Brazil: Political and Economic Situation and
U.S. Relations

Peter J. Meyer
Analyst in Latin American Affairs
March 27, 2014
Congressional Research Service
7-5700
www.crs.gov
RL33456


Brazil: Political and Economic Situation and U.S. Relations

Summary
The United States has traditionally enjoyed cooperative relations with Brazil, which is the
seventh-largest economy in the world and is recognized by the Obama Administration’s National
Security Strategy as an emerging center of influence. Administration officials have often
highlighted Brazil’s status as a multicultural democracy, referring to the country as a natural
partner that shares values and goals with the United States. Bilateral ties have been strained from
time to time, however, as the countries’ occasionally divergent national interests and independent
foreign policies have led to disagreements. U.S.-Brazilian relations have been particularly
strained over the past year as a result of alleged National Security Agency (NSA) activities inside
Brazil. Nevertheless, the countries continue to engage on issues such as trade, energy, security,
racial equality, and the environment.
Political and Economic Situation
Dilma Rousseff of the center-left Workers’ Party was inaugurated to a four-year presidential term
on January 1, 2011, inheriting a country that had benefited from 16 years of stable governance
under Presidents Fernando Henrique Cardoso (1995-2002) and Luis Inácio Lula da Silva (2003-
2010). She has spent much of her time in office focusing on domestic economic challenges.
Brazil experienced a rapid economic expansion from 2004 to 2010, but growth began to slow in
2011. While Rousseff’s efforts to stimulate domestic consumption and protect domestic industry
have helped keep unemployment near record lows, economic growth has yet to accelerate,
averaging 2% annually during the first three years of her term.
Rousseff has also had to contend with several political challenges. Mass demonstrations took
place across Brazil in June 2013, with protesters calling for better quality public services, among
other demands. Rousseff implemented some policy reforms in response to the demonstrations, but
smaller-scale protests have continued to occur and could grow in size in the lead-up to Brazil
hosting the World Cup in June and July 2014. The Brazilian Congress has provided additional
challenges for Rousseff, with some sectors of her multiparty coalition opposing her legislative
initiatives. Although Rousseff’s approval rating declined significantly during 2013, it has partially
recovered and stood at 41% in February 2014. National and state elections are scheduled for
October 2014, and early polling suggests Rousseff is favored to win reelection.
Congressional Action
Brazil has remained a subject of interest in the 113th Congress. In June 2013, the House
Committee on Ways and Means, Subcommittee on Trade, held a hearing examining the
opportunities and challenges of the U.S.-Brazil trade and investment relationship. As part of the
farm bill reauthorization (P.L. 113-79), Congress approved modifications to the U.S. cotton
program that could help resolve a long-running trade dispute with Brazil. Congress also continued
to support conservation of the Amazon Rainforest, appropriating $10.5 million for environmental
programs in the Brazilian Amazon in the Consolidated Appropriations Act, 2014 (P.L. 113-76).
Other measures that have been introduced in the 113th Congress include two bills designed to
pressure Brazil to amend its constitution and allow the extradition of Brazilian nationals; H.R.
571 would suspend foreign assistance to Brazil, and H.R. 572 would suspend the issuance of
visas to Brazilian nationals until Brazil changes its extradition policy.

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Brazil: Political and Economic Situation and U.S. Relations

Contents
Political and Economic Situation ..................................................................................................... 1
Background................................................................................................................................ 1
Cardoso Administration (1995-2002) .................................................................................. 3
Lula Administration (2003-2010) ........................................................................................ 3
Rousseff Administration (2011-Present) ................................................................................... 5
Economic Challenges .......................................................................................................... 6
Mass Demonstrations .......................................................................................................... 7
2014 Elections ........................................................................................................................... 9
U.S.-Brazil Relations ..................................................................................................................... 10
U.S. Foreign Assistance and Trilateral Development Initiatives ............................................. 11
Commercial Relations ............................................................................................................. 12
Bilateral Trade and Investment ......................................................................................... 13
Cotton Dispute .................................................................................................................. 15
Energy Ties .............................................................................................................................. 16
Biofuels ............................................................................................................................. 16
Oil ...................................................................................................................................... 17
Security Cooperation ............................................................................................................... 19
Counternarcotics................................................................................................................ 20
Counterterrorism ............................................................................................................... 21
Defense .............................................................................................................................. 22
Promotion of Racial Equality .................................................................................................. 23
Amazon Conservation ............................................................................................................. 24

Figures
Figure 1. Map of Brazil.................................................................................................................... 2
Figure 2. U.S. Trade with Brazil: 2004-2013................................................................................. 14
Figure 3. U.S. Oil Trade with Brazil: 2004-2013 .......................................................................... 19
Figure 4. Deforestation in the Brazilian Amazon: 2004-2013 ....................................................... 25

Tables
Table 1. U.S. Assistance to Brazil: FY2010-FY2015 .................................................................... 11

Appendixes
Appendix. Legislative Initiatives in the 113th Congress ................................................................. 28

Contacts
Author Contact Information........................................................................................................... 28
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Brazil: Political and Economic Situation and U.S. Relations

Political and Economic Situation
President Dilma Rousseff of the center-left Workers Party took office on January 1, 2011, and is
now in the final year of her term. She inherited a country that had benefited from 16 years of
capable governance under Presidents Fernando Henrique Cardoso (1995-2002) and Luis Inácio
Lula da Silva (2003-2010), during whose terms Brazil made significant advances in economic
stabilization and social inclusion. Rousseff has faced a series of challenges in office, however, as
the Brazilian economy has slowed and citizens have taken to the streets to express a variety of
frustrations. While Rousseff has won support from the Brazilian Congress for portions of her
policy agenda, she occasionally has been stymied by sectors of her own multiparty coalition.
Brazil continues to face considerable economic challenges as the country prepares to host the
World Cup in June and July 2014 and hold national and state elections in October 2014.
Nevertheless, early polling suggests that Rousseff is favored to win a second term as president.
Background
Brazil occupies almost half of the continent of South America and is the fifth most populous
country in the world with 201 million citizens.1 The country declared independence from Portugal
in 1822, initially establishing a constitutional monarchy and retaining a slave-based, plantation
economy. Brazil abolished slavery in 1888 and became a republic in 1889, but economic and
political power remained concentrated in the hands of large rural landowners and the vast
majority of Brazilians remained outside the political system. The authoritarian government of
Getúlio Vargas (1930-1945) began the incorporation of the working classes but exerted strict
control over labor as part of his broader push to centralize power. Vargas also increased the state’s
role in the economy and pursued import-substitution industrialization. Brazil enjoyed multiparty
democracy between 1945 and 1964, but experienced polarization and instability as economic
growth slowed, inflation increased, and populism gained strength.
The Brazilian military seized power in a 1964 coup, ushering in two decades of authoritarian rule
(1964-1985). Although repressive—especially between 1969 and 1974, the Brazilian military was
not as brutal as those in some other South American countries. It nominally allowed the judiciary
and Congress to function during its tenure, but stifled representative democracy and civic action,
carefully preserving its influence during one of the most protracted transitions to democracy to
occur in Latin America. Brazil continued to pursue state-led development during most of the
military era, and industrialization helped foster the transformation of Brazil into a predominantly
urban society.
Brazil restored civilian rule in 1985, and a national constituent assembly, elected in 1986,
promulgated a new constitution in 1988. The constitution, as amended, established a liberal
democracy with a strong president, a bicameral Congress consisting of the 513-member Chamber
of Deputies and the 81-member Senate, and an independent judiciary. Power is somewhat
decentralized under the country’s federal structure, which includes 26 states, a federal district, and
some 5,570 municipalities. The reestablishment of democracy did not ensure stability, however,

1 United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Statistical Yearbook for Latin
America and the Caribbean, 2013
, December 2013, p.33, http://www.eclac.cl/publicaciones/xml/5/51945/
AnuarioEstadistico2013.pdf.
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as Brazil experienced economic recession and political uncertainty during the first decade after
the political transition. Numerous efforts to control runaway inflation failed and two elected
presidents did not complete their terms; one died before taking office and the other was
impeached on corruption charges.2
Figure 1. Map of Brazil

Source: Map Resources. Adapted by CRS Graphics.

2 Brazil: A Country Study, ed. Rex A. Hudson, 5th ed. (Washington, DC: Library of Congress, 1998).
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Cardoso Administration (1995-2002)
Brazil’s economic and political situation began to stabilize under President Fernando Henrique
Cardoso, who was elected to serve two terms between 1995 and 2002. A prominent sociologist of
the centrist3 Brazilian Social Democracy Party (Partido da Social Democracia Brasileira,
PSDB), Cardoso’s initial election in 1994 was largely the result of the success of the anti-inflation
Real Plan” that he implemented as finance minister under President Itamar Franco (1992-1994).
The plan consisted of a new currency (the real) pegged to the U.S. dollar, a more restrictive
monetary policy, and a severe fiscal adjustment that included a 9% reduction in federal spending
and an across-the-board tax increase of 5%. Prices immediately began to stabilize, with annual
inflation falling from 2,730% in 1993 to about 18% in 1995.4 Cardoso continued the economic
reform push after taking office, privatizing some state-owned enterprises and gradually opening
the Brazilian economy to foreign trade and investment.
Although these policies contributed to stronger growth rates for a few years, macroeconomic
stability remained elusive. Foreign investors began flooding Brazil with large capital inflows that
contributed to currency appreciation and the eventual overvaluation of the real. Following the
1997 East Asian and 1998 Russian financial crises, concerns about Brazil’s overvalued exchange
rate and substantial fiscal deficits sparked a massive capital flight. Brazil was forced to adopt a
floating exchange rate and the real lost 40% of its value.5
Cardoso’s popularity declined as Brazil struggled with these economic challenges; however, most
analysts credit him with laying the foundation for the macroeconomic stability that Brazil has
experienced since he left office. In the aftermath of the 1998-1999 financial crises, Brazil adopted
the three main pillars of its macroeconomic policy: a floating exchange rate, a primary budget
surplus, and an inflation-targeting monetary policy. Cardoso also established a series of targeted
income transfer programs designed to alleviate poverty. These economic and social policies have
been maintained and built upon by subsequent administrations.
Lula Administration (2003-2010)
Luis Inácio Lula da Silva—known as Lula—was elected president of Brazil in 2002, his fourth
attempt at the presidency as the candidate of the center-left6 Workers Party (Partido dos
Trabalhadores
, PT) that he helped found as a metalworker and union leader. During his first term,
Lula maintained the market-oriented economic policies associated with his predecessor. He
tightly controlled expenditures, raised the primary budget surplus, and granted additional
autonomy to the Central Bank. At the same time, he placed greater emphasis on reducing poverty,
reorganizing and expanding some of the social programs that had been initiated under Cardoso.
The most high profile program, Bolsa Familia (“Family Grant”), provides monthly cash transfers

