Behind the Brazil-USA Beef

Samuel George on the Brazil – US throw down

“Don’t be fooled by the rocks that I got”

As we all know by now, Brazil, the world’s largest exporter of red meat, has beef with the United States. Since Snowden has been snowed-in in Russia, global heads of states have taken turns duly feigning shock that the US was spying on them.

When evidence emerged that the NSA was monitoring Petrobras, the Brazilian state-owned oil giant, President Dilma Rousseff demanded an apology before ultimately canceling a long planned visit to Washington.

But if you read the international press, you might get the idea that the Brazil-US relationship had been cruising along until Joe Biden started reading people’s emails.

In fact, the US-Brazil beef has been simmering for some time. As the issue returns to the fore, it seems worth revisiting the pair’s recent history.

You just don’t care, do you?

At the heart of the matter remains the US’ reluctance to accept Brazil as a regional power—something Brasilia has assumed to be a natural inheritance. But Brazil doesn’t push drugs, it doesn’t send too many illegal immigrants north, its money is not that long, its not overly leftist, its doesn’t have the bomb, and it doesn’t harbor terrorist.

So frankly, me dear, Washington just doesn’t give a damn.

Brazil sees things differently. Its democracy has been entrenched (if not robust) since the Presidency of Fernando Henrique Cardoso (1995-2002). Meanwhile, the country has averaged over 3.6 percent GDP over the last ten years, while inflation has been held in check.

During the presidency of Luiz Inácio Lula, Brazil became a world player with ambitions of one day becoming a global power.

Therefore, it has been much to the chagrin of the Brazilians that they have struggled to maintain the attention of US Foreign Policy. Rubens Barbosa, a former Brazilian ambassador in Washington, stated in April 2012 that, “American officials seem to know less about Brazil than any other big economy.”

For its part, the US appears to expect Brazilians to instinctively follow American lead on global issues, and when Brazil does not, relations become increasingly estranged.

Brazil still crushes US at soccer. US still doesn’t care.

Oh no, she didn’t!

Brazilians consistently perceive slights from Washington, most recently when President Dilma Rousseff was not afforded a state dinner during her 2012 trip to Washington.

One Brazilian official contrasted the tepid reception of Rousseff with the red carpet roll-out for British Prime Minister David Cameron a month earlier, “even though Brazil surpassed Britain last year to become the World’s sixth-biggest economy.”

While dinner might seem a trivial topic, other issues carry more weight. Brazil has consistently sought the United States’ support in its bid to join the United Nations Security Council as a permanent member.

From the Brazilian perspective at least, American diplomatic support of Brasilia would seem to be a minimal-risk venture. Brazil is a non-nuclear power in a relatively war free zone. It has led the UN stabilization mission in Haiti since 1994, and has helped the Colombian government rescue hostages held by guerrillas.

Nevertheless, American support for Brazil’s bid has been slow and unconvincing. For example, during Rousseff’s April 2012 visit, President Barack Obama ‘acknowledged’ Brazil’s aspiration for permanent membership without supporting it. This, Brazilians are quick to note, is in stark contrast to America’s support of India’s 2010 quest to join the counsel.

Economically, American foreign policy appears aloof to Brazilian growth ambitions. In March 2012, the US Air Force cancelled a contract to purchase 20 Super Tucano Jets from Brazilian national-champion Embraer S.A.

A small purchase by US military standards (the 20 aircrafts were to sell for US$355mn), the contract was “a showcase deal for Embraer,” and Brazilians expected the successful execution of the contract to lead to subsequent deals with Western European powers. The contract’s cancellation caused considerable consternation at the time.

Furthermore, expansionary monetary policy in the United States has incentivized carry trade opportunities in Brazil, forcing the Banco Central do Brasil to cut base rates, even as inflationary pressure mounted. (The SELIC has since crawled back to 9 percent.)

The influx of US dollars has appreciated the real to the determinant of the Brazilian manufacturing sector—perhaps one reason Brazil growth has slowed in 2011 and 2012. US macroeconomic policy decisions have certainly not been made specifically to hurt Brazil (and recent rumors of “tappering-off” have knocked the real down a peg), but the inattention solidifies the Brazilian perspective that their interests are of little concern to Washington.

“I wish I could quantitatively ease my way onto a Brazilian beach…”

Well, then I am just going to hang out with China!

Luckily for Dilma, China, the hot new kid on the block is all about Brazil, even if sometimes Uncle Sam still never seems to notice. From the Brazilian perspective, apparent US indifference contrasts with the Chinese foreign policy approach which has included billions of dollars of investment in much needed Brazilian infrastructure (not to mention a state dinner held for President Rousseff in Beijing during her April 2012 visit).

In 2010, Chinese foreign direct investment in Brazil topped US$20 billion, making China the biggest investor in Brazil – quite a feat considering that in 2009, the Chinese ranked 29^th in investment in Brazil.

Furthermore, it has been Chinese demand for Brazilian commodities that has helped spur Brazilian growth. For example, in 2009, Brazil exported US$6.3 billion in soybeans to China, 56 percent of all Brazilian foreign sales of this commodity.

Chinese state-owned enterprises such as Chongqing Wanzhou Grain and Oil Group have invested heavily in downstream Brazilian soy processing, thus solidifying a relationship that the US Agriculture Department expects to grow exponentially. Thus, for the Brazilians, Chinese foreign policy emphasizes traits that have lead to impressive Brazilian growth.

So save the Five Guys Burgers and trash those internship applications: Dilma won’t be making it to Washington this year. If she needs Obama to know something, she will be sure to include it in her next email to Xi Jinping.