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Foreign Policy: Brazil-United States Relations and the Trade Agreement

Can Brazil find a new place in the international community?

The Bolsonaro government has attempted to carry out a radical change in Brazil’s foreign policy orientation. Since the re-democratization tide of the 1980s, Brazil's foreign policy has been framed by multilateralism, participation in global governance forums, and the diversification of alliances and partnerships. During the past several administrations Brazil has sought to contribute to the reconfiguration of the international order to reduce the influence of the “North” and establish clear rules for international trade, environmental policymaking, and international finance. After nine months in office, Bolsonaro has largely rejected global governance and the construction of a multi-polar world. The Foreign Ministry has prioritized relations with Europe and especially the United States and demonstrated disdain over the deepening of south-south relations cultivated under the governments of Lula and Dilma.

However, Bolsonaro’s project is marked by uncertainty. His changes in Brazilian foreign policy neglect regions and countries where Brazilian economic and political interests are at play and could be impacted. The actions of the Bolsonaro administration regarding Mercosul, China, and the Middle East have been incoherent if not despondent. Even with respect to Brazil’s affairs with Europe, Bolsonaro’s environmental policies have jeopardized constructive relations and the future of the Mercosul-EU trade pact, which took twenty years to negotiate.

(Re)approximation with the United States

Brazil and the US are historic partners although bilateral relations have gone through moments of greater and lesser affinity. Bolsonaro announced his willingness to deepen a partnership with the US during his campaign last year. The reasons he gives for moving closer to the US are the same as he presents regarding his foreign policy toward Colombia, Hungry, and Israel, as well as Italy until last month: ideological and political affinity. Bolsonaro’s brand of conservatism includes, in the realm of international relations, a unipolar world led by the US, which plays the role of a beacon of Western civilization, Christianity, and family values. Since January the Bolsonaro government has taken successive measures to realign and develop close relations with the Trump administration, even at the expense of traditional Brazilian foreign policy tenets. For example, Bolsonaro has violated the sacred diplomatic principle of reciprocity by signing an executive order that waves the tourist visa requirement for US citizens without demanding a correspondent gesture from Trump. The Brazilian government has withdrawn from the International Migration Agreement to further advance relations with the US. Brazil’s strategy toward the Venezuelan crisis is aligned with the US approach. Trump has promised to support the Bolsonaro government’s pledge for full membership in the OCDE in exchange for Brazil’s willingness to relinquish its status as a developing nation at the World Trade Organization. However, in a letter to the OCDE leaked this week, US Secretary of State, Mike Pompeo, backs the bids by Argentina and Romania but makes no mention of Brazil. On defense and security issues, the US seeks to designate Brazil as a major non-NATO ally. The two countries also signed a Technological Safeguards Agreement that makes possible the use of the Alcantara Space Center for the launch of satellites and space vehicles with US technology, with Brazil agreeing to protect such technology. The agreement was ratified by Brazil’s Congress in August amidst political debate surrounding the need to relocate approximately 800 families (2,000 people) from an established quilombo (traditional Afro-Brazilian community founded by maroon slaves). There is also bilateral alignment over the matter of climate change, as both administrations are accused of denialism. NASA and the Brazilian Space Agency recently signed a pact to develop satellites to monitor the climate.

Overall, the reactivation of several bilateral consultation mechanisms, including the Brazil – US Commercial Dialogue, may lead to expanding trade and increasing investments. At the same time, however, Bolsonaro’s stance toward the US can be easily portrayed as submissive and can become another major source of criticism both domestic and foreign, particularly if the partnership between the two countries fails to deliver.

Brazil’s Place in Trump’s agenda

If Brazil’s reapproximation with the US signals an inflection point in the evolution of Brazilian foreign policy, it may be that US relations with Brazil under Trump also signal important changes in the US trade policy formulated and advanced by former president Bill Clinton and renewed by Barack Obama. Trump withdrew from the ratification of the Trans-Pacific Partnership (TPP) that had been signed by twelve countries, demanded the renegotiation of NAFTA, and signaled his intention to negotiate a trade pact with the United Kingdom after BREXIT. Trump seeks to sign trade deals that are less ambitious and with fewer partners and provisions. At the end of July, the US president announced that he would like to negotiate a trade deal with Brazil. Some observers argue that his initiative may be designed to counter the Mercosul-EU trade agreement. A study published by the Brazil – US Business Council (Amcham-Brazil) indicates that the US and the EU compete for over 6,000 products in the Brazilian domestic market. Formal bilateral discussions surrounding a prospective bilateral trade deal were launched in August.