3 The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB). It has moved to the right,
however, since implementing market-oriented economic reforms during the Cardoso Administration. Timothy J. Power
and Cesar Zucco Jr., “Estimating Ideology of Brazilian Legislative Parties, 1990-2005,” Latin American Research
Review
, vol. 44, no. 1, 2009.
4 CRS Report 98-987, Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
5 Ibid; Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010.
6 Although the PT was founded as a leftist party, it moved toward the ideological center upon taking office in 2002.
Power and Zucco, 2009, op.cit.
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to poor families that ensure their children attend school and receive proper medical care. Lula’s
agenda stalled toward the end of his first term as several top PT officials were implicated in a
vote-buying scheme. Although the scandal ultimately led to the convictions of 25 people—
including Lula’s former chief of staff—in 2012,7 Lula was reelected in 2006.
After primarily focusing on maintaining economic stability during his first term, Lula established
a larger role for the Brazilian state in economic development during his second term. He
expanded Bolsa Familia and launched new social welfare programs such as Minha Casa, Minha
Vida
(“My House, My Life”)—an attempt to increase formal housing for low-income Brazilians.
He also continued to raise the minimum wage, which, adjusted for inflation, increased nearly
64% during his eight years in office.8 In response to the global financial crisis, the Lula
Administration implemented a series of stimulus measures designed to offset declines in global
demand with increased domestic consumption. Analysts have credited the administration’s timely
policy response for mitigating the effects of the crisis and facilitating recovery;9 the Brazilian
economy contracted by 0.3% in 2009 before rebounding with 7.5% growth in 2010.10 Moreover,
Lula won legislative approval for a new regulatory framework that is designed to increase the
state’s role in the exploitation of Brazil’s considerable offshore oil reserves and use the resources
to fuel long-term economic and social development.
Although some observers criticized Lula for not doing more to advance certain policy reforms,11
most give him credit for improving social inclusion in Brazil. Between 2001 and 2011, the
percentage of the population living in poverty fell from 37.5% to 20.9%, and the percentage
living in extreme poverty fell from 13.2% to 6.1%.12 Income inequality was also reduced, with
the Gini coefficient13 falling from 0.64 to 0.56 during the same time period.14 While these
advances were partially the result of stronger economic growth driven by a boom in international
demand for Brazilian commodities, government policy also played a role. According to a 2012
study, about 28% of the decline in income inequality in Brazil between 2001 and 2009 was
attributable to increases in the minimum wage and another 12.7% of the decline was attributable
to the Bolsa Família program.15

7 “Brazil Politics: Supreme Court Gives Tough Sentences in ‘Mensalão’ Trial,” Economist Intelligence Unit, October
26, 2012.
8 Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
9 See, for example, International Monetary Fund (IMF), “IMF Executive Board Concludes 2010 Article IV
Consultation with Brazil,” August 5, 2010.
10 IMF, World Economic Outlook Database, October 2013, accessed February 2014.
11 See, for example, “Brazil's Presidential Election: Lula's Legacy,” Economist, September 30, 2010; and Paulo Kliass,
“Lula's Political Economy: Crisis and Continuity,” North American Congress on Latin America (NACLA), March/April
2011.
12 ECLAC, Statistical Yearbook for Latin America and the Caribbean, 2012, December 2012, p.65,
http://www.eclac.cl/publicaciones/xml/4/48864/AnuarioEstadistico2012_ing.pdf.
13 The Gini coefficient is a value between zero and one, where zero represents complete equality and one represents
complete inequality.
14 ECLAC, December 2012, op.cit., p.70.
15 Pedro H. G. Ferreira de Souza, Poverty, Inequality and Social Policies in Brazil, 1995-2009, U.N. Development
Programme, International Policy Centre for Inclusive Growth, Working Paper Number 87, Brasilia, February 2012,
p.19, http://www.ipc-undp.org/pub/IPCWorkingPaper87.pdf.
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Brazil at a Glance
Land Area: 8.5 million sq. km. (slightly smaller than the United States)
Population: 201.5 million (2014 est.)
Race/Ethnicity: White—47.7%, Brown—43.1%, Black—7.6%, Asian—1.1%, Indigenous—0.4% (Self-identification,
2010)
Religion: Catholic—65%, Evangelical Christian—22%, None—8%, Other—4% (2010)
Official Language: Portuguese
Gross Domestic Product (GDP): $2.2 trillion (2013 est.)
GDP per Capita: $10,958 (2013 est.)
Top Exports: iron ore, soy beans, oil, meat, motor vehicles and parts, machinery, and sugar (2013)
Life Expectancy at Birth: 73.2 years (2010-2015 est.)
Infant Mortality Rate: 19 per 1,000 live births (2010-2015 est.)
Adult Literacy Rate: 90.4% (2011)
Poverty Rate: 18.6% (2012)
Indigence Rate: 5.4% (2012)
Sources: Area, race/ethnicity, and religion statistics from the Instituto Brasileiro de Geografia e Estatística (IBGE); GDP
estimates from the International Monetary Fund (IMF); trade data from Global Trade Atlas; population and social
statistics from the U.N. Economic Commission for Latin America and the Caribbean (ECLAC).
Rousseff Administration (2011-Present)
Dilma Rousseff of the center-left PT was inaugurated to a four-year term in January 2011,
becoming Brazil’s first woman president. She had never been elected to public office prior to
winning the presidency,16 but was chosen by Lula to run as his successor. Rousseff served as
minister of mines and energy from 2003 to 2005 and Lula’s chief of staff from 2005 to 2010,
during which time she was in charge of strategic projects such as the government’s housing
program, investments in infrastructure, and a new regulatory framework for developing Brazil’s
offshore oil reserves. Rousseff is an economist by training. She originally became involved in
politics by joining underground leftist groups that fought against the military regime; Rousseff
was arrested, tortured, and imprisoned for nearly three years during the authoritarian period.17
Although her multiparty coalition nominally holds significant majorities in both houses of the
Brazilian Congress, Rousseff has struggled throughout her term to hold the ideologically diverse
coalition together. Given the fragmented nature of Brazil’s political system, presidents have
traditionally distributed control of ministries and state enterprises to coalition partners in order to
construct governing majorities. Rousseff’s distribution of appointments, which heavily favors the
PT over the other seven parties with representation in the 39-member cabinet, has upset some
sectors of the coalition. Her dismissal of six cabinet ministers accused of corruption during her

16 Rousseff won 56% of the vote to defeat José Serra of the PSDB in a second round runoff election on October 31,
2010. The second round was necessary since Rousseff had fallen just short of an absolute majority—with 47% of the
vote—in the first round election held on October 3, 2010. In the first round, she was followed by Serra at 33%, and
Marina Silva, a former Lula Administration environment minister that ran for president as the candidate of the Green
Party (Partido Verde, PV), at 19%.
17 Presidência da República Federativa do Brasil, “Presidenta: Biografia,” July 4, 2011.
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first year in office and periodic efforts to more tightly control government expenditures have
exacerbated these intra-coalition divisions. In Brazil’s 513-seat Chamber of Deputies, for
example, the number of deputies supporting the Rousseff Administration on at least 90% of votes
fell from 306 (60%) in 2011 to 123 (24%) in 2013.18 While Rousseff has been able to win
legislative support for portions of her policy agenda, she has lost key congressional votes on
issues such as the distribution of oil royalties and reforms to Brazil’s forest conservation law.19
Economic Challenges
Rousseff has spent the majority of her time in office focused on domestic economic challenges.
With a gross domestic product (GDP) of $2.2 trillion,20 Brazil is the largest economy in Latin
America and the seventh-largest economy in the world. The country experienced rapid economic
growth from 2004 to 2010, driven by a boom in international demand—particularly from China—
for Brazilian commodities such as meat, sugar, soybeans, iron ore, and crude oil. The initial
expansion was reinforced by domestic consumption from Brazil’s fast-growing middle class,21
which now accounts for a majority of the population.22 As international commodity prices began
to fall, however, economic growth slowed.
The Rousseff Administration has sought to offset the weaker international economic situation by
boosting domestic consumption and protecting domestic industry. The Administration has
pursued an expansionary fiscal policy, implementing a series of short-term stimulus packages. It
has also adopted a new industrial policy, known as Brasil Maior (“Bigger Brazil”), which has
included targeted tax cuts and financing through the Brazilian Development Bank (BNDES) for
domestic manufacturing, stronger preferences for locally produced goods in government
procurement, and restrictions on imports.23
While these measures have helped keep unemployment near historic lows (5.1% in February
2014),24 economic growth has yet to recover. The Brazilian economy expanded by an average of
about 2% annually from 2011 to 2013,25 and is forecast to grow by 2.3% in 2014.26 As a result of
lower tax receipts, the Brazilian government has been forced to rely on accounting maneuvers
and extraordinary revenue to meet its primary budget surplus target.27 Moreover, these economic

