March 2011 visit to Brazil, the U.S. and Brazilian governments
concluded an Agreement on Trade and Economic Cooperation. The agreement creates a new
bilateral trade dialogue designed to foster deeper cooperation on issues such as intellectual
property rights, trade facilitation, and technical barriers to trade.133 During Secretary of State
Clinton’s April 2012 visit to Brazil, she indicated that the United States is interested in furthering
trade relations by negotiating a bilateral investment treaty and eventually a free trade
agreement.134 It is unlikely that the United States and Brazil will complete such agreements in the
near-term, however, as Brazil has never ratified a bilateral investment treaty, and the two
countries continue to have significant differences regarding trade issues.135
Brazil currently benefits from the Generalized System of Preferences (GSP), which provides
duty-free tariff treatment to certain products imported from developing countries. According to
Brazil’s Ministry of Development, about 13% of Brazilian exports fall under the umbrella of
GSP.136 Some Brazil-based subsidiaries of U.S. companies are among those that benefit. On
October 21, 2011, the President signed the Trade Adjustment Assistance Extension Act of 2011
(P.L. 112-40), extending GSP until July 31, 2013.137
Trade between the United States and Brazil totaled $74.3 billion in 2011, an increase of 25% over
2010 levels. U.S. exports to Brazil were valued at $42.9 billion while U.S. imports from Brazil
were valued at $31.4 billion. The United States is Brazil’s second-largest trading partner, behind
China, and Brazil is the eighth-largest trading partner of the United States. Top U.S. exports to
Brazil include machinery, oil and coal, and civilian aircraft and parts. The top U.S. imports from
Brazil are crude oil, iron and steel, machinery, and coffee.138
In September 2012, H.R. 6539 (Nunes) was introduced in the House. The bill would establish a
United States-Brazil Joint Commission on Commerce and Trade. Among other activities, the 16-
member bilateral commission would address bilateral trade matters, seek removal of trade
barriers, and promote commercial opportunities between the United States and Brazil.
Cotton Dispute139
Over the past eight years, Brazil and the United States have been involved in a dispute over U.S.
government support for cotton farmers. In 2002, Brazil went to the WTO to challenge several
provisions of the U.S. cotton program. A WTO dispute settlement panel ruled in Brazil’s favor in
2004, finding that certain U.S. agricultural support payments and export guarantees were
133 White House, Office of the Press Secretary, “Strengthening the U.S.-Brazil Economic Relationship,” March 19,
2011.
134 “Clinton: EEUU Quiere Avanzar Hacia Acuerdo de Libre Comercio con Brasil,” Agence France Presse, April 16,
2012.
135 See, for example, Doug Palmer and Brad Haynes, “U.S. Warns Brazil on Tariffs, Gets Stinging Rebuke,” Reuters,
September 20, 2012.
136 “Deputados dos EUA Renovam Redução de Taxas,” Folha de São Paulo, September 9, 2011.
137 For more information on GSP, see CRS Report RL33663, Generalized System of Preferences: Background and
Renewal Debate, by Vivian C. Jones
138 U.S. Department of Commerce and Brazilian Foreign Trade Secretariat data made available by Global Trade Atlas,
March 2012.
139 For more information on the U.S.-Brazil WTO cotton dispute, see CRS Report RL32571, Brazil’s WTO Case
Against the U.S. Cotton Program by Randy Schnepf.
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inconsistent with its WTO commitments. Although Congress modified agricultural support
programs in 2005, a WTO compliance panel ruled in 2007 that the U.S. actions were
insufficient.140 Following a ruling from a WTO arbitration panel, Brazil announced in March
2010 that it intended to impose retaliatory measures against the United States worth $829 million,
including $591 million in higher tariffs on a range of U.S. products and $239 million through
suspension of certain intellectual property rights obligations.
