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Online Extra: Behind Brazil's New Assertiveness

Celso Amorim, Brazil's Foreign Minister and former ambassador to Britain, the U.N., and the World Trade Organization (WTO), is a key figure at a crucial moment in relations between the U.S. and Brazil. Amorim led the formation of the so-called G-22, a group of developing nations that opposed U.S. and European interests at a recent WTO summit in Cancun, Mexico, causing the talks to collapse. Brazil and its allies want the rich countries to reduce subsidies on agricultural products that are among the developing nation's biggest exports.

As ministers from 34 countries prepare for talks on the formation of a Free Trade Area of the Americas (FTAA) in Miami on Nov. 20-21, Brazil's determination to keep agriculture on the agenda could derail the project. The country's new assertiveness will also likely be evident at forthcoming negotiations with the International Monetary Fund (IMF) over a possible new support package. Jonathan Wheatley, BusinessWeek's Brazil correspondent, talked with Amorim on these and other issues at his office in Bras?lia. Following are edited excerpts of their conversation:

Q: Between the FTAA, the WTO, and Mercosur [the customs union between Brazil, Argentina, Uruguay, and Paraguay, with Chile and Bolivia as associate members], what are Brazil's biggest priorities?

A: Well, Mercosur and South America are in a different category from the rest. They are a priority of much greater political weight. Because it's not just a question of trade. Brazil lives in South America, and our objective is to integrate South America more and more. The question is what form this integration will take. If we reached the stage where there was a customs union for the whole of South America, that would be our ideal. So it's a priority that goes much further than economics and trade.

In a broader trade context, of course we want to bring the FTAA to fruition. But we want a pragmatic and realistic FTAA, not a theological FTAA. And it's a false theology. I've heard it 30 times [from the U.S.], "We want a wide-reaching FTAA." It's simply not true. It's wide-reaching in those areas that are of interest to the strongest country, and it's not wide-reaching in those areas that interest us.

The FTAA's agricultural committee has stopped meeting. There's nothing to discuss. You can't discuss agricultural subsidies, you can't discuss subsidies for agricultural exports, you can't even discuss whether there should be a general rule for eliminating quotas and nontariff barriers. So it's wide-reaching only on one side.

This is the mistake that was made at Cancun. Let's try to make something pragmatic, with no straightjackets. Brazil doesn't want to be put in a straightjacket, but it also doesn't want to put anyone else in a straightjacket. If half a dozen, or 10 or 12 or 20 countries decide to reach a multilateral agreement to invest in the FTAA, let them go ahead. Brazil doesn't think it's good to reach [such] an agreement on the FTAA.

Q: Cancun was portrayed as a great victory for Brazil by President Luis Inacio Lula da Silva. But it wasn't a victory for free trade, which is important for Brazil.

A: In the past, progress on free trade was like this: The European Union and the U.S. reached an agreement, and they said to the others [nations], "Look, this is what there is, make use of it." And they did make use of it. I'm not saying nobody did. But when they negotiated a deal between themselves, such as most-favored-nation status, then some crumbs were left over for the rest of us.

And I think that in Cancun, for the first time in the history of the WTO, there was a more balanced negotiating environment. I think this is a victory. I think it might perhaps take time for those countries who were used to imposing their own will to digest this fact. But I'm certain they will digest it. They will arrive at the conclusion that bilateral agreements are not an alternative to the WTO. Because at the WTO, we're dealing with the whole world.

Q: Is it possible to talk about the FTAA without including agriculture?

A: Strictly speaking, no, it shouldn't be. This is an evaluation we will have to make. Brazil exports shoes, it exports textiles. But there are other products that Brazil exports, such as steel, where the barriers are not tariff barriers. It's no good the U.S. saying, "Our tariff barrier is 12%." Because in reality those products that are of interest to Brazil enter the U.S. at tariffs of 30% to 40%, if you take into account the antidumping measures, the safeguards, specific tariffs on orange juice.

If we manage to negotiate some of these things, then the FTAA could be of interest. If we can only negotiate strictly on tariffs, without including agricultural products, then we would have to reflect seriously. But we continue to work constructively on the presumption that it's possible to reach an agreement.

Q: Peru recently signed a free-trade agreement with Mercosur, but it also wants a similar deal with the U.S. Wouldn't it be in Brazil's interests for South America to negotiate with the U.S. as a bloc rather than individually?

A: Of course. But what we have between Mercosur and Peru is a free-trade agreement. This will integrate us more, it will lead naturally to a greater proximity between our policies in relation to other countries. But there is no exclusivity, it has never been at any moment a condition that for Peru to negotiate with Mercosur it should not negotiate with the U.S. Let Peru negotiate, and it will arrive at a conclusion as to where it has most interest.

