U.S.-Brazil Economic Relations

U.S.-Brazil Economic Relations

U.S.-Brazil Economic Relations
November 27, 2020
The United States and Brazil historically have enjoyed robust political and economic ties, but
many say the countries’ occasionally divergent policy approaches on trade and other matters have
M. Angeles Villarreal,
hindered the development of a close partnership. In March 2019, President Donald J. Trump and
Coordinator
President Jair Bolsonaro announced plans to deepen the bilateral trade relationship, which could
Specialist in International
lead to eventual negotiations for a free trade agreement (FTA). This led to an acceleration of the
Trade and Finance
bilateral dialogue under the 2011 Agreement on Trade and Economic Cooperation (ATEC)

negotiated during the Obama Administration. In October 2020, the two countries announced the
Peter J. Meyer
successful conclusion of a Protocol on Trade Rules and Transparency, which adds three annexes
Specialist in Latin
to the ATEC: Trade Facilitation and Customs Administration, Good Regulatory Practices, and
American Affairs
Anti-Corruption. The Protocol does not require U.S. congressional approval, but would need

approval by the Brazilian Congress. Congress has expressed interest in Brazil and U.S.-Brazilian
relations with environmental conservation and trade relations at the center of its focus. While
Andres B. Schwarzenberg
some Members of Congress see the agreement as a way to increase U.S. investment and promote
Analyst in International
U.S. values in the South America region, others oppose an expanded U.S. economic partnership
Trade and Finance
under the Bolsonaro Administration because of human rights, labor, environmental, and other

concerns.

The deepening of the trade relationship is part of a broader push by the Trump and Bolsonaro
administrations to strengthen the overall U.S.-Brazilian relationship. During the Obama Administration, U.S. and Brazilian
officials frequently highlighted the countries’ shared values as multicultural democracies, and pledged to form a stronger
partnership. Some U.S. officials, however, viewed Brazil’s policies in international trade and climate change as
obstructionist, while some Brazilian officials viewed the U.S. national security surveillance in Brazil as a reason to believe
that the United States opposed Brazil’s rise. Such episodes fueled an ongoing mistrust between the governments of the two
countries. Since the January 2019 inauguration of President Bolsonaro, relations between the two countries have warmed.
The Bolsonaro Administration views a close relationship with the United States as essential for advancing Brazil’s national
interests and strengthening the country’s international standing. President Trump has welcomed Bolsonaro’s rapprochement.
It is unclear if a Biden Administration would continue to pursue closer trade relations and build on the recently concluded
agreements with Brazil.
Despite historical differences in trade policy approaches, U.S.-Brazil trade relations are strong and have deepened in the past
two decades. Total merchandise trade (exports plus imports) between the United States and Brazil totaled $73.7 billion in
2019, with $42.9 billion in U.S. exports and $30.8 billion in U.S. imports. The United States has had a merchandise trade
surplus with Brazil since 2008 ($11.9 billion in 2019) and a services trade surplus for over 20 years. In 2019, the U.S.
services trade surplus with Brazil was $17.8 billion, down from $20.1 billion in 2018. Although U.S. trade ties with Brazil
are strong, China ranks first among Brazil’s trading partner and Brazil’s total trade with China ($98.6 billion in 2019) is
significantly higher than with the United States ($59.8 billion). A factor motivating the United States to strengthen the
bilateral relationship is to increase the market for U.S. goods and services in Brazil.
The October 2020 Protocol on Trade Rules and Transparency, which complements Brazil’s domestic reforms to improve
competitiveness, regulatory reform and economic freedom, includes the following commitments.
 Trade Facilitation and Customs Administration: provisions on disciplines on penalties imposed by
customs administration in each country, single window enabling traders to submit information requirements
through one entry point, authorized economic operator and automated customs procedures to increase
efficiency.
 Good Regulatory Practices (GRP): similar to the GRP framework in the U.S.-Mexico-Canada Agreement
(USMCA), including greater transparency in Brazilian regulatory procedures.
 Anti-Corruption: obligations to adopt and maintain measures to combat bribery and corruption, money
laundering, recovery of proceeds of corruption, denial of safe haven, whistleblower protection.
While some view an FTA between the United States and Brazil to be a distant goal, the dialogue between the two
governments has moved towards a more collaborative relationship. Congress may consider exploring prospects for enhancing
economic and trade relations with Brazil on a “building block” approach using chapters from recent FTAs as templates. For a
comprehensive FTA that includes the elimination of tariff and nontariff barriers, Congress would have to approve such an
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U.S.-Brazil Economic Relations

agreement under Trade Promotion Authority (TPA), the time-limited authority that Congress uses to set trade negotiating
objectives and to establish notification and consultation requirements, and to vote on implementing legislation. TPA expires
on July 1, 2021. For additional information, see CRS In Focus IF10447, U.S.-Brazil Trade Relations, by M. Angeles
Villarreal and Andres B. Schwarzenberg, and CRS Report R46236, Brazil: Background and U.S. Relations, by Peter J.
Meyer.
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Contents
U.S.-Brazilian Relations .................................................................................................................. 2
Brazil’s Trade and Economic Policy ............................................................................................... 5
Brazil’s Historical Economic and Trade Policies ............................................................... 5
Brazil’s Trade with Other Countries ......................................................................................... 8
Brazil’s Regional and Multilateral Trade Initiatives ................................................................. 9
MERCOSUR ...................................................................................................................... 9
MERCOSUR-EU Agreement ............................................................................................ 11
World Trade Organization (WTO) .................................................................................... 12
U.S.-Brazil Trade and Investment ................................................................................................. 12
U.S.-Brazil Trade in Goods and Services ................................................................................ 12
Tariffs and Trade Barriers ....................................................................................................... 14
Other Barriers .......................................................................................................................... 15
U.S.-Brazil Foreign Investment .............................................................................................. 16
U.S.-Brazil Trade Talks ................................................................................................................. 17
“Mini Trade Agreement” ......................................................................................................... 18
Annex I: Trade Facilitation and Customs Administration................................................. 18
Annex II: Good Regulatory Practices ............................................................................... 19
Annex III: Anti-Corruption ............................................................................................... 19
Ongoing Trade Issues .............................................................................................................. 20
Ethanol, Sugar, and Corn .................................................................................................. 20
U.S. Section 232 Tariffs on Brazilian Steel ...................................................................... 20
Policy Issues and Implications ...................................................................................................... 21
Foreign Policy Implications .................................................................................................... 21
Trade and Economic Implications ........................................................................................... 22
Congressional Issues and Outlook .......................................................................................... 23

Figures
Figure 1. Map of Brazil ................................................................................................................... 4
Figure 2. Brazil’s Exports to Major Partners ................................................................................... 8
Figure 3. Brazil’s Imports from Major Partners .............................................................................. 8
Figure 4. U.S. Merchandise and Services Trade with Brazil ......................................................... 13
Figure 5. U.S. Exports to Brazil: 2010-2019 ................................................................................. 14
Figure 6. U.S. Imports from Brazil: 2010-2019 ............................................................................ 14
Figure 7. U.S.-Brazil FDI .............................................................................................................. 17

Tables
Table 1. U.S. and Brazilian Tariff Rates ........................................................................................ 15
Table 2. Investment Position (FDI Stock) in 2019 ........................................................................ 17

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Contacts
Author Information ........................................................................................................................ 24

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U.S.-Brazil Economic Relations

Introduction
The United States and Brazil have enjoyed a strong economic relationship for many years. In
2019, Brazil ranked second among the United States’ Latin American trading partners in goods
and 19th among all U.S. trading partners. In March 2020, President Donald Trump and President
Jair Bolsonaro announced plans to deepen the bilateral trade relationship and potentially move
toward free trade agreement (FTA) negotiations in the years to come. These discussions led to the
Protocol on Trade Rules and Transparency, signed on October 19, 2020, which includes annexes
in trade facilitation and customs administration, good regulatory practices, and anti-corruption.1
The Protocol would need the approval of the Brazilian Congress but would not need approval by
the U.S. Congress. Congress has expressed interest in Brazil and U.S.-Brazilian relations with
environmental conservation and trade relations at the center of its focus. While some Members of
Congress see the agreement as a way to increase U.S. investment and promote U.S. values in the
South America region, others oppose an expanded U.S. economic partnership under the
Bolsonaro Administration because of human rights, labor, environmental, and other concerns.
In addition to the bilateral trade relationship,
U.S.-Brazil October 2020 Joint
the two countries announced a technology
Statement
safeguards agreement in March 2019 that is to

“Together, these provisions demonstrate the
allow U.S. space launches in Brazil, while
countries’ mutual commitment to the fundamental
ensuring proper handling of sensitive U.S.
elements necessary for a fair shake on trade –
technology consistent with U.S. laws. The
publishing information, giving stakeholders an
United States also endorsed Brazil’s accession
opportunity to provide input on the rules,
providing transparent and efficient processes at
to the Organization for Economic Co-
the border, and being vigilant against corruption.”
operation and Development (OECD). Some

