Brazil Attempting to Revive Ties with the US

Armando Monteiro is making the first official visit of a minister to the country since the espionage crisis of 2013 to push for bilateral trade.

The Brazilian government this Wednesday officially starts a move to revive its ties to the United States with the first visit of a minister to the country since the crisis of 2013, when it was discovered that Americans were spying on the Brazilian government. After two years of mutual distrust, the United States is once again becoming the focus of Brazil’s export policy, which is experiencing one of its worst moments since 2003.

Minister of Development, Industry and Commerce Armando Monteiro Neto will arrive in Washington with the mission to re-establish negotiations that were halted and to open the way for improving the balance of trade with Americans. In 2004, Brazil had a trade deficit of nearly $8 billion with the United States.

When deciding that Brazil needed to focus on external markets, President Dilma Rousseff also made it clear that the U.S. needs to be prioritized as a partner. With a rich market, low import tariffs and indications of an economic vitality that Europeans still don’t have, the country can absorb more semi-manufactured and semi-finished goods than it has until now.

“It’s a sign that Brazil considers the U.S. to be a strategic partner. With them, we have the second largest trade flow, but the most important because of its quality, in contrast to China, which we export more commodities to,” affirmed Monteiro after a meeting with industrial leaders last Monday at the Presidential Palace.

All negotiations between Brazil and the U.S. have stopped during the past two years. The plan in the coming months is to be able to expedite agreements, so that Dilma and President Barack Obama have something to sign during Dilma’s state visit to Washington in the second half of this year.

Market

After a year of difficult trade with Argentina, the United States became the largest market for Brazilian manufacturers, but the figures are still much lower than during the best period from 2003 to 2008.

Data collected by the Brazilian National Confederation of Industry (NCI) show that in 2008, Brazil sold the equivalent of $16 billion worth of manufactured goods in the American market. In the following year, that number fell to $9.3 billion and has never returned to the previous year’s level. The NCI calculates a minimum potential of $2.3 billion in immediate growth.

The trade deficit with America has already shrunk. In 2014, it closed at $7.7 billion, with a trade flow of $62 billion. In 2013, the deficit was $11.36 billion, the largest since 2008, the last year in which Brazil was able to sell more than it bought from the United States.

“When relations with the United States expand, they bring more opportunities for industry. They have begun to grow again and it is important for us to be linked to that growth. We need to be flexible to be linked to countries where trade flow is growing,” said Monteiro. According to the minister, the low import tariff — 5 percent on average — facilitates access to the American market.

The United States gross domestic product rose 5 percent in the last trimester of 2014, and 4.7 percent in the previous trimester, exceeding more optimistic forecasts. Yet the forecast for the eurozone’s growth is just 0.8 percent.

The CNI calls for the resolution of topics such as the Treaty on Open Skies, which facilitates American airline operations in Brazil and vice versa, and the Global Entry agreement, which facilitates the flow of people, especially for business. There are still pending patent agreements that allow for acceleration and concession in the two countries, and the creation of regulations regarding plants.

All of those discussions were progressing well until the suspension of Dilma’s visit to the U.S. in 2013 due to the spying scandal. Now, even with information regarding the fact that the White House may not have suspended its surveillance of the Brazilian presidency as it did with Germany, the Brazilian government has decided to ignore political sensitivity and appeal to commercial pragmatism.