Brazil: Political and Economic Situation and
U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
January 14, 2015
Congressional Research Service
7-5700
www.crs.gov
RL33456
Brazil: Political and Economic Situation and U.S. Relations
Summary
The United States enjoys cooperative relations with Brazil, which is the seventh-largest economy
in the world and is recognized by the Obama Administration as an emerging center of
international 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 were particularly strained following revelations in 2013
of alleged National Security Agency (NSA) activities inside Brazil, but cooperation has improved
in recent months. Ongoing areas of engagement include trade, energy, security, racial equality,
and the environment.
Political and Economic Situation
After narrowly winning a presidential runoff election in October 2014, Dilma Rousseff of the
center-left Workers Party was inaugurated to a second four-year term on January 1, 2015. She
faces significant economic and political challenges as she begins her new term. Economic
conditions in Brazil have deteriorated significantly since 2011, with growth stalling and inflation
rising. Rousseff is now in the difficult position of trying to keep her campaign promises to protect
social welfare programs and maintain low unemployment while simultaneously implementing
austerity measures that many economists think are necessary to ultimately boost growth. In order
to advance her policy agenda, Rousseff will need to cobble together a governing majority in the
extremely fragmented Brazilian Congress. This task could become more difficult as an
investigation into corruption at the state-owned oil company, Petrobras, begins to focus on
politicians that benefited from the corruption scheme.
Congressional Action
The 113th Congress expressed interest in several aspects of U.S.-Brazil relations. 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), signed into law in February 2014, Congress approved
modifications to the U.S. cotton program that appear to have helped resolve a long-running trade
dispute with Brazil. In December 2014, Congress approved the Consolidated and Further
Continuing Appropriations Act, 2015 (P.L. 113-235), which appropriated $10.5 million for
environmental programs in the Brazilian Amazon and provided funding to continue the U.S.-
Brazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality.
Among other issues, the 114th Congress is likely to consider appropriations to continue U.S. aid
programs in Brazil and legislation to renew the U.S. Generalized System of Preferences (GSP)
program, which provides nonreciprocal, duty-free tariff treatment to certain products imported
from Brazil and other designated developing countries. The 114th Congress also may revisit
pending reforms to the International Monetary Fund (IMF) that would provide greater voting
power to Brazil and other emerging economies.
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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
Political Challenges ............................................................................................................. 7
U.S.-Brazil Relations ....................................................................................................................... 8
U.S. Foreign Assistance and Trilateral Development Initiatives ............................................. 10
Commercial Relations ............................................................................................................. 11
Bilateral Trade and Investment ......................................................................................... 12
Cotton Dispute .................................................................................................................. 14
Energy Ties .............................................................................................................................. 15
Biofuels ............................................................................................................................. 15
Oil ...................................................................................................................................... 16
Security Cooperation ............................................................................................................... 18
Counternarcotics................................................................................................................ 18
Counterterrorism ............................................................................................................... 19
Defense .............................................................................................................................. 20
Promotion of Racial Equality .................................................................................................. 21
Amazon Conservation ............................................................................................................. 23
Figures
Figure 1. Map of Brazil.................................................................................................................... 2
Figure 2. U.S. Trade with Brazil: 2004-2013................................................................................. 13
Figure 3. U.S. Oil Trade with Brazil: 2004-2013 .......................................................................... 18
Figure 4. Deforestation in the Brazilian Amazon: 2004-2014 ....................................................... 24
Tables
Table 1. U.S. Assistance to Brazil: FY2010-FY2015 .................................................................... 10
Appendixes
Appendix. Legislative Initiatives in the 113th Congress ................................................................. 26
Contacts
Author Contact Information........................................................................................................... 26
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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 was inaugurated to a second four-year
term on January 1, 2015. She spent much of her first term in office dealing with deteriorating
economic conditions. Mass demonstrations shook Brazil in June 2013, with citizens taking to the
streets to denounce corruption and call for better quality public services. The political opposition
tried to take advantage of this popular discontent during national elections held in October 2014,
but Rousseff rallied to narrowly win a second round runoff. During her second term, Rousseff
will seek to protect social welfare programs and maintain low unemployment while implementing
economic austerity measures designed to boost long-term growth. In order to advance her agenda,
Rousseff will need to cobble together a governing majority in the fragmented Brazilian Congress
and limit the political fallout of a major corruption scandal.
Background
Brazil occupies almost half of the continent of South America and is the fifth most populous
country in the world with 203 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 its 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. According to Brazil’s National Truth Commission, at least 434 people
were killed or disappeared by the dictatorship.2 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, establishes 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. Brazil
experienced economic recession and political uncertainty during the first decade after the political
1 Instituto Brasileiro de Geografia e Estatística (IBGE), Estimativas da População Residente no Brasil e Unidades da
Federação com Data Referëncia em 1° de Julho de 2014, August 28, 2014.
2 Comissão Nacional da Verdade, Relatório, Volume 1, December 2014, p.963.
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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.3
Figure 1. Map of Brazil
Source: Map Resources. Adapted by CRS Graphics.
3 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 centrist4 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 1995.5 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.
These policies contributed to stronger growth rates for a few years, but 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 adopted a floating
exchange rate and the real lost 40% of its value.6
Although Cardoso’s popularity declined as Brazil struggled with these economic challenges, 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-left7 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
4 The PSDB was founded as a center-left party by dissidents from the social democratic wing of the Party of the
Brazilian Democratic Movement (Partido do Movimento Democrático Brasileiro, PMDB). It has moved to the right
since implementing market-oriented economic reforms during the Cardoso Administration. Timothy J. Power and
Cesar Zucco Jr., “Estimating Ideology of Brazilian Legislative Parties, 1990-2005,” Latin American Research Review,
vol. 44, no. 1, 2009.
