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Brazil on track to improve shaky ties with U.S. in 2015, experts say
Diplomatic Pouch / January 15, 2015

By Larry Luxner

After a rocky year in U.S.-Brazilian relations, it looks like the Western Hemisphere’s two most important countries have finally patched up their differences and are now eager to cooperate on a range of regional issues ranging from counterterrorism to Cuba.

A Jan. 14 panel at the Atlantic Council’s Adrienne Arsht Latin America Center brought together half a dozen Brazil experts for a lively discussion titled “Advancing the U.S.-Brazil Agenda for 2015 and Beyond.”

The breakfast discussion, held in partnership with the Brazil-U.S. Business Council, attracted more than 100 business executives, diplomats and journalists.

Anthony Harrington, U.S. ambassador to Brazil from 1999 to 2001, praised the Obama administration for sending Vice President Joe Biden to the Jan. 1 inauguration of Dilma Rousseff, who was re-elected president of Brazil in October by the narrowest of margins: 51.6 percent for her leftist Workers’ Party to 48.4 percent for business favorite Aecio Nieves.

“The vice president’s participation marked the highest level of U.S. representation for a Brazilian inauguration in decades, and continues to build on a very strong personal relationship,” said Harrington, who now chairs the managing board at Albright Stonebridge, a Washington-based consulting firm. “In her inaugural speech, she said it was of great importance that Brazil improves its relationship with the United States.”

Brazil, which boasts more than 200 million inhabitants and a GDP of $2.2 trillion, ranks as the world’s seventh-largest economy. The United States, meanwhile, is now the second-largest destination for Brazilian exports (after China) and the largest market for Brazilian manufactured goods.

“Also significant is the nomination of officials familiar with the U.S., including Mauro Vieira and Joaquim Levy, to key cabinet positions. They can be strong interlocutors to implement a substantive agenda that both administrations want to see,” Harrington said. “Hopefully, congresses in both countries can be helpers instead of impediments.”

In September 2013, former NSA whistleblower Edward Snowden leaked details of a secret surveillance program in which the National Security Agency monitored Rousseff’s phone calls and emails, wiretapped communications by her aides and spied on Petrobras, the state-run oil and gas conglomerate. Outraged, Rousseff cancelled her long-planned October 2013 state visit to Washington and used the United Nations General Assembly meeting to lash out at the Obama administration.

But the following spring, Biden announced that he’d attend the June 16 soccer match in the Brazilian city of Natal between the United States and Ghana, and then meet with Rousseff in Brasília, in an effort to mend ties.

Meanwhile, Brazil has been lashed by a series of corruption scandals at state-owned energy conglomerate Petrobras, a company Rousseff chaired for seven years until 2010. She has denied any knowledge of wrongdoing. And the Brazilian economy is only expected to grow by 0.4 percent this year, creating even more headaches for the newly re-elected president.

Raúl Juste Lores, the Washington correspondent for Folha de S. Paulo newspaper, said the 67-year-old president’s new appointments “couldn’t be better” for those who want to see ties between Washington and Brasília rebound quickly.

“And it doesn’t hurt to have someone with a good Rolodex of Washington ties. Ambassador Vieira was here for five years,” he said. “That’s a lot in diplomatic terms, and he just appointed as his chief of staff Julio Bitelli, who was political counselor at the Brazilian Embassy here. So two of the three most powerful diplomats in Brazil have great experience in Washington.”

Vieira, 61, was Brazil’s ambassador to the United States for four years before being named to his new position as foreign minister, effective Jan. 1. Replacing him as ambassador here will be former foreign minister Luiz Alberto Figueredo, former chief

Vieira was profiled in the June 2014 cover of the Washington Diplomat as Brazil prepared to host last year’s FIFA World Cup. Yet few are likely to envy the well-respected career diplomat for his new position, writes Oliver Stuenkel, an assistant professor of international relations at the Getúlio Vargas Foundation in São Paulo.

“After 16 years of activism, Brazil’s foreign policy since 2011 fell victim to a president who cares little about diplomacy and who does not consider international affairs a useful element of her overall national strategy,” Stuenkel wrote on the Post-Western World website. “The Foreign Ministry has suffered large budget cuts that dramatically reduce its capacity to engage internationally, generating strong criticism from both inside and outside of Itamaraty. Even the president’s staunchest supporters seek to change the subject when asked about the state of Brazil’s foreign policy.”

Levy, 53, is Brazil’s new finance minister. Prior to his appointment, the University of Chicago-trained economist was president of Bradesco Asset Management, a division of Bradesco, Brazil’s second-largest private bank. From 1992 to 1999, Levy worked at the IMF in Washington.

“Brazil’s new finance minister is showing first signs of his plans to put Brazil’s economic policy on a pathway to sustained growth,” said Ricardo Sennese, nonresident senior Brazil fellow at the Adrienne Arsht Latin America Center. “The announcement that the government will not give any extra subsidies to utility companies facing mounting debt, but instead will focus on a restructuring of the sector, is a much-awaited sign for the business community. Dilma at least acknowledges that she heard voters’ concerns loud and clear during the election, but the government must cut spending to curb inflation that has hit 8 percent.”

Lores, the journalist, said Vieira’s main challenge now would be internal rather than external.

“The Ministry of Foreign Affairs has seen its budget cut in half in the last three years. Imagine if the State Department’s budget were to be cut in half,” said Lores. “So Vieira’s challenge is to convince Dilma of the importance of foreign affairs.”

Compounding the problem, he said, is that “Dilma is just a part of the decision-making process. We have a very decentralized policy-making process, and Brazil is a very diversified country with a complex society.”

Nick Sprague, vice-president for legal and institutional relations at Braskem America, acknowledged that Brazil’s economy has cooled considerably from the days when GDP was growing at 7 percent a year — but that there was still ample opportunity for investors to make money there.

“On the challenging side, you’ve got demand slowdown, high electricity prices and the potential for water reliability issues. We’ve had very impressive growth in wages over the last 10 years, but we’ve actually fallen in productivity. And there’s also the usual tax and infrastructure logistics challenges,” he said. “On the positive side, Brazil is a huge country and there’s always going to be large demand.”

Also speaking at the Atlantic Council event were Lisa Schineller, managing director of sovereign ratings at Standard & Poor’s, and Peter Schechter, director of the Adrienne Arsht Center. Jason Marczak, the center’s deputy director, moderated the panel.

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