Why Brazil?

Brazil is the world's third largest democracy. After decades of military rule, Brazil now sustains a vibrant open society, with a lively media and a large participatory civil society and middle class. Elections have been hard fought but clean.

In the year 2000, the votes of 110 million Brazilians for 367,371 candidates were counted flawlessly in 5,559 municipalities across Brazil by electronic voting machines.

Political reforms are still incomplete, but much has been achieved for which Brazilians can be justifiably proud, including the removal by impeachment of a president for corruption. And on the economic front, since 1994 Brazil has tamed inflation, a truly historic breakthrough.

We flag four reasons why Brazil is important to the United States: its economic power; its central location within South America; its status as a trading partner and recipient of U.S. investment; and its diplomatic role both within South America and international agencies.

* Brazil is a major economic power and is a leader among advanced emerging markets. Brazil's economy is more than twice as large as Russia's, almost as large as China's, and twice India's. Brazil is the main player in South America, with over half of the region's GDP and population. Brazil is the second-largest market in the world for executive jets and helicopters; the second for cellular telephones and fax machines; the fourth for refrigerators; the fifth for compact discs; and the third for soft drinks.

With purchasing power parity of over US$1 trillion, in 2001 Brazil will rank fifth in the world, after the United States, China, Japan, and Germany. Brazil is the leader of Mercosul -- the Common Market of the South -- which incorporates Brazil, Argentina, Uruguay and Paraguay and has special relations with Chile and Bolivia. Brazil sees Mercosul as being of great importance for its future geopolitical as well as economic role in South America.

Mercosul is a critical building block in any future hemisphere-wide free trade agreement. Brazil is a regional leader in the "new economy." More than 40 percent of Latin America's Internet users are Brazilians, twice as many as in Mexico.

* Brazil shares borders with nine of the 11 South American nations. Along its porous Amazon frontier, the internal war in Colombia is increasingly threatening to spill out into neighboring countries.

The scale of U.S. assistance to Colombia -- third only to Israel and Egypt -- has made the fate of this troubled country a central concern of U.S. foreign policy. Yet many in Brazil, as well as in Peru and Ecuador, fear Plan Colombia will aggravate their problems, as refugees seek havens within their territory, and guerrilla and paramilitary groups expand their warfare across Colombia's frontiers. In Brazil, as well as in its South American neighbors, the corrupting impact of narco money is already a threat to local and state governments.

Brazil will be a central player in any international effort to tackle the problem of narcotic trafficking. Brazil has moved into a leadership role in South America. It was the core country in reaching the Ecuador-Peru border agreement. It has three times in recent years helped stop a coup in Paraguay.

Concern about contagion from the Colombia conflict has already led Brazil to reformulate its national security program and augment its military assets on the border. If current policy toward Colombia fails, the United States may find Brazil a useful partner in developing and implementing alternative approaches.

* The United States is Brazil's main trading partner. U.S. exports to Brazil have more than doubled since 1991 and totaled more than $13 billion in 1999. Trade with Brazil is particularly important for states such as Florida, where Brazil replaced Japan in 1995 as its number one trading partner.

About a quarter of all U.S. trade with Brazil passes through Florida. Exports to Brazil from California, Texas, New York, Illinois, Georgia and Ohio have also expanded exponentially.

Brazil is a major recipient of direct U.S. investment, attracting a continuing high level over the past three years. U.S. investment in Brazil is five times greater than that going into China, and for many of the major U.S. companies, Brazil represents one of their largest overseas engagements. Among the top U.S. companies in Brazil are General Motors, Ford, Texaco, Exxon, General Electric, Citibank, McDonald's, Cargill, Alcoa, Philip Morris, Goodyear as well as virtually the entire pharmaceutical industry.

* Brazil has long played a prominent part in numerous U.N. agencies, providing many skilled chairmen. Brazil will continue to work with the World Trade Organization (WTO) and within the U.N. system, which is central to its ambition to eventually hold a permanent seat on a reconfigured U.N. Security Council. It is important for the United States, especially on upcoming trade negotiations and other global multilateral questions, to examine with Brazil how the two nations can work together in anticipating points of cooperation and to conciliate potential conflicts.

Extract from a Memorandum from the Council on Foreign Relations to President Bush on February 2001, on future relations between Brazil and the United States. (The original transcript is available on http://www.cfr.org/public/pubs/Brazil_TaskForce.html