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Basking in Global Clout, Brazil Ponders Life After Lula
The Washington Diplomat / September 2010

By Larry Luxner

When Brazilians flock to the polls Oct. 3 to choose a new president, Luiz Inácio Lula da Silva won’t be on the ballot — for the first time in 21 years.

Lula, whose left-leaning Partido dos Trabalhadores (Workers’ Party) has ruled Brazil for two consecutive four-year terms, cannot run again. But the 64-year-old president leaves office as one of the most popular heads of state in Latin American history — making it more likely than ever that in one month’s time, voters will elect Lula’s hand-picked successor, Dilma Rousseff, as the first female president in Brazilian history.

Mauro Luiz Iecker Vieira, Brazil’s ambassador to the United States, is justifiably proud of his boss’s accomplishments. “Lula instituted very important macroeconomic and social policies which made possible the inclusion of more than 30 million Brazilians into the middle class,” Vieira told The Diplomat during an interview last month. “Our domestic market has grown tremendously, a key element for economic growth.”

A raft of statistics bears witness to Lula’s success in guiding Latin America’s largest economy. Just before the one-time factory worker and labor leader was sworn into office Jan. 1, 2003, Brazil’s external debt as a percentage of gross domestic product was hovering at 49 percent. Today, its external debt is 10 percent of GDP. Likewise, foreign direct investment has averaged $35 billion annually over the last three years, up from $24 billion a year from 1995 to 2002, and international reserves have jumped from $38 billion to $244 billion since 2002.

Even more impressive, Brazil’s stock market, Bovespa, has yielded average annual returns exceeding 42 percent from the beginning of 2003 through March 31, 2010. Under Lula, Bovespa’s market capitalization has jumped tenfold.

This year, the U.N. Economic Commission for Latin America and the Caribbean predicts Brazil’s GDP will grow by 7.6 percent — far above the 5.2 percent average for Latin America, and faster than even its closest rivals Uruguay and Paraguay (7 percent), Argentina (6.8 percent) and Peru (6.7 percent).

“In less than two decades, the economic reforms begun by then-President Fernando Henrique Cardoso and continued by Lula have transformed Brazil’s debt-laden and inflation-prone economy into one of the most dynamic in the world,” says Joseph Quinlan, managing director and chief market strategist at Bank of America, writing in The Globalist online.

Politically, Brazil is a vibrant democracy that’s taken its place in the BRIC (Brazil, Russia, India and China) bloc of developing powerhouses to become an increasingly assertive global player on issues ranging from trade to climate change to nuclear nonproliferation.

Vieira, 58, is the third Brazilian ambassador profiled by this newspaper since Lula took office. The other two are Roberto Pinto Ferreira Abdenur (July 2004) and Antonio de Aguiar Patriota (March 2008). Abdenur has since retired, and Patriota is now secretary-general of foreign affairs at Itamaraty — the highest-ranking position in Brazil’s foreign service.

Asked if his management style differs significantly from that of his predecessors, Vieira smiled.

“I consider myself a discreet person. A diplomat has to be discreet, and that’s also a reflection of my personality,” he replied. “I’m not very effusive. I’m not a pop star.”

It’s true. Brazil’s newest envoy in Washington certainly isn’t the type of man to go looking for a fight. During our 45-minute interview, Vieira took pains to play down the disputes that have strained bilateral relations of late — from Lula’s embrace of Iran to a looming trade war with the U.S. over cotton imports. At least half a dozen times, he referred to the “excellent ties” that bind Washington and Brasilia.

“Brazil and the United States have many things in common,” he told The Diplomat. “In 1823, the United States became the first country to recognize Brazil’s independence. We share lots of interests in the political and economic fields. All my predecessors have worked very hard to deepen this dialogue and our channels of communications.

“That’s my main mission here,” he says, “to keep the same level of dialogue we have and to improve our excellent communication not only with U.S. government agencies but also the private sector and the academic world.”

Born in the city of Niteroi — across the bay from Rio de Janeiro — Vieira began his diplomatic career in 1975 and landed his first overseas posting three years later at the Brazilian Embassy on Massachusetts Avenue (which is now undergoing a complete renovation after 40 years). He was next assigned to the Latin American Integration Association in Montevideo, Uruguay, and served at Brazilian embassies in Mexico City (1990-92) and Paris (1995-99).

Vieira also held senior positions within the Brazilian Foreign Ministry and various government agencies — including that of the Itaipú Binacional hydroelectric power plant jointly owned by Brazil and Paraguay — before being named chief of staff to then-Deputy Foreign Minister Celso Amorim. In 2004, he was appointed Brazil’s ambassador to Argentina, where he remained until his return to Washington last year.

