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Brazil Trade: Country looking for respect
Journal of Commerce / March 1, 2000

By Larry Luxner

WASHINGTON -- Brazil today ranks as the world's fifth-largest country in both size and population, boasts the world's ninth-largest economy and is the largest recipient of U.S. investment in the developing world.

Yet Rubens Antonio Barbosa, Brazil's new ambassador in Washington, says his enormous country doesn't get enough respect.

"The importance of Brazil is not appreciated in the United States. We are underestimated here," he complained in an interview last month. "Even so, I'm not worried about public opinion or the man in the street, because he has no opinion whatsoever about any country, and the stereotypes of Brazil are generally favorable. Big countries are inward-looking, and their people have little interest in foreign policy. What matters is what a CEO or the media or Congress thinks about Brazil.

"Therefore, the first of my six priorities as ambassador is foreign trade; the second is information," says the ambassador. "That means raising our profile, showing that Brazil is far more important than countries like Russia or China from a trade point of view."

Barbosa listed his other four other priorities in Washington as "Congress, non-governmental organizations, think tanks and financial institutions like the World Bank, the Inter-American Development Bank and the International Monetary Fund."

The 61-year-old career diplomat, who has devoted much of his professional life to various positions with Brazil's Foreign Affairs Ministry, spent five and a half years as his country's ambassador to Great Britain before being appointed to his current post six months ago by President Fernando Henrique Cardoso.

He says that "with globalization and instant communication, the role of an ambassador has changed over time. The big challenge in being posted to Washington these days is to try to differentiate Brazil from the other 180 countries represented here."

From a purely statistical point of view, the statistics ought to speak for themselves.

With 165 million people, Brazil is by far the largest nation in Latin America, and the fifth most populous in the world after China, India, the United States and Indonesia.

More importantly, Brazil has a Gross Domestic Product of $700 billion -- larger than that of Russia and India combined. Brazil is the world's No. 2 producer of iron ore, the 8th-largest producer of aluminum, the largest exporter of coffee, the biggest producer of sugar and the 9th-largest manufacturer of automobiles in the world.

Last year, Brazil overtook China to become the world's No. 3 source of foreign direct investment (FDI), with $29.7 billion in registered FDI -- much of it from the United States. Some 420 out of the Fortune 500 companies are in Brazil, according to Barbosa.

"It's the largest recipient of U.S. investment in the developing world -- more than either China, India, Russia or Mexico," he said, adding that "in 1999, bilateral trade came to $26 billion, with a deficit on the Brazilian side."

Yet Barbosa fumes that Brazil is treated unfairly by the Department of Commerce.

"Despite our deficit, over 80 of our products are restricted," he complains. "For example, the Commerce Department just released a very harsh decision practically banning Brazilian cold-rolled steel. This is unfair. We've explained to them 200 times to them that we represent only 0.5% of the steel market, and still we're taxed ridiculously."

"Developed countires want us to open up, but in Brazil's case there's no other country penalized like this. Nobody will dispute that the United States is one of the most open countries in terms of trade. But it's a coincidence that Brazil exports to the U.S. products -- such as soybeans, ethanol, sugar, orange juice and steel -- that are competitive with U.S. industry. So local companies increase pressure on the government to restrict Brazilian access to the U.S. market."

Even with the trade disputes, Brazil remains a crucial market for U.S. products. Ten states -- Florida, Texas, California, Illionis, New York, Ohio, Michigan, Indiana, New Jersey and Pennsylvania -- exported at least $500 million worth of goods to Brazil last year, with Florida alone exporting around $2.3 billion. Florida also contains one-third of the estimated 600,000 Brazilians living legally and/or illegally in the United States.

Some 90 employees, including 22 diplomats, are posted to the Brazilian Embassy in Washington, making it the largest of Brazil's 120 diplomatic missions overseas. In addition, Brazil maintains consulates in New York, Miami, Chicago, Boston, Houston, Los Angeles and San Francisco.

At the moment, the United States and Brazil are linked by 230 flights a week (though no airlines currently offer nonstop service to or from Washington). Hotel chains from Hilton to Marriott to Inter-Continental are investing heavily in Brazil -- particularly Rio de Janeiro and the Northeast -- a trend Barbosa hopes to encourage through the government's new "Visit Brazil" committee.

Barbosa said his embassy recently awarded the University of Chicago a bid to conduct a survey on U.S. awareness of Brazil. "We know that public knowledge of Brazil is low. But it's known favorably because of Brazil's favorable stereotypes, i.e. sun, music, Rio and the magic of the Amazon," he said. "When the survey is ready by April, we'll know exactly what our shortcomings are."

Despite the geographic distance -- it's an eight-hour flight from Miami to São Paulo -- some 500,000 out of the 3.5 million tourists who visited Brazil in 1998 were Americans. Last year's number was likely to be higher, thanks to a January 1999 devaluation that has made Brazil considerably cheaper for tourists with dollars in their pockets.

"Our currency was way overvalued," said Barbosa. "When we devalued the real by over 30%, everybody was worried. They were anticipating 4-6% negative growth. But by the end of the year, our GDP had grown 0.5%, inflation was only 8.5%, and the country is booming. The main objective of our government is to keep stability, and not let inflation come back. We hope to have 4% growth this year, and the same or more in coming years. The fundamentals are there. The problem is the world economic system."

Barbosa says President Cardoso -- who was reelected last year despite the economic turmoil associated with the devaluation -- will push through badly needed social, tax and fiscal reforms in coming months.

"Even though Cardoso's own party has only 25% representation in Congress, his popularity is going back up," he said. "It dropped a lot after the harsh measures he had to take after the Russian crisis. Now the population perceives that things are improving."

While Cardoso hasn't been able to fix the inequities seemingly built into Brazil's social and economic fabric, he has done something about inflation. Barbosa says prices last year rose by only 0.5% -- a far cry from 1989, when inflation was running at 1,700%.

"When we inaugurated the Real Plan in 1994, the mere fact that we reduced inflation meant the inclusion of over 10 million people into the market economy. Why? Because the purchasing power of the people doubled," he said. "We are now inflation-free. It's a new experience in my lifetime. Only now in the last few years are we learning to live without inflation."

In focusing on Brazil's relations with the United States, Barbosa hasn't forgotten about his country's ties with the rest of Latin America -- or about the Free Trade Area of the Americas (FTAA), a proposed trade bloc that, at least theoretically, will by 2005 extend from Alaska in the north to Tierra del Fuego in the south, encompassing all of North and South America and boosting the hemisphere's competitiveness on the world stage.

"Brazil has a concrete interest in FTAA negotiations, which do not necessarily coincide with U.S. interests. Sometimes you're working in the same direction, but don't necessarily share the same position," said Barbosa. "We are interested in liberalizing trade throughout the Americas, but we want ALL countries to liberalize, not only us."

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