DIRECTORATE-GENERAL FOR EXTERNAL POLICIES POLICY DEPARTMENT
2013 COUNTRY BRIEFING Brazil: After years of social and economic progress, new challenges emerge
Abstract Large-scale social protests have highlighted the challenges Brazil faces, despite economic and social progress achieved in the last decade. Political life is dominated by the issue of how to respond to protestors' grievances. With a year left before the next presidential and parliamentarian elections, on 5 October 2014, speculations about the main candidates and possible alliances between the political parties are intensifying. President Dilma Rousseff's approval rates dropped after the protests, but re-election is still likely. Rousseff's almost three years in power have been marked by a number of corruption affairs which have forced several ministers to resign. The mensalão (or 'big monthly payment') corruption case directly involves the President's Workers' Party (PT). Yet the scandals appear not to have weakened the President, who has taken a strong stance against corruption. The economy has expanded at a sustained rate since the mid-1990s, but growth has slowed in recent years due in part to a less favourable international economic environment. There are concerns that Brazil has become excessively dependent on commodity exports and that its industry has lost competitiveness. On 24 January 2013, the latest EU-Brazil Summit was held in the framework of the Strategic Partnership launched in 2007. The two parties agreed to deepen their political dialogue and establish a high-level dialogue on international peace and security.
FOR EUROPEAN PARLIAMENT INTERNAL USE ONLY
DG EXPO/B/PolDep/Note/2013_272 September 2013 DV/1004728EN.doc PE474.372v01-00 Policy Department, Directorate-General for External Policies
This Country Briefing was requested by the European Parliament's Delegation for Relations with the Mercosur countries.
AUTHORS: Jesper TVEVAD Directorate-General for External Policies of the Union Policy Department WIB 06 M 051 rue Wiertz 60 B-1047 Brussels
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PUBLICATION: English-language manuscript completed on 27 September 2013. © European Union, 2013 Printed inBelgium. This Country Briefing is available on the intranet site of the Directorate-General for External Policies, in the Regions and countries or Policy Areas section. Translation(s) into FR PT ES
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2 Brazil: After years of social and economic progress, new challenges emerge
Table of contents
1 Key issues and developments 3 2 European Parliament–Brazil: Milestones 4 3 Political situation in Brazil 6 3.1 Overview 7 3.2 Parliament 8 3.3 The social protests 10 3.4 The corruption affairs 12 3.5 Outlook: towards the 2014 elections 13 3.6 Foreign policy and international relations 15 4 Economic and social issues 20 4.1 Economic indicators 20 4.2 Trade and investment 21 4.3 Towards a new growth model? 23 4.4 Social issues 25 5 The EU and Brazil 27 5.1 EU-Brazil relations 27 5.2 Cooperation 29 5.3 Trade and investment relations 30 5.4 Outlook for the European Parliament 32 5.5 Policy options 34 6 Basic data 37 7 Map 39
1 Key issues and developments
3 Policy Department, Directorate-General for External Policies
The EU-Brazil Strategic Partnership established in 2007 has served as a basis for an important intensification of EU-Brazil relations, as reflected in the high number of sectoral dialogues and cooperation initiatives in many areas. Brazil' status as the most significant regional player and an increasingly important global actor makes the country a key interlocutor for the EU. The EU and Brazil share the commitment to international cooperation and effective multilateralism. A key objective of the Strategic Partnership is to reinforce cooperation to meet global challenges. Interparliamentary cooperation between the EP and the Brazilian Congress has not yet been fully institutionalised. The first and so far only interparliamentary meeting between the EP and the Brazilian Congress took place in July 2011. Both chambers of the Brazilian Congress have put forward informal proposals on a regular forum for dialogue with the EP. Brazil will cease to receive bilateral development cooperation from the European Commission. The country's contribution to global development aid has expanded. This highlights the relevance of exploring new forms of EU-Brazil cooperation, particularly triangular development cooperation in other parts of Latin America and in Africa. The EU has been negotiating free trade — part of the broader Association Agreement — with Brazil and the other Mercosur countries since 1999. The decision of the EU-Mercosur ministerial meeting (in the margins of the EU-CELAC Summit in January 2013) that both regions should start internal preparatory work on the substance and the conditions for an exchange of offers on market access, to take place no later than the last quarter of 2013, has created expectations of fresh momentum can be brought to the negotiations. The large-scale social protests in June 2013 and the following months have highlighted the challenges Brazil faces, despite the economic and social progress achieved over the last decade. They revealed broader discontent with deficient public services, particularly in health and education, widespread corruption and the political system's lack of accountability. While some of the protestors' demands have been met, the prospects for fundamental political reform are uncertain. It is uncertain whether the protests will have a lasting political impact. The political opposition does not seem to have benefited from them. At present, President Dilma Rousseff appears to still have good chances of being re-elected in the October 2014 elections. Brazil's rising global role has been underpinned by years of economic growth and social development, largely based on commodity exports. There is however some concern that Brazil's economic growth model has become exhausted, and that the industry's loss of competitiveness threatens the economy's long-term sustainability. The need to re-establish competitiveness is acknowledged by the government, which has launched some reform initiatives. Some of the Brazilian government's measures are viewed by the EU as potentially trade- restrictive. According to the European Commission, Brazil is among the countries that over the last years have resorted to the highest number of new potentially trade-restrictive measures.
2 European Parliament–Brazil: Milestones
4 Brazil: After years of social and economic progress, new challenges emerge
13 June 2013 In its Resolution on the role of the EU in promoting a broader Transatlantic Partnership, the Parliament states that the EU and the US should secure the involvement of new key powers, including the EU's two Latin American Strategic Partners, Brazil and Mexico, in the shaping of the international environment and addressing regional conflicts and global challenges. 2 February 2012 In its Resolution on the EU foreign policy towards the BRICS and other emerging powers: objectives and strategies, the EP underlined the increased relevance in foreign policy terms of Brazil and the other BRICS countries. The EP called for enhanced cooperation between the EU and the BRICS on all matters of international concern, particularly with those BRICS that share and respect democratic values and strive for a social market economy. The Resolution welcomed the EU-Brazil Strategic Partnership Joint Action Plan 2012-2014.
6 July 2011 The first interparliamentary meeting between the EP and the Brazilian Congress took place in Strasbourg. The debate centred on the perspectives for an EU-Mercosur Association Agreement, and also addressed issues such as energy, the environment, scientific and technological cooperation, migration, the international economic and financial crisis and the reform of the international financial institutions. The deputies expressed support for creation of a permanent forum to deepen the dialogue between the EP and the Brazilian Congress.
15 February 2011 Parliament gave its consent to the conclusion of an agreement between the EU and Brazil on a short-stay visa waiver for holders of ordinary passports. The agreement allows Brazilian nationals to travel to all EU member states without a visa for short stays and extends the Brazilian visa waiver to all EU member states (before that, citizens of Cyprus, Estonia, Latvia and Malta needed a visa to enter Brazil). On the same date, the EP gave its consents to the conclusion of the Agreement between the EU and Brazil on air services.
20 January 2011 The EP adopted a resolution on Brazil's decision to deny the extradition of an Italian citizen who had been sentenced in absentia in Italy to life imprisonment (guilty of, inter alia, four murders and of involvement in an armed group). Parliament noted that the partnership with Brazil rests on the respect for the rule of law and fundamental rights and expressed confidence that the Brazilian authorities would process the Italian Government's request for a review of the decision.
12 March 2009 In its recommendation to the Council on the EU-Brazil Strategic Partnership, the Parliament stressed Brazil's role as a significant regional and global player and a key interlocutor for the EU who shares a common vision of the world. It further stressed that the Partnership should provide fresh impetus for the conclusion of the EU-Mercosur Association Agreement, and that its political agenda should include the promotion of joint strategies to tackle global challenges and of effective multilateralism.
28 April 2005 The Parliament gave its approval to the conclusion of the EC-Brazil
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Scientific and Technological Cooperation Agreement.
23 May 1996 In a resolution on the violation of human rights in Brazil, the EP strongly condemned the Eldorado Cajás massacre, in which 25 land workers were killed by the military police. It expressed its concern that the absence of agrarian reform in Brazil was a source of violence and stressed the need for a redistribution of unused land, encouraging the Brazilian government and parliament to conclude agricultural reforms.
21 May 1996 The Parliament approved the conclusion of a Framework Agreement between the Community and its member states, of the one part, and Mercosur and its member states, of the other.
12 October 1995 In a resolution on the situation of the indigenous people in Brazil, the Parliament urged the Chamber of Deputies of the Brazilian Congress to safeguard provisions in the constitution in matters concerning the rights of the indigenous people and the improvement of their social end economic situation and called on the Brazilian authorities to ensure that the invasion of indigenous territories and violence against indigenous people are firmly combated and the perpetrators tried.