In an analysis published by the Inter-American Dialogue, researcher Matthew Schewel described Vieira as “an expert at resolving conflicts and building alliances” with Brazil’s immediate neighbors.

“As ambassador in Buenos Aires, he defused a threat by the Argentine government to cancel charter flights by Brazilian carriers TAM and Gol, and helped resolve a labor dispute between Argentina’s truckers’ union and a Brazilian-owned brewer,” Schewel wrote. “Vieira maintained close ties with Argentine officials and President Cristina Fernández, who reportedly referred to him as ‘my friend Mauro.’ He is also known as one of the few ambassadors to receive direct phone calls from Lula.”

During his Senate confirmation hearing (he was later confirmed by a vote of 52-2), Vieira told Brazilian lawmakers that a “harmonious dialogue” was possible between his country and the United States.

Yet things have not always been harmonious. Although differences over Iran tend to grab the most headlines, Brazil and the United States have clashed more frequently on a strictly bilateral issue: trade, most recently involving cotton. In April, the two allies settled a long-standing dispute over U.S. subsidies to cotton growers — one day before Brazil was to begin imposing up to $830 million in sanctions with authorization from the World Trade Organization, which had ruled last summer that American subsidies to cotton growers violated global trade laws.

Under the WTO deal, reported by the New York Times, Brazil held off on retaliation in exchange for U.S. concessions including the modification of an export loan program, and the establishment of a temporary assistance fund for Brazil’s cotton industry.

Vieira said his country has lived with such issues for more than 50 years now; past trade disputes with the United States have involved fresh beef, orange juice and software programs.

“We’ve been trying through the WTO to prove the existence of U.S. subsidies for cotton. We’d like to have the same access to the world market, and at the same level, as any other country. But we understand that the present situation is a consequence of domestic politics,” he said.

“Both countries are interested in concluding the Doha Round. Sometimes we have different positions,” he added. “We are still a developing country, so we put a lot of importance in agricultural negotiations. The U.S. is also a very important food producer, but we need very clear rules for international trade under the WTO system, which should be fair to all countries.”

The two countries have also differed on two of the hemisphere’s key flashpoints: Honduras and Cuba. In June 2009, Honduran President Manuel Zelaya was forcibly removed from office and later spent four months holed up at the Brazilian Embassy in Tegucigalpa after his attempt to return to Honduras. Zelaya was eventually exiled to the Dominican Republic and elections were held to replace him, but Lula continues to oppose the country’s re-entry into the Organization of American States — putting him directly at odds with Secretary of State Hillary Clinton, who wants the OAS to readmit Honduras.

In the same vein, Brazil strongly opposes the U.S. trade embargo against Cuba, arguing that it punishes the island’s 11 million inhabitants while doing nothing to promote democracy.

Last February, Lula called on his old friend and mentor Fidel Castro in Havana, as part of a three-day visit meant to underscore Cuba’s strategic importance to Brazil regardless who replaces Lula as president on Jan. 3, 2011. Brazilian state energy giant Petrobrás is already exploring for oil off Cuba’s Gulf of Mexico coast, while Brazilian construction firm Odebrecht is spending $300 million to convert the aging Cuban port of Mariel into a modern container terminal.

But the biggest bilateral debacle this year of course concerned Iran, a country that until recently was far from the radar screens of Latin America. Iranian President Mahmoud Ahmadinejad led a 200-member business delegation to Brasília in November 2009; he also stopped to see two other Latin buddies: Venezuelan President Hugo Chávez and Bolivian President Evo Morales.

This past May, Lula returned the gesture with a state visit to Tehran that sparked angry protests back in Brazil, even among some of Lula’s allies. Brazil and Turkey subsequently brokered a controversial deal with the Ahmadinejad regime that would have shipped up to 1,200 kilograms of low-enriched uranium out of the country in exchange for nuclear fuel. The arrangement, designed to circumvent sanctions and other unilateral penalties, infuriated the United States and EU member states.

Clinton acknowledged “very serious disagreements” with Brazil over its insistence that the deal it and Turkey brokered be considered before the sanctions vote took place. She called Iran’s uranium fuel-swap proposal a “transparent ploy” aimed at fooling the world. Not surprisingly, when the U.N. Security Council voted 12-2 to pass sanctions against Iran — only Brazil and Turkey cast opposing votes, while Lebanon abstained.

It was a bold gambit that clearly reflected Brazil and Turkey’s frustration with the West’s approach to Iran, as well as a growing self-confidence by their own empowerment. “Both countries look at the global order and see the failings of the West,” according to Matias Spektor, a visiting fellow and Brazil expert at the Council on Foreign Relations. “The West has been expanding the reach of its norms and its rules. But at the same time you’ve got Iraq, the financial crisis, North Korea going nuclear, Iran, the EU imploding — all while these emerging states have proved to be relatively steady.”

