Secretary Kerry’s Brazil Visit: Energy, Education and Global Entry Compete with NSA Criticism

The Secretary of State was the target of a public drubbing in Brazil. Kerry had been warned beforehand that Brazilian criticism of the NSA program would be public and fierce. There is no equivalent national program to collect information in Brazil, and for a nation which still recalls authoritarian ways of the military rule, intelligence gathering holds strong negative connotations. Two days after Secretary Kerry’s visit, President Rousseff’s government announced that it is considering measures to make it a crime for people to read other’s email messages without their consent. The sensitivity of intelligence gathering remained an issue throughout Kerry’s visit, but other important subjects were discussed in the context of President Rousseff’s forthcoming state visit to the United States on October 23. What might we expect in these bilateral discussions?

The U.S. and Brazil have a growing trade and investment ties. According to the U.S. Census Bureau, from a negative trade balance of $1.4 billion in 2007, U.S. exports to Brazil have grown from $24.2 to $43.8 billion in 2012. Imports have also grown, but the balance is now in the U.S. favor at $11.7 billion. Much of this trade is in complementary goods making two-way trade positive for both countries. However, according to the Financial Times, Brazil’s trade with the Europe Union (EU) rose by 195% between 2000 and 2010 to $98 billion, and Foreign Minister Antonio Patriota talks of a ‘fast tracked’ free trade agreement with the EU.  Brazil sees greater opportunity for growth with the European market. Meantime, there is no talk of a trade agreement with the United States.

However, opportunities exist within the bilateral Strategic Energy Dialogue to deepen cooperation on biofuels, renewable energy and energy efficiency, the smart grid, as well as an initiative for oil and gas development and nuclear power. Although the U.S. Department of Energy is responsible for this dialogue, Secretary Kerry expressed his hope that in September’s bilateral meeting, both the U.S. and Brazilian private sectors might find a place at the table to discuss the development of joint projects. Scope exists for the electrical utility companies in both countries to work together in developing energy efficiency techniques and electrical transmission.

In Kerry’s August visit, discussions also took place on Brazilian exports of sugarcane-based ethanol to the United States. Brazilian ethanol is competitive in the U.S. market due to a complex regulatory regime that has encouraged the production of sugarcane-based ethanol to meet increasing levels of ethanol in U.S. gasoline.[1]  To meet the rising quantity of ethanol that U.S. law requires to be blended with gasoline sold in the United States, Brazilian sugarcane producers have invested significantly in the production and processing of sugarcane ethanol for export to the United States. Today, fuel companies are required to use 500 million gallons of ‘advanced’ biofuels to blend into U.S. gasoline. This quantity is expected to triple to 1.75 billion gallons of sugarcane-based ethanol and Brazil is the only ethanol industry with the capacity to meet these ‘advanced’ levels. Clearly, the potential market for Brazilian ethanol is significant, but the current pricing structure in Brazil provides little incentive for Brazilian farmers to add production.  Consequently, there is inadequate supply to meet this huge export potential.  Discussions on how to relieve ethanol producers of the restraints imposed by both U.S. and Brazilian regulators could ease the way for expanded use of Brazilian ethanol in U.S. gasoline production.

A further issue on the bilateral agenda is Foreign Minister Patriota’s desire to extend the U.S. Visa Waiver Program to Brazil. This is limited by U.S. statutory requirements which include the sharing of information on the criminal and alleged terrorist background of travelers to the United States. Both the gathering of this information and its sharing with a foreign government remain a most sensitive issue for Brazilians. It is therefore doubtful that progress can be made in the near term on the Visa Waiver program, particularly given the ruckus over Edward Snowden’s revelations on metadata collection.

Brazilian citizens may not gain the Visa Waiver Program, but the expansion of U.S. consulates in Brazil and the reduction in time to obtain a U.S. visitor’s visa from over 120 days in 2011 to 2 days in 2013 should result in an expansion of Brazilian tourists and business visitors to the United States.  Added to this, Brazilian citizens can now apply for Global Entry privileges at U.S. consulates in Brazil, where the interview and collection of biometric data will be offered. This should facilitate Brazilian entry into the United States for those tourists and business visitors willing to share personal information with the U.S. government, and is likely to be welcomed by Brazilian frequent travelers.

Finally, U.S. schools offering science, technology, engineering and math (STEM) programs welcomed 9,600 Brazilian students in 2012 under Brazil’s ‘Science without Borders’ program. These numbers pale in comparison with approximately 200,000 Chinese students and over 103,000 Indian students registered in broad fields of study in the United States. There should be room to expand STEM students from Brazil. Likewise it is important that U.S. students take advantage of the education and training offered at Brazilian institutions under the U.S. government and private sector initiative, known as ‘100,000 Strong in the Americas.’ However, to attract U.S. students interested in Brazil, U.S. colleges need to offer Portuguese language training. The opportunities for study in Brazilian environmental and energy fields are good, and with private sector participation the number of students will increase. 

In conclusion, bilateral relations depend upon multiple and distinct areas of cooperation which are designed to continue over the long term and allow both nations to weather disagreements, such as the NSA program.  This proposition will be tested in October when President Rousseff keeps to her schedule and enjoys the state visit offered only to special visitors.

[1] Mandated by the 2007 Renewable Fuel Standard legislation, the Environmental Protection Agency (EPA) requires that a Renewable Identification Number (RIN) be issued for each gallon of imported, or domestically produced ethanol.  The RIN is later tied to a tradable credit which value is related to the quantity of ethanol needed in U.S. gasoline; a process managed by the EPA. As the EPA raises the required quantity of ethanol, the value of the tradable credit rises also. Likewise, when the quantity is reduced the value of the credit falls. For example, the EPA postponed the date for raising the required 2013 ethanol content from February to August 2013 with the result that the tradable credit fell to 89 cents per gallon from an earlier $1.43 per gallon in July.