The United States reached a temporary agreement with Brazil in June 2010 to avoid the WTO-
sanctioned retaliatory measures. Under the agreement, the United States pledged to make some
short-term changes to its export credit guarantees and provide the Brazil Cotton Institute with
$147 million annually for a fund to assist Brazilian cotton farmers with technical assistance,
marketing, and market research. In exchange, Brazil agreed to temporarily suspend its retaliation
with the intention of reaching a permanent agreement with the United States after Congress has
an opportunity to adjust the subsidy program.141 A bill that would prohibit payments to the Brazil
Cotton Institute, H.R. 5143 (Kind), was introduced in April 2012. If enacted, the United States
would be unable to comply with the terms of the temporary agreement.
Congress is currently considering changes to the cotton program as part of the 2012 farm bill. The
Senate passed its version of the bill, S. 3240, on June 26, 2012. The House version, H.R. 6083,
was reported out by the Committee on Agriculture on September 13, 2012. Both of the
accompanying committee reports (S.Rept. 112-203142 and H.Rept. 112-669) assert that the bills
would make modifications to the cotton program that should allow the United States to meet its
WTO obligations and reach a permanent agreement with Brazil. The Brazilian government has
objected to several of the provisions that are included in both bills, however, and maintains that
some of the potential modifications “seem to have actually made things worse.”143
Intellectual Property Rights
Brazil and the United States have periodically engaged in disputes over intellectual property
rights. One issue of particular concern to the U.S. government has been Brazil’s threats to issue
compulsory licenses for patented pharmaceutical products. Internationally recognized as having
one of the world’s most successful HIV/AIDS programs, Brazil has guaranteed its citizens
universal free access to antiretroviral therapy (ART) since 1996. In 2001, Brazil decided to
develop generic ART drugs under the compulsory licensing provision of its patent law, and
thereby reduce treatment costs. In response, the United States submitted a complaint to the
WTO—which it later withdrew—asserting that Brazil’s practices violated the Trade-Related
Aspects of Intellectual Property Rights (TRIPS) agreement. While the pharmaceutical industry
argued that TRIPS was an essential tool to protect intellectual property rights, developing
countries (like Brazil) countered that TRIPS inhibited their ability to fight public health
140 “WTO Tells U.S. to Act on Illegal Cotton Subsidies,” Financial Times, December 19, 2007.
141 Swell Chan, “U.S. and Brazil Reach Agreement on Cotton Dispute,” New York Times, April 6, 2010; Ana Nicolaci
da Costa, “Brazil Suspends Retaliation in U.S. Cotton Row,” Reuters, June 17, 2010.
142 The Senate report is available at: http://www.ag.senate.gov/download/?id=5d91a4e4-d805-4623-ae71-
8402bd6b912e.
143 Letter from Mauro Vieira, Ambassador of Brazil to the United States, to the Honorable Debbie Stabenow,
Chairwoman of the Senate Committee on Agriculture, Nutrition & Forestry, July 13, 2012. For more information on
the farm bill, see CRS Report R42552, The 2012 Farm Bill: A Comparison of Senate-Passed S. 3240 and the House
Agriculture Committee’s H.R. 6083 with Current Law, coordinated by Ralph M. Chite.
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emergencies in a cost-effective manner. In 2003, the WTO temporarily waived some provisions
of the TRIPS agreement to allow the export of generic drugs to countries confronting a grave
public health challenge (such as HIV/AIDS, tuberculosis, or malaria). The waiver was made
permanent in 2005.