In addition, he points out, “In Brazilian eyes, the regime has become a politically driven tool in the hands of the United States to selectively ‘lay down the law’ on weaker states. Why, Brazil argues, the fuss over Iran when Israel remains in a state of nuclear denial? And why does a member of the NPT [Nuclear Non-Proliferation Treaty] like Iran get punished for allegedly seeking civilian enrichment technology, when India, which has chosen to remain outside the regime and challenge it overtly, gets a big reward from Washington instead?”

Vieira though downplayed the disagreement. “We disagreed with the United States on the approach, not on the fundamental issues,” the ambassador said, explaining Brazil’s opposition. “We wanted to have more time to continue our negotiations with Turkey and Iran, instead of voting on the sanctions immediately. We worked together with Turkey to negotiate this deal, which we considered very positive. It was only a matter of timing.”

But in general, he adds, sanctions aren’t effective — the U.S. embargo of Cuba being a case in point.

“They hurt poor people and we have always preferred diplomatic negotiations to sanctions, no matter what the issue,” said Vieira. “Also, the peaceful use of nuclear energy is the right of every country in the world. That’s why we say it is Iran’s right too, as long as nuclear technology is used for peaceful purposes.”

That raises the question of Brazil’s own nuclear ambitions, however. Hans Rühle, writing in the German newspaper Der Spiegel, suggests that Brazilian scientists are quietly developing a nuclear bomb despite the fact that the country long ago signed the 1970 Nuclear Non-Proliferation Treaty (NPT).

“Even if there is no definitive proof of Brazil’s nuclear activities, past events suggest that it highly likely Brazil is developing nuclear weapons. Neither the constitutional prohibition nor the NPT would prevent this from happening. All it would take to obtain a parliamentary resolution to eliminate those obstacles would be for Lula to say the United States is not entitled to a monopoly on nuclear weapons in the Americas. If that happens, Latin America would no longer be a nuclear weapons-free zone — and Obama’s vision of a nuclear-free world would be finished.”

Added columnist James Traub of Foreign Policy: “Brazil and Argentina are the only signatories [to the NPT] with nuclear enrichment plants who have not accepted the additional protocols, and Argentina has said it will agree as soon as Brazil does. The Brazilian delegate has reiterated that adopting the additional protocols should be wholly voluntary, as Iran has insisted; he added that in any case, non-nuclear weapons states should not have to accept such restraints until those who have weapons agree to fully disarm.”

Nevertheless, Lula has vowed to respect the Iran sanctions, even though he clearly doesn’t support them. And as Spektor of the Council on Foreign Relations speculated, “while Brazil may try to blunt the sharper edges of what its officials see as U.S. hegemony, it will not undercut broader U.S. nonproliferation interests. On the contrary, it may well help advance them in consequential ways, such as helping build support in the developing world for a more efficient and legitimate regime.”

Lula’s government is also motivated by a long-term bid to increase Brazil’s influence within the United Nations — to be commiserate with its standing on the world stage. As Latin America’s biggest nation in both size and population — and ranking fifth in world population and eighth in the size of its economy — Brazil has long sought a permanent seat on the Security Council alongside the United States, Russia, China, France and Great Britain.

“We think the United Nations must be legitimate and efficient. That’s why it needs to be reformed,” Vieira recently told a panel organized by the Nixon Center. “We believe the framework that resulted from the Second World War no longer represents the world today, and that all major decisions must take large countries like India, Brazil and Indonesia into consideration.”

Even so, Vieira says he feels uncomfortable when he hears Brazil labeled a “great power” despite its status as a geographical and economic heavyweight. “I refer to my country as an emerging territory, a multiethnic society, but not exactly a power,” he said. “For Brazil, multilateralism is the way we relate to the world.”

To that effect, Lula has been busy building political and economic bridges throughout Africa, Asia and the Middle East. Brazil now has 212 overseas embassies, consulates and other missions, up from 150 in 2002. During the eight years of Lula’s presidency, 62 missions (including 37 new embassies) have opened, from St. Kitts and Nevis to Saudi Arabia. Lula has personally visited Africa seven times, and Brazil-Africa trade has skyrocketed from $3.5 billion in 1997 to $15.6 billion in 2006.

But no country is suddenly as important to Brazil as China. In the first six months of this year, Chinese investment in Brazil exceeded $20 billion — more than 10 times all of China’s previous investment in Brazil. The Washington Post, quoting Brazilian government statistics, says that puts China on track to be Brazil’s top investor for 2010, compared with 29th last year.