Q: Let's look at some other countries. What are Brazil's interests in South Africa?

A: We want to have a close relationship with South Africa, just as we want to have with India, with China, with other big developing countries. We want this group of three countries, the Southern G-3 so to speak, which is Brazil, India, and South Africa, to create a nucleus of three big democracies with influence over their regions and which are members of regional groupings.

This is something very important from the political point of view. Our trade with South Africa has increased a lot, and with India as well. I think with this new relationship it will increase even more. We want to negotiate a free-trade agreement between not only South Africa but also the countries in the Southern African Customs Union, SACU, and Mercosur.

And we want to do the same thing in relation to India, which also has some arrangements with Bangladesh and other countries. With this, we will be able to increase trade between developing countries without having to wait for results at the WTO - where it's not us that is holding things up, we want to make progress.

Q: Argentina surprised many with its more aggressive attitude in negotiations with the IMF. Now there's the possibility that Brazil will seek a new agreement. Is there a mood of greater self-confidence in the region?

A: I think so. I think that what Argentina managed to do was positive for the region as a whole, because it shows there's an understanding among the shareholders of the IMF that there are limits to how much you can impose on countries' behavior.

Now, each country has its own situation. Every country has to apply this level of determination. The solution is not necessarily the same for each country. But this level of determination [shown by Argentina] is something that we applaud very much and view as very positive, and it's an attitude that we are taking in the trade area. And we intend to take it in the financial area, too. Clearly, respecting the difference in situations [between Brazil and Argentina].

Q: One thing that's very important now for Brazil is to improve its balance of payments. So there's a theory that one agenda is behind all this articulation, in South America and across the southern hemisphere: trade.

A: Things don't have a single cause. Certainly, to diminish our vulnerability to external shocks, which got much worse in the recent past, is certainly an objective. The perspective of increasing our trade with Africa does exist. And we will increase it. There's no doubt that the alliances contribute to this.

Q: The theory would be that the alliances don't just contribute to trade with those countries, they also contribute to strengthening Brazil's negotiating position with relation, for example, to the FTAA.

A: I agree. It's a good theory. But there's another important aspect of foreign policy, which is the personal leadership of President Lula. This question of fighting hunger, this is also very important. Because it's very good to defend human rights, which we defend here in Brazil, but human rights are not just a matter of civil and political rights. They also include social and economic rights. And President Lula has adopted a more forceful posture in defense of social and economic rights, with this offensive that he has undertaken, in the message he took to Davos, then to Evian, and more recently at the [U.N.] General Assembly.

Q: It seems the President has a double image. Here in Brazil, he has defended austere monetary and fiscal policies, and externally he is seen as the champion of the poor.

A: But there is no contradiction between the two, on the contrary. There is nothing more practical than fighting hunger. But you have to know how to get there. For example, Brazil's internal debt rose from 30% of GDP to 60% of GDP during the previous eight years. And every day, when I was ambassador to London, all the analysts there were saying the dynamic of debt to GDP was unsustainable, and there really was truth in it.

So we had to give clear signals that we understood this problem, otherwise in the short term all we would do is worsen the problem of hunger. Obviously, you don't create a government in a matter of months, the government lasts four years, and I think it's not right to evaluate what we've done to fight poverty, hunger, illiteracy, after a few months, although a lot has been done.

Q: The Washington consensus that was followed in Brazil until recently says that if you put the economy in order, social issues will be solved of their own accord. This government has changed that emphasis. But how can you translate that into action at the international level?

A: Well, I don't want to be accused of demagoguery, but I think that our struggle to liberalize trade in agricultural products at the WTO, accompanied by fostering closer ties between developing countries with large rural communities, such as in India and Egypt, is one way you can take the discussion on social justice from the streets onto the negotiating table. So I think you can do a lot to fight hunger, for example, with the right kind of reform in agriculture.

If you allow Burkina Faso to export cotton without confronting [subsidized cotton] in the U.S. and the European Union, you will do a lot to fight hunger. And on it goes. As another sign of engagement, the President has proposed a fund to fight hunger. Part of the interest on international debt could go to a fund to support poorer countries.

There's no shortage of ideas. What's lacking is political leadership. Our President has made his suggestion. We've convinced multinational Brazilian companies to contribute to this fund, we've managed to get South Africa engaged in this process, and we'll get others too. And I think all this can be very important. But we won't resolve these problems if we don't solve structural problems such as trade.

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