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US-Brazil Trade Relations: Partnership in a New Era
Knowing How the Relationship Prospered

Brazil is the largest country in South America and the fifth largest in the world. It is the world's leading exporter of coffee, sugar and soybeans. Despite rich agricultural and mineral resources and a highly modernized industry, its growth is hampered by a large foreign debt. The country has now begun a drive to develop its vast resources and to industrialize. Nevertheless, Brazil is still a primary agricultural country with severe economic problems.

Brazilian agriculture is largely inefficient and backward. Aside from coffee, sugar and soybeans which are not really of high quality, it also has other commercial crops like bananas, cacao, tobacco, maize, sugarcane and oranges. Brazil is now a more important livestock producer than Argentina, and is also Latin America's largest exporter of lumber.

Iron and manganese ores are the mainstays of Brazilian mining. In fact, Brazil is estimated to have about 15% of the world's iron reserves. High-grade hematite has long been mined at Itabira, Minas Geria and in the Carajas Highlands. Brazil's leading industries manufacture processed foods, chemicals, textiles, metal products and machinery, transportation equipment and petroleum products. The country drastically reduced its dependence on imported petroleum in the 1980s through the use of Gasohol and hydroelectric power.

Brazil has the longest road network in Latin America, as well as the most automobiles, trucks and buses. This paved the way to easier imports and exports of prime commodities. However, the once fundamentally strong economy was inflicted with a huge amount of debt aggravated by floods, drought and high inflation. Since agricultural commodities are highly valuable Brazilian exports, climatic conditions such as drought together with fluctuating world prices significantly altered the world trade picture.

Right in the verge of these economic episodes, the United States provided support to Brazil's foreign trade capabilities. Both were seen to lead the Free Trade Areas of the Americas (FTAA). They have both benefited from each other in terms of international trade aspects as well as in political areas. They successfully crossed the bridge together and constantly shared the same boat. They have prospered in terms of their trade relations and as early as the 1990's, Brazil came back to its good position in global business.

Major Exports and Imports for US and Brazil

Brazil has considered the US to be its best foreign investor both on exports and imports. The United States have helped Brazil conquer its trade deficits which led to a good scheme of paying its debts from the World Bank. The facts and figures have the following data to show for the year 2006:

  • Brazil Exports to US. A favorable result of $26.4 billion American imports was seen for Brazil in 2006. The product which topped the charts is crude oil with an amount of $2.8 billion equivalent to an increase of 77.2% from 2005. It was followed by steelmaking materials, semi-finished iron and steel products, industrial organic chemicals, fully built civilian aircraft, engines and engine parts, footwear, finishing materials, fuel oil, and on the last spot is stone, sand cement and lime which garnered an earning of $665.8 million at a percentage increase of 37.2% from 2005.
  • Brazil Imports from US. The United States data showed a remarkable increase on its imports to Brazil for the year 2006 with an amount totaling to $19.2 billion. Of this total amount, computer accessories, peripherals and parts were commendable for its participation in trade which garnered an amount of $1.7 billion or an increase of 29.5% from 2005. It was joined by civilian aircraft parts, civilian aircraft engines, organic chemicals, fully built civilian aircraft, oil field drilling equipment, plastics, semi-conductors, chemical fertilizers, and pharmaceutical preparations. The last product gained a total amount and percentage of $566.2 million and 20.5% respectively.
  • Fastest-Growing US Exports to Brazil. There were pretty much remarkable sales for other exports of US to Brazil topped by fully built civilian aircrafts which gained a very high 716% equivalent. It was followed by raw cottons, bodies and chassis for passenger cars, oil field drilling equipment, fuel oil and copper. Copper which occupied the sixth rank garnered a 101% increase totaling to $9.2 million.
  • Fastest-Growing US Imports from Brazil. Brazil, on the other hand had its share of fast-rising commodities in terms of sales with oil field drilling equipment and platforms seen on top of the list at an amount of $241.9 million and an impressive percentage of 107%. It was accompanied by five other products namely industrial organic chemicals, cotton cloth and fabrics, military equipment, civilian aircraft equipment and precious metals. The latter emerged with a 103% increase at an amount of $73.3 million.
Trade Agreements between the United States and Brazil

