Summary of Discussions of September 13, 2011 Meeting of the Advisory Committee on International Economic Policy
The meeting was open to the public; however, participants’ statements, other than those cited, are not for attribution. The meeting room was at capacity with individuals from the membership, general public and media.
Committee Chairman Theodore Kassinger of O’Melveny & Myers, LLP, opened the meeting of the Advisory Committee on International Economic Policy (ACIEP) and welcomed members and other participants. Chairman Kassinger reminded participants about the Chatham House Rule and emphasized that comments were not for attribution.
The meeting examined “U.S.-Brazil Relations: Key Opportunities for Cooperation with an Emerging Power.” Assistant Secretary of State for Economic, Energy, and Business Affairs, Jose W. Fernandez, introduced three members of the Council on Foreign Relations (CFR) Taskforce on Brazil: Paula Dobriansky, Senior Vice President and Global Head of Government and Regulatory Affairs at Thomson Reuters and former Under Secretary of State for Global Affairs; Nelson Cunningham, Managing Partner, McLarty Associates; and Dr. Riordan Roett, Director of Western Hemisphere Studies and the Latin American Studies Program at the Johns Hopkins Paul H. Nitze School of Advanced International Studies (SAIS).
Mr. Cunningham opened the discussion by providing an overview of the CFR report “Global Brazil and U.S.-Brazil Relations,” with a focus on Brazil’s economy. The report assesses U.S.-Brazilian relations in a context of Brazil’s transformation from a regional to a global power. The report examines Brazil’s many roles and challenges, and provides recommendations on how the United States and Brazil can build deeper governmental and economic ties.
Mr. Cunningham noted that Brazil has the world’s fifth largest landmass, fifth largest population, and eighth largest economy. It is a hub of the Latin American economy and cornerstone of growth in the region today. Much like India, Brazil is undergoing revolutionary changes. Last year its economy grew 7.5 percent, and in the last 10 years the country’s GDP per capita has doubled. Brazil also has the lowest unemployment rate in the region. The sources of growth include sound economic policy, a solid currency, controlled budget deficits, and a low inflation rate. Brazil is open to foreign investment, especially in the mining and biofuels sector. The United States is the largest buyer of Brazilian goods.
The CFR report further advises that in order to sustain its rising strength, Brazil will need to adjust its economic priorities. Brazil runs large trade surpluses overall and with China in particular, mainly because it exports commodities to China while approximately 90 percent of its imports from China are capital or manufactured goods. Brazil needs its own domestic capital to fund growth. Currently, there is a low level of public investment and savings programs. Significant investments are needed in the country’s infrastructure. Only about 10 percent of the roads in the country are paved. Many of Brazil’s primary airports are overcrowded and demand is expected to continue to rise. Sao Paulo-Guarulhos International Airport is ranked the third worst airport in the world for flight delays. With Brazil hosting the 2014 World Cup and Rio de Janeiro hosting the 2016 Olympics, there is overwhelming motivation to start infrastructure programs that will increase the country’s capacity to better support these major international events. Education and skilled workforce development are areas that require more resources. Brazil would also benefit from building a culture of innovation and research.
Ms. Dobriansky next discussed Brazil’s energy, climate change, and human rights agendas. The report identifies these as key areas where the United States is deepening its relationship with Brazil. With 50 billion barrels of oil beneath its waters, hydroelectric dams that supply 75percent of the country’s electricity, and the world’s sixth largest uranium reserves, Brazil is poised to become a significant exporter of diverse energy products. Brazil’s energy matrix is the least carbon intensive of the major economies and it has made voluntary commitments to further reduce carbon output and deforestation. Deforestation of the Amazon rainforest has accounted for 45 percent of the greenhouse gas emissions for the country. Brazil is a key interlocutor in the United Nations’ climate change negotiations, which has increased the opportunity for further cooperation with the United States. Energy and environmental issues provide Brazil with its most substantial platform for international influence. In recent years, Brazil has made considerable improvements in human rights for its citizens, which have produced economic growth and cut poverty and childhood malnutrition by almost 80 percent. Brazil’s new President, Dilma Rousseff, has been a positive influence in the region to advance human rights and social inclusion throughout the Americas and internationally.