Since the public health exception to the TRIPS agreement was made permanent, Brazil has
issued, or threatened to issue, compulsory licenses on patented pharmaceutical products on
several occasions. In 2007, Brazil broke a patent on a drug used to treat HIV/AIDS that is
produced by Merck & Co. in order to save the Brazilian government an estimated $240 million
over five years.144 Brazil now produces 10 of the 20 drugs used to treat HIV/AIDS and distributes
them to African and Latin American countries.145 In 2009, Brazil suggested that developing
countries should be allowed to lift patent rights to produce more vaccine to battle the A(H1N1)
flu epidemic.146
According to the U.S. Trade Representative (USTR), Brazil has improved its record on protecting
intellectual property rights in recent years. In recognition of this progress, USTR lowered Brazil
from the Priority Watch List of countries with significant intellectual property rights violations to
the Watch List in 2007. The country has remained on the Watch List every year since 2007,
however, as USTR remains “concerned about the widespread availability of pirated and
counterfeit products in Brazil.” In its 2012 Special 301 Report, USTR commended Brazil’s
enforcement efforts, which led to the seizure of over $1 billion worth of pirated and counterfeit
goods in 2011. USTR also urged Brazil to arrest and prosecute those responsible, and strengthen
its copyright law.147 The United States and Brazil are currently working to improve their
cooperation on intellectual property rights issues under the Agreement on Trade and Economic
Cooperation signed in March 2011.148
Human Rights
According to the U.S. State Department’s Country Reports on Human Rights Practices, the most
significant human rights abuses reported in Brazil in 2011 were “substandard prison conditions;
human trafficking, especially sex trafficking of children and adolescents; and forced labor.” Other
human rights problems included “excessive force, beatings, abuse, and torture of detainees and
inmates by police and prison security forces; prolonged pretrial detention and inordinate delays of
trials; violence and discrimination against women; violence against children, including sexual
abuse; violence based on sexual orientation; discrimination against indigenous persons and
minorities; insufficient enforcement of labor laws; and child labor in the informal sector.” The
report asserts that the Brazilian government prosecuted officials who committed abuses but
lengthy appeals processes remained a problem.149
144 “Brazil to Break Merck AIDS Drug Patent: Government Wants Lower Price on Anti-retroviral Medication,”
Associated Press, May 4, 2007.
145 “Brazil Says it has AIDS under Control,” Agence France Presse, November 29, 2011.
146 “Update: Argentina, Brazil Question Swine Flu Vaccine Patents,” CNN Money, July 24, 2009.
147 U.S. Trade Representative, Special 301 Report, April 2012,
http://www.ustr.gov/sites/default/files/2012%20Special%20301%20Report_0.pdf.
148 The agreement is available at: http://www.whitehouse.gov/sites/default/files/uploads/Brazil_ATEC.pdf.
149 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, Country Reports on Human Rights
Practices for 2011, May 24, 2012, http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.
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Trafficking in Persons150
According to the U.S. State Department’s Trafficking in Persons Report, Brazil does not fully
comply with the minimum standards for the elimination of trafficking, but is making significant
efforts to do so. As a result, it is listed as a Tier 2 country.151 Brazil is a large source country for
men, women, and children trafficked for commercial sexual exploitation. Some are exploited in
sex trafficking within the country while others are trafficked to neighboring countries or abroad to
Europe and the United States. Brazil is also a source country for men and children subject to
forced labor within the country.152 Between 25,000 and 40,000 Brazilian men have reportedly
been recruited to labor in slave-like conditions, typically on cattle ranches, logging and mining
camps, and sugar-cane plantations.153
Over the past year, the Brazilian government has taken a number of actions to address the
problem of human trafficking. The Brazilian Tourism Ministry began a campaign against sex
tourism, asking websites to remove content related to sex tourism and distributing posters
warning of criminal penalties for the sexual exploitation of minors.154 The Ministry of Labor’s
mobile units rescued 2,428 victims from slave-like labor conditions, provided $3.4 million in
back-pay and damages to rescued workers, and maintained a “dirty list” of 294 employers that are
responsible for slave-like labor. Additionally, the Brazilian government secured convictions in
nine human trafficking cases. At the same time, government-provided services for trafficking
victims remained inadequate, only 10% of slave-like labor cases were criminally prosecuted, and
a significant number of those rescued from slave-like labor were re-trafficked.
