Atlantic Council / July 2, 2015
By Larry Luxner
Brazilian President Dilma Rousseff has wrapped up her historic visit to the United States and is heading back home, where a shrinking economy and a growing corruption scandal at state-owned oil giant Petrobras have made her deeply unpopular among Brazilians.
In fact, it’s that scandal—not the one involving spying by the National Security Agency two years ago—that’s grabbing all the headlines in Brazil today. Back in 2013, the NSA’s unauthorized eavesdropping of Rousseff’s phone calls and emails led the Brazilian head of state to cancel her planned US visit.
But that’s ancient history now, say Brazil-watchers in Washington who carefully followed Rousseff’s June 30 meeting with President Barack Obama, as well as her visits with top business leaders in New York as well as California’s Silicon Valley. Adventures included visiting the Martin Luther King Jr. Memorial with Obama, and riding in a self-driving car at Google Inc. headquarters in Mountain View, Calif.
“This visit has been incredibly successful, both for the Brazilians and the United States,” said Jason Marczak, Deputy Director of the Atlantic Council’s Adrienne Arsht Latin America Center. “We have to put in perspective that it wasn’t even decided until the Summit of the Americas in April.”
Marczak said that given the short lead time, “it’s impressive how many agreements and memos of understanding were signed between the two countries—everything from education and scientific cooperation to social security and visa issues, not to mention climate change as well.”
Natalie Alhonte, Assistant Director of the Adrienne Arsht Latin America Center, said Rousseff’s five-day visit to the United States focused on how to dig Brazil out of the trap of low growth and high inflation. Economists expect Brazil’s GDP to shrink by 1.5 percent this year after expanding by 7.5 percent in 2010. Inflation exceeds 8 percent and unemployment is growing.
“Guido Mantega, the former Finance Minister during Rousseff’s first term, started to put Brazil on this negative growth trend, but [her appointment of] the current Foreign Minister, Joaquim Levy, is something the business community was really looking for,” Alhonte said. “Even though their parties are the same, her financial, macroeconomic, and business policies will change. That’s one of the reasons she made it a priority. In fact, Levy was sick and came here despite his doctors telling him he shouldn’t have traveled; that’s how important it was for him to be here.”
Among other things, Rousseff and Obama agree to increase the share of renewable, non-hydropower electricity to 20 percent by 2030—a goal that will require the tripling the use of renewable energy in the United States, and doubling it in Brazil. In addition, Rousseff vowed that Brazil would reforest 12 million hectares of Amazon rainforest over the next fifteen years.
During Rousseff’s visit, the U.S. Department of Agriculture agreed to allow fresh beef imports from fourteen Brazilian states, while the State Department said it would move toward visa-free travel—hopefully in time for the 2016 Summer Olympics, which will be hosted by Rio de Janeiro.
“The Olympics are an opportunity to bring more tourists to Brazil,” said Alhonte, noting that Obama has expressed an interest in attending the Games, which take place half a year before he leaves office. “Brazil has the infrastructure and the natural beauty, and attracting mega-events was a plan for long-term growth in the tourism sector, though the visa requirement has been a huge inhibitor of tourism.”
The New Atlanticist’s Larry Luxner spoke with both Marczak and Alhonte for this report. Here are excerpts from that interview:
How would you assess Rousseff’s trip to the United States?
Marczak: This visit has been incredibly successful, both for the Brazilians and the United States. We have to put in perspective that it wasn’t decided until the Summit of the Americas in early April. They had just over two and a half months to put this together. Given that short period of time, it’s impressive how many agreements and memos of understanding were signed between the two countries—everything from education and scientific cooperation to social security and visa issues, not to mention climate change as well.
Is the NSA spying scandal still a lingering issue?
Marczak: We’re way beyond that. Obama has implemented new measures so that this doesn’t happen again. This is not what the visit was about, reliving the past. It’s about the future. It’s a new beginning at the presidential level, but even in the last two years since the [Rousseff] visit was cancelled, Vice President Joe Biden has been in Brazil twice—once for the World Cup and then again for her inauguration.
This relationship is not based on heads of state. The real key here is the Vice President, not the President, but it’s also a relationship with a very important country. We’re doing everything from trade, climate change and the Middle East to food security in Africa and a dialogue on defense. This goes across many departments and ministries.
What was the focus of her corporate meetings in New York and California?
Marczak: Two of the three places she visited—New York and Silicon Valley—were all about investment. That speaks to the nature of the relationship. This is fundamentally driven, in many regards, by business-to-business interests. Private-sector engagement between the US and Brazil has skyrocketed in the last decade, and a lot of this happens not because of government policy, but in spite of government policy. She’s coming to the US not to bring home not only some nice political accord, but also renewed interest in US investment in Brazil.
This is not a fundamentally political relationship. It’s an economic relationship, and both countries feel the benefits. There’s so much synergy between the types of industries that both countries are competitive in. Brazil’s investments in the US focus on innovation and technology such as aerospace. Also on the flip side, they focus on very similar sectors. This shows the robustness and maturity of the relationship, unlike China, whose investments are mainly to extract food and energy. That’s not sustainable for the long run, and being an extractive economy is not where Brazil should be growing.
Where do you see Brazil’s economy going, given the disappointing GDP and inflation statistics we’re seeing?
Marczak: The future of the Brazilian economy is increasingly intertwined with the global economy. Brazil is looking to become much more of a service economy. It has an incredible new Internet law that is the gold standard of the IT industry. That’s really indicative of the future potential of this country.
How much of an impact is the Petrobras scandal having on bilateral relations?
Alhonte: If you talk to people who are heavily invested in bilateral trade, you’ll see that while Petrobras is at the top of mind, they’re much more concerned about Brazil’s low growth cycle and high levels of inflation. Guido Mantega, the former Finance Minister during Rousseff’s first term, started to put Brazil on this negative growth trend, but [her appointment of] the current Foreign Minister, Joaquim Levy, is something the business community was really looking for. Even though their parties are the same, her financial, macroeconomic, and business policies will change. That’s one of the reasons she made it a priority. In fact, Levy was sick and came here despite his doctors telling him he shouldn’t have traveled; that’s how important it was for him to be here.
Marczak: She did the right thing. She addressed the Petrobras scandal head-on. She didn’t wait for questions. From her opening remarks, she talked about the corruption scandals and how she’s addressing them. To be honest, these scandals—in the end—show the strength of Brazilian institutions. I would challenge anyone to count the number of countries in the world where top political and business leaders are indicted and arrested because of corruption allegations.
Do you expect the 2016 Olympics to significantly boost Brazil’s economy?
Alhonte: The Olympics are an opportunity to bring more tourists to Brazil. It has the infrastructure and the natural beauty, and attracting mega-events was a plan for long-term growth in the tourism sector, though the visa requirement has been a huge inhibitor of tourism. President Obama said he wants to go to Brazil for the Olympics.
Given that scandal and her low popularity rating, which has dropped to 9 percent according to the latest polls, is Dilma Rousseff still viable as a politician?
Marczak: She’s very viable. She was democratically elected less than a year ago. Presidents sometimes have to implement tough measures, and there were obviously a series of protests, with some folks calling for her resignation. But there’s no basis for that. She’s stewarding through an economy that is right now in a difficult period, but what she’s doing now is implementing tough austerity measures that are critical for Brazil’s future development.