19 November 1992 The Parliament approved the conclusion and entry into force of the Framework Agreement for Cooperation between the EEC and Brazil. In a Resolution on economic and commercial relations with Brazil, the Parliament noted that Brazil had made considerable efforts to eliminate the economic imbalances inherited from the military dictatorship, welcoming the results of the privatisation programme, the liberalisation of Brazil's external trade and the agreement with creditor banks on the reduction of external debt. The EP also expressed support for the efforts of the government to eliminate inequality and marginalisation and its satisfaction at the signs of democratic activity and moves to fight corruption. On the same date, the EP adopted a resolution on street children in Brazil. Appealing to the Brazilian authorities to do everything to improve their safety, the Parliament called on them to take measures to halt the massacre of street children and bring those responsible for the murders to justice. It stressed the need to implement an effective policy to help street children, calling on the EC and member states to ensure that cooperation with Brazil include as a priority the provision of education, food and health care for these children.
3 Political situation in Brazil
6 Brazil: After years of social and economic progress, new challenges emerge
3.1 Overview
President Dilma Rousseff will soon enter the last year of her four-year presidential term, which began on 1 January 2011 when she took office President Dilma as Brazil's 36th (and first female) President. After the large-scale social Rousseff has little more protests in June 2013 and the following months, political focus is on the than a year left of her responses to the grievances expressed by protestors. With a year left to four- year term. the next presidential and parliamentarian elections, on 5 October 2014, speculations about the likely main candidates and the possible alliances between the political parties are also intensifying. As candidate of the Workers' Party (Partido dos Trabalhadores, PT), Dilma Rousseff was elected in the second round of the 2010 presidential elections, on 31 October, with 56.1 % of the votes against 43.9 % for José Serra, the candidate of the Brazilian Social Democratic Party (Partido da Social Democracia Brasileira, PSDB), in government from 1995 to 2002. The designation of Rousseff — who had been Chief President Rousseff and of Cabinet for President Luis Inácio 'Lula' da Silva since June 2005 and the government are before that Minister for Energy and Mining (2003-2005) — as the PT's supported by a broad presidential candidate owed much to the confidence deposited in her by and heterogeneous President 'Lula', who saw her as his preferred successor. The 2010 multi-party coalition. elections were the first ever where the PT presented another presidential candidate than 'Lula' da Silva, who had been candidate The President's three times (1989, 1994 and 1998) before being elected for the first time Workers' Party (Partido in 2002 and re-elected in 2006. However, Rousseff's score in the two dos Trabalhadores, PT) rounds of the elections was not significantly lower than that of Lula in and the Brazilian 2002 and 2006. Democratic Movement Party (Partido do Rousseff's candidacy was supported by a large coalition of political Movimento Democrático parties called 'For Brazil to continue changing' (Para o Brasil seguir Brasileiro, PMDB) are mudando). In addition to the PT, it included ten other parties, notably the the coalition's most Brazilian Democratic Movement Party (Partido do Movimento important parties. Democrático Brasileiro, PMDB); the Republic Party (Partido da República, PR); Progressive Party (Partido Progressista, PP); the Brazilian Socialist Party (Partido Socialista Brasileiro, PSB); the Democratic Labour Party (Partido Democrático Trabalhista, PDT; the Social Christian Party (Partido Social Cristão, PSC); the Communist Party of Brazil (Partido Comunista do Brasil, PCdoB); and, the Brazilian Republican Party (Partido Republicano Brasileiro, PRB). Rousseff's running mate and Vice President, the former president of the Chamber of Deputies, Michel Temer, is from the PMDB. The government — which currently comprises 39 members1 — reflects the broad multi-party supporting her. It is dominated by members of the PT and its main alliance partner, the PMDB. Currently, PT members are in lead of 17 ministries or entities ranking as ministries, among them
1 24 ministers, nine secretaries with rank as ministers and the heads of six entities with ministerial status and attached directly to the President, notably the Central Bank and the Executive Office (Casa Civil da Presidência), led by the President's 'Chief of Staff'.
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Finance, Defence, Justice, Health, Education, Agricultural Development and the President's Chief of Staff, while PMDB members preside over five ministries, among them notably Agriculture, Mines and Energy, Social Security and the Secretary of Strategic of Strategic Affairs, in The Brazilian Congress charge of long-term policies for Brazil's economic and social traditionally takes a development. Representatives of six minor parties supporting relatively independent Rousseff's candidacy and independents share the remaining posts. role vis-à-vis the Both President Rousseff's Cabinet and lower government levels are Executive. Together with thus broad and politically heterogeneous (as was the case under low levels of party President 'Lula' and usual in Brazil). Currently, the Cabinet counts 10 discipline, this has women, the highest female representation in any Brazilian government. sometimes made it Dilma Rousseff's clear electoral victory and the broad alliance challenging to deal with supporting her provided her with a strong position from the start of her the pro-government term. However, relations between the Executive and the Legislature coalition. have not always been easy, and dealing with a broad multi-party alliance in a system with low levels of party discipline has been a challenge. In addition, the Brazilian Congress traditionally takes an active and independent role vis-à-vis the Executive. The President therefore has to make continuing concessions to the coalition partners, for instance through maintaining their quotas of influence in the government and public administration. In some occasions, the Government has been at odds with a majority in Congress. The clearest example is probably the long dispute over the Forest Code, which regulates private forestry activities. At various stages in the legislative process, the Congress adopted elements that the government could not support (and that were strongly criticised by environmentalist claiming they would lead to accelerating deforestation of the Amazonas), leading to a series of presidential vetoes and modification of the draft bill. The text of the new Forest Code was finally adopted in April 2013. Another dispute has been over a law regulating the distribution of oil revenues between the states, where the Congress in March 2013 overturned a presidential veto against a part of the law.
Government key President: Dilma Vana Rousseff figures Vice-President: Michel Miguel Temer Lulia Cabinet Chief: Gleisi Helena Hoffman Minister Foreign Luiz Alberto Figueiredo Machado Relations: Guido Mantega Minister Finance: Celso Luiz Nunes Amorim Minister Defence: Minister Development, Fernando Damata Pimentel Industry and Trade: Izabella Vieira Teixeira Minister Environment:
3.2 Parliament
The parties supporting Rousseff's candidacy won a solid majority in Congress in the elections on 3 October 2010, obtaining around two thirds of the seats in both the Chamber of Deputies and the Senate.
8 Brazil: After years of social and economic progress, new challenges emerge
The PT was the overall most voted party and re-gained its position as The coalition supporting the first party in Chamber. The PMDB, the dominating party in Brazil President Rousseff has since the restoration of democracy in the first half of the 1980s, lost that a huge majority in both position, but remained the biggest party in the Senate. The PT chambers of the increased its representation from eight to 15 seats in the Senate, Congress, where 23 replacing the PSDB as the second party. In addition to the gains made political parties are by the PT, the centrist PR, with over seven million votes, made strong represented. gains in the Chamber of Deputies. The PSDB became the most important opposition party; it was the second most voted party in the elections to the Senate (with almost 30 million votes), but lost five of its 15 seats there and also suffered losses in the Chamber.
Figure 1: Composition of the Chamber of Deputies 45 49 39 37 (current) 81 27
26
121
88
PT PDT PM DB PSD PSDB PP PR DEM Ot hers/Independents
Figure 2: 2 11 Composition of the 5 20 Senate (current) 6
5 4
16
12
PT PDT PMDB PSD PSDB PP PR DEM Others/Independents
PT: Partido dos Trabalhadores (Workers Party) PDT: Partido Democrático Trabalhista (Democratic Labour Party) PMDB: Partido do Movimento Democrático Brasileiro (Party of the Brazilian Democratic Movement) PSD: Partido Social Democrático(Social Democratic Party) PSDB: Partido da Social Democracia Brasileira (Brazilian Social Democratic Party) PP: Partido Progressista (Progressive Party) PR: Partido da República (Republic Party) DEM: Democratas (Democrats)
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Currently, no less than 23 different political parties are represented in the Congress (15 of them in the Senate). In the Chamber of Deputies, As customary, several eight parties have only three or less seats, out of a total of 513. In the members of Congress Senate, six of the 15 parties represented have one or two seats (out of have changed party. 81). However, the relative Since the Legislature began on 1 February 2011, the composition of the strength of the Congress (particularly the Chamber of Deputies) and the strength of the governing alliance and political parties has changed, due to the parliamentarians changing the opposition remains parties (although measures taken in recent years, including a ruling by largely the same. the Supreme Court, has made party-switching less common than before). The most important change is the emergence of a new party, the Social Democratic Party (Partido Social Democrático, PSD), which has now become the fourth largest in the Chamber of Deputies. The PSD, which was launched on 13 April 2011, has been created by a group of politicians predominantly from the opposition Democrats (Democratas, DEM), led by the former Mayor of São Paulo, Gilberto Kassab). Without any clear ideology, the PSD defines itself as a centrist party. It broadly supports the government, although it has alliances with opposition parties on the state and local levels. Despite these changes, the back-up for Rousseff's government in Congress remain largely unaltered, with a large majority of deputies belonging to the pro-government coalition.