The State Department report offers a number of recommendations for Brazil. It calls for the
Brazilian government to increase efforts to investigate and prosecute trafficking offenses, and
adopt legislation to apply more stringent sentences to trafficking offenders. It also calls for the
Brazilian government to increase dedicated funding to provide specialized services to trafficking
victims. Moreover, the State Department report suggests that Brazil should enhance collaboration
between government entities, and increase anti-trafficking training for law enforcement and
judicial officials.155
150 For more information, see CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando Seelke.
151 Since 2001, the U.S. State Department has evaluated foreign governments’ efforts to combat trafficking in persons
in its annual Trafficking in Persons (TIP) reports, which are issued each June. Countries are grouped into four
categories according to the U.S. assessment of efforts they are making to combat trafficking. Tier 1 is made up of
countries deemed by the State Department to have a serious trafficking problem but fully complying with the minimum
standards for the elimination of trafficking. Those standards are defined in the Victims of Trafficking and Violence
Protection Act of 2000 (P.L. 106-386) as amended. Tier 2 is composed of governments not fully complying with those
standards but which are seen as making significant efforts to comply. Tier 2 Watch List, first added as a category in the
2004 report, is made up of countries that are on the border between Tier 2 and Tier 3. Tier 3 includes those countries
whose governments the State Department deems as not fully complying with TVPA’s anti-TIP standards and not
making significant efforts to do so. Tier 3 countries have been subject to U.S. sanctions since 2003.
152 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2012, June 19, 2012, http://www.state.gov/j/tip/rls/tiprpt/2012/index.htm.
153 Christopher Looft, “Senator’s Trial Points to Modern-Day ‘Slaves’ in Brazil,” InSight: Organized Crime in the
Americas, March 9, 2012.
154 “Brazil Takes on Websites that Promote Sex Tourism,” Associated Press, March 27, 2012.
155 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, Trafficking in Persons Report
2012, June 19, 2012.
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Violent Crime and Abuses by Police
Most observers agree that the related problems of urban crime, illicit drug use, and violence, on
the one hand, and corruption and brutality in law enforcement and prisons, on the other, are
threatening citizens’ security in Brazil. Crime is most prevalent in urban shanty towns (favelas) in
Rio de Janeiro and São Paulo. Violence traditionally has been linked to turf wars being waged
between rival gangs for control of the drug industry or to clashes between drug gangs and police
officers, some of whom have formed paramilitary militias that rid their communities of drug
gangs only to engage in the very same illicit activities.
As police forces in São Paulo and Rio de Janeiro have employed strong-arm tactics designed to
curb rampant criminality, some human rights groups have raised concerns over extrajudicial
killings. Upon completing a November 2007 visit to Brazil, a U.N. Special Rapporteur concluded
that police in Brazil are allowed to “kill with impunity in the name of security.”156 Indeed, more
than 11,000 people were killed by the two police forces between 2003 and 2009. Although the
officers involved reported nearly all of the killings as legitimate acts of self defense, or
“resistance killings,” a two-year investigation by Human Rights Watch concluded that “a
substantial portion of the alleged resistance killings reported ... [were] in fact extrajudicial
executions.” The Human Rights Watch report also indicated that those police officers responsible
for extrajudicial killings enjoy near total impunity. For example, of the over 7,800 complaints
against police officers recorded by the Rio Police Ombudsman’s Office between 2000 and 2009,
only 42 generated criminal charges by state prosecutors and just 4 led to convictions.157
Analysts have long asserted that Brazilian politicians at all levels of government have failed to
devote the resources and political will necessary to confront the country’s serious public security
problems; however, there have been a number of efforts in recent years to improve the situation.
During the Lula Administration, federal government expenditures on public security more than
tripled.158 Under the National Program for Public Safety with Citizenship (Programa Nacional de
Segurança Pública com Cidadanía, PRONASCI), the Brazilian government improved
coordination of federal violence prevention and law enforcement strategies, and placed greater
emphasis on social policies and human rights.159 In September 2012, President Rousseff signed
legislation criminalizing membership in militias, paramilitary organizations, and death squads.