The United States have deemed it necessary to push foreign trade agreements in the South Hemisphere. This being the case, free trade agreements were set forth between the US and Brazil to strengthen the relationship that was not known to falter at all. In order to benefit from both ends, these countries attempted to make a resolved economic climate on the basis of the following:

  • Intellectual Property Protection. This is known to be one of the foregrounds of a good trading scheme between Brazil and United States. The latter protected all intellectual property created within its borders. This significantly reduced the piracy between the two nation's economies. The pact had successfully lessened the copyright costs which have aggravated all the fields of the trading efforts between the two nations and other members of international trade as well.
  • Energy Cooperation. The Brazilian and US governments are currently formulating a pact that could help obtain greater ethanol cooperation and production in the Latin America's. Both countries agreed to share knowledge on technology as well as develop ethanol standards for the entire region. It focuses on developing ethanol from sugarcane-producing countries such as Jamaica, Guatemala and the Honduras.
Trade Conflicts

Despite the persistence of both governments to fight the battle together, there are still issues which need to be resolved. The Doha Round, Free Trade Area of the Americas (FTAA) and the Mercosur all had their own things to say for both nations. They have created a fuss which affected some points of global trade:

  • Doha Round. This was used to facilitate world trade among wealthy and developing nations which included Brazil. This was a kind of regional agreement which suitably worked for the South American region. The pact lost legitimacy in 2001 because of some missed international deadlines. It was revived in 2004 to reduce agricultural subsidies by the United States Government as part of the final proposal of the group. Since benefits from global business is more important to the United States rather than building barriers, they finally went into terms and considered what the lower ranks were asking for. The Doha Round was nevertheless still incomplete up to these days but at least some of its portions are already working.
  • FTAA. The Trade Negotiation of the FTAA was co-chaired by the United States and Brazil. There were no agreed multilateral settlements since the consensus of the body was not achieved. Brazil's agriculture accounted for nearly 30% of its GDP that is why it wanted to stress that the United States should reform its agribusiness. Government officials of Brazil argued that the US has too much import restrictions which gravely affects sugar, soy, peanuts and chocolates which are known as the prime commodities of Brazil. The United States, on the other hand complains about Brazil's high tariff on industrial goods.
  • Mercosur. This is considered as South America's leading trading alliance. This offers free movement of goods, services and people among its member nations. The tariff policies regulates the imports and exports of international trade thus, it is sometimes a hindrance to the complaints of US on high costs of foreign trade with Brazil and other South American countries.
Foreseeing the Future

There may be pressing problems brought about by regionalism that is why it is necessary that the partnership between Brazil and the United States be protected at all grounds. They have both taken advantage of the existence of one another, thus it is deemed necessary to counteract all hindrances to their trade. Their economies have bore abundant fruits and the only way to fulfill their dreams together is to stay intact no matter where the forces of nature would bring them.

As of now, both countries are exerting a lot of logical attempts to stay together. In order to combat their war against terrorism, they have continually stood side-by-side to the warfare against money laundering and arms trafficking. They also regulated rules against drug incidence. These efforts will surely bind them together.

Their unsettled disputes will remarkably be surpassed in the future. The World Trade Organization will surely help them break the walls that could be a known block to their camaraderie. Their hopes will never be gone as long as they believe that they could withstand all the challenges that the present holds and the future will bring.


Note: Trade statistics, industry links, economic projections and global business resources on this page have been compiled from hundreds of trade related websites, government guides and resources on the Internet. We provide this valuable information for industrial suppliers, manufacturers, exporters and importers seeking to enter or expland business opportunities in Brazil.

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