5 CRS Report 98-987, Brazil's Economic Reform and the Global Financial Crisis, by J. F. Hornbeck.
6 Ibid; Riordan Roett, “How Reform has Powered Brazil’s Rise,” Current History, February 2010.
7 The PT was founded as a leftist party, but 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. The scandal ultimately led to the convictions of 25 people—including
Lula’s former chief of staff—in 2012.8 Nevertheless, 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.9 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;10 the Brazilian
economy contracted by 0.3% in 2009 before rebounding with 7.5% growth in 2010.11 Moreover,
Lula won legislative approval for a new regulatory framework that increased the state’s role in the
exploitation of Brazil’s considerable offshore oil reserves and is designed to ensure that those
resources are used to fuel long-term economic and social development.
Although some observers criticized Lula for not doing more to advance certain policy reforms,12
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%.13 Income inequality was also reduced, with
the Gini coefficient14 falling from 0.64 to 0.56 during the same time period.15 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 13% of the decline was attributable to
the Bolsa Família program.16
8 “Brazil Politics: Supreme Court Gives Tough Sentences in ‘Mensalão’ Trial,” Economist Intelligence Unit, October
26, 2012.
9 Cristiano Romero, “O Legado de Lula na Economia,” Valor Online (Brazil), December 29, 2010.
10 See, for example, International Monetary Fund (IMF), “IMF Executive Board Concludes 2010 Article IV
Consultation with Brazil,” August 5, 2010.
11 IMF, World Economic Outlook Database, October 7, 2014.
12 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.
13 U.N. Economic Commission for Latin America and the Caribbean (ECLAC), Statistical Yearbook for Latin America
and the Caribbean, 2013, December 2013, p.65, http://www.eclac.cl/publicaciones/xml/5/51945/
AnuarioEstadistico2013.pdf.
14 The Gini coefficient is a value between zero and one, where zero represents complete equality and one represents
complete inequality.
15 ECLAC, December 2013, op. cit., p.70.
16 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: 202.8 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 (2014 est.)
GDP per Capita: $11,067 (2014 est.)
Top Exports: iron ore, soy beans, oil, meat, and machinery (2014)
Life Expectancy at Birth: 74 years (2012)
Infant Mortality Rate: 12 per 1,000 live births (2013)
Adult Literacy Rate: 91.3% (2012)
Poverty Rate: 18.6% (2012)
Extreme Poverty Rate: 5.4% (2012)
Sources: Area, population, 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; life
expectancy and infant mortality statistics from the World Bank; literacy and poverty rates from the U.N. Economic
Commission for Latin America and the Caribbean (ECLAC).
Rousseff Administration (2011-Present)
President Dilma Rousseff of the center-left PT was originally elected in 2010 after promising to
maintain the popular policies of President Lula, during whose administration the Brazilian
economy expanded by an average of 4% per year, poverty and inequality were reduced
significantly, and nearly 40 million Brazilians joined the middle class.17 Economic conditions
deteriorated during Rousseff’s first term as the Brazilian economy slowed and inflation increased.
Economists estimate that the Brazilian economy grew by 0.2% and inflation was close to 6.5% in
2014.18 While unemployment has remained near record lows (4.8% in November 2014),19 many
Brazilians are frustrated by the stagnation in their living standards. Mass demonstrations took
place across the country in June 2013, with more than a million citizens taking to the streets to
denounce corruption and call for better quality public services.20
The political opposition sought to capitalize on Rousseff’s failure to meet citizens’ rising
expectations by promising a change in direction in the October 2014 presidential election. Two of
the opposition candidates—Marina Silva of the center-left Brazilian Socialist Party (Partido
Socialista Brasileiro, PSB) and Aecio Neves of the centrist PSDB—led Rousseff in the polls at
17 IMF, World Economic Outlook Database, October 7, 2014; 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.
18 Raymond Colitt, “Brazil May Add Tax Increase to Budget Cuts, Finance Chief Says,” Bloomberg, January 9, 2015.
19 IBGE, “In November, Unemployment was at 4.8%,” December 19, 2014.
20 “Brazil’s Stormy June: Not Turkey or Egypt,” Latin American Security & Strategic Review, June 2013.
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key stages of the presidential race. Support for the opposition candidates ebbed, however, as
Rousseff and the PT convinced many Brazilians that Silva and Neves would end popular social
welfare programs and threaten the socioeconomic gains made in Brazil over the past 12 years. In
the end, Rousseff rallied to win a second round runoff with 51.6% of the vote.21
President Rousseff was inaugurated to a second four-year term on January 1, 2014. As she begins
her second term, she continues to face significant economic and political challenges. On the
economic front, Rousseff will seek to keep her campaign promises to protect social welfare
programs and maintain low unemployment while implementing the austerity measures that many
economists think are necessary to encourage investment and boost growth (see “Economic
Challenges”). Politically, Rousseff will try to advance her policy agenda through the extremely
fragmented Brazilian Congress while dealing with the fallout of a major corruption scandal (see
“Political Challenges”).
Economic Challenges
President Rousseff will likely spend much of her second term focusing on domestic economic
challenges. With a gross domestic product (GDP) of $2.2 trillion,22 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,23 which now accounts for a majority of the population.24 As commodity prices began to fall,
however, Brazil’s economic growth slowed.