“The new Protocol also sets the stage for future
experts contend that the United States and
discussions to deepen and broaden work under
Brazil have numerous reasons to build on the
the ATEC. The two countries wil also seek to
progress made in the economic relationship
identify priority sectors to further reduce barriers
over the years.
to trade in a broader perspective regarding the
2 Some policymakers maintain
bilateral economic and commercial relationship.”
that strengthening trade ties with Brazil would

help bolster U.S. interests in the region, given

“The agreement today wil help all traders who
seek simpler customs procedures, more
China’s increasing presence there. Others who
opportunity to participate in development of
are concerned about the environment, labor
regulations, and more confidence in the rules of
standards, and human rights, particularly
the marketplace. Looking forward, the Protocol is
under the Bolsonaro administration, are more
evidence that Brazil and the United States can
successful y deepen their trade relationship in
hesitant to expand trade ties. As Latin America
ways that are beneficial to both countries.”
faces increasing uncertainty amid global
Source: Governments of the United States and Brazil,
power shifts and external shocks, there may be
“United States and Brazil Sign New Protocol on Trade
other strategic and economic reasons to
Rules and Transparency,” Joint Statement, October 20,
strengthen the bilateral economic relationship.
2020.
President Bolsonaro, who entered office in
January 2019, is pursuing free-market reforms during his four-year term, which ends in

1 Office of the United States Trade Representative, U.S.-Brazil 2020 Protocol on Transparency and Trade Rules, Fact
Sheet, October 19, 2020, at http://www.ustr.gov.
2 See for example, Abrazp Neto, Daniel Godinho, and Lisa Schineller, U.S.-Brazil Trade and FDI: Enhancing the
Bilateral Economic Relationship, ApexBrazil and the Atlantic Council, March 2020.
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December 2022. He has taken steps to cooperate with the United States on issues of mutual
interest. Brazil’s long-term trade strategy, however, is bound by its status as a party to the
Mercado Común del Sur (MERCOSUR), a common market trade arrangement with Argentina,
Paraguay and Uruguay. If Brazil were to pursue an FTA, it would have to decide whether to
pursue it together with MERCOSUR countries or bilaterally, which would require changing
MERCOSUR’s rules.
U.S.-Brazilian Relations3
The ongoing bilateral trade negotiations are part of a broader push by the Trump and Bolsonaro
administrations to strengthen U.S.-Brazilian relations. The United States and Brazil historically
have enjoyed robust political and economic ties, but many say the countries’ occasional divergent
policy approaches and national interests have hindered the development of a closer partnership.
During the Obama Administration, for example, U.S. and Brazilian officials frequently
highlighted the countries’ shared values as multicultural democracies, and pledged to “form a
U.S.-Brazil Partnership for the 21st Century.”4 However, Brazil’s independent foreign policy
frustrated some U.S. officials, who viewed Brazil’s negotiating positions in international trade
and climate discussions as obstructionist.5 Similarly, revelations that the U.S. National Security
Agency had engaged in extensive surveillance in Brazil reinforced a view among some Brazilian
officials that the United States opposed Brazil’s rise.6 Such episodes fueled mutual mistrust
between the countries’ policy-making communities and stalled bilateral initiatives.
U.S.-Brazilian relations have warmed since the January 2019 inauguration of President
Bolsonaro. Whereas the past several Brazilian administrations sought to maintain autonomy in
foreign affairs, Bolsonaro views a close relationship with the United States as essential for
advancing Brazil’s national interests and strengthening the country’s international standing. He
frequently has aligned his foreign policy positions with those of the Trump Administration,
particularly within multilateral organizations. Over the past two years, Brazil has backed the U.S.
trade embargo on Cuba at the United Nations, joined with the United States to impose sanctions
on Venezuelan officials using the Inter-American Treaty of Reciprocal Assistance, and supported
the Trump Administration’s candidate to lead the Inter-American Development Bank, rather than
offering its own.7 Bolsonaro also has expressed support for U.S. actions outside Latin America,
including the killing of Iranian military commander Qasem Soleimani in Iraq and the Trump
Administration’s decision to withdraw from the World Health Organization.8

3 For more information on U.S.-Brazil relations, see CRS Report R46236, Brazil: Background and U.S. Relations, by
Peter J. Meyer.
4 White House, Office of the Press Secretary, “Joint Statement by President Obama and President Rousseff,” April 9,
2012.
5 Moises Naim, “Rousseff Should Leave US with a Trade Deal,” Financial Times, April 8, 2012.
6 “More in Sorrow than Anger,” The Economist, September 18, 2013.
7 “Brazil for First Time Votes against U.N. Call for End to U.S. Embargo on Cuba,” Reuters, November 7, 2019;
Meeting of Consultation of Ministers of Foreign Affairs, The Crisis in the Bolivarian Republic of Venezuela and its
Destabilizing Effects on the Hemisphere, RC.30/RES.2/19, December 3, 2019; and “EUA Atropelam Brasil e
Anunciam Candidato à Presidência do BID,” Folha de São Paulo, June 16, 2020.
8 “Bolsonaro backs Trump amid US-Iran Tensions,” Agence France Presse, January 6, 2020; and “Bolsonaro Threatens
to Pull Brazil from WHO,” Agence France Presse, June 5, 2020.
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President Trump welcomed Bolsonaro’s rapprochement and joined with him to reaffirm a
“strategic alliance” between the United States and Brazil.9 Enhanced security cooperation has
been a top priority for both countries. U.S. and Brazilian law enforcement agencies have signed
agreements to improve information sharing and strengthen border security while seeking to better
coordinate their efforts to combat drug-trafficking and other transnational crime.10 Military-to-
military ties also have increased, particularly since President Trump designated Brazil as a major
non-NATO ally in July 2019. As one of only 17 countries with that designation, Brazil now has
privileged access to U.S. military equipment, training, and joint research and development
opportunities.11
The United States and Brazil have also made several notable advances in bilateral cooperation on
science and technology. In 2019, after decades of sporadic discussions, the United States and
Brazil signed a technology safeguards agreement that allows U.S. launch technology to be used at
Alcântara space center in Brazil’s northeastern state of Maranhão (see Figure 1 for a map of
Brazil). The agreement could pave the way for expanded commercial, defense, and scientific
cooperation related to space. The United States and Brazil are also working together to respond to
the Coronavirus Disease 2019 (COVID-19) pandemic. Building on a long history of collaboration
on health and biomedical research, the U.S. Centers for Disease Control and Prevention and the
National Institutes of Health are working with Brazilian institutions to strengthen surveillance and
data analysis systems and to expedite the development of a vaccine.12
Nevertheless, some policy differences have emerged over sensitive issues that affect the
economic and geopolitical interests of the United States and Brazil. The Trump and Bolsonaro
administrations have both sought to protect certain domestic industries by imposing or
maintaining barriers to bilateral trade (see “U.S.-Brazil Trade Talks”). They also have differed in
their approaches toward relations with China. Bolsonaro echoed many of President Trump’s
criticisms of China during his 2018 presidential campaign, but he generally has sought to
maintain cordial relations in office, recognizing China’s role as Brazil’s top trade partner and an
important source of foreign investment. Brazil’s ability to maintain close ties with the United
States and China is now under pressure, however, as U.S. officials have warned Brazil that U.S.
investment and bilateral military and intelligence cooperation could be in jeopardy if Brazil
allows the Chinese company Huawei to participate in the country’s fifth-generation (5G) wireless
network.13
The Bolsonaro and Trump Aadministrations’ efforts to strengthen U.S.-Brazilian relations also
have encountered some domestic political opposition. Prominent members of Brazil’s foreign
policy establishment repeatedly have criticized Bolsonaro’s alignment with the Trump
Administration, arguing that Bolsonaro is subordinating Brazilian interests to those of the United
States and violating principles enshrined in the Brazilian constitution, such as non-intervention

9 White House, “Joint Statement from President Donald J. Trump and President Jair Bolsonaro,” March 7, 2020.
10 U.S. Embassy & Consulates in Brazil, “Increasing Law Enforcement Cooperation and Information Sharing,” March
19, 2019.
11 White House, “Designation of the Federative Republic of Brazil as a Major Non-NATO Ally,” Presidential
Determination No. 2019-21 of July 31, 2019, 84 Federal Register 43035, August 19, 2019; and U.S. Department of
State, Bureau of Political Military Affairs, “Major Non-NATO Ally Status,” fact sheet, January 30, 2020.
12 U.S. Department of State, U.S. Embassy & Consulates in Brazil, “Amb. Todd Chapman: The Brazil-US Strategic
Relationship: Past, Present and Future,” August 20, 2020.
13 “Brazil may Face ‘Consequences’ if it Gives Huawei 5G Access, Says U.S. Ambassador,” Reuters, July 29, 2020;
and Samy Adghirni, “China Says Brazil’s Business Reputation Hinges on 5G Decision,” Bloomberg, October 6, 2020.
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and the peaceful resolution of conflicts.14 Similarly, some U.S. Members of Congress are opposed
to a close partnership with the Bolsonaro Administration, which they maintain is presiding over
an erosion of democracy and human rights in Brazil and implementing policies that threaten the
Amazon Rainforest and global efforts to mitigate climate change.15
Figure 1. Map of Brazil

Source: Map Resources. Adapted by CRS Graphics.