Affiliation with such groups—which often include members of the police, military, and fire
squads—is now punishable with four to eight years in jail.160
Some state level efforts have also improved. One of the more high profile examples is the state of
Rio de Janeiro’s “Favela Pacification Program.” Whereas previous law enforcement efforts
generally centered around quick raids followed by long periods of government neglect, the favela
pacification program is designed to establish a permanent state presence in areas controlled by
156 “Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions Concludes Visit to Brazil,” States News
Service, November 15, 2007.
157 Human Rights Watch, Lethal Force: Police Violence and Public Security in Rio de Janeiro and São Paulo,
December 2009, http://www.hrw.org/sites/default/files/reports/brazil1209webwcover.pdf.
158 “Recent Public Security Policies in Brazil,” Document provided in a meeting with officials from Brazil's Ministry of
External Relations, December 9, 2010.
159 Joe Bateman, “Brazilian Citizen Security Policies: Variety of Experiences Useful in Regional Debates,” Washington
Office on Latin America (WOLA), August 22, 2012.
160 “Brasil: Será Delito Integrar Groups de Exterminio, Milicias y Paramilitares,” Agence France Presse, September 28,
2012.
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organized crime. Under the initiative, elite police units enter favelas and clear them of drug
gangs. Newly recruited Police Pacification Units (Unidades de Polícia Pacificadora, UPPs) then
set up a permanent security presence, and other governmental institutions establish basic social
services. UPPs are now present in 28 favelas and have enjoyed considerable success thus far.
According to a study of the first 13 UPPs established, intentional homicides decreased 58%,
deaths for “resisting authority” declined 98%, and robbery decreased 54% over four-and-a-half
years. Although there have been significant increases in reports of other criminal offenses—such
as domestic violence (290%), rape (164%), and theft (55%)—some analysts think the increases
may reflect a greater willingness by favela residents to report crimes to the police.161
Race and Discrimination
People of African descent in Brazil, also known as Afro-Brazilians, have long been
disproportionately affected by the country’s high level of inequality. Little concrete information
was available, however, until the Brazilian government began to collect better statistics on 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 and affirmative action legislation of any
country in Latin America. In 2001, Brazil became the first Latin American country to endorse
quotas to increase minority representation in government service. In 2003, Brazil became the first
country in the world to establish a special secretariat with a ministerial rank to manage racial
equity promotion policies. In 2010, Brazil enacted the Statute of Racial Equality, which offers tax
incentives for enterprises that undertake racial inclusion, stipulates that the government shall
adopt affirmative action programs to reduce ethnic inequalities, and reaffirms that African and
Brazilian black history should be taught in all elementary and middle schools, among other
provisions. Most recently, in August 2012, Brazil adopted an affirmative action law that requires
federal universities to reserve half of their spots for graduates of public high schools and
distribute those spots according to the racial makeup of each state.162 Although most Brazilians
favor government efforts to combat social exclusion, affirmative action initiatives have been
somewhat controversial.163
In March 2008, Brazil and the United States signed an agreement known as the United States-
Brazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality.
The initiative recognizes that Brazil and the United States are multi-ethnic, multi-racial
democracies, and seeks to promote equality of opportunity for the members of all racial and
ethnic communities. To that end, Brazil and the United States share best practices through
activities such as training programs, workshops, technical expert exchanges, scholarships, and
public-private partnerships.164 Current areas of focus include: expanding access to education for
students of African descent, eliminating racial health disparities, mitigating environmental
161 “UPPs Succeed in Lowering Violent Crime Rates,” Latin News Daily, September 19, 2012.
162 Simon Romero, “Brazil Enacts Affirmative Action Law for Universities,” New York Times, August 30, 2012.
163 Diogo Schelp, “Queremos Dividir o Brasil como na Foto?” Veja, September 2, 2009; “Affirming a Divide,”
Economist, January 28, 2012.
164 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” April 11, 2012.
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impacts in communities of African descent, addressing challenges in criminal justice systems, and
guaranteeing equal access to economic opportunities.165 Congress called for continued U.S.
support for the Joint Action Plan in the report (H.Rept. 112-331) accompanying the Consolidated
Appropriations Act of 2012 (P.L. 112-74).