During her first term, Rousseff sought to offset the weaker international economic situation by
stimulating domestic consumption and protecting domestic industry. Her administration
implemented a series of short-term tax cuts and provided subsidized credit through state banks.
Although these measures appear to have helped keep unemployment near historic lows, they also
eroded the country’s primary budget surplus25 and helped push inflation to the upper edge of the
government’s targeted boundary (4.5% with a 2-point tolerance band). To mitigate the increase in
inflation, the Rousseff Administration held down fuel and electricity prices, which, in turn,
deterred investment in the energy sector. While inflation has remained relatively high, economic
growth has yet to recover, averaging 1.6% from 2011-2014.26
Further deceleration of the Brazilian economy and the threat of a credit rating downgrade appear
to have led President Rousseff to reconsider her economic policies. Following her reelection, she
appointed a new economic team that intends to implement a series of austerity measures designed
to encourage investment and ultimately boost growth. The new finance minister plans to make the
fiscal adjustments necessary to increase Brazil’s primary surplus to 1.2% of GDP in 2015 and at
21 Tribunal Superior Eleitoral, “Estatísticas Eleitorais 2014,” October 26, 2014.
22 IMF, World Economic Outlook Database, October 7, 2014.
23 The Brazilian government breaks the population into five income classes: A, B, C, D, and E. Those in the “C” class,
who earn approximately $600-$2,600 (R$1,610-6,941) per month, are generally referred to as the “new middle class.”
24 Neri, June 2011, op. cit., p.35.
25 The primary balance is equal to government revenues minus expenditures prior to subtracting debt payments.
26 IMF, World Economic Outlook Database, October 7, 2014.
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least 2% of GDP in 2016.27 The Rousseff Administration has already announced a partial budget
freeze and restrictions on certain pension and unemployment benefits. Additional measures may
include tax increases, restrictions on subsidized credit offered through state banks, and reductions
in electricity and fuel subsidies. At the same time, the Brazilian Central Bank has continued to
increase the benchmark interest rate, and has announced its intention to bring inflation back down
to 4.5% by the end of 2016.28
While international investors have praised Rousseff’s policy shift, her political base is less
supportive. Rousseff, who campaigned against austerity during the election, has insisted that her
administration will be able to carry out the economic adjustment while protecting employment
and maintaining social welfare programs.29 Private sector analysts currently estimate that Brazil’s
economy will grow by 0.4% in 2015, however, as the Brazilian government’s tighter fiscal and
monetary policies are likely to dampen prospects for short-term growth.30 In 2013, mass
demonstrations were initially sparked by an increase in public transit fares. Brazil could
experience renewed social unrest in 2015 if citizens are forced to contend with a weaker labor
market and reductions in government subsidies for fuel, electricity, and transportation.
Political Challenges
President Rousseff also faces considerable political challenges as she begins her second term.
Although her nine-party coalition continues to hold majorities in both houses of the Brazilian
Congress, it will be difficult to hold the ideologically diverse bloc together. Legislative support
for Rousseff’s agenda has declined each year since she took office. In 2011, deputies in the
governing coalition voted with Rousseff 89% of the time. By 2014, Rousseff could only count on
coalition deputies 66% of the time.31 Thus, while Rousseff has won approval for significant
pieces of legislation like the Marco Civil—a civil rights framework for the internet that ensures
net neutrality, other priorities like political reform have yet to advance.
The Rousseff Administration’s austerity measures are likely to further erode her legislative
support. Brazilian presidents have traditionally distributed control of ministries and state
enterprises to political allies in order to construct governing majorities. Political parties will likely
consider these positions less valuable, however, as the ministries and enterprises have their
budgets cut. Likewise, efforts to control government expenditures will leave fewer resources to
support legislators’ priorities. Consequently, the Rousseff Administration will be in a weaker
position to negotiate with the parties in her coalition.
Rousseff will also have to manage the fallout of a major corruption scandal. According to
Brazilian prosecutors, several construction and engineering firms colluded to systematically drive
up the price of bids for contracts with the state-owned oil company, Petróleo Brasileiro S.A.
27 “Brazil Economy: New Finance Minister Sets Out Medium-Term Fiscal Targets,” Economist Intelligence Unit,
December 2, 2014.
28 Mario Sergio Lima and Raymond Colitt, “Brazil’s Goal is 4.5% Inflation in December 2016, Tombini Says,”
Bloomberg, December 17, 2014.
29 President Dilma Rousseff, Discurso da República, Dilma Rousseff, durante Compromisso Constitucional Perante o
Congresso Nacional, January 1, 2015.
30 Jonathan Wheatley, “Brazil’s Fading Economy Sounds a Warning for EM,” Financial Times, January 12, 2015.
31 Gustavo Uribe and Paulo Gama, “Apoio a Dilma na Câmara Diminui no Ano da Sua Reeleição,” Folha de São
Paulo, December 26, 2014.
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(Petrobras). Some of the funds from the inflated contracts were then funneled to corrupt
executives at the construction firms and Petrobras, and to various political parties, including
Rousseff’s PT. Brazilian authorities have filed charges against at least 91 people since the
corruption investigation began in March 2014. Rousseff served as the chairwoman of Petrobras
from 2003-2010, but she has not been linked to the corruption scheme.32
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.”33 To this end, the countries have at least 20 active
bilateral dialogues, which serve as vehicles for policy coordination on issues of mutual concern.34
State Department officials maintain that the United States and Brazil are “natural partners” with
“shared values and increasingly converging goals.”35 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 2014, for example, Brazil opposed international
efforts to diplomatically-isolate Russia after it annexed Crimea, and largely refrained from openly
criticizing the Venezuelan government’s harsh response to political protests.36 While Brazil did
not support the actions of the Russian and Venezuelan governments, its aversion to sanctions and
preference for dialogue led it to approach the issues much differently than the United States.