14 See, for example, Fernando Henrique Cardoso, Aloysio Nunes Ferreira, and Celso Amorim, et al., “A Reconstrução
da Política Externa Brasileira,” Estado de São Paulo, May 8, 2020.
15 See, for example, Letter from Honorable Richard E. Neal, Chairman, House Committee on Ways and Means, et al. to
Honorable Robert Lighthizer, U.S. Trade Representative, June 3, 2020.
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Brazil’s Trade and Economic Policy
Brazil is the world’s fifth-largest country and ninth-largest economy, with a gross domestic
product (GDP) of $1.8 trillion and a GDP per capita of $8,717 in 2019.16 Services account for
more than half of GDP, followed by industry and agriculture. Agribusiness (commodity and
processed goods) accounts for about a third of GDP, explaining Brazil’s emphasis on agricultural
policies in trade negotiations. Brazil is one of the world’s largest producers of sugar cane,
oranges, coffee, soybeans, beef, poultry, and corn. Brazil is the largest oil producer in South
America and the ninth largest in the world.17 It is also a major producer of steel, chemicals,
aircraft, automobiles, and auto parts. However, it remains a relatively small trader by world
standards. In 2019, the United States was Brazil’s second-largest single-country goods trading
partner.18
Brazil’s Historical Economic and Trade Policies
For much of the 20th century, Brazil, like other countries in Latin America, adopted an inward-
oriented industrialization strategy, commonly termed “import-substitution industrialization” (ISI).
To promote industrial development, Brazil created—and protected from foreign competition—
government-sponsored or state-owned enterprises (SOEs). Many of these still operate today,
although some have been privatized. These include the National Steel Company (founded in
1942), the National Bank for Economic and Social Development (BNDES, founded in 1952),
Petrobras, the national petroleum company (founded in 1953), and Embraer, a leading aircraft
manufacturer (founded in 1969). BNDES was at the heart of Brazil’s ISI policies, providing
financing for public infrastructure and strategic industries. It continues today as an important
source of long-term business financing, given the unique structure of Brazil’s financial system.19
Brazil’s industrial policy achieved notable results for decades, but with predictable tradeoffs.20
Because its import-oriented development strategy shielded domestic industry from global
competition, it also weakened market incentives to innovate and become more efficient. Trade
policy was essentially “administered protectionism.”21 The large state bureaucracy and other

16 The World Bank, World Development Indicators (2020).
17 International Trade Administration, Energy Resource Guide, Brazil - Oil and Gas, 2020,
https://www.trade.gov/energy-resource-guide-oil-and-gas-brazil.
18 Brazil Ministry of Development, Industry, and Foreign Trade (Ministério do Desenvolvimento, Indústria, e Comércio
Exterior), accessed through Trade Data Monitor (accessed October 6, 2020).
19 According to BNDES, the Bank “is the main financing agent for development in Brazil. Since its foundation, in
1952, [it] has played a fundamental role in stimulating the expansion of industry and infrastructure in the country. Over
the course of the Bank’s history, its operations have evolved... and now they include support for exports, technological
innovation, sustainable socio-environmental development and the modernization of public administration.” For more
detail, see Banco Nacional de Desenvolvimento Econômico e Social (BNDES), “The BNDES,” and Rogerio Studart
and Luma Ramos, “Financing Sustainable Infrastructure in the Americas,” GEGI Working Paper 007, Boston
University’s Global Economic Governance Initiative, July 2016.
20 See, for example, Werner Baer, “Brazil’s Import-Substitution Industrialization,” in Edmund Amann, Carlos R.
Azzoni, and Werner Baer (eds.), The Oxford Handbook of the Brazilian Economy, New York: Oxford University Press,
2018.
21 This policy was overseen by the Carteira de Comércio Exterior do Banco do Brasil (CACEX), created during the
military dictatorship (1964-1985). Trade policy today is set by the president, with the Ministry of Foreign Affairs as the
lead agency. The Chamber of Foreign Trade (Câmara de Comércio Exterior, CAMEX), created in 1995, acts as an
advisory agency for all government departments. Cross-sectoral business interests are voiced by the Brazilian Business
Coalition (Coalizão Empresarial Brasileira, CEB), established in 1996. NGOs, trade unions, and other independent
groups are represented in coalition groups, such as the Brazilian Network for the Integration of People (Rede Brasileira
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policies also contributed to inefficiency and a high cost of doing business. Although privatization
efforts in the 1990s improved the competitive landscape in Brazil, corruption, bribery, complex
regulations, and an antiquated and cumbersome tax code remain serious obstacles.22 These
challenges directly diminish Brazilian productivity and attractiveness for investment, and
indirectly deter trade liberalization. Yet, continuing to protect this regulatory regime and its
national production structure had remained, until recently, an important aspect of Brazil’s trade
strategy—one that it pursued unilaterally and regionally as it sought to enhance its influence in
Latin America and the world.23
Brazil’s status as a regional leader has stemmed, in large part, from its leadership in pressing for
South American economic integration, conditional support of multilateral negotiations, and
reticence to conclude separate trade deals with developed countries.24 In 1991, Brazil
consolidated its position as the regional industrial hub with the creation of MERCOSUR, a
common market trade arrangement with Argentina, Paraguay and Uruguay (see section on
“MERCOSUR”). MERCOSUR has continued to operate defensively for the most part, with a
high common external tariff (CET) and numerous nontariff barriers (NTBs) that have shielded the
region from competition, primarily from the United States and Europe.
Traditionally, Brazil has sought to integrate South America and counter or reduce U.S. economic
influence in the region. The country took a number of steps to realize this agenda, particularly in
the 1990s and early 2000s. For example, it played a leading role in the establishment of the South
America Community of Nations as a loosely interwoven example of political and economic
integration, and it strongly resisted efforts to conclude the U.S.-led Free Trade Area of the
Americas (FTAA) (see textbox).25 Also, during the Doha Round of WTO multilateral trade
negotiations that began in 2001, and in the aftermath of their breakdown, Brazil played a critical
role in rallying other developing countries into a powerful bloc within the WTO (for more
information on Brazil’s membership in the WTO, see section on “World Trade Organization
(WTO)”.26 Brazil has been a leading voice in calling for a reduction in agricultural tariffs in

Pela Integração dos Povos, REBRIP).
22 See, for example, James Roberts and Gabriel de Arruda Castro, “Big Government Has Crushed Economic Freedom
in Brazil,” The Heritage Foundation, May 29, 2018; Alexia Fernandex Campbell, “A Day in the Life of Brazil's Insane
Bureaucracy,” The Atlantic, August 4, 2016; and Lisa Flueckiger, “’Brazil Cost’ Bureaucracy Continues to Hinder
Business”, The Rio Times, August 5, 2016.
23 Over the past year, in particular, there has been a shift in Brazil’s approach to economic policy, including trade. For
instance, in a joint statement circulated on October 2, 2020 at the World Trade Organization, Brazil, along with the
United States and Japan, expressed “serious concerns with non-market-oriented policies and practices that have
resulted in damage to the world trading system and lead to severe overcapacity, create unfair competitive conditions,
hinder the development and use of innovative technologies, and undermine the proper functioning of international
trade.” In response, one analysts noted, “Not long ago, Brazil championed the cause of developmental reforms in Doha
agriculture negotiations through its G20 coalition of developing countries. But it has now changed its positions so
radically that it is difficult to believe that it is now promoting the importance of market-oriented conditions.” For more
detail, see Washington Trade Daily, “US, Others Urge Market Conditions,” Vol. 29, No. 200, October 6, 2020.
24 For a recent overview of Brazil’s rise as a regional and international power, see “Special Issues: Latin American
Responses to the Rise of Brazil,” Bulletin of Latin American Research, Vol. 35, No. 1, 2016.
25 South America Community of Nations later became the Union of South American Nations. Opposition to the FTAA,
was due, in part, to concerns that trade liberalization could injure the Brazilian economy. For more detail on Brazil’s
regional integration efforts, see, for example, Elena Lazarou, “Brazil and Regional Integration in South America:
Lessons from the EU’s Crisis,” Contexto Internacional, Vol.35, No. 2, 2013; .Marcel Nelson, “Brazil and the FTAA
Negotiations” in A History of the FTAA: From Hegemony to Fragmentation in the Americas, New York: Palgrave
Macmillan, 2015; Albert Fishlow, “Brazil: FTA or FTAA or WTO?” in Free Trade Agreements: US Strategies and
Priorities, edited by Jeffrey Schott, Washington, DC: Peterson Institute for International Economics, 2004.
26 Charalampos Efstathopoulos, “Leadership in the WTO: Brazil, India and the Doha Development Agenda,”
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developed nations and resisting calls for greater access to developing nations’ services and
industrial sectors. In addition to negotiating for developing country interests in multilateral and
regional trade talks, Brazil, as part of MERCOSUR, has also concluded trade agreements with
numerous other countries.27
Free Trade Area of the Americas (FTAA)
In 1994, 34 Western Hemisphere nations met at the first Summit of the Americas envisioning a plan to complete a
Free Trade Area of the Americas (FTAA) by January 1, 2005. Despite almost a decade of talks and formal
negotiations, progress effectively stalled in late 2003. Problems arose over differences between Brazil and the
United States, which, as the co-chairs of the Trade Negotiations Committee (TNC), held the key to
consummating the agreement. At the heart of the disagreement were diametrically opposing positions that
reflected not only differences in sectoral and industrial issues, but in broader trade preferences as well. The
United States was committed to an agreement that included negotiating investment, services, intellectual property
rights, and government procurement, among other issues. Brazil, on the other hand, supported a more limited
approach that addressed primarily market access, and it refused to engage on other issues unless the United States
conceded to addressing trade remedies and subsidies, tariff peaks, and tariff rate quotas (TRQs) in agriculture.
This impasse resulted in a compromise that called for a two-tier agreement under which countries could assume
different levels of commitment. The proposed framework, viewed by the United States as an accommodation to
Brazil, would have included a common set of rights and obligations for all countries along with optional obligations
states could assume through a plurilateral agreement. Defining these various commitments proved unworkable,
and the breadth of an emerging resistance to the FTAA became clear at the fourth Summit of the Americas in
2005. A total of 29 countries supported renewing negotiations, and the United States pushed to set a specific date
in 2006. Brazil, Argentina, Uruguay, and Paraguay (the MERCOSUR countries) rejected this idea, arguing that the
conditions for achieving a balanced and equitable agreement did not yet exist. Taking a more extreme position,
Venezuela lobbied to end any further effort on the FTAA and for unified resistance against U.S. policies and
presence in Latin America. The Summit declaration called for a time to explore problems in the FTAA process,
while awaiting the outcome of the World Trade Organization (WTO) Doha Development Round. Because there
was no unified vision on how to proceed with the FTAA, negotiations were suspended in 2005 and never
resumed.
In its steps to liberalize the economy, Brazil affirmed at the WTO in October 2020, along with the
United States and Japan, that “market-oriented conditions are fundamental to a free, fair, and
mutually advantageous world trading system, to ensure a level playing field for Members’
enterprises for the benefit of their citizens.”28 In addition, the Bolsonaro Administration has
introduced reforms to reduce the regulatory burden on businesses, and it has taken advantage of
MERCOSUR rules to cut tariffs on more than 2,300 products—including certain drugs, medical
equipment, and heavy machinery—in an effort to upgrade Brazil’s industrial sector.29 The
President has also pledged to reform BNDES, overhaul the pension system, privatize some SOEs,
and sell off government assets.