3.3 The social protests
The large-scale social protests in June 2013 and the following months have contributed to put focus on the challenges Brazil faces, despite the notable economic and social progress achieved over the last decade. The protests were the most important ones in Brazil for more than 20 years (since the 1992 demonstrations calling for then President Fernando Collor de Mello to be impeached for corruption) and took place across the country. They culminated on 20 June, when The mass demonstrations all over Brazil were calculated to have gathered perhaps demonstrations in June up to 1,5 million persons (around 300 000 in Rio de Janeiro alone, started as protests around 100 000 in other big cities such as São Paulo, Manaus and Belo against increases in bus Horizonte). The first demonstrations were severely repressed by the and metro fares, but police and various violent groups were active among the protestors, but rapidly developed into a most protests were peaceful. Protests and demonstrations have manifestation of broader continued since June, but on a smaller scale. Most recently, protests discontent with were held in various parts of Brazil on occasion of the Independence inadequate social Day on 7 September. services, corruption and an unaccountable The demonstrations began as a protest against increases in bus and political system. metro prices, demanding cheaper and better public transport, but rapidly developed into a manifestation of broader discontent with inadequate public and social services, particularly in health and education, widespread corruption and an opaque and unaccountable political system. Analysts have seen the protests as an expression of the growing (and partly frustrated) expectations and aspirations among the
10 Brazil: After years of social and economic progress, new challenges emerge
middle classes. They took place against the background of huge public expenses to prepare the infrastructure for events like the 2014 Football World Cup and 2016 Olympic Games, which put into relief the deficiencies of social and public services. Dilma Rousseff and the government (as most of the political spectrum) have recognised the protests as legitimate and expressed understanding of the demands made. Many demands found a quick response, with various initiatives being taken immediately after the protests in June: Local authorities quickly cancelled the announced increases in transport tariffs, helped by the decision of the Chamber of Deputies to abolish taxes on public transport. The Chamber rejected an unpopular proposal to prevent federal The President and the prosecutors from carrying out criminal investigations on their own Congress have been initiative (widely seen as curbing anti-corruption efforts). quick in taking initiatives in response to the The Senate voted a law to grant 75 % of oil royalties to education protests, among other and 25 % to health (definitively approved by Congress in August). things by allocating The Senate voted to classify corruption and embezzlement as more revenues to health 'heinous' crimes, paving the way for stronger penalties. and education. The Chamber of Deputies endorsed a proposal to make voting in both chambers of the Congress public. The Chamber (unanimous) approved the constitutional amendment to abolish secret voting in Congress on 3 September; the amendment is now before the Senate. Obligatory public voting in the Congress could contribute to make the political system more transparent and accountable. However, there are also concerns that it would make it more difficult for Congressmen to vote freely against the Executive. On 24 June, President Rousseff, in a meeting with leaders of the groups organising the protests, the mayors of the state capitals and state governors, promised to increase funding of public transport by around USD 25 billion and provide more resources to health and education. She also underlined the need for a fiscal reform and better management of public funds. On 9 July, Rousseff issued a decree to improve health services by educating and employing more doctors, including from other countries (in August it was announced that Brazil will contract some However, President 4 000 Cuban doctors, to work particularly in rural areas). Rousseff's proposal for a comprehensive The President also suggested holding a referendum on a constituent political reform has not assembly to reform the 1988 constitution (the proposal was later led to tangible results. abandoned because of lacking support in Congress) or a referendum on An electoral 'mini- a political reform, including changes in legislation on elections and reform' before the 2014 political parties. elections is unlikely to A committee in the Chamber of Deputies is currently preparing a draft live up to expectations bill on political reform, to be submitted to a referendum, but it is unlikely of more fundamental that the Congress will agree on the reforms in time for them to enter into changes to the political force before the October 2014 elections. Among the proposals on the system. table are:
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- holding state and national elections at the same time (in order not to have, as now, nation-wide elections every two years); - public funding of electoral campaigns; - the possibility to collect signatures to present draft bills by popular initiative through internet. - abolishing re-election of the President, governors and mayors.
On its side, a Commission in the Senate on 16 September 2013 approved what has been called an electoral 'mini-reform', in time for it to enter into force before October 2014. However, it includes only minor changes to the rules governing elections and has been criticised for not addressing any substantial problems.
3.4 The corruption affairs
Dilma Rousseff's first almost three years in power have been marked by a number of corruption affairs, which have led to the resignation of During Dilma Rousseff's seven ministers and various high-level officials. The resignation of her presidential term, seven first Cabinet Chief, Antonio Palocci, in June 2011 was seen as the first ministers and several crisis of Rousseff's mandate. It has been followed by the resignation of high-level officials have seven ministers, from different political parties, all accused of being resigned in connection responsible for different kinds of corruption and embezzlement. Most with corruption recently, the Deputy Minister of Labour Paulo Pinto resigned on 10 scandals. September 2013, accused of being involved in fraudulent tender processes. However, the various scandals do not seem to have weakened President Rousseff. She has taken a strong stance against corruption and has promised to continue efforts to clean up the government and public administration, and done little to defend ministers accused of corruption or avoid their departure from government. This has won Rousseff considerable popular support and is likely one of the main reasons for the high approval rates the President has enjoyed Taking a strong stance throughout most of her term in office. again corruption, President Rousseff's Also, the political consequences of the corruption affairs and the handling of the affairs resignations have been limited, despite concerns that they could has won her weaken the pro-government coalition and undermine its support in considerable public Congress. Most of the resigned ministers have been replaced by support and high another representative of the same party, maintaining the overall approval rates. balance between the various members of the governing coalition. The corruption scandal with the potentially most serious implications for The so-called mensalão Rousseff and her government has been the so-called mensalão (big (big monthly payment) monthly payment) affair, which fully involves the governing PT. The corruption scandal has case goes back to 2005, where allegations were first made that the PT led to the conviction of had paid public money to legislators from other parties in order to leading members of the ensure their support for President 'Lula' da Silva's government. party under former Government officials, deputies and leading PT politicians were forced to President 'Lula' da resign after revelations of being involved. Silva's government. In a trial taking place from August to December 2012, leading members of the PT were found guilty of charges of illicit association, money
12 Brazil: After years of social and economic progress, new challenges emerge
laundering and vote-buying, among other crimes. The most prominent of them was President 'Lula' da Silva's Chief of Staff and former President of the PT, José Dirceu, who according to the Attorney General was the main person at the 'political core' of the illegal payment scheme, and two other leading PT members, the party's former President José Genuino and former treasurer, Delubio Soares. Dirceu was sentenced to ten years and ten months in prison, while Genuino and Soares received shorter terms in prison. The mensalão trial was hailed as historic and a watershed in the fight against corruption and impunity in Brazil. The fact that a majority of the Supreme Court judges had been appointed under the presidencies of Their conviction was 'Lula' da Silva and Rousseff weakened allegations that the mensalão hailed as a watershed in scandal had been orchestrated by the opposition and/or government- the fight against hostile media, although some representatives of the PT and other corruption and impunity. parties have stated that the sentences were political and unfair. However, the Supreme Court's recent decision Although most of the sentences have been upheld by the Supreme to accept the re-opening Court, on 18 September 2013 the Court decided to accept appeals that of the cases against 12 could re-open the cases against 12 of the convicted in the mensalão of the convicted is seen affair (for those charges where they were convicted with four or more by some as a setback judges voting for acquittal). This makes possible a new process against that will reduce Dirceu and the other leading PT members, which may not be finished confidence in the before 2016. The Supreme Court's decision to allow a possible retrial is institutions. seen by some as step back in the fight against corruption and immediately provoked various protests. Former President 'Lula' da Silva has claimed that he was not aware of the payments, and the Supreme Tribunal has rejected petitions that he should also be charged. However, in April 2013, prosecutors asked the federal police to investigate 'Lula''s possible implication in the corruption scheme. Continuing accusations against the former President, together with the conviction of his close collaborators and PT leaders, could somehow tarnish 'Lula' da Silva's reputation and diminish the great popularity he continues to enjoy almost three after having left the presidency.