18 José Roberto de Toledo, Isadora Peron, and Rodrigo Burgarelli, “PSD e PSB Puxam Derrotas do Governo na
Câmara; Núcleo Fiel a Dilma Fica 60% Menor,” O Estado de São Paulo, January 20, 2014.
19 Joe Leahy, “Brazil Grapples with Dysfunctional Congress; Controversy over Pastor Highlights Complexity of
Dealing with a Congress Hostage to Diverse Interest Groups,” Financial Times, April 10, 2013.
20 IMF, World Economic Outlook Database, October 2013, accessed February 2014.
21 The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn approximately $760-$3,280 (R$1,734-7,475) per month, are generally referred to as the “new middle class.”
22 Marcelo Cortes Neri, Os Emergentes dos Emergentes: Reflexões Globais e Ações para a Nova Classe Média
Brasileira
, Fundação Getulio Vargas, Rio de Janeiro, June 27, 2011, p.35.
23 “Brazil: Propping Up Industry,” Economist Intelligence Unit, August 15, 2011; Howard Schneider, “Brazil’s Inward
Turn Bothers U.S.” Washington Post, December 4, 2012.
24 Instituto Brasileiro de Geografia e Estatística (IBGE), “Unemployment Rate was 5.1% in February,” March 27,
2014.
25 IMF, World Economic Outlook Database, October 2013, accessed February 2014.
26 IMF, World Economic Outlook Update, Is the Tide Rising?, January 21, 2014.
27 Paulo Trevisani, “Brazil Changes Budget; Freezes Some Spending to Regain Markets’ Confidence,” Wall Street
Journal
, February 20, 2014.
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policies have helped push inflation to the upper edge of the government’s targeted boundary
(4.5% with a 2-point tolerance band), weakening citizens’ purchasing power and eroding national
competitiveness. In order to keep inflation under control, the Brazilian Central Bank, which
previously had reduced interest rates to record lows, was forced to reverse course and adopt a
tighter monetary policy.28
Many analysts maintain that Brazil’s slower economic growth is the result of structural
constraints such as “infrastructure deficiencies, high labor costs and low skill levels, a high tax
burden and an onerous tax system, excessive administrative burdens, shallow credit markets, and
barriers to international trade.”29 They argue that the Brazilian government should address these
constraints and thereby improve productivity and boost investment, rather than continuing to try
to stimulate consumption.30 It appears as though the Rousseff Administration recognizes these
constraints on growth. Among other measures, it has cut taxes and encouraged private investment
in the country’s overburdened infrastructure by tendering concessions to build and operate roads,
railways, ports, and airports. Significant challenges remain, however, as Brazil is ranked 116th out
of 189 countries in the World Banks’s 2014 “Ease of Doing Business” index,31 and gross
domestic investment stands at 18.4% of GDP32—well below the 22%-23% of GDP that
economists estimate is necessary to sustain higher economic growth.33
Mass Demonstrations
Mass demonstrations took place across Brazil in June 2013, and smaller protests have continued
to take place periodically since then. The protests began on June 6, 2013, when about 2,000
people took to the streets of São Paulo to oppose an increase in bus fares. The crowds started to
grow as Brazilians shocked by the heavy-handed police response joined in subsequent
demonstrations. The situation then rapidly evolved as Brazilians began to air a broader array of
grievances and news of the demonstrations was relayed through social media. At the peak of the
demonstrations on June 20, 2013, an estimated 1.2 million people protested in 80 cities across
Brazil.34
While the protesters voiced a wide range of complaints, the underlying cause of the
demonstrations appears to be the government’s failure to meet citizens’ rising expectations. Some
40 million Brazilians have joined the middle class since 2003,35 and many that have left poverty
behind expect further improvements in their living standards. Public education, health, and
transportation services are generally perceived to be low quality, however, and the slowing
economy and rising cost of living have reinforced the precarious position of the new middle class.
Moreover, inequality remains high by international standards despite a significant reduction over

28 Walter Brandimarte, “Insight – Brazil’s Tombini: An Inflation Hawk, Believe It or Not,” Reuters, August 23, 2013.
29 Organisation for Economic Co-operation and Development (OECD), OECD Economic Surveys: Brazil, October
2013.
30 Ibid; “The Days of Easy Growth are Over for Now,” Latin America Monitor: Brazil, July 2013; IMF, Brazil: Staff
Report for the 2013 Article IV Consultation
, IMF Country Report No. 13/312, Washington, DC, October 2013,
http://www.imf.org/external/pubs/ft/scr/2013/cr13312.pdf.
31 World Bank, “Ease of Doing Business in Brazil,” http://www.doingbusiness.org/data/exploreeconomies/brazil.
32 IMF, October 2013, op.cit., p.45.
33 Joe Leahy, “Investors Worry the Dilma Model is Unravelling in Brazil,” Financial Times, May 20, 2013.
34 “Brazil’s Stormy June: Not Turkey or Egypt,” Latin American Security & Strategic Review, June 2013.
35 Neri, 2011, op.cit., p.35.
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the past decade; the top 10% of Brazilians receive over 46% of all income—more than the bottom
80% of Brazilians combined.36
Although there continues to be broad support for Brazil’s development model, which includes
relatively high taxes (36.3% of GDP in 2012)37 and an active role for the government in the
economy,38 many Brazilians believe public funds are being squandered through corruption and
unnecessary expenditures. Some 200 federal legislators are reportedly facing criminal charges,39
and, until recently, several legislators that had been convicted in high-profile corruption cases
were allowed to keep their seats in Congress. The Confederations Cup soccer tournament that
Brazil hosted in June 2013 as a prelude to the 2014 World Cup served as a useful backdrop for
protesters seeking to highlight the divergence between the priorities of average citizens, who
demand better public services, and Brazilian politicians, who are investing about $11.2 billion
(R$25.6 billion)40 to upgrade soccer stadiums and related infrastructure. Over the course of June
2013, the percentage of Brazilians rating the Rousseff Administration as “good” or “excellent”
fell 27 points to 30%.41 Politicians from other parties and at other levels of government saw
similar declines, reflecting citizens’ general discontent with the Brazilian political class.
The demonstrations appear to have caught Brazilian politicians off-guard.42 Prior to the protests,
President Rousseff enjoyed high approval ratings, and many in the ruling coalition assumed that
Brazilians would continue to reward them politically for Brazil’s decade-long rise in living
standards. According to some analysts, however, it is precisely because Brazilians enjoy more
economic security that they have been able to focus on broader quality of life and good
governance issues.43 Moreover, while some labor unions and social movements have close ties to,
and regularly consult with, the PT and other Brazilian political parties, the protests reportedly
have been fueled by youth without strong connections to the political system.44
In an attempt to regain the initiative, Rousseff called on Brazilian policy makers to adopt a
variety of policy changes—some of which she had previously proposed—to address the
protesters’ demands. Her five so-called “pacts” related to fiscal responsibility, political reform,
healthcare, public transportation, and education.45 While some of Rousseff’s initiatives have
moved forward, others have not. Her political reform proposal found little support in the Brazilian
Congress, but small-scale electoral changes and several anti-corruption and transparency
measures have been enacted. The Brazilian Congress also adopted a measure to dedicate 75% of

36 ECLAC, December 2013, op.cit., p.77.
37 OECD, ECLAC, and Inter-American Center of Tax Administrations, Revenue Statistics in Latin America, 1990-
2012
, January 2014.
38 For example, a November 2013 poll found that 67% of Brazilians think the government, rather than the private
sector, should be most responsible for investing to produce economic growth. Ricardo Mendonça, “Brasileiros se
Dividem sobre Impostos e Papel do Governo,” Folha de São Paulo, December 8, 2013.
39 Simon Romero, “Public Rage Catching Up With Brazil’s Congress,” New York Times, June 27, 2013.
40 República Federativa do Brasil, Ministério do Esporte, “Matriz de Responsabilidades Consolidada,” September
2013.
41 “Avaliação da Presidente Dilma Rousseff,” Datafolha, June 28, 2013.
42 Francisco Peregil, “Las Protestas Dejan a Brasil Perplejo,” El País (Spain), June 23, 2013; “A Direção do PT está em
Pânico, Diz Historiador,” Folha de São Paulo, June 23, 2013.
43 Bob Moser, “Record Low Unemployment Fueling Protestor Confidence in Brazil,” MercoPress, July 2, 2013.
44 Fernando Rodrigues, “Movimento está Divorciado dos Políticos Tradicionais,” Folha de São Paulo, June 18, 2013.
45 Presidência da República Federativa do Brasil, “Discurso da Presidenta da República, Dilma Rousseff, durante
Reunião com Governadores e Prefeitos de Capitais,” June 24, 2013.
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the funds generated by oil royalties to education and 25% to health care. For its part, the Rousseff
Administration has increased expenditures for urban transportation projects, and created a
program known as Mais Médicos (“More Doctors”) that has brought nearly 14,000 (mainly
Cuban) doctors to Brazil to work in underserved communities.46
Although some Brazilians have continued to protest, the demonstrations have been less frequent
and smaller in scale since June 2013. The protests also appear to have lost some public support as
a result of so-called “Black Bloc” demonstrators that have engaged in confrontations with police
and vandalism. Between June 2013 and February 2014, the percentage of Brazilians supporting
the protests fell from 81% to 52% and the percentage opposed to the protests increased from 15%
to 42%.47 Nevertheless, large-scale demonstrations could reemerge in the lead-up to the World
Cup, which is scheduled to be played in Brazil between June 12 and July 13, 2014.
2014 Elections
Brazil is scheduled to hold presidential, legislative, and state office elections on October 5, 2014.
President Rousseff is running for reelection as the PT’s candidate and is currently attempting to
solidify alliances with the rest of the parties in her ruling coalition. The principal opposition
candidates appear to be Aécio Neves, a Senator from the state of Minas Gerais and the candidate
of the PSDB, and Eduardo Campos, the governor of the state of Pernambuco and the candidate of
the center-left Brazilian Socialist Party (Partido Socialista Brasileiro, PSB). Campos has forged
an alliance with Marina Silva, who served as an environment minister in the Lula Administration
and won 19% of the presidential vote in 2009. While the PSDB has led the political opposition
since the PT first took power in 2003, the PSB was a member of the ruling coalition until
September 2013. Neves and Campos have adopted similar campaign rhetoric, promising to
maintain the successful social policies of the PT while increasing government efficiency,
strengthening the economy, reducing crime, and improving the quality of public services.48
Early polling suggests that Rousseff is favored to win reelection. A February 2014 poll found that
when asked to choose between the top three contenders, 47% of Brazilians would vote for
Rousseff, 17% would vote for Neves, and 12% would vote for Campos. Nevertheless, there are
some indications that the race could tighten. Rousseff’s approval rating has only partially
recovered since its precipitous drop in June 2013 and currently stands at 41%. Likewise, 67% of
Brazilians say they would prefer that the next president take different actions than those of
President Rousseff. Rousseff also currently benefits from higher name recognition, which will
likely change over the course of the campaign. While Rousseff is known to all Brazilians, 24%
have never heard of Neves and 45% have never heard of Campos.49 If no candidate wins an
absolute majority, a runoff election would be scheduled for October 26, 2014.