From Natal in the north to Porto Alegre in the south, the Chinese are building shipyards, auto factories, steel mills and ports, and offering the Brazilians generous loans at ridiculously low interest rates in order to clinch deals left and right.

At the same time, Lula has grown wary of Chinese competition dominating the Brazilian market and has recently turned back to the United States and traditional investment partners to ensure that the country diversifies its economic growth.

To that end, total Brazilian exports worldwide came to $153 billion last year, a 155 percent increase from the $60 billion in exports recorded in 2002. Inflation, meanwhile, has fallen from 8.4 percent at the end of 2002 to 4.8 percent by the end of 2009. The purchasing power of average Brazilians has increased, vastly boosting the number of middle-income citizens who can afford home mortgages for the first time in their lives.

In addition, Lula’s “Zero Fome” (Zero Hunger) program, begun in 2003, has slashed malnutrition by 73 percent in the last six years, according to the UN Food and Agriculture Organization. Criticized as inefficient by the political opposition, Zero Fome allocates $55 a month to poor families on the condition their children go to school; it also distributes food to 37 million children while they’re at school.

Since its inception, Zero Hunger has managed to slash infant mortality by 45 percent. Between 2003 and 2008, the proportion of Brazilians living below the poverty line has dropped from 28 percent to 16 percent.

Boosting Lula’s legacy is the recent discovery of vast deepwater oil deposits.

Last year, ExxonMobil Corp. announced that its Azulao-1 well had tapped a reservoir that could contain 8 billion barrels of recoverable oil — enough crude to rival the nearby Tupi prospect as the Western Hemisphere’s largest find in 30 years.

Bloomberg News reported that the discovery will undoubtedly intensify interest in Brazil’s offshore region among U.S., European and Chinese producers in the face of a dwindling supply of untapped oil basins outside the Persian Gulf and Russia. Petrobras triggered worldwide interest in Brazil’s offshore crude deposits with its November 2007 announcement that Tupi — located off the coast of Rio de Janeiro — may hold the equivalent of 8 billion barrels of recoverable oil, making it the largest find in the Americas since Mexico’s Cantarell field was discovered in 1976.

More recently, Exxon announced that before this year is over, it intends to drill a third well in the so-called BM-S-22 pre-salt area off São Paulo after earlier finding signs of oil at a well in the same block. Exxon and Hess Corp. each hold 40 percent of the block, while Petrobras owns the remaining 60 percent.

Taken together, these new deposits could easily double Brazil’s reserves and make the country a major world petroleum exporter.

All this bodes well for Lula’s favorite candidate, Dilma Rousseff, as voters prepare to elect a new president in October. Officially, eight candidates are in the running, but only three really matter: Rousseff, Lula’s 62-year-old former chief of staff and longtime Workers’ Party activist; José Serra, governor of São Paulo state, with 42 million people the wealthiest and most populous of Brazil’s states; and — to a much lesser extent — Marina Silva, Lula’s popular former environment minister, running on the Green Party ticket.

According to an Ibope poll published Aug. 17 by the TV Globo network, Rousseff has widened her lead to 11 percentage points over Serra, putting her in position to win in the first round of the October election.

“The attitude is, ‘If Lula says she is the right person, she is the right person,” Brazil expert and Johns Hopkins University professor Riordan Roett told the New York Times recently. “I can’t think of any other case in Latin America in the recent past where this has been the case, where a twice-elected president was simply saying, ‘Trust me.’”

Domestically speaking, little distinguishes Rousseff from Serra, though expectations are that when it comes to foreign policy, Serra — if he should be elected — will distance himself from some of Lula’s more radical allies such as Ahmadinejad, Morales and Chávez.

Vieira declined to comment on the upcoming election, except to say that whoever wins is unlikely to change the course Lula has set for the country — nor does he expect any serious glitches on Election Day.

“I don’t think the elections will affect our economy in any way,” he told The Diplomat, adding that “our democratic institutions are very sound, and our elections are not contested by anyone.”

As for Vieira, he says he’ll remain in Washington for another year, regardless of who wins.

“There’s no reason to change ambassadors immediately. Ambassadors are personal representatives of the president, and at the moment, 100 percent of our ambassadors abroad are career diplomats — from the biggest to the smallest embassies. We didn’t have one single political appointee during the Lula government.”

The ambassador also discounted the historical significance of Brazil getting its first female president (at least three other Latin American countries are currently or have been headed by women: Argentina, Chile and Costa Rica).

“We men are a minority. There are more women than men in the world,” he said matter-of-factly. “Of the three most important candidates for president in Brazil right now, two are women. That’s itself a sign that it’s not that important anymore.”

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