Press reports about alleged National Security Agency (NSA) activities in Brazil led to a frosty
period in the bilateral relationship. The reports, which indicated that the NSA had spied on
President Rousseff and Brazil’s state-owned oil company, 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 led the Brazilian government to
32 Rogerio Jelmayer, “Brazil Official Sees Alleged Petrobras Corruption Scheme Reaching $1.6 Billion; Brazil
Construction Companies Allegedly Involved in Petrobras Scheme May Face Fines,” Wall Street Journal, November
19, 2014; Dom Phillips, “Oil Scandal in Brazil Just Keeps Growing; Optimists See Chance for Change,” Washington
Post, December 22, 2014; Jeb Blount and Anthony Boadle, “Insight-Failure to Stop Petrobras Scandal Could Haunt
Brazil’s Rousseff,” Reuters, January 2, 2015.
33 White House, National Security Strategy, May 2010, p. 44.
34 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S. Relations with Brazil,” Fact Sheet, October
3, 2013.
35 William J. Burns, Deputy Secretary of State, “Building a Deeper Partnership with Brazil,” Remarks in Rio de
Janeiro, Brazil, March 1, 2012.
36 Oliver Stuenkel, Why Brazil has not Criticized Russia over Crimea, Norwegian Peacebuilding Resource Centre,
Policy Brief, May 2014; “Brazil Defends Quiet Diplomacy towards Venezuela,” Latin News Daily Report, April 4,
2014.
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terminate a $2 billion contract with Microsoft, and 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”).37 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.”38
U.S.-Brazil relations have begun to warm again in recent months. In September 2014, the U.S.
and Brazilian governments signed a tax information exchange agreement that had been frozen in
the aftermath of the NSA revelations. The new agreement meets the requirements set by the
Foreign Account Tax Compliance Act (FATCA, P.L. 111-147)39 and could be a step toward a
bilateral treaty to avoid double taxation of businesses.40 Cooperation continued in October 2014,
when the U.S. and Brazilian governments signed a memorandum of understanding designed to
resolve a long-running trade dispute over U.S. cotton support programs (see “Cotton Dispute”).
During her second term inaugural address, which was attended by Vice President Biden, President
Rousseff asserted that “it is of great importance that we improve our relationship with the United
States.”41 To that end, she has appointed her former ambassador to the United States as foreign
minister and announced her intention to reschedule the postponed state visit.
Despite these advances, there are a few issues that could generate tension in the relationship in
2015. The U.S. Department of Justice and Securities and Exchange Commission (SEC) are
reportedly investigating alleged corruption at Brazil’s state-owned oil company, Petrobras, and
U.S. investors have filed a class action lawsuit against the company. Brazilian officials reportedly
are concerned that the investigations could hinder Petrobras operations and impede investment.42
Brazilian officials have also expressed dismay that the U.S. Congress has not yet ratified reforms
to the International Monetary Fund (IMF) that would provide greater voting power to Brazil and
other emerging economies; the reforms have been awaiting congressional ratification for more
than four years.43
37 Brazilian Congress, Federal Senate Committee on Foreign Relations and National Defense, Directions for Brazil-
United States Relations, Testimony of Paulo Sotero, Director of the Brazil Institute of the Woodrow Wilson
International Center for Scholars, April 3, 2014.
38 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.
39 For more information on FATCA, see CRS Report R43444, Reporting Foreign Financial Assets Under Titles 26 and
31: FATCA and FBAR, by Erika K. Lunder and Carol A. Pettit.
40 Embassy of the United States, “Brazil and the United States Sign Agreement on Exchange of Tax Information,” press
release, September 23, 2014; “Brazil, U.S. Sign Tax Pact Frozen by Spy Scandal,” Reuters, September 23, 2014.
41 President Dilma Rousseff, Discurso da República, Dilma Rousseff, durante Compromisso Constitucional Perante o
Congresso Nacional, January 1, 2015.
42 Valdo Cruz, “Investigação dos EUA Preocupa Planalto,” Folha de São Paulo, November 11, 2014; “Brazil’s
Petrobras Says Received U.S. SEC Subpoena for Documents,” Reuters, November 24, 2014; “Petrobras Hit with U.S.
Class Action Suit over $98 Bln in Securities,” Reuters, December 26, 2014.
43 Ian Talley, “U.S. Inaction Sows Dissent in Monetary Fund—Representatives of Emerging Economies at the IMF Say
They Have Waited Too Long for the Congress to Act,” Wall Street Journal, April 15, 2014. For more information on
the potential reforms, see CRS Report R42844, IMF Reforms: Issues for Congress, by Rebecca M. Nelson and Martin
(continued...)
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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 $18 million in FY2012, $15.2 million in FY2013, and an
estimated $13.9 million in FY2014 (see Table 1). The Obama Administration requested $3.4
million for Brazil in FY2015, but it is currently unclear how much will be provided through the
Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235). Although the
Administration did not request any funds to continue supporting conservation efforts in Brazil,
the act provides $10.5 million for environmental programs in the Brazilian Amazon (see
“Amazon Conservation”). Other funds may be used to train the Brazilian military (see “Security
Cooperation”), counter HIV/AIDS, and strengthen export controls.