The Tone and Future of Negotiations

At the moment, negotiations are not directed at achieving a comprehensive trade agreement. Rather, given the difficulties of removing all tariff barriers, government officials point to a broad bilateral agenda that includes efforts to boost investments and suspend tariffs on manufactured goods produced in one country with inputs from another. The negotiations do not have a timetable and it is improbable that a bilateral accord could be reached and signed before the next US presidential elections in November 2020 or even the next Brazilian elections in 2022. Meaningful trade agreements take years, if not decades, to negotiate while the domestic political climate in both countries remains turbulent. In Brazil, the political class must deal with difficult economic reforms while both the president and Congress enjoy low approval ratings. In the US the impeachment inquiry launched by House democrats throws a great deal of uncertainty over next year’s elections. A possible Brazil-US trade agreement needs to overcome possible political changes on both sides. For now, the Bolsonaro government relies more on presidential diplomacy and on the alleged affinity between the two presidents. The Minister of the Economy Paulo Guedes has shown optimism in the face of such challenges, and his negotiating team is bearing down to take advantage of the current US Congress and its authority to ratify a tariff-reducing agreement until 2021.

Meanwhile, there are additional challenges that Brazil must overcome. First, it must guarantee that its trade agreement with the EU does not prevent a parallel preferential trade deal with the US. Second, as a Mercosul member-state, Brazil cannot sign agreements that do not include the other country-members. While current Argentine President Macri has landed support for a Mercosul trade deal with the US, he will likely lose this year’s election and a victorious Peronist president will certainly be less willing to enter an agreement that extends the US influence in the region.

Contrasting Brazilian Positions

The US is a key commercial trading partner of Brazil despite the recent drop in Brazilian exports to its Northern partner to around 12%. Brazilian business leaders believe that the opportunity exists for reversing this trend. The National Industrial Confederation (CNI) and the Industry Federation of São Paulo (FIESP) both support ongoing negotiations with the US government. They expect that increasing bilateral trade will have a positive impact on sectors such as agribusiness, oil & gas, renewable energy, and infrastructure as well as technological development. On the other hand, trade analysts associated with the opposition to the Bolsonaro administration point to risks stemming from trade concessions. They call attention to the similar industrial bases and export profiles of both countries and argue that greater bilateral trade could act to discourage further investment in Brazilian industrial production. Aside from this point, analysts also fear that a trade agreement with the US, or its collateral impacts, may cool trade relations with China and further undermine relationships with the EU and its member states. China is the largest importer of Brazilian commodities and is currently engaged in an escalating trade conflict with the US. The EU is not in conflict with the Trump administration but is working to strengthen its position in international markets. The EU-Mercosul agreement, whether not effectively threatened by the Bolsonaro’s environmental policies, is supposed to be used by the EU to counter the US. An agreement between the US and Brazil could undermine this plan.

Responses from the Brazilian and US Legislatures

The Democratic Party majority in the House of Representatives has already signaled the possibility of suspending negotiations with Brazil. Democrats are concerned with Brazilian environmental policy and will not support further negotiations until Bolsonaro demonstrates a willingness to protect the Amazon from deforestation. Nineteen Democrat representatives signed a resolution representing such concerns and conditions. This same group of parliamentarians is working to introduce legislation that would ban Brazilian meat and soy imports, and suspend existing financing programs, because of mounting concern over the Amazon.

In Brazil, the issue of bilateral trade with the US has not reached the Congress. Foreign policy is normally a prerogative of the executive and rarely attracts much legislative attention unless it has a direct impact on the domestic agenda. But the bilateral relationship with the US has become a topic of legislative interest since Bolsonaro has nominated his son Eduardo, a Federal Deputy from the state of São Paulo, as the Brazilian ambassador to the US, an appointed that must be confirmed by the Senate. The president’s move has been the object of much criticism, including that of blatant nepotism. President Bolsonaro argues that the confirmation of his son would serve to advance bilateral relations with Washington and especially President Trump, with whom he imagines to have a personal relation. The political significance of Eduardo’s nomination would be much larger, however. He is allegedly the chief formulator of the new Brazilian foreign policy, as his influence is considered higher than that of the current Foreign Minister Ernesto Araújo. Failure to confirm Eduardo would be a serious defeat for the conservative foreign policy orientation that frames the president’s approach to international affairs.

Despite this hot political topic, the trade policy itself does not attract much attention either in the Chamber of Deputies or the Senate. It is unlikely that Congress will oppose a new trade agreement negotiated between Bolsonaro and Trump.

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