Cambridge Review of International Affairs,” Vol. 25, No. 2, 2015; and Kristen Hopewell, “Rising Powers and the
Collapse of the Doha Round,” WIDERAngle, October 2016.
27 World Trade Organization, Regional Trade Agreements Database. For more analysis on Brazil-Africa economic
relations, see, for example, “Brazil Relaunching Economic Ties with the African Continent,” MercoPress, October 10,
2017; African Development Bank Group, “Brazil’s Economic Engagement with Africa,” Africa Economic Brief, Vol.
2, No. 5, May 11, 2011; G. Lechini, “Latin America-Africa Cooperation: Brazil as a Case Study,” in J. Mangala (eds),
Africa and the New World Era, New York: Palgrave Macmillan, 2010; Levi J. Jordan, “Into Africa: Brazil Deepens
Ties,” Americas Society/Council of the Americas, June 18, 2010.
28 For more detail, see Washington Trade Daily, “US, Others Urge Market Conditions,” Vol. 29, No. 200, October 6,
2020.
29 Paulo Trevisani, “Brazil Opens Up an Economy Long Shielded From Competition,” The Wall Street Journal,
September 23, 2019.
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Brazil’s Trade with Other Countries
China ranks first among Brazil’s trading partners in merchandise trade, followed by the United
States, Argentina, Germany, and the Netherlands. In 2019, Brazil’s trade (exports plus imports)
with China totaled $98.6, while trade with the United States totaled $59.8 billion. Brazil’s top
export market in 2019, as shown in Figure 2, was China, followed by the United States,
Netherlands, Argentina and Japan. Brazil’s exports to China are increasing rapidly, from $40.6
billion in 2014 to $63.4 billion in 2019 (56% increase), compared to exports to the United States,
which increased from $27.0 billion to $29.7 billion (10% increase). Brazil’s leading suppliers of
imports in 2019 were China, the United States, Argentina, Germany, and South Korea (Figure 3).
Brazil’s imports from all countries decreased from $229.2 billion in 2014 to $177.3 billion in
2019.30
Figure 2. Brazil’s Exports to Major Partners

Source: CRS presentation of data from Brazil’s Ministry of Development, Industry, and Trade provided by
Trade Data Monitor.
Figure 3. Brazil’s Imports from Major Partners

Source: CRS presentation of data from Brazil’s Ministry of Development, Industry, and Trade provided by
Trade Data Monitor.

30 Data is from Brazil’s Ministry of Development, Industry and Trade provided by Trade Data Monitor.
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Note: Although Brazil’s imports from Argentina and Germany between 2014 and 2019 appear to be equal, there
is a relatively small difference in value for each year. In 2019, for example, imports from Argentina totaled $10.6
bil ion, while imports from Germany totaled $10.3 bil ion.
Brazil’s major imports in 2019 from all countries included mineral fuels and oil ($24.0 billion),
electrical machinery and equipment ($22.1 billion), nuclear reactors and machinery ($21.3),
motor vehicles and parts ($12.2 billion), and organic chemicals ($11.0 billion). Its major exports
included mineral fuels and oil ($30.3 billion), oilseeds and grains ($26.4 billion), ores and related
products ($25.8 billion), meat ($15.3 billion), and machinery and mechanical appliances ($12.5
billion).31
Brazil’s Regional and Multilateral Trade Initiatives
Brazil’s trade strategy has mainly focused on negotiating for developing country interests, on
both the multilateral and regional levels, with MERCOSUR as a central part. Between 1996 and
2017, the trade bloc has entered into trade arrangements with other countries in the hemisphere,
including Chile, Bolivia, Peru, Colombia, and Mexico, and also with Israel, Egypt, and the
Southern African Customs union. Most of these are partial agreements that did not fully eliminate
tariff and non-tariff trade barriers, and, thus, have not fully liberalized all trade among member
countries.32 Brazil is also a member of the WTO.
MERCOSUR
MERCOSUR, comprised of Brazil, Argentina, Paraguay and Uruguay, was created in 1991
through the Treaty of Asunción. It identified several goals, including the following:
 formation of a common market with eventual free movement of goods, services, and
factors of production;
 adoption of a common external tariff and a common trade policy;
 coordination of macroeconomic and sectoral policies; and
 legislative harmonization in areas conducive to stronger integration.
Venezuela joined MERCOSUR as a full member in 2012, but was suspended in late 2016.33
MERCOSUR countries have a combined GDP of about $3.4 trillion, making it the largest
preferential trade group in South America and one of the world’s largest economic blocs.
The trade arrangement evolved from a series of 1980s bilateral agreements between Brazil and
Argentina. It was conceived as a way to foster new levels of political and economic openness and
cooperation following a prolonged period of mutual distrust—much of it taking place under
military dictatorships in both countries. In addition, as South American economies moved away
from an ISI model of development to one based increasingly on trade openness, a regional trade
agreement made sense given that the four countries were “natural trade partners,” sharing
geographical, cultural, and economic complementarities. 34 Uruguay and Paraguay pressed hard to
expand the arrangement to a four-country common market to improve their trade prospects, or at

31 Data from Brazil’s Ministry of Development, Industry and Trade provided by Trade Data Monitor.
32 See Organization of American States, Foreign Trade Information System, at http://www.sice.oas.org.
33 For more information on Venezuela, see CRS Report R44841, Venezuela: Background and U.S. Relations,
coordinated by Clare Ribando Seelke.
34 Marcel Vaillant, “MERCOSUR: Southern Integration Under Construction,” IPG, February 2005.
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least to ensure that they would not be isolated by a bilateral economic pact between their two
largest neighbors. 35
MERCOSUR, therefore, evolved from economic and political circumstances that emphasized the
need to preserve and enhance the Brazil-Argentine bilateral relationship, while fostering cautious
ambitions for sub-regional economic integration that could also serve as a platform for the four
countries’ entry into the global economy. The treaty followed guidelines compatible with the
Latin American Integration Association, a regional trade organization that provides a common,
flexible framework for establishing sub-regional trade pacts that encourage inclusiveness and
minimal harm to nonmembers.
MERCOSUR followed an incremental path to a common market, beginning with a transition
period (1991-1995) in which it operated as an increasingly comprehensive FTA based on a
schedule of automatic tariff reductions. The formal jump to a common market was made on
January 1, 1995, but in reality, MERCOSUR became (and remains) only a partial customs
union.36
Brazil and Argentina account for about 95% of MERCOSUR’s GDP and population, which
explains why Argentina is one of Brazil’s top trading partners while Paraguay and Uruguay are
not. Some observers maintain that the reason MERCOSUR was formed was to protect “Brazilian
and Argentine industries from global competition.”37 Although MERCOSUR countries have
progressively lifted trade barriers and established a free trade area since 1991, they continue to
have barriers in some sectors. MERCOSUR countries have a common external tariff (CET) of
12.5% to 35% on certain imports from outside the region and adopt a common trade policy
toward outside countries and trading blocs.38 However, the four countries have exceptions to the
CET and to other trade policies with third countries. For example, Brazil unilaterally imposed
antidumping restrictions on steel imports from China in 2011 and reportedly has one hundred
separate tariff code exceptions to the CET.39
In addition, there are possible weaknesses with the CET, a core requirement of a true customs
union. The CET can be levied twice, first when a good initially enters a MERCOSUR country,
and again if it crosses into another member country. Between the double taxation and multiple
exceptions issues, resolving application and uniform enforcement of the CET are viewed by many
as an important unaddressed issue. Double taxation is an issue particularly for Paraguay, which
suffers significant custom revenue losses because most goods enter the MERCOSUR area
through one of the other three countries. The incompleteness of the customs union fosters

