Summary
U.S. President Barack Obama met with Brazilian President Dilma Rousseff on April 9 in Washington. The meeting came amid widespread concern over the lack of movement in the two countries' relationship, and it was not the first uninspired meeting between the two heads of state. Obama's visit to Brazil in March 2011 is said to have fallen short of Rousseff's expectation that the two governments would make progress on key mutual policy interests.
The relationship between the countries has been lackluster for decades — well before Rousseff or Obama took office. Brazil finds itself fundamentally opposed to the United States on a number of issues both transient and existential, and this reality is unlikely to change any time soon. Though Brazil and the United States could expand cooperation in several key areas, the two face significant hurdles in their relations, and their strategic relationship is constrained by Brazil's relative isolation and lack of leverage on most global issues.
Trade and Currencies
Trade is an important subject of mutual concern. Both Brazil and the United States are attempting to boost exports and create jobs domestically. Under these circumstances, any significant reduction of trade barriers between the two countries would need to be mutual, but there is resistance on both sides. Brazil has carried a significant trade deficit with the United States since the fourth quarter of 2008. U.S. imports are picking up and Brazil would like to see the United States increase its openness to Brazilian goods, but Brasilia is not in a position to offer any large trade concessions in return. The areas in which Brazil needs to increase exports — manufactured and semi-manufactured goods — are the very U.S. sectors with which Brazilian companies have the hardest time competing when they are exported to the Brazilian domestic market. With elections on the horizon, the Obama administration has similar concerns about American businesses losing market share.
Brazil's biggest concerns about its trade position stem in part from the rapid rise in the Brazilian real. Causes for the real's upward valuation range from increased speculative investment to a rise in foreign direct investment in Brazil's extractive industries and the relative decline of the U.S. and European economies over the past three years. The currency's upward trajectory has made Brazilian exports more expensive and has fueled a consumer boom that could inflict permanent damage to its industrial sector. Brazil has criticized monetary expansion by Europe and the United States — action taken to counterbalance the effects of the 2008-2009 global financial crisis — arguing that it has played a significant role in devaluing the dollar and the euro against the real. Brazil has also issued wide-ranging calls for global action against the perceived undervaluation of China's currency and has filed a complaint with the World Trade Organization. Brazil is unlikely to get much traction with the United States on the issue. The U.S.-China relationship is exceedingly important and complex, and the United States will not make moves against China on Brazil's behalf unless they first satisfy U.S. strategic imperatives.
Oil
Energy extraction is an area where Brazil and the United States have unequivocal opportunities for a mutually beneficial partnership. Brazil has substantial reserves of offshore oil; the United States has a surplus of technology that Brazil would like to acquire and of capital that could be used to develop those deposits. On a strategic level, the United States has a strong interest in reducing its exposure to Middle Eastern oil imports. Brazil could provide an alternative.
For Brazil, however, this is mostly a long-term prospect. Brazil is currently a net importer of oil products from the United States — likely as a direct result of a consumer credit boom, which is driving an increase in car purchases. Furthermore, Brazil is currently embroiled in a $22 billion dispute with U.S. energy giants Transocean and Chevron Corp. over a 3,000-barrel oil spill at the Frade offshore oil field in November. Though the suit appears to be a result of competition, or at least a lack of coordination, between federal prosecutors and the executive, it is just such legal issues that make Brazil a very risky place to invest. This dynamic may hinder the close collaboration and investment Brazil will need to develop pre-salt deposits and acquire new technologies.
Brazil is also the largest producer of ethanol in the world. The recent expiration of significant corn ethanol subsidies and an increase in the portion of ethanol allowed in U.S. gasoline mean that if Brazil can increase ethanol production, it may well find the United States to be a very willing importer. But after a couple of bad sugar harvests and with the possibility of a rise in gasoline prices on the horizon, Brazil has seen production stagnate and can expect to see rising domestic demand for ethanol. These dynamics will stifle Brazil's ability to satisfy U.S. ethanol demand.
Looking Forward
There is little to bind Brazil and the United States at a higher strategic level. Brazil has always aspired to be a global power. Brasilia sees the country's current economic rise as providing at minimum a chance to gain a seat on the U.N. Security Council. But though Brazil can be considered a strategic power in the South Atlantic, its inward-looking focus and lack of naval power leave the country very little real leverage beyond its own borders. Forays into international politics by former Brazilian president Luiz Inacio Lula da Silva were largely met with puzzlement at home and frustration abroad. The United States and Brazil often find themselves at an impasse in Latin America as Brazil continues to slowly assert itself as a natural regional leader in the face of historical U.S. and European domination.
The Rousseff administration has brought Brazil back to a policy focused on domestic economic concerns, and Brazil’s domestic needs have long put the country at odds with the United States. While the United States pioneered the free-trade policies of the post-WWII era, Brazil has for the last half century attempted to reproduce the industrial revolution through sheer state willpower and import-substitution industrialization. The result of its isolationist policies has been to intensify the effect of Brazil's geographic isolation. Despite its continental reach, the majority of Brazil is dominated by impenetrable jungle. Brazil's history is the story of a country gradually settling the areas of its interior that can be made arable, while attempting to build capital-intensive infrastructure to bring supplies from resource-rich areas to highly concentrated population centers.
Whereas Brazil has focused on its interior for the duration of its post-colonial history, the United States has grown to be a dominant global military power. While it is difficult at this point to imagine any direct conflict between the United States and Brazil, the U.S. dominance extends throughout the Western Hemisphere. Brazil, along with other middle powers, struggles in relations with the United States as both a rival and a partner. Brazil has an interest in holding itself apart from the group of nations that sign onto U.S. policies and sees itself as deserving equitable treatment from the United States.
For now, though, Brazil has little to no meaningful involvement in the areas where the United States is most heavily strategically engaged — Eurasia, the Middle East and East Asia — meaning that the United States has little grounds for significant engagement with Brazil.