3.5 Outlook: towards the 2014 elections
During most of her term in office, approval rates for President Rousseff have reached around 60-65 %, higher than those of previous presidents. Until now, she has therefore seemed to be in a good Dilma Rousseff's very position to opt for re-election in 2014. However, following the mass high approval rates fell protests in June 2013, the approval rates for Rousseff herself and the following the mass government fell drastically to a level around 40 %, making the prospects protests in June 2013, for re-election less certain. making the prospects for One element that could affect the stability of the governing coalition and her re-election less Rousseff's chances of being re-elected is the volatility of the party certain. system, which has been underlined by the rise of the PSD. This new party seems designed to attract sections from other centrist parties, in first place PSDB and DEM, and could become an important political
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player in the future. In the municipal elections in October 2012, the PSD came in fourth place as regards the number of municipalities governed by the party. More problematic for President Rousseff and the PT is the growing strength of the PSB, which on 18 September 2013 decided to leave the government (where it has two members) and the alliance supporting Rousseff. The party will not join the opposition, but rather take an 'independent' position, so the step will most probably not have any immediate political consequences. However, the PSB's leader, Eduardo Campos, Governor of the state of Pernambuco, now seems likely to present his candidacy for the 2014 presidential elections. This could reduce Rousseff's chances of winning the polls, at least in the first round. The PSB's withdrawal form the governing alliance comes after the party's success in the municipal elections, where it increased its number of mayors to 444 (out of 5 564 municipalities) and won in a number of large cities, including five state capitals. The launch in February 2013 of a new ecologist party, the 'Sustainability Network' (Rede Sustentabilidade) led by Marina Silva, may also cause The emergence of new changes in the political landscape. Silva, a former member of the PT political parties and and Minister for the Environment from 2003 to 2008, surprisingly came others abandoning the into third place with 19 % of the votes in the first round of the 2010 governing coalition elections as candidate for the Green Party (Partido Verde, PV). could also affect Particularly important for Dilma Rousseff's government is the alliance Rousseff's chances in with the PMDB, the principal political party in Brazil together with the PT, the 2014 polls. the biggest party in the Senate and which yields significant power on the state and local level. The PMDB's loose structure and its non-ideological character has facilitated the party's alliance with the PT since Lula won the presidency in 2002, but could also lead the PMDB to seek new coalition partners. A government re-shuffle on 15 March 2013, which gave the PMDB one more ministerial post than it had, was seen as a sign of the President's intention to consolidate the alliance with the However, there are PMDB before the 2014 elections. indications that Rousseff's popularity is Continuing low approval rates and a deteriorating social climate, in recovering and the long- combination with sluggish economic growth, could cause the governing term political impact of coalition to unravel, reducing Rousseff's chances of being re-elected. In the social protests may such as scenario, speculations whether former President 'Lula' may be reduced. At this point stand as the PT's presidential candidate for a third term are likely to in time, the most likely intensify. scenario is that the bulk However, recent weeks seem to indicate that the political impact of the of the pro-government large-scale protests in June 2013 may not be long-lasting and that coalition will keep President Rousseff is gradually regaining her lost popularity. The together and support opposition does not seem to have benefited from the protests, which Rousseff's re-election. were more directed against the 'political class' as such than the President or the governing PT in particular. In fact, Rousseff may be able use the quest for change to her advantage, proposing further reform, in a way similar to how the corruption affairs actually have helped the President to consolidate her personal authority and popularity.
14 Brazil: After years of social and economic progress, new challenges emerge
The municipal elections on 7 and 28 October 2012 — before the social protests, but after the mensalão trial opened — did not give any clear indications that the position of the PT has significantly weakened. In the Brazil's biggest city, São Paulo, the PT's candidate, Fernando Haddad — strongly supported by 'Lula' da Silva — was elected mayor with 56 % of the vote in the second round of the polls, defeating José Serra from the PSDB. It was the PT's first electoral victory in São Paulo since 2000. Overall, the PT won the elections in around 635 municipalities, some 13 % more than in the previous elections in 2008. The party's candidates were elected mayor or went to a second electoral round in 30 of Brazil's main cities (similar figures for the PSDB were 23 and 20 for the PMDB). Rousseff has also maintained a solid lead in the polls over the expected two closest rivals in the 2014 elections, Marina Silva and Aecio Neves of the PSDB. Provided that the President's popularity continues to recover, the most likely scenario is therefore that the pro-government multi-party alliance, except the PSB, remains largely intact and supports Rousseff's re-election in 2014. However, no presidential candidate has yet been officially announced and any prediction of the result of the election at this stage is premature.
3.6 Foreign policy and international relations
Brazil is the most important emerging economy after China and India, and has been forecasted to become the world's fourth largest economy in 2040 (after China, the US and India). Seeking an international role which matches the country's weight in the international economy, Brazil Brazil has become an has become an increasingly important global player over the last 15 increasingly important years. Particularly during President 'Lula' da Silva's second term (2006- international player, 2010), the Brazilian foreign policy became more assertive and aiming at supported by the increasing the country's presence in the main international fora. This country's growing approach was backed up by Brazil's strong economic performance. economic weight. Brazil was particularly active in engaging with other emerging powers and developing countries, particularly the BRICS countries (Brazil, Russia, India, China and South Africa), and in the framework of the so- called IBSA group (India, Brazil, South Africa), in the promotion and coordination of the G20 coalition in the framework of the negotiations on agricultural trade in the World Trade Organisation (WTO), but also in reinforcing Brazil's presence in Africa, Asia and the Middle East. The Brazilian foreign In a very active presidential diplomacy, 'Lula' da Silva raised the voice of policy has become more Brazil on a range of global issues, from the design of new international assertive, seeking to financial regulations in the wake of the 2008 international financial crisis, play a global role and to climate change and the Middle East peace process. The President increasing its presence often appeared as spokesman for the emerging and developing world, in the main international criticising, among other issues, industrial countries' agricultural and multilateral for a, subsidies, demanding access to the manufacture of generic medicines, such as the G20 and the particularly anti-retroviral drugs and suggesting the creation of a global WTO. anti-hunger fund to be financed through a tax on arms exports.
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Internationally, Brazil is an active member of the UN and participates in international peacekeeping, notably as leading the UN Stabilisation Mission in Haiti (MINUSTAH). By 31 August 2013, 1 672 Brazilian Brazil's bid for a troops (and 34 police and military experts) were deployed in UN permanent seat in the peacekeeping missions. UN Security Council However, Brazil's bid for a permanent seat in the UN Security Council remains frustrated. (UNSC), presented for the first time prior to the envisaged UN reform in 2005, has not prospered. Most recently, Brazil was member of the UNSC in 2010-2011 (in 2011, together with India and South Africa, making it the first time that the five BRICS countries were in the UNSC at the same time, since the emergence of the BRIC concept). In the declarations from the BRICS Summits in Sanya (China) in April 2011 and in New Delhi in March 2012, China and Russia stated the importance they attach to the international status of Brazil (and India and South Africa) and that they 'understand and support their aspiration to play a greater role in the UN', but did not express direct support for the demand for a seat in the UNSC. Brazil's international standing has also been reinforced with the consolidation of the G20 as the main forum for international economic cooperation and governance. Similarly, Brazil (together with China) could be considered the main beneficiary of the 2011 reform of the International Monetary Fund (IMF), which augmented the quotas and the influence and voting rights of key emerging countries. The election in May 2013 of Roberto Carvalho de Azevêdo, former Ambassador to the World Trade Organisation (WTO), as Director General of the organisation underlined the importance Brazil attaches to the WTO and in general the country's international ambitions and prestige. The same could be said about the election, in June 2011, of Jose Graziano da Silva as Director-General of the UN Food and Agriculture Organisation (FAO). Graziano played a key role in the successful 'Fome Zero' or 'Zero Hunger' programme in Brazil. Brazil has pleaded for a strengthened coordination between the G20, the IMF, the World Bank and individual countries as a way to achieve the resumption of global economic growth. This 'multilateral' approach to international economic governance should be seen against the background of Brazil's criticism of some of the policies implemented in Europe and the USA to counter the economic crisis. For instance, in her Brazil's active foreign speech to the UN General Assembly Resolution (UNGA) in September policy has continued 2012, Dilma Rousseff criticised austerity policies for deepening the under President recession and having negative effects on the emerging countries. Brazil Rousseff, although her has also criticised monetary policies in the EU, the US and China for international profile is creating exchange rate imbalances and pressing up the currencies of somehow more discreet countries such as Brazil, reducing their competitiveness. than her predecessor, The diversification of Brazil's foreign relations and the strengthening of 'Lula' da Silva. links to partners in the global South have also led to an increased presence in Africa and the Middle East. Reinforced dialogue and cooperation between regional bodies in South America and these two regions to a large extent reflect Brazilian initiatives, for instance the
16 Brazil: After years of social and economic progress, new challenges emerge
three summits held so far between the Union of South American Nations (União de Nações Sul-americanas, UNASUL) and the League of Arab States, and the three Africa-South America summits (the last one was held on 22 February 2013). The general objectives of the foreign policy have not changed under Dilma Rousseff, who has continued efforts to consolidate and further increase the country's global role and presence in international and multilateral bodies, although her international profile is more discreet than her predecessor's.