35 The addition of Uruguay and Paraguay raised a fundamental debate about MERCOSUR’s purpose. Despite the
charter having well-defined integration and development goals, Brazil and Argentina have viewed MERCOSUR as a
political project as well. Paraguay and Uruguay, by contrast, have emphasized its economic priority, with some
observers insisting that MERCOSUR gets off track when it operates from a political agenda. For more detail, see Luis
Alberto Lacalle de Herrera, “MERCOSUR: Project and Perspectives,” Diplomacy, Strategy & Politics Review,
April/June 2007. It is worth noting that Lacalle was president of Uruguay between 1990 and 1995, and he played an
instrumental role in the negotiation and creation of MERCOSUR.
36 A free trade agreement (FTA) eliminates tariffs on goods exchanged among participating countries. In a customs
union, members also adopt a common external tariff (CET) and common trade policy toward third-party countries. A
common market takes the next step of allowing for the free flow of all factors of production (capital and labor) among
members.
37 Claire Felter, Danielle Renwick, and Andrew Chatzky, Mercosur: South America's Fractious Trade Bloc, Council on
Foreign Relations, July 10, 2019.
38 "Cual es el Pais que mas Perfora el Arancel Externo Comun del Mercosur," El Pais, Uruguay, February 5, 2020.
39 Claire Felter, Danielle Renwick, and Andrew Chatzky, Mercosur: South America's Fractious Trade Bloc, Council on
Foreign Relations, July 10, 2019.
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asymmetry issues that are at the root of MERCOSUR discontent, which suggests that the
achievement of a full common market may be seen by many to remain a distant goal.
MERCOSUR remains at the heart of Brazil’s trade strategy. Brazil relies on the customs union to
strengthen its regional economic leadership, and by extension, its trade negotiating position
abroad. MERCOSUR also serves Brazil’s trade strategy, allowing Brazil to influence the levels of
deepening and help ensure a balance between maintaining its industrial policy and co-opting
regional voices in approaching the United States, the European Union (EU), and issues of
common interest at the WTO.
MERCOSUR-EU Agreement
Since 1995, MERCOSUR countries have worked on several trade initiatives, including trade
liberalization with the EU. In June 1999, formal negotiations began for an interregional
agreement with goals to include liberalization of trade in goods and services in conformity with
WTO rules, as well as enhanced cooperation and a strengthening of political dialogue. In June
2019, MERCOSUR and the EU concluded negotiations for an ambitious and comprehensive
trade agreement in principle, part of a wider Association Agreement between the two regions. The
final texts have not been signed and must be ratified by both regions before the agreement can
enter into force. Some EU countries are opposed to the agreement due to major concerns about
deforestation in Brazil and it is not clear if or when the agreement might enter into force.40
If ratified, the EU-MERCOSUR agreement41 would:
 Remove the majority of tariffs between the two regions, including tariffs on
motor vehicles and parts, machinery, chemicals, pharmaceuticals, apparel,
footwear, and knitted fabrics.
 Reduce MERCOSUR tariffs on chocolates, wines, spirits, and soft drinks from
the EU.
 Provide duty-free access to certain EU dairy products to MERCOSUR countries.
 Adopt measures on intellectual property rights protections including geographical
indications (GIs), government procurement provisions, trade in services, and
food safety.
 Promote high standards in regard to the environment and sustainable
development.
If the agreement is ratified, MERCOSUR partners would gain improved access to European
markets, especially in agriculture, which potentially could adversely affect U.S. exporters.
Another possible impact, according to some observers, is the “continued willingness of other
countries to set the rules of global trade in the absence of U.S. leadership.”42

40 See "France Says it Opposes EU-Mercosur Trade Deal Over Deforestation Concerns," Euractiv, September 21, 2020,
and “Germany Revives Hopes for EU-Mercosur Deal,” Euractiv, September 22, 2020.
41 European Commission, EU and Mercosur Reach Agreement on Trade, Press Release, June 28, 2019.
42 Justin Millar, EU-Mercosur FTA: The Unheralded Trade Agreement with Big Implications, The Chicago Council on
Global Affairs, December 20, 2019.
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World Trade Organization (WTO)43
Brazil has been a member of the the General Agreement on Tariffs and Trade (GATT) since July
30, 1948 and a member of the WTO since January 1, 1995.44 During the Doha Round of
multilateral trade negotiations that began in 2001, and in the aftermath of their breakdown in
2008, Brazil has played a critical role in rallying other developing countries into a powerful bloc
within the WTO. It has been a leading voice in calling for a reduction in agricultural tariffs and
subsidies in developed nations and resisting calls for greater access to developing nations’
services and industrial sectors. In October 2014, the United States and Brazil settled a long-
standing WTO dispute over U.S. government support for cotton farmers. The United States has
brought four WTO cases against Brazil on the automotive sector, import prices, and patent
protection. In March 2019, Brazil committed to forgo special treatment in future WTO
negotiations. It had until recently identified itself as a “developing country” at the WTO, availing
itself of certain flexibilities in implementing agreements and commitments known as “special and
differential treatment.” The Brazilian government’s decision was in exchange for U.S. support of
its effort to join the OECD.45 Brazil formally applied to accede to the WTO Agreement on
Government Procurement (GPA) in May 2020.
U.S.-Brazil Trade and Investment
Although U.S.-Brazilian trade relations were contentious for about 20 years, there may be
opportunity to move toward trade liberalization. Previous Brazilian administrations generally
objected to trade agreements outside of MERCOSUR and pursued trade issues multilaterally at
the WTO. The Bolsonaro Administration’s more open strategy towards the United States could
bring about significant change if it can gain enough support within the Brazilian congress.
U.S.-Brazil Trade in Goods and Services
Brazil has duty-free benefits under the U.S. Generalized System of Preferences (GSP) program,
which provides nonreciprocal, duty-free tariff treatment to certain U.S. imports from designated
developing countries. Brazil was the fourth-largest beneficiary of the program in 2019, with duty-
free imports to the United States valued at $2.3 billion, or 7.4% of all U.S. merchandise imports
from Brazil.
Despite historical differences in trade policy approaches between the two countries, U.S.-Brazil
trade relations are strong and have deepened in the past two decades. Total merchandise trade
(exports plus imports) between the United States and Brazil totaled $73.7 billion in 2019, with
$42.9 billion in U.S. exports and $30.8 billion in U.S. imports. Merchandise trade between the
two countries peaked in 2012, at $75.9 billion. The United States has had a merchandise trade
surplus ($11.9 billion in 2019) with Brazil since 2008 and a services trade surplus for over 20
years (see Figure 4). In 2019, the U.S. services trade surplus with Brazil was $17.8 billion, down

43 For more information on the WTO, see CRS In Focus IF10002, The World Trade Organization, by Cathleen D.
Cimino-Isaacs, Rachel F. Fefer, and Ian F. Fergusson and CRS Report RL32060, World Trade Organization
Negotiations: The Doha Development Agenda, by Ian F. Fergusson.
44 World Trade Organization, Brazil and the WTO, Member Information, at
https://www.wto.org/english/thewto_e/countries_e/brazil_e.htm.
45 Brazil is seeking membership in the Organization for Economic Cooperation and Development (OECD), but it is not
a member country. Brazil is one of the non-member economies with which OECD has working relationships in
addition to its member countries. For more information, see OECD, Brazil and the OECD, at
https://www.oecd.org/brazil/brazil-and-oecd.htm.
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from $20.1 billion in 2018. U.S. services exports totaled $24.6 billion, while services imports
totaled $6.8 billion.
Figure 4. U.S. Merchandise and Services Trade with Brazil

Source: Compiled by CRS with data from the U.S. International Trade Commission (USITC) and U.S. Bureau of
Economic Analysis.
Although China overtook the United States as Brazil’s largest trading partner in 2008, U.S. trade
with Brazil has more than doubled since 1999 (in nominal terms), especially in the energy and
aerospace industries. Leading U.S. export items to Brazil in 2019 included non-crude petroleum
oil, civilian aircraft and engines, crude petroleum oil, coal and coal products, and electronic
circuits and parts (Figure 5). Leasing U.S. import items from Brazil included crude petroleum oil
aircraft and spacecraft, non-crude petroleum oil, iron or steel products, and chemical wood pulp
(Figure 6).
Major U.S. services exports to Brazil in 2019 included travel ($8.3 billion), telecommunications,
computer, and information services ($3.4 billion), business services ($3.1 billion), financial
services ($2.9 billion), and charges for use of IPR ($2.1 billion). U.S. services import included
business services ($1.6 billion), air transportation services ($1.2 billion), and travel ($0.8 billion).
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Figure 5. U.S. Exports to Brazil: 2010-2019

Source: Compiled by CRS with data from U.S. International Trade Commission.
Figure 6. U.S. Imports from Brazil: 2010-2019

Source: Compiled by CRS with data from U.S. International Trade Commission.
Tariffs and Trade Barriers
MERCOSUR rules, which Brazil follows closely, permits a CET of up to 35% ad valorem, with
flexibilities and exceptions that may go well beyond those levels. Brazil has average most-
favored-nation (MFN) applied tariff of 10.1% for agricultural goods and 13.9% for non-
agricultural goods (the major category of U.S. exports to Brazil)—more than four times that of
the United States (Table 2).46 Brazil’s maximum WTO bound tariff rate is 30.8% for non-
agricultural products and 35.4% for agricultural products.
In past discussions on market access, the United States has focused on reductions in industrial
tariffs, whereas Brazil has emphasized lowering U.S. peak tariffs on agricultural imports subject
to tariff-rate quotas (TRQs). Brazil has noted that the U.S. average MFN applied tariff rate on
agricultural products (4.7%) can mask the high cost that Brazil’s exporters face from U.S. out-of-
quota peak tariffs.