In addition to supporting aid programs in Brazil, 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.44 The
Administration’s FY2015 foreign aid request for Brazil included $2 million in Development
Assistance (DA) to implement jointly funded food security projects in countries such as Haiti,
Honduras, and Mozambique.
Table 1. U.S. Assistance to Brazil: FY2010-FY2015
In thousands of U.S. dollars
Account
FY2010 FY2011 FY2012 FY2013 FY2014
(est.) FY2015
(req.)
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
Total
25,099 23,321 18,038 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.
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.
(...continued)
A. Weiss.
44 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.
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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)45 and multilateral negotiations at the World Trade Organization (WTO).46
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).47 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 Round48 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
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.49
Some Brazilian analysts have argued that the international trading system is undergoing a
significant transformation and that Brazil should reconsider its current trade policy.50 They
maintain that large-scale agreements like the Trans-Pacific Partnership (TPP) and the
Transatlantic Trade and Investment Partnership (TTIP)51 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
45 For background information on Mercosur, see CRS Report RL33620, Mercosur: Evolution and Implications for
U.S. Trade Policy, by J. F. Hornbeck.
46 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.
47 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.
48 For more information on the Doha Round, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Ian F. Fergusson.
49 “The World Trade Organization: Unaccustomed Victory,” Economist, December 14, 2013. For more information,
see CRS Report IF10002, The World Trade Organization at 20, by Ian F. Fergusson.
50 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; 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.
51 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 (T-TIP) Negotiations, by Shayerah Ilias Akhtar and Vivian C. Jones.
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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 some members of the Rousseff Administration agree that Brazil should accelerate its trade
agreement negotiations, others maintain that opening up Brazil to more foreign trade would
decimate Brazilian industry.52 The Brazilian government has placed renewed emphasis on
concluding an agreement between Mercosur and the EU, but further policy shifts will likely
depend on how the TPP and TTIP negotiations advance and economic conditions in Brazil. In
2014, Brazil reportedly posted its first trade deficit since 2000.53
Bilateral Trade and Investment
Despite 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.54 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.55
U.S.-Brazil services trade has grown even more quickly than merchandise trade, increasing by
406% between 2004 and 2013. In 2013, total trade in services amounted to $34 billion. The
United States continued to run a substantial trade surplus, valued at $19.3 billion, as U.S. services
exports to Brazil totaled $26.6 billion and U.S. services imports from Brazil totaled $7.3 billion.
Travel, transport, telecommunications, and intellectual property charges were the top categories
of U.S. services exports to Brazil while business services was the top category of U.S. imports
from Brazil.56
Brazil has traditionally benefited from the Generalized System of Preferences (GSP) program,
which provides nonreciprocal, duty-free tariff treatment to certain products imported from
designated developing countries. Legal authorization for the GSP program expired on July 31,
52 “Brasil Debe Acelerar Pactos Internacionales de Comercio: Jefe de Gabinete,” Reuters, November 19, 2014; “Brazil
Trade Minister Says Opening Up Trade Would be ‘Disaster’ – Paper,” Reuters, September 27, 2014.
53 Rogerio Jelmayer, “Brazil Posts First Trade Deficit Since 2000,” Wall Street Journal, January 5, 2015.
54 U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb, March 2014.
55 U.S. Department of Commerce and República Federativa do Brasil, Secretaria de Comércio Exterior (SECEX) data,
as made available by Global Trade Atlas, March 2014.
56 U.S. Department of Commerce, Bureau of Economic Analysis, “U.S. Trade in Services, by Country or Affiliation
and by Type of Service,” November 2014.
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2013, and Congress has yet to renew it.57 In 2012, the last full year that the GSP program was in
effect, Brazil was the third-largest beneficiary. 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 2012.58 Some observers have questioned the inclusion of Brazil and other
upper-middle-income countries in the GSP program; the European Union removed such countries
from its GSP program as of 2014.59
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: 2014 data are not yet available.
Foreign direct investment (FDI) between the United States and Brazil currently flows mostly in
one direction, towards Brazil. As of 2013, the accumulated stock of U.S. FDI in Brazil was $78.1
billion, with significant investments in manufacturing and finance, among other sectors. In 2013,
the stock of Brazilian FDI in the United States totaled $1.1 billion.60
57 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.
58 U.S. Department of Commerce data, as made available by the U.S. International Trade Commission, Interactive
Tariff and Trade DataWeb, March 2014.
59 European Commission, “New GSP as of 2014,” December 18, 2013.
60 U.S. Department of Commerce, Bureau of Economic Analysis, “Balance of Payments and Direct Investment Position
Data,” November 2014.
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Cotton Dispute61
In October 2014, Brazil and the United States appeared to resolve a more than decade-long
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 a reauthorization of the farm bill.62
The U.S. government stopped complying with the temporary agreement in 2013, 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 2013.63 The suspension of
payments led the Brazilian government to once again explore retaliatory measures.64
In February 2014, President Obama signed into law a new farm bill (P.L. 113-79). According to
the conference report accompanying the act (H.Rept. 113-333), the legislation included 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) asserted that the farm bill contains elements that will continue to
distort the international cotton market, and authorized the Brazilian government to request a
WTO panel to assess whether the farm bill brings the United States into compliance with previous
rulings.65
Rather than requesting a new WTO compliance panel, Brazil reached a settlement with the United
States. According to the memorandum of understanding signed in October 2014, the United States
61 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.
62 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.