As regards the perhaps most controversial aspect of President 'Lula''s Brazilian diplomacy foreign policy, the relationship to Iran, the government seems to have traditionally adheres to moved somehow closer to European and US positions under President the principle of non- Rousseff. Although there a no signs that Brazil's relations with Iran have interference and non- deteriorated significantly, Rousseff has — in difference to her intervention. This has predecessor — has denounced human rights violations in Iran and in sometimes led to March 2011, Brazil voted against Iran in the UN Human Rights Council, positions which differ for the first time in ten years. Rousseff's absence from the funeral of from those of the US President Hugo Chávez of Venezuela on 8 March 2013 was seen by and the EU. some as an attempt to avoid Iran's President Ahmadinejad. Brazil's position on issues related to the situation in the Middle East has underlined the country's adhesion to the principles of non-interference and non-intervention in the internal affairs of other countries, displaying differences with the US and the wider Western world. In March 2011 Brazil abstained in the Security Council on the voting of Resolution 1973 (2011) which authorised Member States to take all necessary measures to protect civilians and civilian populated areas under threat of attack in Libya, and spoke out against the NATO-led bombing campaign. Similarly, Brazil has called for an internal solution to the civil war in Syria, guaranteeing human rights and reforms, but has opposed external interference or sanctions against the country. In October 2011, Brazil abstained in the UNSC on a Resolution condemning abuses by the Syrian regime (which was vetoed by China and Russia). However, compared to the other BRICS countries, Brazil has been outspoken in Brazil's scepticism about its condemnation of the Syrian regime. In November 2011, Brazil voted interventionism and the in favour of a UNGA Resolution condemning killings and torture by the use of military power is Syrian security forces (the other four BRICS countries abstained). reflected in the concept Similarly, in the context of the decision in July 2012 to withdraw its of 'responsibility while diplomats from Syria, Brazil strongly condemned the violent oppression protecting' — presented of unarmed civilians. Equally, Brazil did not oppose UNSC Resolution in the UN framework as 2085 in December 2012 which authorised the military operation in complementary to the northern Mali, although it stressed the need for the UNSC to monitor the 'responsibility to protect'. operation very closely. Expressing the concerns about the use of military power and the selective use of international law under the principle of the 'responsibility to protect' (R2P), as adopted by the UN in 2005, Brazil has been promoting the complementary concept of 'responsibility while protecting' (RWP). Launched by President Rousseff in her speech to the UNGA in
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September 2011, it emphasises that the prevention of conflicts is always preferable, that all peaceful means to protect civilians under threat of violence should always be exhausted, that the use of force should produce as little violence and instability as possible and needs to be monitored and assessed. The promotion of the RWP-concept could be seen as an example of how Brazil is seeking to play an intermediating role between the USA and Europe, on one side, and states which like China, Russia and other emerging countries traditionally reject interventions, even to protect civilian populations under threat. It also reflects Brazil's ambition to actively seek influence in defining of norms Brazil plays a leading regulating the international community. role in integration and In relation to the revelations of the US National Security Agency's (NSA) cooperation in Latin and surveillance activities, Brazil has presented another international South America, being a initiative. In her speech to the UNGA on 24 September 2013, President driving force behind Rousseff proposed to create a system in the UN framework to govern UNASUR and by far the the Internet, including mechanisms to protect against the illegal most important of the interception of data. five Mercosur member states. In Latin America, Brazil has been at the forefront of efforts to deepen regional integration, playing a leading role in Mercosur, the UNASUL and the Community of Latin American and Caribbean States (Comunidade de Estados Latino-americanos e Caribenhos, CELAC), and other regional groupings. Brazil was a driving force behind the foundation of the UNASUR in December 2004. In this framework it also Venezuela's accession actively promoted the South American Defence Council (Conselho de to Mercosur has long Defesa Sul-Americano) as regional body for cooperation on defence been a Brazilian and security issues. objective. However, the Brazil has also acted as mediator in political crises in various countries Mercosur's decision in in the region, for instance in Honduras (playing a leading role in the June 2012 to suspend region's dealing with the 2009 coup that removed President Manuel Paraguay's membership Zelaya and with the aftermath of the crisis), Bolivia, Colombia, Ecuador and admit Venezuela as and Venezuela. full member has provoked criticism in Brazil is the by far the most important of the five Mercosur countries, Brazil. representing 71 % of the bloc's combined population and 75 % of its combined GDP. The Mercosur General High Representative (representing the bloc in negotiations with third parties and with the right Brazil's relations to the to propose initiatives on the integration process) is the former Brazilian 2 USA have been marked Vice Minister for Industry and Trade, Ivan Ramalho. by a certain rivalry As the biggest and most influential Mercosur member state, Brazil between the two biggest played a key role in the decisions taken by the Mercosur Summit in countries in the western June 2012 to suspend Paraguay's membership and incorporate hemisphere and trade Venezuela as full member. For Brazil, Venezuela's accession has long disputes. However, the been seen as an objective of strategic importance, given Venezuela's relationship has become energy resources and the new trade and investment opportunities it
2 He took over from another Brazilian, diplomat and former Minister under President 'Lula', Samuel Pinheiro Guimarães, who was elected High Representative in January 2011, but resigned in June 2012.
18 Brazil: After years of social and economic progress, new challenges emerge closer in recent years. could create for Brazil's industry. The two countries have signed various cooperation agreements and established a 'strategic association'. However, the decision to suspend Paraguay from Mercosur and admit Venezuela as full member has not been uncontroversial in Brazil, and was criticised by the opposition PSDB and private sector representatives. However, reportedly Brazil was decisive in avoiding economic or financial sanctions against Paraguay and has most recently helped to remove the obstacles to Paraguay's re-integration in Mercosur by mediating between Paraguay and Venezuela, for instance when President Rousseff arranged a meeting between Presidents Horacio Cartes and Nicolas Maduro in the margins of the UNASUL summit in Suriname in early September 2013. The alleged US monitoring of President Despite persistent frictions as regards trade and economic imbalances Rousseff's with the Mercosur partner Argentina, the bilateral relationship remains of communications has strategic importance for Brazil, and the two countries' partnership created new remains the fundamental axis of the Mercosur. controversies in Brazil- The relationship with the USA has been characterised by trade disputes USA relations and and Brazil's criticism of what it sees as US protectionism, as well as a provoked the certain rivalry between the two biggest countries in the western suspension of hemisphere. Brazil did not support the US-led intervention in Iraq and Rousseff's visit to has been disapproving of Washington's policy towards Cuba, Venezuela Washington, scheduled and Iran. At the same time, the two countries have pragmatically for October. However, cooperated on a number of regional and international issues, both countries seem recognising that the other was too important to neglect. Relations have keen to limit the fall-out become closer in recent years, reflecting US recognition of Brazil's from the revelations. international strategic importance and its role as a stabilising force in South America. As the world's two largest ethanol producers, Brazil and the USA have also agreed to promote production and use of ethanol. Similarly, in April 2010, the two countries signed an agreement to increase bilateral cooperation in the area of defence, the first accord of this type since 1952. President Obama's visit to Brazil on 19-20 March 2011 —and the fact that he went to Brazil before a visit by President Rousseff to Washington — was seen as a sign of the USA's wish to develop strong relations to Brazil, although the visit did not seem to yield substantive political results. However, in recent months, US-Brazilian relations have been strained by the claims that the US NSA has monitored communications from President Rousseff and also spied on Petrobras, the state controlled energy company. As a result, on 17 September 2013 it was announced that an official visit by President Rousseff to Washington, scheduled for 23 October 2013, had been postponed. The Brazilian government stated that the illegal interception of communications was incompatible with the democratic co-existence between friendly countries and that given the absence of an exhaustive explanation of the question, the conditions for the visit were not given. However, it also underlined that once this question has been resolved, the visit should take place as soon as possible to advance the construction of the two countries' 'strategic partnership'.
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The possible political consequences of the resignation of Minister of Foreign Affairs Antonio Patriota on 26 August 2013 remain to be seen. Patriota was forced to step down following a diplomatic dispute with Bolivia over the assistance given by Brazil's embassy in La Paz to a Bolivian Senator to flee to Brazil (the Senator had remained during 15 months in the embassy after having asked for political asylum; the Bolivian government considers him to be a criminal, who has been sentenced on charges of corruption). Brazil's UN ambassador, Luiz Alberto Figueiredo, was appointed as new Minister.
4 Economic and social issues
4.1 Economic indicators
The Brazilian economy has experienced sustained growth since the mid-1990s (except 1998-1999 and in 2009), but is currently going through an important slowdown. After GDP growth reached 7.5% in The economy has 2010, marking a strong recovery after the international financial and expanded at a sustained economic crisis in 2008-2009, the economy only expanded by 2.7 % in rate since the mid- 2011 and less than 1 % in 2012. This year, growth has picked up, albeit 1990s, but growth has moderately, and is expected to reach around 2.5 %. slowed down in recent Among the reasons for de-accelerating growth is a less favourable years in a less benign international economic climate, which has led to weaker demand on international Brazil's main export markets, such as China and Argentina. Domestic environment consumption has remained relatively dynamic, due to increasing wages and falling unemployment, but also increasing levels of indebtedness. The government has launched several measures to stimulate consumption and exports and thus economic growth, including tax cuts, more credits at low prices, measures to reduce business costs, public investment, loans to local infrastructure projects.
