US-Brazil Trade and FDI: Enhancing the Bilateral Economic Relationship
Foreword
The year 2020 marks a pivotal moment for the Western Hemisphere, with the potential to maximize the bilateral relationship between the United States and Brazil. The two countries have begun to seize the benefits of their synergies, but hurdles remain that prevent a full and successful commercial reality. A closer and stronger trade and foreign-direct-investment-relationship would amplify growth and prosperity for both societies. This paper aims to offer a renewed vision for strengthening US-Brazil trade and FDI, supporting concrete steps toward deepening the commercial relationship, and laying the foundation for a potential free trade agreement (FTA).
Table of Contents
- Executive Summary
- A New Chapter for US-Brazil Relations
- Deepening US-Brazil Trade and Investment
- Institutional Hurdles and Potential Opportunities
- The US Perspective
- The Brazil Perspective
- Working Toward Greater Foreign Direct Investment
- Domestic Reforms Paving the Way for Greater Investment
- Bilateral Pathways for Deepening Investment
- Key Recommendations
- Conclusion
- Acknowledgments
- About the Authors
Executive Summary
The global horizon today presents transformative trends affecting the world and marketplace, bringing immense opportunity. The United States and Brazil are uniquely positioned to advance momentum for a robust bilateral economic relationship. This paper lays out the benefits that a closer economic relationship may offer, providing new ideas and reinforcing momentum for deepening the bilateral relationship at a time of great synergy between the countries’ leadership.
A New Chapter for US-Brazil Relations
The United States and Brazil have a long and prosperous relationship, with opportunities for strategic cooperation in various sectors. The partnership is characterized by shared visions of growth and prosperity. Recent numbers show mutual benefits behind the bilateral relationship, with two-way trade in goods and services amounting to more than $100 billion. The positive state of bilateral relations offers a unique opportunity to build momentum to deepen economic ties.
Deepening US-Brazil Trade and Investment
An FTA would be the most ambitious economic measure between both countries, potentially having a net positive impact on GDP, exports, imports, wages, and employment. However, an FTA is a long-term goal that demands time, resources, and political capital. Various steps can be taken to ripen the path to an eventual agreement.
Institutional Hurdles and Potential Opportunities
Brazil’s position as a member of Mercosur requires consensus from all Mercosur members for changes to its normative framework. Any changes would come with substantial costs to the political balance in the region. From Brazil’s perspective, an FTA negotiation with the United States is an incredible opportunity but not a simple task.
The US Perspective
The United States sees the moment as ripe for engaging in productive conversations that will yield positive outcomes for both parties. While an FTA should continue to be the goal, results in the short term are key to laying the groundwork for an eventual agreement.
The Brazil Perspective
Brazil has been walking more resolutely down the path of greater global trade integration. The current Brazilian administration has defined trade integration as a top priority. The moment is ripe for laying the groundwork for an FTA discussion with the United States.
Working Toward Greater Foreign Direct Investment
The benefits and importance of strengthening bilateral foreign direct investment between Brazil and the United States are clear. However, while the US-Brazil or Brazil-US FDI relationship is one of mutual benefits, it remains uneven.
Domestic Reforms Paving the Way for Greater Investment
Brazil’s tax reform, reforms to increase ease of doing business in Brazil, FX legislation reform, and the US tax reform all play significant roles in paving the way for greater investment.
Bilateral Pathways for Deepening Investment
In addition to domestic reforms, to foster greater FDI, the United States and Brazil can work toward achieving two consequential bilateral agreements: a double taxation agreement and a bilateral investment agreement.
Key Recommendations
- Conclude a multi-chapter trade enhancement agreement.
- Start negotiations for an agreement to avoid double taxation.
- Create a high-level mechanism to oversee and strengthen the bilateral relationship.
- Enhance good regulatory practices and sector-specific regulatory cooperation.
- Initiate efforts to increase communication and cooperation on standards-development in emerging sectors.
- Coordinate efforts to ensure effective initiation of Brazil’s accession to the OECD.
- Conclude a Mutual Recognition Agreement between national trusted traders programs.
- Adopt electronic phytosanitary certificates in bilateral trade.
- Implement a full-fledged Global Entry Program for Brazilian travelers coming into the United States.
- Increase US-Brazil policy cooperation in third countries and international fora in areas of investment and trade policy coherence.
Conclusion
The United States and Brazil have an opportunity to explore new ways to deepen their bilateral trade and investment relationship. With political will and support from private sectors, they can maximize their commercial benefits.
Acknowledgments
The Atlantic Council’s Adrienne Arsht Latin America Center acknowledges contributions from various stakeholders in government and private sectors from both countries.
About the Authors
- Abrão Árabe Neto – Executive Vice President for Amcham Brasil.
- Ken Hyatt – Senior Advisor at Albright Stonebridge Group.
- Daniel Marteleto Godinho – Corporate Strategy Director at WEG.
- Lisa Schineller – Managing Director for S&P Global Ratings.
- Roberta Braga – Associate Director at the Atlantic Council’s Adrienne Arsht Latin America Center.
SDGs, Targets and Indicators
SDGs | Targets | Indicators |
---|---|---|
SDG 8: Decent Work and Economic Growth | 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries. | 8.1.1: Annual growth rate of real GDP per capita |
SDG 9: Industry, Innovation and Infrastructure | 9.3: Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets. | 9.3.1: Proportion of small-scale industries with a loan or line of credit |
SDG 17: Partnerships for the Goals | 17.3: Mobilize additional financial resources for developing countries from multiple sources. | 17.3.1: Foreign direct investments (FDI), official development assistance and South-South Cooperation as a proportion of total domestic budget |
Analysis
1. Which SDGs are addressed or connected to the issues highlighted in the article?
The article addresses several Sustainable Development Goals (SDGs), including:
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation and Infrastructure
- SDG 17: Partnerships for the Goals
2. What specific targets under those SDGs can be identified based on the article’s content?
The specific targets under the SDGs that can be identified based on the article’s content include:
- Target 8.1: Sustain per capita economic growth in accordance with national circumstances.
- Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services.
- Target 17.3: Mobilize additional financial resources for developing countries from multiple sources.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
The indicators mentioned or implied in the article that can be used to measure progress towards the identified targets include:
- Indicator 8.1.1: Annual growth rate of real GDP per capita.
- Indicator 9.3.1: Proportion of small-scale industries with a loan or line of credit.
- Indicator 17.3.1: Foreign direct investments (FDI), official development assistance and South-South Cooperation as a proportion of total domestic budget.
4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article.
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Fuente: atlanticcouncil.org
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