63 William Mauldin, “U.S. to Stop Brazil Farm Payments; Sequester Will Stop Assistance Related to Cotton Dispute,”
Wall Street Journal, August 7, 2013.
64 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.
65 CAMEX, “CAMEX Autoriza Abertura de Painel na OMC sobre Legislação Agrícola Norte-Americana,” February
19, 2014.
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agreed to make a final one-time payment of $300 million to the Brazil Cotton Institute and make
some additional changes to its export credit guarantee program. In exchange, Brazil agreed not to
challenge U.S. cotton support programs at the WTO prior to September 30, 2018.66
Energy Ties
Energy has been another important area of U.S.-Brazilian cooperation in recent years. Brazil is
the world’s second-largest producer of ethanol (after the United States). It has also discovered
large offshore oil deposits that have the potential to turn the country into a major oil and gas
producer. To facilitate greater cooperation in the development of safe, secure, and affordable
energy, President Obama and President Rousseff launched a Strategic Energy Dialogue in 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 an 18-27.5% ethanol blend.67 The Brazilian
ethanol sector has struggled in recent years, however, due to poor harvests and lower demand
resulting from the Brazilian government’s policy of capping gasoline prices to hold down
inflation.68 Consequently, the ethanol industry has seen lower levels of investment and
production. In 2013, Brazil produced 479,000 barrels per day of ethanol, which was an 18%
increase compared to 2012, but slightly less than it produced in 2010.69 The Brazilian government
has sought to provide some relief to the ethanol industry by raising gasoline prices, increasing the
ethanol blend requirement, and reducing taxes on ethanol. Nevertheless, some analysts maintain
that the lack of transparency and certainty regarding how gasoline prices are determined are likely
to continue to discourage investment in the industry.70
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.71
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,
66 The Memorandum of Understanding Related to the Cotton Dispute (WT/DS267) is available at http://www.ustr.gov/
sites/default/files/20141001201606893.pdf.
67 “Brazil’s President Signs Higher Ethanol Blend into Law,” Reuters, September 25, 2014.
68 “Brazil Offers Tax Breaks to Ethanol Exporters,” EFE News Service, Septembe 10, 2014.
69 Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP), Oil, Natural Gas and Biofuels Statistical
Yearbook 2014, 2014, p.62.
70 Claire Casey, “Is Brazil the Energy Power of the Future (and Always Will Be)?,” Americas Quarterly, (Summer
2013).
71 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.
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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.72
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, 2015.73 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.74 Total
bilateral ethanol trade has actually declined since then, 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.75
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 world and an important
source of energy for the United States.76 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.77 At the
end of 2013, Brazil’s proven oil reserves stood at 15.6 billion barrels, accounting for slightly less
than 1% of global reserves.78 More than 94% of Brazil’s proven reserves are located offshore.79
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.80 The new
framework increased the role of the Brazilian government and is designed to ensure that the
72 White House, Office of the Press Secretary, “Fact Sheet: The U.S.-Brazil Strategic Energy Dialogue,” April 9, 2012.
73 Ministério do Desenvolvimiento, Indústria e Comércio Exterior, Câmara de Comércio Exterior (CAMEX),
Resolução N° 94, de 8 de Dezembro de 2011.
74 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.
75 U.S. Energy Information Administration (EIA), “Petroleum & Other Liquids: Data,” March 2014.
76 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.
77 EIA, Country Analysis Briefs: Brazil, December 29, 2014, http://www.eia.gov/countries/analysisbriefs/brazil/
brazil.pdf.
78 BP, BP Statistical Review of World Energy, August 2014, p. 6, http://www.bp.com/content/dam/bp/pdf/Energy-
economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf.
79 ANP, 2014, op. cit., p. 31.
80 Langevin, 2012, op. cit.
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country’s oil reserves are used to fuel long-term economic and social development. Among other
provisions, the framework establishes state-owned 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.81 The Brazilian Congress continued to debate a new law regarding the distribution of
oil royalties until March 2013.
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 has
actually declined by nearly 4% since 2011; in 2013, Brazilian oil production totaled 2.1 million
barrels per day.82
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.83 The Brazilian government declared the auction a success,
but some energy analysts maintain that the country will need to modify the new regulatory
framework prior to auctioning other concessions in order to attract the investment necessary to
develop its reserves and accelerate production.84
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
2013.85 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.86
81 “Brazil Congress Passes Oil Industry Overhaul,” Reuters, December 1, 2010; “The Impact of Pre-Salt: A Long-Term
Perspective,” Oxford Analytica, May 2010.
82 BP, August 2014, op. cit., p.8.
83 “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.
84 Matthew Cowley and Paulo Trevisani, “Brazil Seen Having to Alter Oil Rules,” Wall Street Journal, October 22,
2013.
85 EIA, “Petroleum & Other Liquids: Data,” March 2014.
86 Jeb Blount, “Analysis: Petrobras Fuel Woes Make Brazil Dependent on U.S., India,” Reuters, January 22, 2014.
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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.
Notes: 2014 data are not yet available.
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.
Counternarcotics
Brazil is not a major drug-producing country, but 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.87 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
87 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.
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Comando da Capital, PCC), have reportedly begun to operate transnationally, eliminating
intermediaries in order to control cross-border trafficking.88
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 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.89 In 2013, Brazilian authorities reportedly seized 35.7 metric tons of cocaine and 220.8
metric tons of marijuana.90
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 nongovernmental
organizations that work with addicts and their families in 2013.91 U.S. counternarcotics assistance
to Brazil amounted to $3.5 million in FY2012 and $1.9 million in FY2013.92 The Obama
Administration did not request any counternarcotics assistance for Brazil in FY2014 or FY2015.93
Counterterrorism94
The tri-border area 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 in the
Western Hemisphere. Nevertheless, the United States remains concerned that proceeds from legal
and illegal goods flowing through the tri-border area could potentially be diverted to support
terrorist groups.95 For example, in 2010, the U.S. Treasury Department sanctioned Hezbollah’s
88 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.