8 7,5 Table 1: 7 GDP growth 2004-2014 6,1 6 5,7 (in percentages). 5,2 5 4 4 3,2 3,2 3 2,7 2,5 2 0,9 1 0 -1 2004 2005 2006 2007 2008 2009-0,3 2010 2011 2012 2013 2014 Source: International Monetary Fund, World Economic Outlook Database, April/July 2013. Growth-stimulating economic policies have for some time been
20 Brazil: After years of social and economic progress, new challenges emerge
accompanied by steady cuts in interest rates. Between October 2012 and April 2013, the Central Bank's main interest rate stood at 7.25 %, a Despite the slowdown, record low (only in September 2011, the rate was 12 %). However, it inflation has been has since then been increased to 9 %. increasing in 2013. This reflects concerns about rising inflation. After having stood around 5 However, price % in mid-2012, consumer prices picked up and the inter-annual inflation increases seem to have rate reached a peak of 6.7 % in June 2013. Since then, consumer prices started to slow down have slowed down, with the inter-annual inflation rate standing 6.1 % in again, among other August 2013, the lowest level since January. However, this is still well things due to interest above the Central Bank's inflation target of 4.5 %. rate hikes.
2001 Figure 3: 2011 Sectoral composition of Industry, 27% GDP, 2001 and 2011 Industry, 28% Se rvices, 66%
Se rvices, 67% Agriculture, 6% Agriculture, 6%
Source: World Bank
4.2 Trade and investment
One of the drivers of the expansion of Brazil's economy has been a strong export growth. Brazil has taken advantage of increasing international prices for raw materials and agricultural commodities, not Exports have increased the least caused by growing demand from China. strongly for several years After a sharp drop in both exports and imports in 2009 as due to high international consequence of the international crisis, trade recovered strongly in prices on commodities. 2010 and 2011. However, the increase in both exports and imports However, since 2012 was reverted in 2012, when the total value of exports fell by 5.3 % and exports have dropped. 3 of imports by 1.3 %. This trend has continued in the first eight months of 2013, with a decline in the total value of exports of 4.3 %, compared to the same period in 2012. In contrast, imports have grown again, by 4 % from January-August 2013.
3 Figures from the Central Bank (Banco Central do Brasil): http://www.bcb.gov.br/?indicators
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Figure 4: 300000 Brazil's trade in goods 250000 (USD millions) 200000
150000
100000
50000
0 2006 2007 2008 2009 2010 2011 2012
Imports Ex ports Balance of t rade
Source: Banco Central do Brasil (http://www.bcb.gov.br/?indicators) Consequently, Brazil's traditional surplus on the trade balance has diminished substantially. After a sharp drop (by almost 35 %) in 2012 Declining exports mean to slightly less than USD 20 billion — the lowest level in a decade — it that Brazil this year will is likely that Brazil in 2013 will register its first trade deficit in 13 years. register the first trade In the first seven months of 2013, the trade balance recorded a deficit deficit since 2000. of almost USD 5 billion. In addition to trade in goods, Brazil registers a considerable deficit in trade in commercial services. Exports have become increasingly dominated by raw materials and commodities in recent years. In 2011, agricultural products represented 34 % of all exports, and fuel and mining products another Exports have increasingly 30 %, while manufactures represented the remaining 33 %. On the become dominated by other hand, industrial products represented 72 % of the country's raw materials and imports (in 2011). commodities, while Brazil's exports markets are relatively diversified. Despite the strong industrial products growth in exports to China, which in 2009 became Brazil's second dominate imports. trade partner, the EU remains the principal market for Brazilian exports, and also the main supplier of the country's imports.
Table 3: Brazil's top five trading partners, 2012
Origin of imports Destination of exports Trade partners
USD USD USD # Origin % # Destination % # Partner balance million million million
1 EU 47 662 21.4 1 EU 48 860 20.1 1 EU 96 522 + 1 198
2 China 34 248 15.3 2 China 41 228 17.0 2 China 75 476 + 6 979
3 USA 32 603 14.6 3 USA 26 849 11.1 3 USA 59 452 - 5 754
4 Argentina 16 444 7.4 4 Argentina 17 998 6.8 4 Argentina 34 442 + 1 554
22 Brazil: After years of social and economic progress, new challenges emerge
5 South Korea 9 098 4.1 5 Japan 7 956 3.3 5 Japan 17 054 + 221
All imports: 223 149 All exports: 242 580 Balance of 19 431 trade: Source: Banco Central do Brasil (http://www.bcb.gov.br/?indicators)
The deteriorating trade balance has also led to a growing current account deficit. After the first seven months of 2013, it stood at USD 52.5 million — an all-time high and higher than the deficit registered for the whole of 2012. As a share of GDP, the current account deficit represented 3.95 % at the end of July 2013, compared to the 2.24 % a year earlier. Diminishing export revenues and deteriorating financial accounts have led to a decrease in Brazil's international reserves in the Central Bank: in mid-September 2013, they reached around USD 368 billion, slightly under the levels recorded in 2012 and during the first half of 2013. However, in proportion to the size of the economy, Brazil has the highest international reserves among the BRICS countries.
Also the inflows of foreign direct investment (FDI) point to a less benign Inflows of foreign direct economic situation. On the back of strong growth in exports and investment (FDI) have domestic demand, FDI inflows have increased substantially in the last stagnated since 2012. decade, reaching a record USD 66.6 billion in 2011, 37 % more than in However, Brazil remains 2010. However, also the steady inflow of foreign capitals stagnated in s the third most 2012, when they were about USD 65 billion, at roughly the same level important destination for (only 2 % lower) than the year before. Nevertheless, Brazil maintained FDI in the world. the position as the world's third most important destination of FDI flows (after the USA and China) it obtained in 2011. Figures for the first seven months of 2013 indicate that FDI inflows were similar to those registered during the same period of 2012. Among the trends characterising FDI flows to Brazil in recent years has been the growing share of Chinese investment, for instance in iron-ore mining.
Figure 5: 800000 Brazil's FDI stocks 700000 (USD million) 600000 500000 400000 300000 200000 100000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Inward FDI stocks Outward FDI stocks
Source: http://unctadstat.unctad.org/TableViewer/tableView.aspx
4.3 Towards a new growth model?
The last years' relative economic setback has put focus on the weaknesses of Brazil's economic growth model. Exports have
23 Policy Department, Directorate-General for External Policies
increasingly become dominated by basic goods and a limited number of agricultural commodities (soya, sugar, meat etc.) and mining products (iron ore). This has allowed Brazil to benefit from strongly growing international prices (owing in first place to demand from China) for these products, but exports of manufactured goods have stagnated. In 2012, exports of primary products represented 47 % of all exports against 29 % in 2005, while sales of manufactured goods represented 40 % of all exports compared to 57 % in 2005. At the same time, imports of There are concerns that manufactured products have continued to rise, due to increasing Brazil has become too consumption and a growing share of imported components in industrial dependent on commodity production. Also the appreciation of the currency — fuelled by huge exports and that the capital inflows — over time has made exports more expensive and industry has lost imports cheaper. competitiveness, This has created concerns that Brazil has become excessively threatening the dependent on commodity exports (and thus too vulnerable towards economy's long-term volatile international prices), while the industry has lost competitiveness sustainability. and is hampered by low investment levels. Some even talk about the risk of de-industrialisation. The manufacturing industry's loss of competiveness could become particularly problematic if weaker growth in the global economy leads to more permanently lower demand and prices on commodities and raw materials. There is broad agreement that structural reforms are necessary to make the Brazilian economy more competitive and more sustainable in the long run. These should aim at, for instance: modernising the country's deficient infrastructure, improving the educational system to give the workforce better qualifications, simplifying administrative procedures, making the tax system simpler and more efficient, improving access to credits, and dismantling monopolistic structures in some sectors of the economy. The government has implemented various measures to boost the competitiveness of the industrial sector, stimulate investment, diversify exports and develop Brazil's road and railway net, as well as defend industries on the domestic market.
Acknowledging the need Many of these are included in the 'Bigger Brazil' (Brasil Maior) plan, to boost the industry's launched by President Rousseff in August 2011, which includes cuts in competitiveness, the taxes for industries with a high number of employees, export incentives government has launched and measures to promote innovation and technological development. It various initiatives to targets in particular industries which have had difficulties in competing stimulate investment and with cheap imports, such as textile, footwear, cars and IT. The plan aims spending on research and at increasing investments as percentage of GDP and private spending development and on research and development, making the industry more energy- modernising the effective and augmenting Brazil's share of international trade. The plan infrastructure. is estimated to cost around USD 16 billion for a three-year period (2011- 2014). Further measures to address competitiveness problems were announced by President Rousseff in September 2012, including the reduction of energy and transport rates and new rules for concessions to private companies. The government also continues implementing the investment
24 Brazil: After years of social and economic progress, new challenges emerge
programme known as the PAC (Programa de Aceleração do Crescimento, Programme for the Acceleration of Growth), originally launched in 2007. The programme's second phase, known as PAC 2, which was launched in March 2010 involves investments in the order of the equivalent of EUR 414 billion between 2010 and 2014 and EUR 273 billion beyond 2014. It focuses on the energy sector, rail and road transport as well as on financing the national housing program. Developing Brazil's infrastructure, which in many respects is considered of poor quality and lagging behind other emerging economies, is an important long-term challenge to ensure continuing growth and improve competitiveness. To address this, the government in August 2012 launched a plan to mobilise investment of around USD 65 billion to modernise and augment the capacity of the country's main highways and the railway net. The necessary investments should come from the private sector, but it is foreseen that the public National Development Bank (Banco Nacional do Desenvolvimento, BNDES) will offer subsidized loans to investors. The plan is also meant to have a more immediate stimulating effect on the economic activity, by implementing half of the foreseen total investment during the next five years. Similarly, The exploitation of big infrastructure projects have been started with a view to the 2014 Brazil's oil reserves, Football World Cup and the 2016 Olympic Games in Rio de Janeiro. particularly the The government also promotes private investment, including by foreign underwater 'pre-salt' investors, in the management of ports, roads and airports as a way to reserves in the Atlantic, making the infrastructure more efficient. could have an enormous impact on the Brazilian The development of oil production, particular from the underwater pre- economy. salt fields in the Atlantic Ocean, has the potential to transform Brazil into an important oil exporting country and significantly boost fiscal revenues. With around 15 billion barrels of proven reserves, which could increase to perhaps as much as 100 billion, Brazil's estimated oil reserves are among the most important in the Americas. The state controlled oil company Petrobras has announced that it expects to increase its domestic production to around 2.5 million barrels of oil per day by 2016. However, this will require substantial investments: in June 2012, Petrobras made public a business plan for 2012-2016 including investments for USD 237 billion, of which almost 20 % should go to exploration and production in the pre-salt fields. The auction of exploration rights will begin with the first field in October 2013. The process has suffered considerable delays, among other things due to the political dispute over the distribution of royalties between state and municipal governments.