46 Paulo Victor Chagas, “Cinco Pactos Foram a Resposta do Governo Federal aos Protestos de Junho,” Agência Brasil,
December 31, 2013; Johanna Nublat, “Com Nova Leva, Cubanos Serão 82% do Mais Médicos,” Folha de São Paulo,
March 6, 2014.
47 Fabiano Maisonnave, “Aprovação à Realização da Copa é a Menor em 5 Anos,” Folha de São Paulo, February 24,
2014.
48 Gustavo Patu, “Críticas de Aécio e Campos ao PT são Quase Idênticas,” Folha de São Paulo, February 9, 2014.
49 Datafolha, Intenção de Voto para Presidente 2014, February 20, 2014; Fernando Rodrigues, “Dilma Para de Subir,
Mas Seria Reeleita No 1° Turno,” Folha de São Paulo, February 23, 2014.
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U.S.-Brazil Relations
The United States and Brazil have traditionally enjoyed cooperative relations. The Obama
Administration’s National Security Strategy recognizes Brazil as an emerging center of influence
and asserts that the U.S. government welcomes Brazil’s leadership to “pursue progress on
bilateral, hemispheric, and global issues.”50 To this end, the countries have at least 20 active
bilateral dialogues, which serve as vehicles for policy coordination on issues of mutual concern.51
State Department officials maintain that the United States and Brazil are “natural partners” with
“shared values and increasingly converging goals.”52 Through the Obama Administration’s
100,000 Strong in the Americas initiative and Brazil’s Science without Borders program, for
example, both countries are seeking to create new academic and research partnerships and
increase educational exchanges among U.S. and Brazilian students.
Nevertheless, bilateral ties have been strained from time to time as the countries’ occasionally
divergent national interests and independent foreign policies have led to disagreements. Several
long-running disputes relate to trade, where Brazil has pushed the United States to reduce
protections for U.S. agriculture and the United States has pushed Brazil to reduce protections for
Brazilian industry (see “Commercial Relations”). Other disagreements have arisen as Brazil has
taken on a larger role in international affairs. In 2010 and 2011, for example, Brazil used its
temporary seat on the U.N. Security Council to advocate engagement with internationally isolated
regimes like Iran, Libya, and Syria. While the United States and Brazil generally agreed on
desired outcomes in these countries, Brazil’s long-standing commitment to the peaceful resolution
of conflicts and its aversion to the use of military force (or economic sanctions, which it views as
a prelude to the use of force) led it to approach the issues much differently than the United States.
Bilateral relations have been particularly strained over the past year as the press has reported on
alleged National Security Agency (NSA) activities in Brazil. The reports, which indicated that the
NSA had spied on President Rousseff and the state-owned oil company Petróleo Brasileiro S.A.
(Petrobras) in addition to engaging in broader electronic surveillance, led Brazil to indefinitely
postpone a state visit to Washington that Rousseff was scheduled to make in October 2013. They
also appear to have influenced Brazil’s decision to award a $4.5 billion fighter jet procurement
deal to Sweden’s Saab AB over Boeing (see “Defense”). At the September 2013 U.N. General
Assembly, Rousseff denounced alleged NSA activities as a breach of international law and a
threat to democratic governance, stating, “I fought against authoritarianism and censorship, and I
cannot but defend, in an uncompromising fashion, the right to privacy of individuals and the
sovereignty of my country. In the absence of the right to privacy, there can be no true freedom of
expression and opinion, and therefore no effective democracy.” She also asserted that “friendly
governments and societies that seek to build a true strategic partnership ... cannot allow recurring
illegal actions to take place as if they were normal. They are unacceptable.”53

50 White House, National Security Strategy, May 2010, p. 44.
51 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S. Relations with Brazil,” Fact Sheet, October
3, 2013.
52 William J. Burns, Deputy Secretary of State, “Building a Deeper Partnership with Brazil,” Remarks in Rio de
Janeiro, Brazil, March 1, 2012.
53 President Dilma Rousseff, Statement by H.E. Dilma Rousseff, President of the Federative Republic of Brazil, at the
Opening of the General Debate of the 68th Session of the United Nations General Assembly
, September 24, 2013.
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U.S. Foreign Assistance and Trilateral Development Initiatives
As a middle-income country, Brazil does not receive large amounts of U.S. assistance. The
United States provided Brazil with $25.5 million in FY2011, $19 million in FY2012, and $15.2
million in FY2013. The Obama Administration estimates that $13.9 million will be provided to
Brazil in FY2014 and has requested $3.4 million for Brazil in FY2015 (see Table 1). The
majority of the assistance provided in recent years has supported conservation programs in the
Brazilian Amazon (see “Amazon Conservation”). The FY2015 request is significantly lower than
the FY2014 estimate as a result of the Administration not requesting additional funds for these
environmental programs in Brazil. The United States has also provided Brazil with security
assistance, much of which has focused on counternarcotics and military capacity building efforts
(see “Security Cooperation”).
Table 1. U.S. Assistance to Brazil: FY2010-FY2015
In thousands of U.S. dollars
FY2014
FY2015
Account
FY2010 FY2011 FY2012 FY2013 (estimate)
(request)
State Department and
25,099 23,321 18,038 15,185 13,865
3,365
USAID, Subtotal
DA
16,789 15,000 12,800 11,462 12,500
2,000
GHP-State
1,300 1,300 1,300 881 500
500
GHP-USAID
5,000
4,990 0 0 0
0
INCLE
1,000 1,000 3,000 2,000
0
0
NADR
400 400 300 270 240
240
IMET
610 631 638 572 625
625
DOD, Subtotala 1,928
2,167
919
NA
NA NA
1004 583
1,012
557
NA
NA
NA
2249c
0 127 247 NA NA
NA
2561 1,345
1,028
115
NA
NA
NA
Total
27,027 25,488 18,957 15,185 13,865
3,365
Sources: U.S. Department of State, Congressional Budget Justifications for Foreign Operations, Fiscal Years 2012,
2013, 2014, and 2015;
U.S. Department of Defense, Reports to Congress on Foreign-Assistance Related Programs,
Fiscal Years 2010
, 2011, and 2012.
Notes: DA=Development Assistance; GHP=Global Health Programs; INCLE=International Narcotics Control
and Law Enforcement; NADR=Nonproliferation Anti-terrorism, Demining, and Related programs;
IMET=International Military Education and Training; 1004=DOD counternarcotics aid; 2249c=DOD
counterterrorism education and training; and 2561=DOD humanitarian aid.
a. DOD assistance data for FY2013, FY2014, and FY2015 are not yet available.
Most U.S. assistance is provided through the State Department and U.S. Agency for International
Development (USAID), and is funded through annual Department of State, Foreign Operations,
and Related Programs appropriations measures. A small portion of U.S. assistance for Brazil is
provided through the Department of Defense (DOD), and is funded through annual DOD
appropriations measures.
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In recent years, USAID has begun working with Brazil’s development agency, the Brazilian
Cooperation Agency (Agência Brasileria de Cooperação, ABC), in third countries. Under these
so-called trilateral development initiatives, the United States and Brazil share expertise and
funding in order to accomplish common goals.54 The Administration’s FY2014 budget request
included funding to strengthen ABC’s capacity and implement jointly funded food security
projects in countries such as Haiti, Honduras, and Mozambique. It also included funding designed
to foster collaboration between the Centers for Disease Control and Prevention (CDC) and the
Brazilian Ministry of Health in order to combat HIV/AIDS in Brazil and Lusophone Africa.55
A measure introduced in the 113th Congress, H.R. 571 (T. Ryan), would suspend foreign
assistance to Brazil until the country amends its constitution to allow the extradition of Brazilian
nationals. The bill, which was prompted by the case of a Brazilian woman who allegedly killed
her American husband before fleeing to Brazil, has yet to advance.
Commercial Relations
Trade policy has often been a contentious issue in U.S.-Brazilian relations. Over the past two
decades, Brazil’s trade policy has prioritized regional integration through the Common Market of
the South (Mercosur)56 and multilateral negotiations at the World Trade Organization (WTO).57
Brazil is the industrial hub of Mercosur, which was established in 1991 and also includes
Argentina, Paraguay, Uruguay, and Venezuela. While the bloc was created with the intention of
incrementally advancing toward full economic integration, only a limited customs union has been
achieved thus far. The group has also been plagued by internal disputes and frequent rule
changes. Instead of serving as a platform for insertion into the global economy as originally
envisioned, Mercosur has evolved into a more protectionist arrangement, shielding its members
from external competition. Beginning in the 1990s, the United States sought to incorporate
Mercosur and other sub-regional trade blocs into a hemisphere-wide Free Trade Area of the
Americas (FTAA).58 The initiative was effectively killed in 2005, however, when the United
States was unable to persuade Brazil and the other members of Mercosur to continue the
negotiations.
At the WTO, Brazil has played a key role in the Doha Round59 of multilateral trade negotiations
that began in 2001. It has led the G-20 group of developing nations in insisting that developed
countries reduce agricultural tariffs and subsidies. Brazil has also resisted calls by the United
States and other developed countries for increased access to developing nations’ industrial and

54 Paulo Sotero, Shaping U.S.-Brazil Relationship after the Snowden Affair: A Conversation with Ambassador Thomas
A. Shannon
, Woodrow Wilson International Center for Scholars, Brazil Institute, Special Report, Washington, DC,
February 2014, http://www.wilsoncenter.org/sites/default/files/AmbassadorThomas%20Shannon%20-%20Final.pdf.
55 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2014, Annex:
Regional Perspectives
, July 2, 2013, http://www.state.gov/documents/organization/208291.pdf.
56 For background information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for
U.S. Trade Policy
, by J. F. Hornbeck.
57 João Augusto de Castro Neves, Brazil's Slow and Uncertain Shift from Protectionism to Free Trade, Inter-American
Dialogue, Working Paper, January 2014, http://www.thedialogue.org/uploads/CastroNeves_Trade.pdf.
58 For background information on the FTAA see CRS Report RS20864, A Free Trade Area of the Americas: Major
Policy Issues and Status of Negotiations
, by J. F. Hornbeck.
59 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda
, by Ian F. Fergusson.
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services sectors. In 2013, Brazil’s widely respected diplomat and trade representative Roberto
Azevêdo was appointed Director General of the WTO. He has sought to revive the Doha Round,
successfully negotiating a small-scale agreement on trade facilitation measures in December
2013. Negotiations on more sensitive issues like agriculture reportedly remain stalled.60
Some Brazilian analysts have argued that the international trading system is undergoing a
significant transformation and that Brazil should reconsider its current trade policy.61 They
maintain that large-scale agreements like the Trans-Pacific Partnership (TPP) and the
Transatlantic Trade and Investment Partnership (TTIP)62 could establish new and more
comprehensive rules for trade and investment. By setting new global standards, the agreements
could effectively bypass the current round of WTO negotiations and threaten Brazil’s ability to
shape the international trading system. The agreements could also place Brazilian companies at a
competitive disadvantage and threaten the global market share of Brazilian exports. In order to
remain relevant and take advantage of changing opportunities, these analysts argue that Brazil
should conclude trade negotiations with the European Union (EU) and consider pursuing a trade
agreement with the United States. While major shifts in trade policy appear to be unlikely in the
near term, Brazil has already placed renewed emphasis on concluding an agreement between
Mercosur and the EU.63 Further policy shifts may depend on how the TPP and TTIP negotiations
advance and economic conditions in Brazil.
Bilateral Trade and Investment
Despite these differences in trade policy and the lack of a free trade agreement, U.S.-Brazil trade
has grown considerably over the past decade (see Figure 2). Whereas total U.S. merchandise
trade with the world increased 68% between 2004 and 2013, U.S.-Brazil merchandise trade
increased 105% to $71.7 billion during the same time period. U.S. goods exports to Brazil
increased 218% to $44.1 billion and U.S. goods imports from Brazil increased 30% to $27.6
billion. As a result of the relatively faster growth of U.S. exports compared to imports (which
declined significantly in the aftermath of the financial crisis), the United States has run a trade
surplus in goods with Brazil since 2008. In 2013, the surplus was valued at $16.6 billion.64 Top
U.S. goods exports to Brazil included heavy and electric machinery, refined oil products, and
civilian aircraft and parts. Top U.S. goods imports from Brazil included crude oil, iron and steel,
machinery, civilian aircraft, ethanol, and coffee. In 2013, Brazil was the United States’ ninth-
largest trading partner, and the United States was Brazil’s second-largest trading partner, behind
China.65