89 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.
90 INCSR, 2014, op. cit.
91 Ibid.
92 U.S. Department of State, USAID, and U.S. Department of Defense data as presented by the Foreign Assistance
Dashboard, March 2014.
93 U.S. State Department, Congressional Budget Justification, Department of State, Foreign Operations, and Related
Programs, Fiscal Year 2015, March 4, 2014.
94 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.
95 U.S. Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism 2013, April
2014, http://www.state.gov/j/ct/rls/crt/2013/224825.htm.
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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 tri-border area following the 2006
conflict between Israel and Hezbollah. Wehbe also reportedly had overseen Hezbollah’s
counterintelligence activity in the tri-border area and had worked for the office of Iranian
Supreme Leader Ayatollah Ali Khamene'i.96
The U.S. government has worked with Brazil to address concerns about the tri-border area and
strengthen the country’s counterterrorism capabilities. The countries of the tri-border area 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 provided anti-terrorism assistance designed to strengthen Brazil’s capacity
to secure its borders and conduct terrorism-related investigations. U.S. authorities have also
supported the Brazilian government’s efforts to prevent terrorist attacks at the 2014 World Cup
and 2016 Summer Olympic Games.97
The State Department’s Country Reports on Terrorism for 2013 recognized the Brazilian
government’s continued support for counterterrorism-related activities, including investigating
potential terrorism financing and document forgery networks. Despite this cooperation, 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, several pieces of
antiterrorism legislation are pending in the Brazilian Congress.98
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.99 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.100 Both
96 U.S. Department of the Treasury, “Treasury Targets Hizballah Financial Network,” press release, December 9, 2010.
97 Country Reports on Terrorism 2013, April 2014, op. cit.
98 Ibid.
99 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.
100 U.S. Department of Defense, Office of the Secretary of Defense, “Fact Sheet: U.S.-Brazil Defense Cooperation,”
(continued...)
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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 2012.
As previously mentioned, 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 $638,000 in FY2012, $572,000 in FY2013, and an estimated $625,000 in FY2014.
The Administration requested $625,000 in IMET assistance for Brazil in FY2015.101
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 is providing 20 A-29 Super Tucano aircraft to the
Afghan military for advanced flight training, surveillance, close air support, and air interdiction
missions.102 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.103 The Brazilian
Air Force announced its preference for the Gripen in 2010, reportedly citing its lower purchase
and maintenance costs and the ability to transfer more technology to Brazil.104 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,105 the NSA allegations may have been enough
to push Boeing out of the running.
Promotion of Racial Equality
While Brazilians have experienced significant improvements in economic and social conditions
over the past decade, racial disparities persist. Afro-Brazilians, who comprise about half of the
Brazilian population,106 account for less than 25% of Brazilians that have completed post-
(...continued)
March 14, 2011.
101 U.S. Department of State, Congressional Budget Justifications for Foreign Operations, Fiscal Years 2014 and 2015,
available at http://www.state.gov/f/releases/iab/index.htm.
102 “Brazilian Firm to Provide Aircraft to Afghan Air Force,” American Forces Press Service, February 27, 2013.
103 Alfonso Soto and Brian Winter, “Saab Wins Brazil Jet Deal after NSA Spying Sours Boeing Bid,” Reuters,
December 18, 2013.
104 Raymond Colitt, “Brazil Air Force Prefers Swedish Jets – Report,” Reuters, January 5, 2010.
105 In 2006, for example, the United States prevented Brazil from selling 24 Super Tucano light attack planes to
Venezuela.
106 According to Brazil's 2010 census, 43.1% of Brazilians self-identify as pardo (“brown”) and 7.6% self-identify as
(continued...)
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secondary degrees and 17% of Brazilians that have completed graduate degrees.107 In 2010, the
median income of Afro-Brazilians was 64% of the median income of white Brazilians.108 Even
after controlling for education, occupation, and location, white Brazilians reportedly receive
higher wages than Afro-Brazilians.109 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.110
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.111 Most recently, President Rousseff enacted a law in June 2014 that reserves 20% of jobs in
the Brazilian executive branch and state-owned enterprises for Afro-Brazilians.112 Although race-
based affirmative action policies have been rather controversial among some sectors of the
Brazilian population,113 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.114 Current areas of focus include expanding access to education for
students of African descent, eliminating racial health disparities, mitigating environmental
(...continued)
preto (“black”). IBGE, Censo Demográfico 2010, November 2011.
107 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.
108 IBGE, 2011, op. cit.
109 Dias & Goes, 2013, op. cit., p.21.
110 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.
111 Simon Romero, “Brazil Enacts Affirmative Action Law for Universities,” New York Times, August 30, 2012;
“Rousseff Decrees Affirmative Action,” Latin News Daily Report, October 16, 2012.
112 “Brazil Enacts 20 Percent Quotas for Blacks in Federal Jobs,” Agence France Presse, June 9, 2014.
113 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.
114 U.S. Department of State, Bureau of Western Hemisphere Affairs, “U.S.-Brazil Joint Action Plan Promotes Racial
and Ethnic Equality,” April 11, 2012.