46 World Trade Organization, World Tariff Profiles 2019.
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Table 1. U.S. and Brazilian Tariff Rates
(in percent)
United States
Brazil

Total
Ag
Non-Ag
Total
Ag
Non-Ag
Simple Average Final Bound

3.4
4.9
3.2
31.4
35.4
30.8
Simple Average MFN Applied
2019
3.3
4.7
3.1
13.4
10.1
13.9
Trade Weighted Average
2018
2.3
4.6
2.2
10.2
12.5
10
Source: CRS presentation of data from the WTO’s World Tariff Profiles 2019.
Notes: Most-favored-nation (MFN).
Other Barriers
In its 2020 National Trade Estimate Report on Foreign Trade Barriers, the U.S. Trade
Representative (USTR) also highlights some additional barriers to U.S. exports and investment in
Brazil.
 Nontariff Barriers (NTBs). The most cited NTBs are
 complex and discriminating tax treatment of imports that do not meet local
content and other production requirements,
 prohibitions on imports of used and remanufactured goods,
 fees on retail goods entering Brazil by express shipment, and
 technical barriers (including conformity assessments) that cause lengthy
delays in the approval of medical devices, pharmaceuticals, and processed
food products.47
 Import Licenses/Customs Valuation. Issues include onerous registration and
fees required of all importers, automatic and non-automatic license requirements,
delays in licensing, and burdensome documentation.48 U.S. exporters of
agricultural commodities and beverages, pharmaceuticals, and footwear and
apparel have expressed concerns about the lack of transparency surrounding
import-licensing procedures.
 Subsidies. Brazil’s 2011 industrial policy, Greater Brazil Plan (Plano Brasil
Maior), offers a variety of tax, tariff, and financing incentives to encourage local
firms to produce for export, including tax suspensions on imports by companies
committed to exporting information technology (IT) services. It also provides a
broad range of assistance to its agricultural and manufacturing sectors in the form

47 Local content measures “typically oblige an investor to produce or purchase from local sources some percentage or
absolute amount of the value of the investor's production. These measures are essentially the same as local sourcing or
import substitution requirements as the investor is obliged in both cases to source inputs locally rather than import.”
(Negotiating Group on Trade-Related Investment Measures, Submission by the United States, GATT Doc.
MTN.GNG/NG12/W/9, February 9, 1988.)
48 According to the USTR, while “a list of products subject to non-automatic import licensing procedures is available...,
specific information related to non-automatic import licensing requirements and explanations for rejections of non-
automatic import license applications are lacking. The lack of transparency surrounding these procedures creates
additional burdens for U.S. exporters.” (Office of the USTR, National Trade Estimate Report on Foreign Trade
Barriers, March 2020.) Article X of the WTO’s General Agreement on Tariffs and Trade “requires Members to publish
promptly laws, regulations, judicial decisions and administrative rulings of general application, including those
pertaining to requirements on imports or exports and to administer them in a uniform, impartial and reasonable
manner.” (WTO, “Technical Information on Import Licensing”)
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of low interest financing, price support programs, tax exemptions, and tax
credits.
 Government Procurement. The Brazilian government generally grants
procurement preference to firms that produce in Brazil and that fulfill certain
economic stimulus requirements, such as generating employment or contributing
to technological development. SOEs usually may only subcontract services to
U.S. and other foreign firms if domestic expertise is unavailable. In addition,
there are local content requirements for all oil companies operating in Brazil’s
upstream exploration and production phases, including Petrobras. Brazil is not a
party to the GPA. However, it has been an observer to the WTO Committee on
Government Procurement since 2017, and in May 2020, formally submitted its
application to accede to the GPA, which would increase government procurement
market access for foreign companies in Brazil.
 Intellectual Property Rights (IPR) Protection. The United States has long-
standing concerns about Brazil’s enforcement of IPR. Brazil remained on the
Special 301 “Watch List” in USTR’s 2020 Special 301 Report for continued IPR
enforcement challenges, including high levels of counterfeiting and piracy, both
online and in physical markets, and long delays in issuing patents (average patent
pendency is 10 years).49 The USTR has expressed concerns about the lack of
protection against unfair commercial use of undisclosed test results and other
data generated to obtain marketing approval for pharmaceutical products.50
 Services Barriers. Brazil imposes a fixed tax on foreign films released in
theaters and has other encumbered practices for foreign film distribution. There
are also content quotas on subscription television services, costly and time-
consuming procedures for express delivery services, improved but still difficult
entry into the insurance and reinsurance businesses, and local content
requirements and redundant and excessive testing of telecommunications
equipment.
 Investment Barriers. Brazil imposes restrictions on foreign purchase and lease
of agricultural land. A draft bill, which would lift some of the limits on foreign
ownership of agricultural land, has been awaiting a vote in the Brazilian
Congress since 2015.
U.S.-Brazil Foreign Investment
Investment plays an important and growing role in U.S.-Brazil commercial ties, and analysts
generally contend that a trade agreement could also significantly boost bilateral foreign direct
investment (FDI) flows. In particular, a trade agreement could expand U.S. market access and
investor protections in Brazil. However, it would need to overcome unique challenges, such as
state-driven strategic investment policies and the strong presence of Brazil’s SOEs in investment
activity. The United States and Brazil do not have a bilateral investment treaty (BIT) or a Trade

49 Brazil has been on the Special 301 “Priority Watch List” or “Watch List” every year since 1989, with the exception
of 1998, for continued IPR enforcement challenges.
50 According to 2017 study, “[a]mong Latin American countries, Brazil has the largest generic drug sector, representing
almost 28% of the country’s pharmaceutical sales.” (Elize Massard da Fonseca and Kenneth C Shadlen, “Promoting
and Regulating Generic Medicines: Brazil in Comparative Perspective,” Revista Panamericana de Salud Pública,
2017.
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and Investment Framework Agreement (TIFA), although discussions in the past have touched on
all these themes without an agreement.
According to the U.S. Bureau of Economic Analysis (BEA), U.S. investment in Brazil, the largest
economy in Latin America next to Mexico, is relatively small. It represents 1.4% of the
cumulative stock of U.S. direct investment abroad (U.S. FDI stock) (Figure 7). While U.S.
investment in Brazil as a share of total U.S. investment abroad has fluctuated in recent years, it is
significantly smaller than two decades ago, when it stood at around 3.0%.
U.S. FDI stock in Brazil, on a historical-cost
basis, was $81.7 billion in 2019 (Table 2), a
Figure 7. U.S.-Brazil FDI
$2.7 billion (3.4%) increase from 2018. Since
2017, it has remained above the peak of $76.8
billion reached in 2012. Most U.S. investment
in Brazil, as well as most Brazilian
investment in the United States, is in
manufacturing. The stock of Brazilian FDI in
the United States increased from $7.3 billion
in 2009 to $45.3 billion in 2019 (Figure 7).

Source: CRS presentation of data from the U.S.
Bureau of Economic Analysis.

Table 2. Investment Position (FDI Stock) in 2019
(in billions of U.S. dollars)
Industry

Total
Wholesale
Finance and
Mining
Manufacturing
Trade
Insurance
Other
a
U.S. Direct Investment Abroad (on a historical-cost basis)

World
$5,959.6
$154.3
$903.7
$238.6
$847.1
$3,816.0
Latin Americab
911.9
51.0
95.2
37.3
235.7
492.7
Brazil
81.7
12.3
26.0
2.4
16.8
24.2
Mexico
100.9
10.7
41.2
4.7
14.8
29.5
FDI in the United States (UBO)c