60 “The World Trade Organization: Unaccustomed Victory,” The Economist, December 14, 2013.
61 See, for example, “Chances Perdidas,” Correio Braziliense, January 2, 2014; Sonia Filgueiras, “Olhar do Planalto –
Sob o Risco do Isolamento,” Brasil Econômico, December 18, 2013; and Vera Thorstensen and Lucas Ferraz, The
Impacts of TTIP on Brazil
, Fundação Getulio Vargas, Study Sponsored by the Confederação Nacional da Industria
(CNI), November 2013.
62 For more information on these agreements, see CRS Report R42694, The Trans-Pacific Partnership (TPP)
Negotiations and Issues for Congress
, coordinated by Ian F. Fergusson; and CRS Report R43387, Transatlantic Trade
and Investment Partnership (TTIP) Negotiations
, by Shayerah Ilias Akhtar and Vivian C. Jones.
63 Carlos Caicedo, “Brazil Keen to Speed Up EU-Mercosur Free-Trade Deal at Expense of Argentina,” IHS Global
Insight
, March 13, 2014.
64 U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb
, accessed March 2014.
65 U.S. Department of Commerce and República Federativa do Brasil, Secretaria de Comércio Exterior (SECEX) data,
(continued...)
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Figure 2. U.S. Trade with Brazil: 2004-2013
In billions of U.S. dollars
50
40
30
20
10
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-10
-20
Goods Exports
Goods Imports
Services Exports
Services Imports
Goods Trade Balance
Services Trade Balance

Source: CRS presentation of U.S. Department of Commerce Data.
Notes: Services trade data are not yet available for 2013.
U.S.-Brazil services trade has grown even more quickly than merchandise trade, increasing by
356% between 2004 and 2012 (the most recent year for which data are available). In 2012, total
trade in services amounted to $30.7 billion. The United States continued to run a substantial trade
surplus, valued at $17 billion, as U.S. services exports to Brazil totaled $23.9 billion and U.S.
services imports from Brazil totaled $6.9 billion. Travel, telecommunications, and royalties and
license fees were the top categories of U.S. services exports to Brazil while business,
professional, and technical services was the top category of U.S. services imports from Brazil.66
Brazil has traditionally benefited from the Generalized System of Preferences (GSP), which
provides non-reciprocal, duty-free tariff treatment to certain products imported from designated
developing countries. Legal authorization for the GSP program expired on July 31, 2013, and
Congress has yet to renew it.67 In 2012, the last full year that the GSP was in effect, Brazil was
the third-largest beneficiary of the program. The country’s duty free imports to the United States
under the GSP program were valued at $2.3 billion, equivalent to about 7% of all U.S. imports
from Brazil in 2012.68 Some observers have questioned the inclusion of Brazil and other upper-

(...continued)
as made available by Global Trade Atlas, accessed March 2014.
66 U.S. Department of Commerce data, as made available by the Bureau of Economic Analysis, accessed March 2014.
67 For more information on GSP and potential congressional reauthorization of the program, see CRS Report RL33663,
Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones.
68 U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb
, accessed March 2014.
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middle-income countries in the GSP; the European Union removed such countries from its GSP
program as of 2014.69
Foreign direct investment (FDI) between the United States and Brazil currently flows mostly in
one direction, towards Brazil. As of 2012 (the most recent year for which data are available), the
accumulated stock of U.S. FDI in Brazil was $79.4 billion, with significant investments in
manufacturing and finance, among other sectors. Brazilian FDI in the United States has increased
considerably over the past decade, but remains low by comparison. In 2012, the stock of Brazilian
FDI in the United States totaled $3.6 billion.70
Cotton Dispute71
For more than a decade, Brazil and the United States have been involved in a dispute over U.S.
government support for cotton farmers. In 2002, Brazil went to the WTO to challenge several
provisions of the U.S. cotton program. A WTO dispute settlement panel ruled in Brazil’s favor in
2004, finding that certain U.S. agricultural support payments and export guarantees were
inconsistent with its WTO commitments. Although Congress modified agricultural support
programs in 2005, a WTO compliance panel ruled in 2007 that the U.S. actions were insufficient.
Following a ruling from a WTO arbitration panel, Brazil announced in March 2010 that it
intended to impose retaliatory measures against the United States worth $829 million. This
included $591 million in higher tariffs on a range of U.S. products and $239 million through
suspension of certain intellectual property rights obligations.
The United States reached a temporary agreement with Brazil in June 2010 to avoid the 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 had
an opportunity to adjust the subsidy program in the farm bill reauthorization.72
The U.S. government stopped complying with the temporary agreement in 2013, however,
making only a portion of the required monthly payment in September 2013 and then stopping
payments altogether as of October 2013. Secretary of Agriculture Tom Vilsack reportedly asserted
that the partial payment was required by budget sequestration and that he had no authority to
continue making payments once the farm bill expired at the end of September.73 The suspension
of payments led the Brazilian government to once again explore retaliatory measures.74

69 European Commission, “New GSP as of 2014,” December 18, 2013.
70 U.S. Bureau of Economic Analysis, “Balance of Payments and Direct Investment Position Data,” accessed March
2014.
71 For more information on the U.S.-Brazil WTO cotton dispute, see CRS Report R43336, Status of the WTO Brazil-
U.S. Cotton Case
, by Randy Schnepf.
72 Swell Chan, “U.S. and Brazil Reach Agreement on Cotton Dispute,” New York Times, April 6, 2010; Ana Nicolaci
da Costa, “Brazil Suspends Retaliation in U.S. Cotton Row,” Reuters, June 17, 2010.
73 William Mauldin, “U.S. to Stop Brazil Farm Payments; Sequester Will Stop Assistance Related to Cotton Dispute,”
Wall Street Journal, August 7, 2013.
74 República Federativa do Brasil, Ministério do Desenvolvimento, Indústria e Comércio Exterior, Câmara de
Comércio Exterior (CAMEX), Resolução N° 105, de 18 de Dezembro de 2013.
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Congress passed a new farm bill (P.L. 113-79) that President Obama signed into law on February
7, 2014. The conference report accompanying the act (H.Rept. 113-333) states that the legislation
includes several substantive changes to U.S. cotton support programs and the export credit
guarantee program in order to resolve the dispute with Brazil. Nevertheless, Brazil’s Foreign
Trade Board (Câmara de Comércio Exterior, CAMEX) maintains that the new farm bill contains
elements that will continue to distort the international cotton market, and it has authorized the
Brazilian government to request a WTO panel to assess whether the farm bill brings the United
States into compliance with previous rulings.75 The Brazilian government has reportedly decided
not to immediately request such a panel and instead enter into negotiations with the United States
in hope of achieving a mutually agreeable resolution.76
Energy Ties
Energy has been another important area of U.S.-Brazilian cooperation in recent years. Brazil is
widely regarded as a world leader in energy policy for successfully reducing its reliance on
foreign oil through the development of alternative energy resources and increased domestic
production. In addition to being the world’s second-largest producer of ethanol (after the United
States), Brazil generates 80% of its electricity through hydropower.77 Brazil also has discovered
large offshore oil deposits that have the potential to turn the country into a major oil and gas
producer and an important source of energy for the United States. To facilitate greater cooperation
in the development of safe, secure, and affordable energy, President Obama and President
Rousseff launched a Strategic Energy Dialogue in March 2011.
Biofuels
In response to sharp increases in global oil prices in the 1970s, the Brazilian government began a
national program to promote the production and consumption of sugarcane ethanol. Today, most
cars in Brazil are capable of running on pure ethanol, which is available at nearly every fueling
station, or gasoline, which is required to include a 20%-25% ethanol blend.78 Ethanol’s share of
the Brazilian light-duty fuel market reportedly declined from 50% in 2009 to 30% in 2012,
however, as the Brazilian government held down gasoline prices as part of its efforts to control
inflation.79 Government policy and international sugar prices that have provided incentives for
sugarcane processors to produce sugar rather than ethanol have contributed to lower levels of
investment and production in the ethanol industry. In 2012, Brazil produced 405,000 barrels per
day of ethanol, which was more than it produced in 2011 but less than it produced 2010.80 The
Brazilian government has sought to provide some relief to the ethanol industry by raising gasoline
prices, increasing the ethanol blend requirement from 20% to 25%, and reducing taxes on
ethanol. Nevertheless, some analysts maintain that the lack of transparency and certainty

75 CAMEX, “CAMEX Autoriza Abertura de Painel na OMC sobre Legislação Agrícola Norte-Americana,” February
19, 2014.
76 “Brazil Threatens Compliance Panel Over Farm Bill; Pursues Negotiations First,” Inside U.S. Trade, February 20,
2014.
77 U.S. Energy Information Administration (EIA), Country Analysis Briefs: Brazil, October 1, 2013.
78 Ibid.
79 Claire Casey, “Is Brazil the Energy Power of the Future (and Always Will Be)?,” Americas Quarterly, (Summer
2013).
80 EIA, October 2013, op.cit.
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regarding how gasoline prices are determined are likely to continue to discourage investment in
the industry.81
In 2007, the United States and Brazil, the world’s two largest ethanol-producing and consuming
countries, signed a memorandum of understanding to promote greater cooperation on ethanol and
other biofuels. The agreement involves (1) technology sharing between the United States and
Brazil; (2) feasibility studies and technical assistance to build domestic biofuels industries in third
countries; and (3) multilateral efforts to advance the global development of biofuels.82
Since then, the United States and Brazil have moved forward on all three facets of the agreement.
Bilaterally, the U.S. and Brazilian governments are attempting to improve methods for modeling
the sustainability of biofuels, including their effects on greenhouse gas emissions and land use,
and exchanging information on how to maximize fuel economy in flex-fuel vehicles. They are
also coordinating efforts to develop sustainable aviation biofuels. At the same time, the U.S. and
Brazilian governments are working together in third countries, and have provided joint technical
assistance designed to strengthen policy frameworks, implement blending laws, and develop
domestic production capabilities in the Dominican Republic, El Salvador, Guatemala, Haiti,
Honduras, Jamaica, and Senegal. Multilaterally, the United States and Brazil are working with
other members of the Global Bioenergy Partnership (GBEP) to promote the sustainable
production and use of modern bioenergy.83
In addition to these efforts, Brazil and the United States have taken steps to liberalize trade in
ethanol. In December 2011, the Brazilian government issued a resolution to extend its duty-free
treatment of imported ethanol until December 31, 2015.84 Similarly, the U.S. Congress allowed a
54-cent-per-gallon duty on imported ethanol to expire at the end of 2011. Prior to its expiration,
the duty served as a significant barrier to direct imports of Brazilian ethanol in most years.85 Total
bilateral ethanol trade has actually declined since then, however, falling from 33,000 barrels per
day in 2011 to 19,000 barrels per day in 2013. This decline is the result of lower U.S. exports to
Brazil, as imports from Brazil have increased from 7,000 barrels per day to 16,000 barrels per day
during the same time period. In 2013, U.S. imports from Brazil were equivalent to about 1.8% of
total U.S. ethanol consumption.86
Oil
Since 2007, Brazil has discovered substantial new offshore oil fields that have the potential to
turn the country into one of the top five oil and gas producers in the world87 and an important

