Obama Comes Back from Brazil Empty-Handed

For those who expected the signing of large contracts, Obama’s visit to Brazil was a big disappointment. The foundations for a prosperous trade relationship might be laid, but the United States certainly cannot claim to have any special access to the “new Saudi Arabia” of the Americas, which was the visit’s main topic.

The fact that Brazil’s President Dilma Rousseff felt slightly ignored, due to the Libyan crisis, might have contributed as well: In the two-day visit in Brasilia and Rio, Obama and his team often gave the impression of being “absent-minded.”

“Pre-salt” is the key word to his visit. “Pre-salt” is the name geologists gave the new off-shore reserves discovered far off Brazil’s coast. They are situated in a wide submarine layer paralleling major industrial hubs from Rio to Minas Geraìs to San Paolo. The reserves are located 250 km off the coasts, beneath very deep waters, with oil reserves holding up to 100 billion barrels. About these reserves Obama said in a meeting with chief executives from large Brazilian companies: “By some estimates, the oil you recently discovered off the shores of Brazil could amount to twice the reserves we have in the United States.”

When all the new reserves are fully tapped, Brazil will be the fourth or fifth largest exporter of petrol and natural gas worldwide. Obama came to woo an energy superpower while the military operation in Libya was in full swing, showing how unstable another part of the world can be — a part on which the United States historically depends considerably for oil supply. That is why Obama decided to dedicate his first presidential visit to South America to Brazil.

However, Obama did woo his Brazilian audience. “You now have the seventh largest economy on Earth,” he said. Having announced that, he made public that the Brazil’s GDP took over Italy’s (and shortly it will overtake France’s too, in part due to the overvaluation of the Brazilian real). He praised this economic miracle created by the people. “…tens of millions of Brazilians have been lifted out of poverty, Obama said. “Nearly half of your population is now considered middle-class…You’ve shown that the spirit of capitalism can thrive alongside the spirit of social justice.”

Brazil is not only a superpower in the agricultural and commodity sectors, but an industrial one as well: “At the end of 2008, U.S. subsidiaries of Brazilian firms employed more than 42,000 U.S. workers.”

Obama confronted the hard core of his strategic interest in Brazil. “At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil,” he said, “the United States welcomes the potential for a new, stable source of energy.” This is a proposal for a long-term cooperation: The Obama administration is wooing the giant public oil company Petrobas, hoping to obtain long-term supply agreements. However, it was precisely this part where the visit ended with no tangible results.

Obama reminds us that Brazil is an energy superpower in other areas as well. Brazil is a leader in the green economy and the United States could benefit a lot from them. “Nearly 80 percent of your electricity comes from hydropower,” Obama said.

And this comes at a time when the development of power plants is still in the early stages. It is estimated that only 30 percent of Brazil’s hydropower potential is currently in use. “You are world leaders in biofuels,” Obama admitted. And here he ventured out to one of the mine fields, where the dialogue between the two big countries of the Americas is trapped in misunderstandings and conflicts.

In fact, Brazil generates 45 percent of its power (including fuel) from bioethanol. It is far more “green,” less polluting and more eco-efficient, since it is produced from sugar cane. However, Washington set up an array of trade barriers against bioethanol. The same Obama, during his election campaign in the Midwest, relentlessly defended public subsidies for biofuel producers based on corn or other cereals — a fuel much less “green,” less eco-efficient and which also competes with people’s food needs.

The future of the U.S.-Brazil dialogue will depend on Washington’s willingness to eliminate its trade barriers. Brazilians have plenty of alternatives: In 2009 the United States was overtaken by China as Brazil’s main trading partner. Although Obama honored Brasilia and Rio with his first South American visit, President Dilma Rousseff’s visit in April will have another destination: Beijing.