Obama Tells Rousseff He Wants U.S. to Be Among Brazil’s ‘Best Customers’

President Barack Obama said he wants the U.S. to become one of Brazil’s “best customers” when recent oil discoveries come online and pledged to work with his counterpart, Dilma Rousseff, to deepen trade ties with Latin America’s biggest economy.

Obama arrived yesterday to Brasilia juggling the demands of a five-day tour with a crisis in Libya after an international coalition began military action against forces loyal to Muammar Qaddafi. Today, in Rio de Janeiro, he’s scheduled to visit a shantytown and the city’s iconic Christ the Redeemer statue with his wife, Michelle, and their daughters, Malia and Sasha.

Officials from the two governments yesterday signed 10 agreements pledging coordination within the Group of 20 nations, the joint development of aviation biofuels and promotion of educational exchanges. They also completed a trade and economic cooperation agreement aimed at streamlining trade through the removal of non-tariff barriers.

Obama’s visit, less than three months after Brazil’s first female president took office, highlights the nation’s growing clout. Brazil is now the fourth-biggest U.S. creditor, holding $198 billion in Treasuries, and American exports to the country have more than doubled over the past five years.

“The United States doesn’t simply recognize Brazil’s rise, we support it enthusiastically,” Obama, 49, told reporters.

The U.S. president highlighted Brazil’s recent offshore oil discoveries, the largest in the Americas since 1976, as an area where the two countries can vastly expand their economic relations.

“We want to help you with the technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers,” he said.

Distance From Lula

Rousseff’s efforts to distance herself from her predecessor and mentor, Luiz Inacio Lula da Silva, assured Obama a welcome reception. Since taking office, Rousseff has surprised friends and foes alike by pledging to rein in spending, expressing concern over China’s policy of undervaluing the yuan and downplaying Lula’s friendly relations with Iran.

While reciprocating Obama’s praise and acknowledging his “great” efforts to rebuild the U.S. economy, Rousseff reiterated Brazil’s longstanding complaint over U.S. trade barriers on its agricultural exports. Among them are U.S. farm subsidies and the 54 cents-per-gallon tariff on imports of Brazilian ethanol that Congress renewed in December.

“We seek more fairness and balanced trade relations,” said Rousseff. “For us, it’s fundamental that we eliminate barriers that have arise against our products” including ethanol, beef and orange juice.

Currency Imbalances

Rousseff also expressed concern over U.S. policies and economic imbalances arising from global financial crisis that “provoke important changes in the relations of currencies around the world.” Guido Mantega, her finance minister, blames the U.S. for a “currency war” that has fueled a 36 percent rally by the real the past two years.

Obama said he chose Brazil to kick off his first-ever visit to South America in recognition of the country’s ascendancy. He was joined in Brasilia by business leaders seeking to profit from Brazil’s oil discoveries and $200 billion in road, airport and hotel improvements needed before the 2014 World Cup and 2016 summer Olympics. Brazil’s $2.2 trillion economy grew 7.5 percent last year, the fastest pace in more than two decades.

Libya

The tour, which includes stops in Chile and El Salvador, will continue even as U.S. armed forces begin what Obama said are “limited” operations to enforce a no-fly zone over Libya.

“We have no plans to cut the trip short,” Ben Rhodes, Obama’s deputy national security adviser, told reporters on a conference call from Brasilia yesterday. The administration is confident in its ability to maintain secure communications to stay in touch with the Pentagon and leaders in other nations. “Right now that’s very much our approach.”

Brazil’s abstention this week in the Security Council vote authorizing air strikes against Libya underscores the limits to closer ties with the U.S.

Rousseff yesterday expressed frustration with the “slow pace of reform” of the council and other multilateral institutions that she said don’t reflect the growing economic weight of emerging markets.

“It was necessary a very severe economic crisis to move conservatism that blocked the reforms of the financial institutions,” she said.  “In the case of the UN reform, we now have the opportunity to act in advance.”

Security Council Bid

Obama said he appreciates Brazil’s campaign to become a permanent member of the council, though did not endorse its bid like he did India’s on a trip to New Delhi last year. Instead, the two leaders agreed the council needs reform and expressed their support for a modest expansion that improves its effectiveness and efficiency, as well as its representation.

Relations between Brazil and the U.S. reached a nadir last year when Lula, pushed by anti-American elements of his and Rousseff’s Workers’ Party, voted against tighter UN sanctions on Iran’s nuclear program. Lula also embraced Venezuelan President Hugo Chavez, who is Washington’s fiercest critic in the region.

A former student activist who was tortured while jailed by Brazil’s 1964-1985 military dictatorship, Rousseff criticized Iran’s human-rights record after Lula hosted Iranian President Mahmoud Ahmadinejad in 2009 and visited Tehran in 2010.

China Looming

Obama’s trip comes as Chinese demand for Brazil’s iron ore and soy beans has allowed it to overtake the U.S. as the South American nation’s biggest trading partner. Trade with China jumped 53 percent to $56 billion last year, compared with $45 billion for the U.S.

The windfall hasn’t been friction-free. The real has strengthened 33 percent against the yuan since the start of 2009, more than all 24 emerging-market currencies tracked by Bloomberg, hurting manufacturers competing with Chinese imports.

Rousseff’s shared sense with Obama that China is harming the economic interests of both their countries by undervaluing the yuan creates an opening for the U.S. leader.

“There is increased recognition, as trade with China has grown, that it’s not only a cooperative relationship but also a competitive one,” said Albert Fishlow, a former deputy U.S. assistant secretary of state who has written a book on Brazil that was published this month. “There is clearly a degree of similarity in the U.S. and Brazilian positions.”

To contact the reporter on this story: Julianna Goldman in Brasilia at jgoldman6@bloomberg.net; Iuri Dantas in Brasilia at idantas@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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