81 Casey, 2013, op.cit.
82 U.S. Department of State, Office of the Spokesman, “Memorandum of Understanding Between the United States and
Brazil to Advance Cooperation on Biofuels,” March 9, 2007, http://www.state.gov/p/wha/rls/158654.htm.
83 White House, Office of the Press Secretary, “Fact Sheet: The U.S.-Brazil Strategic Energy Dialogue,” April 9, 2012.
84 Ministério do Desenvolvimiento, Indústria e Comércio Exterior, Câmara de Comércio Exterior (CAMEX),
Resolução N° 94, de 8 de Dezembro de 2011.
85 Although some Brazilian ethanol was allowed to enter the United States duty-free after being reprocessed in
Caribbean Basin Initiative (CBI) countries, such imports could only account for up to 7% of the U.S. ethanol market. A
2.5% ad valorem tariff on ethanol imports to the United States remains in place permanently unless the Harmonized
Tariff Schedule code is changed.
86 EIA, “Petroleum & Other Liquids: Data,” accessed March 2014.
87 Mark S. Langevin, Brazil’s Hydrocarbon Bonanza: Can the State Manage Pre-Salt Production for National
Development and Geopolitical Power?
, Brazil-Works, Discussion Paper, May 2012.
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source of energy for the United States. The new discoveries are so-called “pre-salt” reserves,
located beneath layers of rock and salt more than 18,000 feet below the ocean surface. Some
energy analysts have estimated that the total recoverable reserves of pre-salt oil and natural gas
may exceed 50 billion barrels of oil equivalent.88 Brazil’s proven oil reserves stood at 15.3 billion
barrels at the end of 2012, accounting for slightly less than 1% of global reserves.89 Nearly 94%
of Brazil’s proven reserves are located offshore.90
In December 2010, the Brazilian Congress approved a new regulatory framework for developing
the approximately 70% of pre-salt reserves that had not already been auctioned off.91 The new
framework increased the role of the Brazilian government and is designed to ensure that the
country’s oil reserves are used to fuel long-term economic and social development. Among other
provisions, the framework establishes state-owned Petróleo Brasileiro S.A. (Petrobras) as the sole
operator for all new offshore projects; replaces the existing concessionary model with a
production sharing regime; guarantees Petrobras a minimum 30% stake in all new joint ventures;
creates a new public company—Petrosal—to manage the development of the offshore reserves;
increases local content requirements; and creates a new social fund overseen by the Brazilian
Congress to direct offshore revenues toward four key areas: education, infrastructure, science and
technology, and poverty reduction.92 The Brazilian Congress continued to debate a new law
regarding the distribution of oil royalties until March 2013.93
The delay in approving the new regulatory framework and royalty distribution law prevented
Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels (Agência Nacional do
Petróleo, Gás Natural e Biocombustíveis
, ANP) from auctioning new concessions for nearly five
years. As a result, oil production did not increase as quickly as originally predicted and actually
slightly declined between 2011 and 2012 to 2.1 million barrels per day.94 Even so, the Brazilian
government received record revenues from the oil industry in 2012 that amounted to about $14
billion (R$31.8 billion).95
The ANP held its first auction of pre-salt concessions under the new regulatory framework in
October 2013. While the ANP reportedly had expected more than 40 companies to participate,
only 11 companies signed up for the auction, and a consortium of five companies (Petrobras,
Royal Dutch Shell, Total, China National Petroleum Corporation, and China National Offshore
Oil Corporation) was the sole bidder.96 The Brazilian government declared the auction a success,
but some energy analysts maintain that the country will need to modify the new regulatory

88 EIA, October 2013, op.cit.
89 BP, BP Statistical Review of World Energy, June 2013, p. 6, http://www.bp.com/content/dam/bp/pdf/statistical-
review/statistical_review_of_world_energy_2013.pdf.
90 Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP), Oil, Natural Gas and Biofuels Statistical
Yearbook 2013
, 2013, p. 26.
91 Langevin, 2012, op.cit.
92 “Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long-Term
Perspective,” Oxford Analytica, May 2010.
93 The royalty distribution law has not yet gone into effect as it is being challenged in Brazil’s Supreme Court.
94 BP, June 2013, op.cit., p.8.
95 ANP, 2013, op.cit.
96 “Weak Libra Interest Rounds Out a Rough Week for Brazil’s Rousseff,” Latin News Daily Report, September 20,
2013; “Brazil’s Oil Revolution Gets Off to a Slippery Start,” Latin News Daily Report, October 22, 2013.
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framework prior to auctioning other concessions in order to attract the investment necessary to
develop its reserves and accelerate production.97
U.S.-Brazilian oil trade has expanded significantly over the past decade (see Figure 3). U.S.
crude oil imports from Brazil grew rapidly from 51,000 barrels per day in 2004 to 295,000 barrels
per day in 2009. They have declined since then, however, as U.S. consumption has fallen and
U.S. domestic production has increased. In 2013, the United States imported 109,000 barrels per
day of crude oil from Brazil, which was equivalent to about 1.4% of total U.S. crude imports.
U.S. exports of refined products to Brazil have also grown quickly, increasing 544% from 27,000
barrels per day in 2004 to 174,000 barrels per day in 2013. As a result, U.S. refined product
exports to Brazil exceeded U.S. crude imports from Brazil for the first time in at least a decade in
2013.98 Brazil has been forced to increasingly rely on imports as its consumption has grown more
quickly than its production and refinery capacity. Some energy analysts expect this trend to
continue until at least 2017, when two new Brazilian refineries are scheduled to begin
operations.99
Figure 3. U.S. Oil Trade with Brazil: 2004-2013
In thousands of barrels per day
350
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
U.S. Crude Oil Imports
U.S. Petroleum Product Exports

Source: CRS presentation of U.S. Energy Information Administration (EIA) data.
Security Cooperation
Although U.S.-Brazilian cooperation on security issues has traditionally been limited, law
enforcement and military ties have increased in recent years. Areas of coordination include
counternarcotics, counterterrorism, and defense.

97 Matthew Cowley and Paulo Trevisani, “Brazil Seen Having to Alter Oil Rules,” Wall Street Journal, October 22,
2013.
98 EIA, “Petroleum & Other Liquids: Data,” accessed March 2014.
99 Jeb Blount, “Analysis: Petrobras Fuel Woes Make Brazil Dependent on U.S., India,” Reuters, January 22, 2014.
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Counternarcotics
While Brazil is not a major drug-producing country, it is the world’s second-largest consumer of
cocaine hydrochloride and likely the world’s largest consumer of cocaine-base products. It also
serves as a transit point for illicit drugs destined for Europe.100 Security analysts contend that
organized crime in Brazil has increased in scope and scale over the past decade as the drug trade
has expanded. Some of the country’s large, well-organized, and heavily armed criminal groups,
such as the Red Command (Comando Vermelho, CV) and the First Capital Command (Primeiro
Comando da Capital
, PCC), have reportedly begun to operate transnationally, eliminating
intermediaries in order to control cross-border trafficking.101
In recognition of these challenges, Brazil has taken several steps to improve its antidrug efforts.
In 2004, it implemented an air bridge denial program, which authorizes lethal force for air
interdiction, and in 2006, Brazil passed an anti-drug law that prohibits and penalizes the
cultivation and trafficking of illicit drugs. Brazil has also sought to improve security along the
15,719 kilometer border that it shares with 10 nations, including the region’s cocaine producers—
Bolivia, Colombia, and Peru. Under its Strategic Border Plan, introduced in June 2011, the
Brazilian government has reportedly deployed inter-agency resources, including unmanned aerial
vehicles (UAVs), to monitor illicit activity in high-risk locations along its borders and in the
remote Amazon region. It has also signed agreements and carried out joint operations with
neighboring countries.102 In 2013, Brazilian authorities reportedly seized 35.7 metric tons of
cocaine and 220.8 metric tons of marijuana.103
In 2008, the U.S. and Brazilian governments signed a memorandum of understanding designed to
enhance the capacity of Brazilian authorities to combat drug trafficking and reduce domestic drug
demand. To these ends, the United States provided support to a canine unit and special
investigation units within the Brazilian Federal Police, and provided support to non-governmental
organizations that work with addicts and their families in 2013.104 U.S. counternarcotics
assistance to Brazil amounted to $2 million in FY2011, $3.5 million in FY2012, and $1.9 million
in FY2013.105 The Obama Administration did not request any counternarcotics assistance for
Brazil in FY2014 or FY2015.106

