Brazil and the US: Key Partners Clinton's Fall Trip Should Be Preceded by an All-Out Push for Fast-Track Negotiating Authority

Article excerpt

The United States and Brazil - the two largest countries of the Americas - have a strong mutual interest in building a more economically integrated and politically cooperative hemisphere. Brazil is potentially a vital partner for the US. It is not a rival, competing for leadership among Latin American countries.

Brazil recognizes that the US will remain the dominant power in the hemisphere for years to come. The US economy is, after all, more than 10 times larger than that of Brazil. The US is the main trading partner and source of investment capital for nearly every Latin American country. Nonetheless, Brazil - with Latin America's largest economy, land mass, and population - is important and influential in regional affairs. What happens in Brazil matters a great deal for the rest of Latin America.

Brazil's significance, moreover, has grown sharply in the past few years, largely because of its high-quality leadership and the success of its economic policies. Three years ago, Brazil's annual inflation exceeded 7,000 percent; today it is less than 10 percent. Although many trade barriers remain, tariffs on most imports have been cut deeply. Privatization and infrastructure development are proceeding, and there has been an explosion of foreign direct investment to Brazil, expanding from $2 billion in 1993 to $9 billion last year and a projected $15 billion this year. The Mercosur economic pact, led by Brazil and Argentina, has shown extraordinary dynamism. On the political front, Brazil is also demonstrating international leadership. It heads the four-nation group that brought peace to the Peru-Ecuador frontier, and it played a key role in stopping a military coup in Paraguay last year. Staggering problems Brazil still has staggering problems to deal with. Its public administration is bloated and inefficient; large budget and trade deficits leave the economy vulnerable; poverty, inequality, and social injustice are still endemic. Reform comes slowly in Brazil because it usually requires amending the country's unwieldy Constitution, which needs the approval of a three-fifths majority in both houses of Congress. President Fernando Henrique Cardoso's own authority to shape policy was strengthened recently when he gained (through a constitutional amendment) the right to stand for reelection - but, with elections now only 18 months away, the prospects of any substantial new reform initiatives are diminishing. While there are no deep conflicts in US-Brazilian relations, serious differences have emerged, mainly over trade policy. The development of hemispheric free trade arrangements is one point of contention. Some US officials believe Brazil is an obstacle to the building of the Free Trade Area of the Americas (FTAA), as agreed at the 1994 Miami summit meeting of presidents and prime ministers. Brazil is seen as trying to slow negotiations, make the FTAA less comprehensive, and even postpone the accord beyond the agreed-upon 2005 start date. This view is partly justified, although Brazil's decisions are driven mostly by domestic political considerations, not by international economic or political strategy. There is just not much political support in Brazil for accelerating or deepening trade liberalization. Opposition comes from many in the business community (including US-based multinational corporations) who fear international competition, as well as from labor unions and other traditional foes of free trade. Indeed, trade politics in Brazil are remarkably similar to those in the US preventing the passage of new fast-track legislation. These problems are compounded by large current account and fiscal deficits and an overvalued currency - all of which threaten Brazil's anti-inflation efforts and the credibility of its economic reforms. …

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