4.4 Social issues
During the last decade, the combination of macroeconomic stability, economic growth creating new jobs, declining birth rates and comprehensive social programmes has reduced poverty rates considerably. The percentage of the population living in poverty fell from
25 Policy Department, Directorate-General for External Policies
37.5 % in 2002 to 20.9 % in 2011, while the indigence rate decreased from 13.2 % to 6.1 % in the same period4. It is estimated that during the last ten years some 30 million people have entered what is defined as 'middle class' status (earning the equivalent Brazil has achieved a of between USD 900 and 2 000 per month), which now comprises significant reduction in slightly more than half of Brazil's population. Unemployment has also poverty rates. It is been brought down: the rate of open urban unemployment stood at estimated that around 5.6 % in July 2013, compared to 12.3% in 2002. 30 million poor have acquired 'middle-class A fundamental objective of President Rousseff's government is to further status'. reducing poverty and expanding the middle classes, by raising incomes and creating more jobs. It has pledged to eradicate extreme poverty by 2014 and stated that the middle class should include 60 % of the population by 2018. The government has set There has also been a steady increase in social expenditure. As one of the goal to eradicate the few countries in Latin America, social spending as portion of the extreme poverty by GDP has grown continuously over the last two decades, and now 2014. amounts to close to 25% of GDP. This is the highest percentage in the region (after Cuba). The government's commitment to active social policies to combat poverty was underlined by the launch, in June 2011, of the programme 'Brazil without Poverty' (Brasil sem Miséria) programme, which aims at eradicating extreme poverty through cash transfers, professional In addition to economic training and technical assistance. In February 2013, President Rousseff growth and the creation announced an extension of the programme to lift a further 2.5 million of new jobs, poverty people out of extreme poverty. Additionally, a number of comprehensive reduction has been social programmes established under the previous government facilitated by active continue: social policies, among The 'Zero Hunger' (Fome Zero) programme to combat hunger and them a number of extreme poverty. 'flagship' social The 'Family Allowance' (Bolsa Familia) programme which provides programmes. financial aid to poor families provided that their children attend school and get vaccinated. About 13 million families, or around 52 million people, are receiving stipends through this programme. The 'My home, my life' (Minha Casa, Minha Vida) housing programme, launched in 2009, which aims at facilitating housing through subsidising property development. The programme has been very successful, with reportedly up to nine million families hoping to acquire a property over the next year, many with the support of this programme.
Despite sluggish economic growth, social expenditure has continued to increase. The state budget for 2013, adopted in Congress on 12 March 2013, sets out substantial increases in spending on the anti-poverty programmes, in addition to increases on spending on healthcare (15%)
4 Figures from the UN Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America 2012.
26 Brazil: After years of social and economic progress, new challenges emerge
and education (33%). Similarly, the minimum wage, and with it pensions and social security payments, was raised by around 8 %. The reduction of poverty is hampered by deep-rooted income and regional inequalities. Traditionally, income inequalities in Brazil have been bigger than in any other country in Latin America and remain much more pronounced than in other emerging economies. Regional disparities, between the economic centres in Brazil's south-east and the poor rural areas in the north and the northeast are also enormous, with Although they have relatively many more people in the latter depending on pensions and been reduced somewhat social schemes. It has been estimated that the per capita income is in the last decade, social more than ten times higher in the São Paulo region than in the poor and regional inequalities states of the Nordeste. According to official data, some 60% of people remain important. living in extreme poverty live in the northeast. However, inequalities and income gaps have narrowed somewhat during the last decade due to economic growth and social improvements. In this respect, data published by the prestigious Getúlio Vargas Foundation (Fundaçao Getúlio Vargas) indicate that while incomes for the poorest 50% of the population increased by 68% between 2000 and 2010, incomes for the richest 10% grew by only 10%. The development of other social indicators, as for instance schooling, also point to a trend towards less pronounced inequalities. The Gini coefficient has moved from around 0.60 around 2000 to slightly less than 0.55 in 2009. In any case, promoting equitable growth will remain a fundamental challenge in the years ahead.
5 The EU and Brazil
Given its size, economic weight and its political and diplomatic As a significant regional importance, Brazil is key partner of the EU. The Strategic Partnership, and global player, Brazil established in 2007, has served as a basis for an important is a key partner for the intensification of EU-Brazil relations, as reflected in the high number of EU. sectoral dialogues and cooperation initiatives in many areas. The EU and Brazil share the commitment to international cooperation and effective multilateralism; a key objective of the Strategic Partnership is to reinforce cooperation to meet global challenges. Since 1992, EU- Brazilian relations have also developed in the framework of the relations between the EU and Mercosur.
5.1 EU-Brazil relations
Brazil was the South American state to recognise the European Community and establish a permanent representation in Brussels, Brazil and the EU have establishing diplomatic relations with the European Economic maintained formal Community (EEC) and Euratom in 1960. However, it was not until the relations since 1960. In early 1970s, with the growth of trade relations, that the Community 2007, they established a became one of Brazil’s principal partners, and in 1973, the EEC and comprehensive strategic Brazil signed a trade cooperation agreement. With the consolidation of partnership. democracy in Brazil, bilateral relations took a leap forward, and a Framework Cooperation Agreement was signed in 1992. It covered,
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inter alia, cooperation in trade, investment, finance and technology, and brought Brazil under the EU's Generalised System of Preferences (GSP). The Framework Cooperation Agreement signed with the Mercosur on 15 December 1995 further consolidated cooperation with Brazil. Finally, an Agreement for Scientific and Technological Cooperation was signed in 2004 (and most recently renovated for a five- year period in August 2012). In recognition of Brazil's increasing presence as an actor on the international scene, the EU-Brazil Strategic Partnership was established in 2007. At the he first EU-Brazil Summit, held in Lisbon on 4 July 2007, the two parties formalized the comprehensive strategic partnership and Key objectives of the defined a number of priority areas of action, including: Strategic Partnership are to strengthen - the strengthening of effective multilateralism, including pursuing effective multilateralism the reform of the UN system; and cooperate closely - the promotion of human rights; - close cooperation on global challenges such as tackling poverty on global challenges. and inequality, environmental issues (such as climate change, water management and the preservation of forests and biodiversity) and energy; - cooperation in sectors and areas of mutual interest, including economic and financial issues, information society, aviation and maritime transport, science and technology, satellite navigation, social matters and regional development; - the enhancement of stability and prosperity in Latin America, The most recent EU- including cooperation to promote regional integration within Brazil summit, in Mercosur as well as the conclusion of an EU-Mercosur Association Agreement. January 2013, the two parties agreed to further Since 2007, there have been six EU-Brazil summits. The last summit, deepen their political held on 24 January 2013 in Brasilia, underlined the consistent dialogue to promote the strengthening of bilateral relations, and it was agreed to further deepen convergence of views the political dialogue in order to promote the convergence of views on on global issues and global issues and to favour the rapprochement of positions in positions in international international fora. fora. The Summit also welcomed the advances in the implementation of the EU-Brazil Joint Action Plan for the period 2012-2014, which was adopted in 2011. It sets out a wide range of common initiatives and actions to be taken within five broad priority areas5: - the promotion of peace and comprehensive security through an effective multilateral system; - the enhancement of the economic, social and environmental partnership to promote sustainable - development; - the promotion of regional cooperation: - the promotion of science, technology and innovation; and.
5 http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/124878. pdf
28 Brazil: After years of social and economic progress, new challenges emerge
- the promotion of people-to-people exchanges.