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impacts in communities of African descent, addressing challenges in criminal justice systems, and
guaranteeing equal access to economic opportunities.115 According to H.Rept. 113-499, which is
considered part of the explanatory statement, the Consolidated and Further Continuing
Appropriations Act, 2015 (P.L. 113-235) includes resources to continue and strengthen the
initiative in FY2015.
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.116 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.117
About 69% of the Amazon Basin, which is shared by seven nations,118 lies within Brazil.119 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
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.120
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,121 the
Brazilian government has implemented a series of policies designed to slow deforestation. In
2002, for example, it created the Amazon Protected Areas Program, which now includes some
600,000 square kilometers of forest.122 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.123 Brazil appears
to be on track to achieve its goal, as annual deforestation has fallen from 27,772 square
115 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.
116 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.
117 Eric A. Davidson et al., “The Amazon Basin in Transition,” Nature, vol. 481 (January 19, 2012), p. 321.
118 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.
119 UNEP, 2004, op. cit.
120 Davidson et al., 2012, op. cit., p.321.
121 See, for example, Fabiana Frayssinet, “Climate Change-Brazil: Farmers ‘Have Good Reason to Worry’,” Inter Press
Service, September 21, 2011; “Amazonian Deforestation May Cut Rainfall by a Fifth: Study,” Agence France Presse,
September 5, 2012; and “Amazon Rainforest Begins to Fail to Regulate Climate – Scientist,” BBC Monitoring
Americas, November 5, 2014.
122 “Brazil to Spend $216 Mn on Protected Areas in Amazon,” EFE News Service, May 22, 2014.
123 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.
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kilometers in 2004 to 4,848 square kilometers in 2014 (see Figure 4).124 According to a 2012
study, about half of the reduction in deforestation in the Brazilian Amazon between 2005 and
2009 was attributable to the Brazilian government’s conservation policies, though lower
commodity prices also contributed to the decline.125
Figure 4. Deforestation in the Brazilian Amazon: 2004-2014
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
2014
Source: CRS presentation of data from the Brazilian government’s Instituto Nacional de Pesquisas Espaciais
(INPE).
Despite recent progress, Brazil’s deforestation rate increased by nearly 29% between 2012 and
2013. Although it fell by about 18% between 2013 and 2014, the deforestation rate remains
higher than it was in 2012. Some analysts have attributed the increase in deforestation to
government policy changes. In 2011, President Rousseff signed a law transferring responsibility
for environmental oversight of nonfederal lands from Brazil’s federal environmental protection
agency to local officials. The federal government maintains that local officials are better placed to
manage such resources, but critics argue that local authorities lack the necessary finances and are
more susceptible to intimidation and corruption.126 In 2012, the Brazilian Congress approved a
major overhaul of the forest code—a law that requires rural landowners to set aside 20%-80% of
their land for natural vegetation. President Rousseff vetoed some of the most controversial
provisions of the legislation, but the final version relaxed conservation requirements for
124 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, December 2014.
125 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.
126 Paulo Prada, “Special Report: Brazil Backslides on Protecting the Amazon,” Reuters, August 3, 2012.
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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.127
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
private property in the world.128 Rousseff’s decision to appoint two climate change skeptics who
have clashed with environmentalists to her cabinet has raised further questions about her
Administration’s commitment to conservation.129
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 $10.8 million in FY2012, $9.6 million in
FY2013, and an estimated $10.5 million in FY2014.130 Although the Obama Administration did
not request any funds for conservation efforts in Brazil in FY2015, the Consolidated and Further
Continuing Appropriations Act, 2015 (P.L. 113-235) provides $10.5 million for environmental
programs in the Brazilian Amazon.
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
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 livelihoods in
endangered areas outside of the Amazon Rainforest such as the Atlantic Rainforest, Caatinga, and
Cerrado ecosystems.131
127 “Brazil President Makes Final Changes to Forestry Law,” Agence France Presse, October 18, 2012.
128 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.
129 Hector Velasco, “Rise of Brazil’s Ranching Queen Sparks Green Protests,” Agence France Presse, December 24,
2014; Simon Romero, “Climatologists Balk as Brazil Picks Skeptic for Key Post,” New York Times, January 6, 2015.
130 USAID data, as presented by the Foreign Assistance Dashboard, November 2014.
131 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. 113-235 (H.R. 83). Consolidated and Further Continuing Appropriations Act, 2015. Signed
into law on December 16, 2014. The explanatory statement accompanying the act designated
$10.5 million for environmental programs in the Brazilian Amazon. H.Rept. 113-499, which is
considered part of the explanatory statement, recognized the work being done under the U.S.-
Brazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote Equality, and
stated that the act includes resources to continue and strengthen the initiative in FY2015.
P.L. 113-79 (H.R. 2642). Agricultural Act of 2014. Signed into law on February 7, 2014.
Included changes to the U.S. cotton program designed to facilitate the resolution of 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 stipulated that $10.5 million of the funds
appropriated should support environmental programs in the Brazilian Amazon. H.Rept. 113-185,
which is considered part of the explanatory statement, recognized the work being done under the
U.S.-Brazil Joint Action Plan to Eliminate Racial and Ethnic Discrimination and Promote
Equality, and stated that the legislation included 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. Included a provision that would have required 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 have prohibited the Secretary of Agriculture from making
payments to the Brazilian Cotton Institute. The payments were part of an 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 have suspended 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 have suspended the issuance of visas to
Brazilians until Brazil amends its constitution to allow the extradition of Brazilian nationals.
Author Contact Information
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
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