Dr. Roett then addressed overall U.S.-Brazil relations and Brazil’s role both in the Americas and globally. U.S.-Brazil relations have often been overcast with misperception and misunderstanding. The United States and Brazil share many common interests, but their respective foreign policies on Latin America, the Middle East, trade, and monetary policy have diverged. Recent bilateral dialogues have signaled a willingness to forge closer ties on bilateral, regional, and global issues. Agreements on a wide range of issues—including trade and finance, infrastructure investment, civil aviation, energy, labor, education, and social issues—have been reached. Brazil has shown a persistent desire to elevate the influence and interest of developing countries, especially within trade negotiations. This reflects the duality within Brazil as both a developed and developing country. Brazil has assumed a role as one of the peacekeeping nations. Brazil is escalating investment and trade throughout the region. A strengthened relationship between the United States and Brazil could be the basis for economic growth in Brazil, the United States, and globally.
An ACIEP member stated some of the problems within the U.S.-Brazil relationship stem from Brazil’s distrust of the United States, including from perceived lack of follow-through by the United States on proposals to settle disputes involving cotton and ethanol trade. This member further expressed the view that the lack of commitment by Brazil on climate change negotiations is based on the failure of the United States, China, and other countries to undertake necessary sacrifices. Other Committee members raised questions on how to create job growth and stimulate entrepreneurship in Brazil. One member pointed out that Brazil is disadvantaged because of its complicated tax system and policy environment at the local, state, and federal levels; its model for economic development is “top down.” Assistant Secretary Fernandez added that Brazil has a huge trade imbalance with China.
Assistant Secretary Fernandez gave an update on the State Department’s efforts to reform the U.S. National Contact Point (NCP) under the OECD’s Guidelines for Multinational Enterprises. He announced his decision to create a Stakeholders Advisory Board (SAB) to provide advice on how the U.S. NCP implements its new procedures and undertakes its outreach obligations for promoting the OECD’s Guidelines to business, civil society, and the general public. The body will have no role in individual specific instances or in reviewing the U.S. NCP’s decisions. The SAB, which will be a new subcommittee under the auspices of the ACIEP, will be led by two co-chairs, representing business and civil society. The SAB will be comprised of 12 other members, representative of diverse business and civil society sectors. Once co-chairs are designated, they will undertake a selection process for members for this new subcommittee.
Investment Subcommittee chairwoman, Thea Lee, had no new activity to report but commented positively on the establishment of the SAB as a result of the Investment Subcommittee’s recommendation to create an oversight function for the U.S. NCP.
Sanctions Subcommittee chairman Barry Carter reported that the subcommittee would continue monitoring Iran’s compliance of international sanctions; efforts to relax sanctions on Libya; and opportunities to make recommendations on U.S.-Cuba sanctions issues. In July, the subcommittee met with State Department officials regarding conflict minerals such as gold, tin, and tungsten, and the human rights abuses and supply chain issues that are associated with them.
ACIEP’s chairman Ted Kassinger read the update on the Subcommittee on Women’s most recent activities. Since the last ACIEP meeting, the Subcommittee has developed a project to conduct an international survey of studies on why women at the most senior levels greatly benefit a company’s bottom line. Such growth relates directly to an increase in revenues, stronger human resources, and overall corporate direction. The subcommittee will research the best practices for women in areas such as training, executive mentorship and coaching, flexible work arrangements, and graduate education to empower women into senior level positions. Once this report has been formulated it will be presented to the ACIEP for consideration and approval to be submitted to the Department of State. ACIEP members traveling abroad are encouraged to participate in the subcommittee’s speakers program aimed at meeting with women’s organizations overseas.
At the conclusion of the subcommittee reports, ACIEP Committee Chairman Ted Kassinger thanked the participants and adjourned the meeting.