Strengthening the partnership
CLOSE TIES WITH ITS HUGE NATURAL RESOURCES AND EXPORT-ORIENTED INDUSTRIAL SECTOR, BRAZIL IS LATIN AMERICA'S BIGGEST ECONOMY AND AN IMPORTANT FRIEND OF THE UNITED STATES. ON JANUARY 1 A NEW ADMINISTRATION TAKES OVER AND WASHINGTON HOPES TO BUILD AN EVEN CLOSER RELATIONSHIP

OVERVIEW Brazil is a robust democracy with an outward-looking, predominantly liberalized economy—a natural partner for the United States

WHEN Luiz Inácio Lula da Silva is sworn in on New Year’s Day, Latin America’s largest nation will get a President who has pledged to combine sound economic management and close ties with the United States with policies aimed at overcoming inequalities within Brazilian society.
The change of government in Brazil is seen in Washington as an opportunity to forge new relationships that could strengthen ties between the two nations.

“We fully expect our common goals to remain unchanged, and we expect the partnership to become even stronger,” says U.S. Assistant Trade Representative for the Western Hemisphere, Peter Allgeier.
Of the President-Elect, universally known to Brazilians as “Lula”, Mr. Allgeier says, “We understand that he is working to forge a consensus among the stakeholders in Brazilian society, to find a path to the future that will allow Brazil to grow in a manner suiting its undisputed potential, and that provides opportunities for broader participation in the world economy.”

Compared with its neighbor, Argentina, Brazil has been posting some encouraging economic data. Rampant inflation is a thing of the past, and the stepped devaluation of the national currency, the real, has given a welcome boost to the country’s exporters.
Brazil boasts a healthy trade surplus—predicted by the Central Bank to top $12 billion this year, which will be the country’s best performance in a decade—but it is also a useful market for American goods. According to the U.S. Commercial Service, sectors such as energy generation, construction, safety and security equipment and metalworking machinery offer some of the best export opportunities.

However, the challenges facing the new administration are enormous. Brazil is reckoned to have the widest gap between rich and poor of any country in the world. The luxurious condominiums alongside Rio de Janeiro’s Copacabana beach are only a stone’s throw away from some of Latin America’s worst shantytowns.
On the other hand, Brazil is also a country with colossal material resources, a well-developed export-oriented industrial sector, a fabulous historical and cultural heritage, and a vibrant and predominantly young population. The economy is outward-looking and largely liberalized, thanks mainly to the outgoing President, Fernando Henrique Cardoso.

“Cardoso was elected President in 1994, on the back of a successful anti-inflationary program he introduced as Finance Minister,” explains Brazilian affairs analyst Sue Branford. “Since then, he has pushed ahead with market reforms. He has privatized state companies and dismantled trade barriers, opening up the economy to the world market.”

Lula has pledged to maintain the main thrust of his predecessor’s economic policies, while giving added value by tackling poverty and hunger. At the same time, his social concerns have won U.S. endorsement. “Lula’s objective of eliminating hunger is one every American can support,” Under-Secretary of State Otto Reich has declared.
“Nutrition is an essential element of economic development because it affects education and health, which are two essential elements of development.”

Around 53 million Brazilians out of a total of 170 million are classified as living under the poverty line and their advancement is essential for the future stability of the country. Moreover, the United States does not intend simply to wait and see if that actually happens.
“The economic, political and social health of Brazil is important to the U.S.,” says Mr. Reich. “Brazil is a key to the economic recovery of South America and it is a world economic power. So to the extent that Brazil is weak, it hurts us.”

Enlightened self-interest is at play in the way that the Bush administration is actively championing Brazil’s cause on the international stage. “We are going to do everything we can to help bilaterally and through our influence in the international financial institutions,” Mr. Reich says.
As co-chairs of the Free Trade Area of the Americas negotiations, both countries are playing a vital role in the process to integrate the economies of the Western Hemisphere into a single free trade arrangement.
Peter Allgeier sees this as “a great opportunity to strengthen our relationship in ways that we haven’t had in the past.”

Of course the relationship with the United States extends beyond trade. “The United States has always viewed Brazil as a friend, and as a leader in the hemisphere,” says Mr. Allgeier. He is confident that ties with Brazil will not just continue but intensify under the new government.
“We face many common challenges, from combating terrorism and money-laundering to fighting poverty and stimulating economic growth,” he says.
“Brazil is the fifth most populous country, a robust democracy, and is the eleventh largest economy in the world. It is therefore a natural partner for the United States.”