World
$4,458.4
N/A
$1,785.7
$467.2
$549.7
$1,655.7
Latin Americab
227.7
N/A
102.3
9.7
31.3
84.4
Brazil
45.3
N/A
37.5
2.2
1.2
4.5
Mexico
42.9
N/A
24.7
1.8
0.9
15.5
Source: CRS presentation of data from the U.S. Bureau of Economic Analysis.
Notes: (a) Excludes depository institutions. (b) Latin America and Other Western Hemisphere (excluding
Canada). UK Islands in the Caribbean (including the British Virgin Islands, Cayman Islands, Montserrat, and Turks
and Caicos Islands) and Bermuda account for 33.0% (or $300. 5 bil ion) and 28.3% (or $262.4 bil ion),
respectively, of total U.S. direct investment in Latin America. (c) According to BEA, the ultimate beneficial owner
(UBO) “is that person, proceeding up a U.S. affiliate's ownership chain, beginning with and including the foreign
parent, that is not owned more than 50 percent by another person. The country of ultimate beneficial owner is
often the same as that of the foreign parent, but it may be a different country or the United States.”
U.S.-Brazil Trade Talks
In March 2019, Presidents Trump and Bolsonaro met in Washington, DC; it was the Brazilian
president’s first bilateral visit abroad. President Bolsonaro was joined by seven of his twenty-two
ministers, including the economic and foreign affairs ministers. During this visit, the two
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countries defined an agenda prioritizing cooperation in trade and investments, as well as defense,
security, and innovation.51 Both leaders expressed an interest in eventually entering into a
comprehensive trade agreement. The initial agenda was to build a “Prosperity Partnership” to
increase jobs, investment, and trade, with emphasis on trade facilitation and good regulatory
practices.52
“Mini Trade Agreement”
On March 7, 2020, Presidents Trump and Bolsonaro agreed to accelerate a bilateral dialogue that
began under the Obama Administration in the 2011 Agreement on Trade and Economic
Cooperation (ATEC).53 U.S. and Brazilian government trade officials subsequently began talks on
April 16 to conclude in 2020, a partial or “mini trade agreement” on trade facilitation and good
regulatory practices. The goal was for the agreement to potentially serve as a foundation for more
comprehensive talks if the two countries move forward on a trade agenda. The so-called mini deal
would have provisions similar to chapters in agreements such as USMCA, but it would not
include any of the major market opening measures or rules and disciplines, including enforcement
mechanisms, in most U.S. FTAs.54
On October 19, 2020, the United States and Brazil announced the successful conclusion of the
Protocol on Trade Rules and Transparency (Protocol), which complements Brazil’s domestic
reforms to improve competitiveness, regulatory reform and economic freedom. The Protocol adds
three annexes to the ATEC: Trade Facilitation and Customs Administration, Good Regulatory
Practices, and Anti-Corruption. The Protocol does not require U.S. congressional approval, but
will need approval by the Brazilian Congress prior to its entry into force. While some Members
of Congress see the trade deal as a way to increase U.S. investment and promote U.S. values in
the Hemisphere, others oppose an expanded economic partnership under the Bolsonaro
Administration due to human rights, environmental and other concerns.
Annex I: Trade Facilitation and Customs Administration
Annex I would expand on the multilateral WTO Trade Facilitation agreement. Key provisions
include:
 online publication of customs and other border information,
 single window enabling traders to submit information requirements through one
entry point,

51 Abrao Neto, Ken Hyatt, et al., U.S.-Brazil Trade and FDI: Enhancing the Bilateral Economic Relationship,
ApexBrazil, Atlantic Council, March 2020.
52 The White House, Joint Statement from President Donald J. Trump and President Jair Bolsonaro, Statements &
Releases, March 19, 2020.
53 The U.S.-Brazil Agreement on Trade and Economic Cooperation was negotiated with Brazil under the Obama
Administration in 2011 to expand trade relations. The agreement includes commitments to form a bilateral trade and
economic commission with the objective of promoting cooperation between the two countries. For more information,
see Bilaterals.org, U.S.-Brazil ATEC (2011), available at https://www.bilaterals.org/?us-brazil-atec-2011.
54 The United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020, is the most
recent U.S. free trade agreement (FTA). It is comprised of 34 chapters, including chapters on trade facilitation,
regulatory practices, and anti-corruption, and 12 side letters. It retains most of the market-opening commitments under
the North American Free Trade Agreement (NAFTA) and makes notable changes to rules and disciplines such as
investment, government procurement, and intellectual property protection. It adds new chapters on digital trade, state-
owned enterprises, and currency misalignment. For more information, see CRS Report R44981, The United States-
Mexico-Canada Agreement (USMCA), by M. Angeles Villarreal and Ian F. Fergusson.
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 automated customs procedures to increase efficiency including electronic
systems for traders, acceptance of electronic documents under specific
international standards,
 a joint work plan to advance an Authorized Economic Operator (AEO) mutual
recognition agreement (customs-to-business partnerships facilitating legitimate
low-risk trade),
 advance rulings (prior “binding” information about tariff classification and
customs treatment applied to specific goods at time of importation),
 mechanisms to ensure consistent customs treatment from port to port,
 disciplines on penalties imposed by customs administration in each country, and
 expanded customs cooperation, including on trade enforcement.
Annex II: Good Regulatory Practices
This annex, the second agreement of its kind, is similar to the good regulatory practices
framework in the U.S.-Mexico-Canada Agreement (USMCA). It would aim to provide greater
transparency in Brazilian regulatory procedures through the following:
 online publication of draft regulations and opportunity for comments,
 a website with information on regulations and regulators’ specific
responsibilities,
 encouraging the use of a Regulatory Impact Assessment to evaluate draft
regulations,
 review of regulations for their effectiveness and identification of opportunities to
reduce regulatory burden,
 encouragement for regulatory authorities to use “high quality” information and
for transparency about the source of information, and
 recognition of the role of advisory groups and the opportunity to provide input.
Annex III: Anti-Corruption
This annex contains anti-corruption commitments, including:
 obligations to adopt and maintain measures to combat bribery and corruption,
 provisions to preclude the tax deductibility of bribes, recovery of proceeds of
corruption, denial of safe haven for foreign public officials that engage in
corruption,
 sanctions for corrupt acts,
 rules of integrity in maintaining financial records,
 procedures to report corrupt acts and whistleblower protection,
 policies and procedures to promote accountability of public officials, and
 obligations for public sector and civil society participation in anticorruption
efforts.
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Ongoing Trade Issues
The United States and Brazil are also involved in market access negotiations on steel, ethanol,
sugar and corn. On September 11, 2020, the two governments issued a joint statement stating that
they have held consultations on bilateral trade on ethanol and decided to pursue discussions for an
arrangement to improve market access for ethanol and sugar in Brazil and the United States and
consider an increase in market access for corn in both countries.55
Ethanol, Sugar, and Corn
In August 2020, Brazil’s tariff-rate quota (TRQ) on ethanol imports from the United States
expired. The TRQ allowed duty-free entry of 750 million liters of ethanol; any imports over that
amount were subject to a 20% tariff. The two countries are discussing ways to resolve this issue
and ensure fair market access on ethanol so that the ethanol industries in both countries “will be
treated fairly and benefit from future regulatory changes on biofuel products in Brazil and the
United States.” The discussions, which started on September 14, 2020, are scheduled to take
place over a 90-day period and are to cover improved market access for ethanol, sugar, and corn
in the United States and Brazil. During this time, Brazil is to maintain a pro-rated TRQ for
ethanol proportionate to the total annual volume of the TRQ that was in force on August 30,
2020.56 In August 2020, a group of 20 U.S. lawmakers wrote a bipartisan letter asking the United
States Trade Representative to urge the Brazilian government to terminate the ethanol TRQ and
“prohibitive 20% tariff” on out-of-quota products from the United States and reinstate the duty-
free exemption for U.S. ethanol from MERCOSUR’S CET that was in effect between 2012 and
2017.57
U.S. Section 232 Tariffs on Brazilian Steel
In March 2018, President Trump issued two proclamations imposing tariffs on U.S. imports of
certain steel and aluminum products, including products from Brazil, using presidential powers
granted under Section 232 of the Trade Expansion Act of 1962.58 Section 232 authorizes the
President to impose restrictions on certain imports based on an investigation and affirmative
determination by the Department of Commerce that the targeted import products threaten to
impair national security. The proclamations outlined the President’s decisions to impose tariffs of
25% on steel and 10% on aluminum imports, with some flexibility on the application of tariffs by
country. The Administration later excluded Brazil from Section 232 tariffs after the Brazilian
government agreed to a quota allotment restricting exports of Brazilian steel to the United States.
In August 2020, President Trump issued a proclamation announcing a tightening of the quota on
U.S. imports of steel from Brazil. The proclamation states that the United States and Brazil will
hold further consultations in December 2020 to discuss steel trade between the two countries.59

55 Office of the United States Trade Representative, "Joint Statement on U.S.-Brazil Trade in Ethanol," press release,
September 11, 2020, at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/september/joint-
statement-us-brazil-trade-ethanol.
56 Ibid.
57 Letter from Representative Darin LaHood, Representative Adrian Smith, and 18 other Members of Congress to
Office of the U.S. Trade Representative, Ambassador Robert E. Lighthizer, August 20, 2020. Representative LaHood is
co-chair of the House U.S.-Brazil Caucus.
58 For more information, see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress,
coordinated by Rachel F. Fefer and Vivian C. Jones.
59 President Donald J. Trump, Proclamation on Adjusting Imports of Steel into the United States, August 28, 2020.
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Trade journals report that the tightening of the quota of steel imports from Brazil is in response to
Brazil’s restrictions on U.S. ethanol exports.60
Policy Issues and Implications
Foreign Policy Implications
As the fifth-largest country and the ninth-largest economy in the world, Brazil plays an important
role in global governance. Over the past 20 years, Brazil has forged coalitions with other large,
developing countries to push for changes within multilateral institutions and to ensure that global
agreements on issues ranging from trade to climate change adequately protect their interests.
Brazil also has taken on a greater role in promoting peace and stability around the world by
engaging in development cooperation, contributing to U.N. peacekeeping missions, and
mediating conflicts in South America and further afield. Although recent domestic challenges
have led Brazil to turn inward and weakened its appeal globally, the country continues to exert
influence on international policy issues that affect the United States.
Some analysts view Brazil as a “global swing state” with the potential to either reinforce or
undermine the rules-based international order that the United States and its allies established in
the aftermath of World War II.61 Given Brazil’s strategic importance, they argue that the United
States should more actively engage the country and devote increased attention and resources to
forging a close partnership. Pursuing a free trade agreement, for example, could bring Brazil into
closer alignment with the United States by strengthening bilateral commercial ties and reducing
Brazil’s economic dependence on China.
Although a comprehensive trade agreement may be difficult to conclude in the near-term, the new
Protocol on Trade Rules and Transparency could reinforce recent advances in the U.S.-Brazil
relationship. As noted previously, U.S.-Brazilian relations have warmed over the past two years,
but the countries’ increased cooperation appears to be based, in part, on the personal rapport
between President Trump and President Bolsonaro. The recently concluded Protocol could help
institutionalize improved ties by providing a framework for continued engagement that will last
beyond the current administrations.
A more far-reaching trade agreement could have implications for global efforts to promote
democracy and mitigate climate change. Some human rights and environmental advocates have
urged the United States not to conclude any type of trade agreement with the Bolsonaro
Administration.62 They argue that an agreement would bolster Bolsonaro politically, endangering
democracy and human rights in Brazil as well as efforts to conserve the Amazon Rainforest.
Others maintain that the United States currently has little leverage in its relations with Brazil,
partly due to the lack of a bilateral free trade agreement.63 They argue that in the absence of more
significant economic ties, the United States is unlikely to be able to exert influence on the