Amazon Conservation
The Amazon basin spans the borders of eight countries and is the most biodiverse tract of tropical
rainforest in the world. It holds 20% of the Earth’s fresh water and 10% of all known species. The
Amazon also holds 10% of the world’s carbon stores and absorbs nearly 2 billion tons of carbon
dioxide each year, making it a sink for global carbon emissions and an important asset in the
mitigation of climate change. Approximately 60% of the Amazon falls within Brazilian borders,
making Brazil home to 40% of the world’s remaining tropical forests.166 The Brazilian Amazon
was largely undeveloped until the 1960s, when the military government began subsidizing the
settlement and development of the region as a matter of national security. The human population
grew from 6 million in 1960 to 25 million in 2010, and approximately 20% of the Brazilian
Amazon has now been deforested as a result of settlements, roads, logging, farming and other
activities.167
Recognizing that continued destruction of the Amazon is damaging to Brazil’s global image and
could threaten energy generation and agricultural production in the future,168 the Brazilian
government has implemented a series of policies designed to slow deforestation. For example, the
Lula and Rousseff Administrations have significantly expanded the country’s nature reserves,
bringing Brazil’s total area of protected land to nearly 300,000 square miles.169 Likewise, the
Brazilian government adopted a plan to reduce the rate of Amazon deforestation by half—based
on the 1996-2005 average—to 2,300 square miles per year by 2017, and reduce Amazon
deforestation by 80% by 2020. To meet these targets, the Brazilian government is increasing
surveillance, replanting over 21,000 square miles of forest, and financing sustainable
development projects in areas where the local economy depends on logging.170 Brazil appears to
be on track to achieve its goals, as annual deforestation has fallen from about 10,700 square miles
in 2004 to about 2,500 square miles in 2011.171 There is considerable debate as to whether these
decreases are the result of government policies or changing economic circumstances, such as
lower commodity prices. One recent study, which examined deforestation in the Brazilian
165 U.S. Department of State, Office of the Spokesperson, “U.S.-Brazil Joint Action Plan Technical Meeting,” August
20, 2012.
166 “Brazil: Global Warming Risks Threaten Amazonia,” Oxford Analytica, March 16, 2009; Conor Foley, “The End of
the Amazon?,” Foreign Policy, June 2009; Lesley K. McAllister, “Sustainable Consumption Governance in the
Amazon,” Environmental Law Reporter, December 2008; “Amazon: World’s Largest Tropical Rainforest and River
Basin,” World Wildlife Fund, 2009.
167 Bryan Walsh, “Amazonia: What’s Happening to the World’s Biggest Rain Forest?,” TIME, January 18, 2012.
168 See, for example, Fabiana Frayssinet, “Climate Change-Brazil: Farmers ‘Have Good Reason to Worry’,” Inter Press
Service, September 21, 2011; and “Amazonian Deforestation May Cut Rainfall by a Fifth: Study,” Agence France
Presse, September 5, 2012.
169 “Brazil: Government Policy for Amazon Still Ambiguous,” Latin News Weekly Report, May 22, 2008; “In
Anticipation of Rio+20, Brazil Creates New Nature Reserves and Closes Major Land-fill,” MercoPress, June 7, 2012.
170 “Government Sets Targets to Cut Deforestation,” Latin American Regional Report: Brazil & Southern Cone,
December 2008; “Brazil: Climate Credentials to the Fore in Copenhagen,” Oxford Analytica, November 19, 2009.
171 Fabiana Frayssinet, “Climate Change: Brazil Perfects Monitoring of Amazon Carbon Emissions,” Inter Press
Service, August 27, 2012.