100 U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, International Narcotics
Control Strategy Report (INCSR), Volume I: Drug and Chemical Control
, March 2014, http://www.state.gov/j/inl/rls/
nrcrpt/2014/vol1/222851.htm.
101 Robert Muggah and Guztavo Diniz, Securing the Border: Brazil’s “South America First” Approach to
Transnational Organized Crime
, Igarapé Institute, Strategic Paper 5, October 2013, http://pt.igarape.org.br/wp-content/
uploads/2013/10/SP_05_EN_Securing-the-border_7th_oct.pdf.
102 U.S. Department of State, Bureau of International Narcotics and Law Enforcement Affairs, International Narcotics
Control Strategy Report (INCSR), Volume I: Drug and Chemical Control
, March 7, 2012, http://www.state.gov/j/inl/
rls/nrcrpt/2012/vol1/184098.htm#Brazil; “Hermes 450: O Vigilante Das Fronteiras Brasileiras,” Terra (Brazil), August
25, 2011; “Brazil-Region: Flying Start for the New ‘Border Strategy’,” Latin American Security & Strategic Review,
July 2011.
103 INCSR, 2014, op.cit.
104 Ibid.
105 U.S. Department of State, USAID, and U.S. Department of Defense data as presented by the Foreign Assistance
Dashboard
, accessed March 2014.
106 U.S. State Department, Congressional Budget Justification for Foreign Operations, Fiscal Year 2014, May 17,
2013, and Congressional Budget Justification, Department of State, Foreign Operations, and Related Programs, Fiscal
Year 2015
, March 4, 2014.
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Counterterrorism107
The Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay has long been used for arms
smuggling, money laundering, and other illicit purposes. According to the State Department’s
Country Reports on Terrorism, there are no known operational cells of al Qaeda or Hezbollah-
related groups in the Western Hemisphere; however, the United States remains concerned that
proceeds from legal and illegal goods flowing through the TBA could potentially be diverted to
support terrorist groups.108 For example, in December 2010, the U.S. Treasury Department
sanctioned Hezbollah’s chief representative in South America, Bilal Mohsen Wehbe, for
transferring funds collected in Brazil to Hezbollah in Lebanon. According to the Treasury
Department, Wehbe and an associate raised more than $500,000 from Lebanese businessmen in
the TBA following the 2006 conflict between Israel and Hezbollah. Wehbe also reportedly had
overseen Hezbollah’s counterintelligence activity in the TBA and had worked for the office of
Iranian Supreme Leader Ayatollah Ali Khamene'i.109
The U.S. government has worked with Brazil to address concerns about the TBA and strengthen
the country’s counterterrorism capabilities. The countries of the TBA and the United States
created the “3+1 Group on Tri-Border Area Security” in 2002, and the group built a Joint
Intelligence Center to combat trans-border criminal organizations in 2007. Within Brazil, the
United States has supported efforts to implement the Container Security Initiative (CSI) at the
port of Santos, and has sought to strengthen Brazil’s capacity to secure its borders and conduct
terrorism-related investigations. U.S. authorities are currently assisting Brazil with major event
security management as it prepares to host the 2014 World Cup and 2016 Summer Olympic
Games.110
The State Department’s Country Reports on Terrorism for 2012 recognized the Brazilian
government’s continued support for counterterrorism-related activities, including investigating
potential terrorism financing and document forgery networks.111 However, Brazil has yet to adopt
legislation to make terrorism and terrorism financing autonomous offenses. Like many other
Latin American nations, Brazil has been reluctant to adopt specific antiterrorism legislation as a
result of the difficulty of defining terrorism in a way that does not include the actions of social
movements and other groups whose actions of political dissent were condemned as terrorism by
repressive military regimes in the past. Despite these challenges, some Brazilian legislators have
renewed their efforts to enact an anti-terrorism law, maintaining that Brazil needs to strengthen its
legal framework in advance of the upcoming major sporting events.112

107 For more information on terrorism concerns in Latin America, see CRS Report RS21049, Latin America: Terrorism
Issues
, by Mark P. Sullivan and June S. Beittel.
108 U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism 2012, May
30, 2013, http://www.state.gov/j/ct/rls/crt/2012/209984.htm.
109 U.S. Department of the Treasury, “Treasury Targets Hizballah Financial Network,” Press Release, December 9,
2010.
110 Country Reports on Terrorism 2012, May 2013, op.cit.
111 Ibid.
112 Fernanda Odilla and Gabriela Guerreiro, “Lei Antiterrorismo Pode Dar Pena de Até 40 Anos a Manifestantes,”
Folha de São Paulo, February 12, 2014; Paloma Rodrigues, “Após Morte de Cinegrafista, Senado Tenta Acelerar ‘Lei
Antiterror’,” CartaCapital, February 11, 2014.
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Defense
According to General John F. Kelly, Commander of U.S. Southern Command, challenges in
broader bilateral relations have affected U.S.-Brazilian defense ties, but military-to-military
cooperation at the operational and tactical levels remains strong.113 The U.S. and Brazilian
militaries have worked together closely in Haiti, where Brazil commands the U.N. Stabilization
Mission (MINUSTAH). Joint efforts in the aftermath of Haiti’s January 2010 earthquake were the
largest combined operations of U.S. and Brazilian military forces since World War II. Other areas
of military-to-military cooperation include information exchanges, combined military training,
and joint military exercises. In April 2010, the U.S. and Brazilian governments signed a Defense
Cooperation Agreement designed to promote cooperation in areas such as research and
development, technology security, and acquisition of defense products and services. This was
followed by a General Security of Military Information Agreement, signed in November 2010,
which is designed to facilitate the sharing of classified defense and military information.114 Both
agreements still need to be approved by the Brazilian Congress. Additional coordination takes
place through a presidential-level Defense Cooperation Dialogue, which President Obama and
President Rousseff launched in April 2012.
As noted above, the United States provides International Military Education and Training (IMET)
aid to Brazil. The assistance is designed to strengthen military-to-military relationships, increase
the professionalization of Brazilian forces, and enhance Brazil’s capacity to assume a larger role
in peacekeeping operations and in combating terrorism. IMET assistance amounted to $631,000
in FY2011, $638,000 in FY2012, and $572,000 in FY2013. Brazil is receiving an estimated
$625,000 in IMET in FY2014, and the Administration has requested $625,000 in IMET
assistance for Brazil in FY2015.115
Two defense procurement deals have received considerable attention in recent years. In February
2013, the U.S. Air Force awarded a $427 million contract for light air support aircraft and
associated maintenance and training to Brazil’s Embraer S.A. and its U.S.-based partner, Sierra
Nevada Corp. Under the contract, Embraer will provide 20 A-29 Super Tucano aircraft to the
Afghan military for advanced flight training, surveillance, close air support, and air interdiction
missions.116 The U.S. Air Force had originally awarded the contract to Embraer in December
2011, but the order was cancelled after U.S.-based Hawker Beechcraft challenged the
procurement process.
Some observers assumed that the U.S. contract with Embraer increased the likelihood that Brazil
would award a contract for 36 new fighter jets to Boeing. Brazil awarded the $4.5 billion contract
to Sweden’s Saab AB in December 2013, however, choosing the Gripen NG over Boeing’s F/A-
18 Super Hornet. While the decision appears to have been at least partially a reaction to alleged
NSA surveillance activities inside Brazil, there were also other considerations.117 The Brazilian

113 General John F. Kelly, Commander, United States Southern Command, Posture Statement before the 113th
Congress House Armed Services Committee
, February 26, 2014, p. 21, http://www.southcom.mil/newsroom/
Documents/2014_SOUTHCOM_Posture_Statement_HASC_FINAL_PDF.pdf.
114 U.S. Department of Defense, Office of the Secretary of Defense, “Fact Sheet: U.S.-Brazil Defense Cooperation,”
March 14, 2011.
115 U.S. Department of State, Congressional Budget Justifications for Foreign Operations, Fiscal Years 2013, 2014,
and 2015
, available at http://www.state.gov/f/releases/iab/index.htm.
116 “Brazilian Firm to Provide Aircraft to Afghan Air Force,” American Forces Press Service, February 27, 2013.
117 Alfonso Soto and Brian Winter, “Saab Wins Brazil Jet Deal after NSA Spying Sours Boeing Bid,” Reuters,
(continued...)
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Air Force announced its preference for the Gripen in January 2010, reportedly citing its lower
purchase and maintenance costs and the ability to transfer more technology to Brazil.118 Given
Brazil’s current economic challenges and the fact that some Brazilian officials were already wary
of relying on U.S. hardware as a result of past experiences in which the U.S. government blocked
sales of Brazilian arms containing U.S. technology,119 the NSA allegations may have been enough
to push Boeing out of the running.
Promotion of Racial Equality
Brazil has experienced significant improvements in economic and social conditions over the past
decade; however, considerable socioeconomic disparities between races persist. While Afro-
Brazilians comprise about half of the Brazilian population,120 they account for less than 25% of
Brazilians that have completed post-secondary degrees and 17% of Brazilians that have
completed graduate degrees.121 In 2010, the median income of Afro-Brazilians was 64% of the
median income of white Brazilians.122 Even after controlling for education, occupation, and
location, white Brazilians reportedly receive higher wages than Afro-Brazilians.123 Moreover,
Afro-Brazilians are disproportionately the victims of Brazil’s high levels of crime and violence.
In 2010, the homicide rate for Afro-Brazilians was 36.5 per 100,000—nearly two and a half times
the rate of other Brazilians.124
In order to reduce racial disparities, the Brazilian government has enacted a series of
antidiscrimination and affirmative action measures. Brazil became the first Latin American
country to endorse racial quotas in government service in 2002, and became the first country in
the world to establish a special secretariat with a ministerial rank to manage racial equity
promotion policies in 2003. In 2010, Brazil enacted the Statute of Racial Equality. Among other
provisions, the law offers tax incentives for businesses that undertake racial inclusion, calls on the
government to adopt affirmative action programs, and reaffirms that African and Afro-Brazilian
history should be taught in all elementary and middle schools. In 2012, Brazil adopted a law that
requires federal universities to reserve half of their admissions spots for students who are Afro-
Brazilian, indigenous, or graduates of public high schools (which tend to serve the poorest
students). The law gradually increases the admissions spots required to be reserved from 12.5% in
2013 to 50% in 2016, with half of the reserved spots set aside for low income students of all races
with the highest grades and the other half divided in accordance with the racial makeup of each
state.125 Most recently, President Rousseff has proposed reserving 20% of jobs in the federal

(...continued)
December 18, 2013.
118 Raymond Colitt, “Brazil Air Force Prefers Swedish Jets – Report,” Reuters, January 5, 2010.
119 In 2006, for example, the United States prevented Brazil from selling 24 Super Tucano light attack planes to
Venezuela.
120 According to Brazil's 2010 census, 43.1% of Brazilians self-identify as parda (“brown) and 7.6% self-identify as
preta (“black”). IBGE, Censo Demográfico 2010, November 2011.
121 Tatiana Dias Silva and Fernanda Lira Goes, Igualdade Racial no Brasil: Reflexões no Ano Internacional dos
Afrodescendentes
, Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro, 2013, p. 20.
122 IBGE, 2011, op.cit.
123 Dias & Goes, 2013, op.cit., p.21.
124 Daniel R. C. Cerqueira and Rodrigo Leandro de Moura, Vidas Perdidas e Racismo no Brasil, IPEA, Nota Técnica
N° 10, Brasília, November 2013, p. 6.
125 Simon Romero, “Brazil Enacts Affirmative Action Law for Universities,” New York Times, August 30, 2012;
(continued...)
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government for Afro-Brazilians.126 Although race-based affirmative action policies have been
rather controversial among some sectors of the Brazilian population,127 they have been upheld as
constitutional by the Brazilian Supreme Court.
In March 2008, Brazil and the United States signed an agreement known as the United 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.128 Current areas of focus include expanding access to education for
students of African descent, eliminating racial health disparities, mitigating environmental
impacts in communities of African descent, addressing challenges in criminal justice systems, and
guaranteeing equal access to economic opportunities.129 H.Rept. 113-185, which is considered
part of the explanatory statement accompanying the Consolidated Appropriations Act, 2014 (P.L.
113-76), recognizes the work being done under the U.S.-Brazil Joint Action Plan to Eliminate
Racial and Ethnic Discrimination and Promote Equality, and states that the legislation includes
funds to continue the initiative in FY2014.
Amazon Conservation
The Amazon Basin is estimated to span more than 6.8 million square kilometers. It produces
about 20% of the world’s fresh water discharge and contains the largest remaining rainforest on
Earth.130 In addition to supporting significant biological diversity, the Amazon Rainforest is a
global sink for carbon emissions and an important asset in the mitigation of climate change. The
forest biomass is estimated to hold about 100 billion tons of carbon, which is equivalent to more
than 10 years of global fossil fuel emissions.131
Although the Amazon Basin is shared by seven nations,132 69% of it lies within Brazil.133 The
Brazilian Amazon was largely undeveloped until the 1960s, when the military government began
subsidizing the settlement and development of the region as a matter of national security. Partially