60 Isabelle Icso, "Lawmakers Press USTR to Address Brazil's 'Prohibitive' Ethanol TRQ," World Trade Online,
November 2, 2020.
61 Daniel M. Kliman and Richard Fontaine, Global Swing States: Brazil, India, Indonesia, Turkey and the Future of
International Order, German Marshall Fund of the United States and Center for a New American Security, November
2012.
62 See, for example, Gimena Sánchez-Garzoli, “The United States Must Not Enter into a Free Trade Agreement with
Brazil Given President Bolsonaro’s Frontal Assault on Human Rights,” Washington Office on Latin America, June 24,
2020.
63 See for example, Ricardo Mendes, “Trump or Biden: What Will it Mean for Brazil and Bolsonaro?,” remarks at the
Wilson Center, Brazil Institute, October 6, 2020.
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Brazilian government to improve environmental protections or address other concerns. Modern
U.S. FTAs include chapters on the environment with enforceable commitments along with
cooperative mechanisms that could enhance standards in other countries.
Trade and Economic Implications
The effects of a potential U.S.-Brazil trade agreement on the U.S. economy, and the mechanisms
by which it could affect U.S. economic growth and employment, are difficult to quantify. This is
partly due to the challenges associated with disentangling the effects of trade liberalization on
both economies from those of other domestic and global developments. Economic analyses can
be constrained by a lack of data and other theoretical and practical limitations. While there is a
general consensus among economists that, in the aggregate, the economic benefits of such an
agreement would outweigh the costs, the reality is that it would likely present both opportunities
and challenges for the United States. Each country may have import-sensitive sectors where some
U.S. businesses and workers may benefit (e.g., those who can expand their production and get
higher-paying jobs), while others bear the costs (e.g., those who are displaced because of import
competition) through greater competition achieved through greater bilateral trade liberalization.
For Brazil, a trade agreement with the United States could potentially serve as a force for
encouraging greater economic openness and needed economic reform. A U.S.-Brazil trade
agreement would likely cover a range of policy issues that have cross-border implications,
including trade in goods and services, investment, regulatory and other NTBs, government
procurement, e-commerce, agricultural barriers, IPR, SOEs, worker rights, and the environment.
As such, it could serve as a catalyst for economic growth and development that can have a
significant impact on Brazil’s economy—and the region’s—beyond what would be predicted
from traditional trade models. This could be particularly important as Brazil tries to raise its own
standards, implement domestic economic reforms, and continue to integrate into the regional and
global economies.
Many trade analysts, scholars, and policymakers contend that an agreement—whether narrowly
focused (lower or zero tariffs only) or comprehensive (lower or zero tariffs and significant
reductions in NTBs)—is likely to yield net gains in terms of U.S. exports, employment, and
growth. Initially, most of the gains could be expected to come from the reduction or elimination
of Brazil’s tariffs, which are relatively high on average. In addition, while reductions in NTBs are
possible, NTBs in Brazil differ in nature and are considered to be far-reaching, so their complete
elimination may not be politically or technically feasible.
While the economic effects of a free trade agreement cannot always be quantified or always
represented in trade models, estimates of the potential benefits and costs may help to inform trade
policy debates. For example, a 2016 joint study by the Brazil-U.S. Business Council and Trade
Partnership Worldwide LLC found that a comprehensive trade agreement, once fully
implemented, would have a positive impact on the U.S. economy.64 The study examined the
possible effect of a hypothetical agreement that fully eliminates U.S. and Brazilian tariffs
affecting bilateral trade and reduces by 50% actionable nontariff measures affecting goods and
services traded between the two countries. The results indicated that, by 2030, U.S. GDP would
rise by $24 billion (0.11%), U.S. employment could expand by close to 100,000 jobs (0.05%),
and U.S. exports to Brazil would increase by $62 billion (78%).65 Ultimately, the impact of any

64 Brazil-U.S. Business Council, “Impact of a U.S.-Brazil Trade Agreement on the U.S. Economy,” 2016.
65 For some of their estimates, the study assumed, among other things, that the Trans-Pacific Partnership (TPP), the
Trans-Atlantic Trade and Investment Partnership (T-TIP), and the Trade in Services Agreement would be in full effect.
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potential agreement would depend on the range of issues covered and the extent to which barriers
are reduced between the two countries.
Congressional Issues and Outlook
While an FTA between the United States and Brazil may continue to be an elusive proposition,
government-to-government dialogues have moved towards a more collaborative relationship.
Congress may consider exploring prospects for enhancing economic and trade relations with
Brazil under a “building block approach” towards an eventual FTA. If the United States and
Brazil eventually enter into formal FTA negotiations in the years to come, Congress would have
to approve such an agreement under Trade Promotion Authority (TPA). TPA is the time-limited
authority that Congress uses to set trade negotiating objectives, establish notification and
consultation requirements, and consider implementing legislation for reciprocal trade agreements
under expedited procedures, provided they meet certain statutory requirements.66 Under the
Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-15) (P.L. 114-26),
TPA is authorized through July 1, 2021. The 117th Congress may consider reauthorization of TPA
and negotiating objectives such as those in TPA-15. Many Members of Congress have expressed
interest in the advancement of environmental, human and labor rights, and tax reform in Brazil
before an FTA could be considered.
The new Protocol on Trade Rules and Transparency Protocol does not include provisions
eliminating tariffs or nontariff barriers to trade, and, does not require any change in U.S. laws that
Congress would have to approve by Congress. The Brazilian Congress would need to approve it,
however, before it can enter into force. Before the United States and Brazil could move forward
with negotiations on a comprehensive free trade agreement (FTA), it is likely that there would
have to be more bipartisan support in the U.S. Congress in addition to support for negotiating an
agreement by the President of the United States. Another issue before moving forward on
possible FTA talks relates to Brazil’s membership in MERCOSUR. If Brazil were to decide to
negotiate an FTA with the United States, it would need to work with other MERCOSUR parties
to change the group’s rules.
Congress may examine a framework for furthering trade ties with Brazil and addressing trade
issues, such as intellectual property rights protection and digital trade. Several U.S. policymakers
have expressed increasing interest in expanding trade ties with Brazil by using USMCA chapters
as templates for smaller agreements. Other Members of Congress objected because the U.S.-
Brazil 2020 protocol on trade rules and transparency because it does not include agricultural
provisions. They were also concerned that Brazil would be unwilling to address “their long-held
tariff and nontariff barriers for agriculture.”67 U.S. industry associations have expressed hope that
the protocol updating the U.S.-Brazil ATEC would lead to more ambitious talks for a
comprehensive agreement. U.S. express shipment companies, for example, are urging the
Administration to continue trade talks, stating that Brazil has burdensome and protectionist

For more detail, see Brazil-U.S. Business Council, “Impact of a U.S.-Brazil Trade Agreement on the U.S. Economy,”
2016.
66 See CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by Ian F.
Fergusson, and CRS In Focus IF10038, Trade Promotion Authority (TPA), by Ian F. Fergusson.
67 Letter from Representative Ron Kind, Member of Congress, to The Honorable Robert E. Lighthizer, U.S. Trade
Representative, and The Honorable Sonny Perdue, Secretary of Agriculture, October 19, 2020.
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barriers that create a competitive disadvantage for the industry.68 U.S. ethanol producers have also
stated their hope that future talks could address Brazil’s trade barriers to U.S. ethanol exports.69
The presumptive Biden Administration’s trade policy could include an early review of ongoing
trade talks with Brazil and other countries, as well as the identification of future U.S. priorities
and the direction it wishes to take on these issues. The former Vice President did not make trade a
central issue in his campaign and or offer details on trade issues.

Author Information

M. Angeles Villarreal, Coordinator
Andres B. Schwarzenberg
Specialist in International Trade and Finance
Analyst in International Trade and Finance

Peter J. Meyer

Specialist in Latin American Affairs

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
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copy or otherwise use copyrighted material.

68 "Express Shipment, Ethanol Groups Push for More in U.S.-Brazil Trade Talks," World Trade Online, November 2,
2020.
69 Geoff Cooper, President & CEO, Renewable Fuels Association, letter to President Donald J. Trump, October 22,
2020.
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