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Amazon between 2005 and 2009, found that about half of the reduction in deforestation was
attributable to the Brazilian government’s conservation policies.172
Some environmentalists are concerned that government policy changes may halt or even reverse
Brazil’s recent progress in reducing deforestation. In December 2011, President Rousseff signed a
law transferring responsibility for environmental oversight of non-federal lands from Brazil’s
federal environmental agency, the Instituto Brasileiro do Meio Ambiente e dos Recursos
(IBAMA), to local officials. While the federal government maintains that local officials are better
placed to manage such resources, critics argue that local authorities lack the necessary finances
and are more susceptible to intimidation and corruption.173 Many environmentalists are also
concerned about potential changes to Brazil’s forest code—a law that requires rural landowners to
set aside between 20% and 80% of their land for natural vegetation. The Brazilian Congress
approved a major overhaul of the code in April 2012. Although President Rousseff vetoed some
of the most controversial provisions, the final version relaxes conservation requirements for
environmentally sensitive areas like river banks, reduces reforestation requirements for land that
has already been deforested, and decreases the total amount of forest that must be preserved.174
Supporters of the reform assert that it is necessary in order to bring farmers into compliance with
the law, and argue that the updated forest code remains among the strictest regulations of
privately-owned property in the world.175
U.S. environment programs in Brazil are designed to support tropical forest conservation through
the promotion of proper land-use and encouragement of environmentally friendly income
generation activities for the rural poor. In FY2006, USAID initiated the Amazon Basin
Conservation Initiative, which supports community groups, governments, and other organizations
working throughout the Amazon Basin to conserve the forest’s biodiversity. USAID provided
Brazil with $14 million for environmental programs in FY2010, $11.5 million in FY2011, and an
estimated $10 million in FY2012.176 Although the Obama Administration did not request any aid
for environmental programs in Brazil for FY2013, the report (S.Rept. 112-172) accompanying the
Senate version of the annual foreign aid appropriations bill, S. 3241, recommends $10 million to
continue USAID’s activities in the Brazilian Amazon.
In August 2010, the United States and Brazil signed a debt-for-nature agreement under the
Tropical Forest Conservation Act of 2008 (P.L. 105-214). According to the agreement, the United
States will reduce Brazil’s debt payments by $21 million over five years. In exchange, the
Brazilian government will commit those funds to activities to conserve protected areas, improve
natural resource management, and develop sustainable livelihoods in endangered areas outside of
the Amazon such as the Atlantic Rainforest, Caatinga, and Cerrado ecosystems.177
172 Juliano Assunção, Clarissa C. e Grandour, and Rudi Rocha, Deforestation Slowdown in the Legal Amazon: Prices
or Policies, Climate Policy Initiative, Working Paper, Rio de Janeiro, February 6, 2012,
http://climatepolicyinitiative.org/wp-content/uploads/2012/03/Deforestation-Prices-or-Policies-Working-Paper.pdf.
173 Paulo Prada, “Special Report: Brazil Backslides on Protecting the Amazon,” Reuters, August 3, 2012.
174 “Environmental Law in Brazil: Compromise or Deadlock?,” Economist, June 2, 2012; Fernanda Krakovics,
“Ruralistas Vencem, e Senado Aprova Novo Código Florestal,” O Globo (Brazil), September 26, 2012.
175 Reese Ewing, “Interview-Brazil Land Use Bill to Make Forests Profitable,” Reuters, June 1, 2011; Kátia Abreu,
“Código Florestal e a Busca da Perfeição,” Folha de São Paulo, September 29, 2012.
176 U.S. Agency for International Development (USAID), CN #122, August 18, 2011; USAID, CN #90, July 12, 2012.
177 U.S. Department of State, Office of the Spokesman, “Debt-for-Nature Agreement to Conserve Brazil’s Tropical
Forests,” August 12, 2010. For more information on the Tropical Forest Conservation Act, see CRS Report RL31286,
Debt-for-Nature Initiatives and the Tropical Forest Conservation Act: Status and Implementation, by Pervaze A.
(continued...)
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Author Contact Information
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
Acknowledgments
Clare Ribando Seelke, Specialist in Latin American Affairs, contributed to this report.
(...continued)
Sheikh.
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