(...continued)
“Rousseff Decrees Affirmative Action,” Latin News Daily Report, October 16, 2012.
126 Tatiana Dias Silva and Josenilton Marques da Silva, Reserva de Vagas para Negros em Concursos Públicos: Uma
Análise a partir do Projeto de Lei 6.738/2013
, (IPEA), Nota Técnica N° 17, Brasília, February 2014.
127 See, for example, Diogo Schelp, “Queremos Dividir o Brasil como na Foto?” Veja, September 2, 2009; and Julia
Carvalho, “O Grande Erro das Cotas,” Veja, August 29, 2012.
128 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” April 11, 2012.
129 U.S. Department of State, Office of the Spokesperson, “Steering Group Meeting of the U.S.-Brazil Joint Action Plan
to Eliminate Racial and Ethnic Discrimination and Promote Equality,” Media Note, July 17, 2013.
130 United Nations Environment Programme (UNEP), Global International Waters Assessment: Amazon Basin, GIWA
Regional Assessment 40b, Kalmar, Sweden, 2004, http://www.unep.org/dewa/giwa/areas/reports/r40b/
giwa_regional_assessment_40b.pdf.
131 Eric A. Davidson et al., “The Amazon Basin in Transition,” Nature, vol. 481 (January 19, 2012), p. 321.
132 The seven nations that share the Amazon Basin are Brazil, Bolivia, Colombia, Ecuador, Guyana, Peru, and
Venezuela. The Amazon Rainforest extends beyond the Amazon Basin into Suriname and French Guiana.
133 UNEP, 2004, op.cit.
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as a result of these incentives, the human population grew from 6 million in 1960 to 25 million in
2010. Forest cover in the Brazilian Amazon has declined to about 80% of its original area as a
result of settlements, roads, logging, farming, and other activities in the region.134
Figure 4. Deforestation in the Brazilian Amazon: 2004-2013
In square kilometers
30,000
25,000
20,000
15,000
10,000
5,000
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

Source: CRS presentation of data from the Brazilian government’s Instituto Nacional de Pesquisas Espaciais
(INPE).
Recognizing that continued destruction of the Amazon Rainforest is damaging to Brazil’s global
image and could threaten energy generation and agricultural production in the future,135 the
Brazilian government has implemented a series of policies designed to slow deforestation. From
2004 to 2011, for example, Brazil increased the size of its nature reserves by 500,000 square
kilometers. Likewise, the Brazilian government adopted a plan to reduce the rate of Amazon
deforestation by 80%—based on the 1996-2005 average—to 3,925 square kilometers per year by
2020. To meet this target, the Brazilian government is increasing surveillance, replanting forest,
and financing sustainable development projects.136 Brazil appears to be on track to achieve its
goal, as annual deforestation has fallen from 27,772 square kilometers in 2004 to 5,843 square
kilometers in 2013 (see Figure 4).137 There is considerable debate, however, as to whether these
decreases are the result of government policies or changing economic circumstances, such as
lower commodity prices. According to a 2012 study, about half of the reduction in deforestation

134 Davidson et al., 2012, op.cit., p.321.
135 See, for example, Fabiana Frayssinet, “Climate Change-Brazil: Farmers ‘Have Good Reason to Worry’,” Inter Press
Service
, September 21, 2011; and “Amazonian Deforestation May Cut Rainfall by a Fifth: Study,” Agence France
Presse
, September 5, 2012.
136 República Federativa do Brasil, Ministério do Meio Ambiente, Plano de Ação para Prevenção e Controle do
Desmatamento na Amazônia Legal (PPCDAm): 3ª Fase (2012-2015)
, Brasília, June 2013.
137 República Federativa do Brasil, Ministério da Ciência, Tecnologia e Inovação, Instituto Nacional de Pesquisas
Espaciais (INPE), Projeto PRODES, Monitoramento da Floresta Amazônica Brasileira por Satélite, accessed March
2013.
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in the Brazilian Amazon between 2005 and 2009 was attributable to the Brazilian government’s
conservation policies.138
Despite recent progress, Brazil’s deforestation rate increased by nearly 28% between 2012 and
2013—a development that some analysts have attributed to government policy changes. In 2011,
President Rousseff signed a law transferring responsibility for environmental oversight of non-
federal lands from Brazil’s federal environmental protection agency to local officials. While the
federal government maintains that local officials are better placed to manage such resources,
critics argue that local authorities lack the necessary finances and are more susceptible to
intimidation and corruption.139 Many environmentalists are also concerned about changes to
Brazil’s forest code—a law that requires rural landowners to set aside 20%-80% of their land for
natural vegetation. The Brazilian Congress approved a major overhaul of the code in 2012.
Although President Rousseff vetoed some of the most controversial provisions, the final version
reportedly relaxed conservation requirements for environmentally sensitive areas like river banks,
reduced reforestation requirements for land that had already been deforested, and decreased the
total amount of forest that must be preserved.140 Supporters of the reform assert that it was
necessary in order to bring farmers into compliance with the law, and argue that the updated
forest code remains among the strictest regulations of privately owned property in the world.141
In recent years, the United States has provided assistance to Brazil designed to support tropical
forest conservation through the promotion of sustainable land use and encouragement of
environmentally friendly income generation activities for the rural poor. In FY2006, USAID
initiated the Amazon Basin Conservation Initiative, which supports community groups,
governments, and other organizations working throughout the Amazon Basin to conserve the
forest’s biodiversity. USAID provided Brazil with $11.5 million for environmental programs in
FY2011, $10.8 million in FY2012, and $9.6 million in FY2013.142 The explanatory statement143
accompanying the Consolidated Appropriations Act, 2014 (P.L. 113-76) stipulates that $10.5
million of the funds appropriated by the act should support environmental programs in the
Brazilian Amazon in FY2014. As was the case in FY2013 and FY2014, the Obama
Administration has not requested any funding for environmental programs in Brazil in FY2015.144
In addition to providing foreign aid, the United States has signed a debt-for-nature agreement
with Brazil under the Tropical Forest Conservation Act of 2008 (P.L. 105-214). According to the
August 2010 agreement, the United States is reducing Brazil’s debt payments by $21 million over
five years. In exchange, the Brazilian government is committing those funds to activities to
conserve protected areas, improve natural resource management, and develop sustainable

138 Juliano Assunção, Clarissa C. e Grandour, and Rudi Rocha, Deforestation Slowdown in the Legal Amazon: Prices
or Policies
, Climate Policy Initiative, Working Paper, Rio de Janeiro, February 6, 2012,
http://climatepolicyinitiative.org/wp-content/uploads/2012/03/Deforestation-Prices-or-Policies-Working-Paper.pdf.
139 Paulo Prada, “Special Report: Brazil Backslides on Protecting the Amazon,” Reuters, August 3, 2012.
140 “Brazil President Makes Final Changes to Forestry Law,” Agence France Presse, October 18, 2012.
141 Reese Ewing, “Interview-Brazil Land Use Bill to Make Forests Profitable,” Reuters, June 1, 2011; Kátia Abreu,
“Código Florestal e a Busca da Perfeição,” Folha de São Paulo, September 29, 2012.
142 USAID data, as presented by the Foreign Assistance Dashboard, accessed March 2014.
143 The joint explanatory statement is available from the House Committee on Rules at http://rules.house.gov/bill/113/
hr-3547-sa.
144 U.S. Department of State, Congressional Budget Justification, Department of State, Foreign Operations, and
Related Programs
, Fiscal Year 2015, March 4, 2014.
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livelihoods in endangered areas outside of the Amazon Rainforest such as the Atlantic Rainforest,
Caatinga, and Cerrado ecosystems.145

145 U.S. Department of State, Office of the Spokesman, “Debt-for-Nature Agreement to Conserve Brazil’s Tropical
Forests,” August 12, 2010. For more information on the Tropical Forest Conservation Act, see CRS Report RL31286,
Debt-for-Nature Initiatives and the Tropical Forest Conservation Act: Status and Implementation, by Pervaze A.
Sheikh.
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Appendix. Legislative Initiatives in the
113th Congress

P.L. 113-79 (H.R. 2642). Agricultural Act of 2014. Signed into law on February 7, 2014. Includes
changes to the U.S. cotton program that could allow for a resolution to a long-standing WTO
dispute with Brazil.
P.L. 113-76 (H.R. 3547). Consolidated Appropriations Act, 2014. Signed into law on January 17,
2014. The explanatory statement accompanying the act stipulates that $10.5 million of the funds
appropriated should support environmental programs in the Brazilian Amazon. H.Rept. 113-185
(which accompanied H.R. 2855 and is considered part of the explanatory statement) recognizes
the work being done under the U.S.-Brazil Joint Action Plan to Eliminate Racial and Ethnic
Discrimination and Promote Equality, and states that the legislation includes funds to continue the
initiative in FY2014.
S. 744 (Schumer). Border Security, Economic Opportunity, and Immigration Modernization Act.
Agreed to in the Senate on June 27, 2013. Includes a provision that would require U.S. consular
missions to explore options for expanding visa processing capacity in Brazil.
H.R. 1644 (Kind). Introduced April 18, 2013; referred to the House Committee on Agriculture.
Among other provisions, would prohibit the Secretary of Agriculture from making payments to
the Brazilian Cotton Institute. The payments are part of a temporary agreement between the
United States and Brazil regarding the WTO cotton dispute.
H.R. 571 (T. Ryan). Karl Hoerig Foreign Aid Suspension Act. Introduced February 6, 2013;
referred to the House Committee on Foreign Affairs. Would suspend U.S. assistance to Brazil
until it amends its constitution to allow the extradition of Brazilian nationals.
H.R. 572 (T. Ryan). End Immunity for Brazilian Criminals Act. Introduced February 6, 2013;
referred to the House Committee on the Judiciary. Would suspend the issuance of visas to
Brazilians until Brazil amends its constitution to allow the extradition of Brazilian nationals.

Author Contact Information

Peter J. Meyer

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


Congressional Research Service
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