Various high-level visits have also underlined the importance of bilateral relations. In January 2011, the recently appointed Brazilian Foreign Minister, Antonio Patriota, visited Brussels on his first visit in the office outside Latin America. Similarly, HR/VP Catherine Ashton visited Brazil in February 2012, meeting with President Rousseff and Antonio Patriota, among others.
5.2 Cooperation
On the basis of the 1992 and 1995 cooperation agreements and the Strategic Partnership, the EU and Brazil have established a wide range of cooperation and dialogues in many different sectors. Currently, there are 30 ongoing dialogues between the EU and Brazil in areas of mutual interest, based on the principle of reciprocity and complementarity and aiming at sharing knowledge and experiences. The dialogues range from public sector governance and human rights over economic and financial issues, social policies, education and the environment, to Cooperation and regional integration policies. dialogue on the basis of the 1992 cooperation Among the most recent dialogues to be established are the dialogues agreement and the on agricultural questions and o drugs. At the January 2013 EU-Brazil Strategic Partnership Summit, the two parties agreed to further develop their cooperation on take place in more than international questions and conflict situations by establishing a high- 30 different sectors. level dialogue (on senior officials' level) on international peace and security, including peacekeeping and peacebuilding. The European Commission's cooperation with Brazil focuses on two main priorities: to enhance bilateral relations through stimulating exchanges and sectoral dialogues; to promote the environmental dimension of sustainable development. In this respect, the EU has given ample support to the Programme for the Conservation of Brazilian Tropical Forests in order to put an end to deforestation. In quantitative terms, the Commission's bilateral cooperation with Brazil is relatively modest: EUR 61 million have been allocated to the bilateral cooperation for the 2007-2013 period (compared to EUR 64 million in A new phase of EU- 2002-2006). Brazilian cooperation As an upper-middle-income country, Brazil is one of the countries in will begin in 2014. Latin America that will cease to receive 'traditional' bilateral development cooperation from 2014–2020. Cooperation in the future will be based on the new 'Partnership Instrument', introduced in the financial framework for 2014-2020. In science and technology, Brazil is the fourth most important non- European partner (after the USA, China and Russia) participating in European research projects under the EU's 7th framework program in research and technological development for 2007-2013. All areas of the programme are open to Brazilian research institutions and companies.
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During the first half of the programme, from 2007 to 2010, Brazil received funding of some EUR 26 million for 166 projects involving 235 national organizations. The 2013 EU-Brazil Summit agreed that the bilateral cooperation in Science, Technology and Innovation should be upgraded and given a more strategic orientation. Brazil has also benefited significantly from loans from the European Investment Bank (EIB) to support private sector investment in the country. Brazil has been granted loans for close to EUR 1.5 billion.
5.3 Trade and investment relations
Brazil is the EU's eighth most important trade partner and export market in the world (and the most important in Latin America). Brazil is the EU's most Total value of trade between the EU and Brazil increased 91 % from important trade partner 2005 to 2012, despite a steep drop in both exports and imports in 2009 in Latin America and the as a consequence of the international economic crisis. The growth in eighth in the world. The EU-Brazilian trade has however been asymmetric: while EU exports to EU remains Brazil's Brazil more than doubled (from around EUR 16 billion to almost 40 principal trade partner. billion), EU imports from Brazil grew only by 54 % (from some EUR 24 billion to 37 billion). However, during the last decade, EU exports to This development is reflected in the overall relative importance for the Brazil have increased EU of trade with Brazil: the country's share of total EU exports grew relatively more than from 1.5% to 2.3% during this period, while the share of total imports imports. In 2012, the EU stagnated (it stood at 2.1% in 2012, compared to 2.0% in 2005). had a surplus on the The trade balance has been in Brazil's favour up to 2012, when the EU trade balance with for the first time registered a surplus in its trade with goods with Brazil. Brazil. This trend seems to be accelerating this year: according to data from Brazil's Central Bank, exports to the EU fell by 10 % during the first eight months of 2013 compared to the same period in 2012, while imports increased by 6 %6.
Figure 6: 50000 EU trade with Brazil (EUR millions) 40000 30000
20000
10000
0 2005 2006 2007 2008 2009 2010 2011 2012 -10000
-20000 Imports Ex ports Balance of trade
Source: European Commission, DG Trade.
6 http://www.bcb.gov.br/?indicators
30 Brazil: After years of social and economic progress, new challenges emerge
These trends illustrate the more general problem affecting Brazil's foreign trade: the strong surge in imports of manufactured products and the dependence on the exports of primary commodities. The EU's sales to Brazil are mainly made up of products as machinery and transport equipment, chemicals and other manufactured goods. Brazil is also an Brazil is the EU's important market for commercial services, area in which the EU principal supplier of maintains a solid trade surplus. agricultural products. In contrast, the EU's imports from Brazil are dominated by primary products, in particular agricultural products. In fact, Brazil is the single biggest supplier of agricultural products to the EU, representing 12% of all EU agricultural imports (2012). However, around a quarter of the EU's imports from Brazil are manufactured goods. Brazil is one of the few countries in Latin America for which the EU as a group remains the most important trading partner, representing about 21 % of the total value of the country's foreign trade in 20127.
Table 3: Imports: Exports: The EU's trade in goods Value 2012: EUR 37 090 million EUR 39 595 million with Brazil EU's rank (for Brazil), 1 1 2012: Brazil's rank (for EU), 10 8 2012 % Brazil's total, 2012: 19.9 % 18.6 % % EU total, 2012: 2.1 % 2.3 % Source: DG Trade
Trade relations have on occasions been subject to disputes. The probably most important was due the European Commission's decision In recent years, the in 2008 to impose restrictions on beef imports from Brazil in order to European Commission deal with risks from foot and mouth disease. More recently, the EU has has denounced various denounced import restrictions implemented by Brazil. The European trade distorting Commission's Tenth Report on Potentially Trade Restrictive Measures, measures and import covering the period from May 2012 to May 2013, highlights Brazil restrictions implemented among the emerging economies that have applied the highest number by Brazil. of potentially trade-distorting measures. The report points to Brazil as standing out as having implemented the heaviest tariff increases and as representing more than a third of trade-related restrictions in government procurement. The Commission also express concerns about the measures put in place by Brazil to stimulate exports, finding that they distort competition. Looking at the potentially trade restrictive measures implemented since 2008, Brazil is number four among countries that have implemented most measures (after Argentina, Russia and Indonesia).8
7 http://www.bcb.gov.br/?indicators 8 http://trade.ec.europa.eu/doclib/docs/2013/september/tradoc_151703.pdf
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The negotiations of the The EU has been negotiating an Association Agreement, including free EU-Mercosur trade, with Brazil and the other Mercosur countries since 1999. Talks Association Agreement, were suspended in 2004 due to differences on regarding trade in including trade agriculture, services and the opening up of public markets, but were re- liberalisation, are launched on occasion of the EU-Latin America-Caribbean Summit in approaching a decisive May 2010. Since then, nine rounds of negotiations have been taken moment: the exchange place. The EU-Mercosur Ministerial Meeting in Santiago de Chile on 26 of offers on market January 2013 (in the margins of the EU-CELAC Summit) recognized the access, as agreed in progress made in the negotiations, but acknowledged that further work January 2013. was necessary. The meeting decided that both blocs should start work to prepare an exchange of offers on market access, to take place no later than the last quarter of 2013. Considering the scant progress in the EU-Mercosur negotiations, the have been reports that Brazil (and Uruguay) could seek an agreement It has been suggested at 'separate speeds' in order to overcome the position of other Mercosur that Brazil could seek an countries less keen on liberalising trade (Argentina and Venezuela). agreement at 'separate However, so far no official proposal has been made to change the speeds' in order to format of the bloc-to-bloc negotiations. overcome the position of The possibility of a separate negotiation/agreement reflects concerns in other Mercosur countries Brazilian industry and export sectors about the loss of competitiveness, less keen to liberalise the possible dependence on exports to China and the absence of trade trade. This reflects agreements between Mercosur and other major trading blocs. The concerns in Brazil about influential Industry Federation of São Paulo (Federação das Indústrias the loss of do Estado de São Paulo, FIESP) has recently stated that an agreement competitiveness and the with the EU was needed to break Brazil's "trade isolation" and that absence of agreements negotiations should not stall due to the reluctance of two countries. between the Mercosur and other major traders. Other reasons for the Brazilian interest in reaching a free trade agreement with the EU are the start of the negotiations of the EU-USA Transatlantic Trade and Investment Partnership (TTIP) and the expiration in 2014 of the preferences for Brazil's exports to the EU under Without an agreement, the GSP. Brazil will lose preferential Brazil is a natural main destination for European investment, and the EU access to the EU market is the principal investor in the country. In 2011, the stock of direct under the GSP from investment from the EU in Brazil reached EUR 239 billion, almost 39 2014. billion more than the year before. Notably, investment relations between the EU and Brazil are very much reciprocal: in 2011, the stock of Brazilian Fids in the EU reached a value of around EUR 78 billion, corresponding to around a third of the value of European FDI in Brazil. In some years, the flows of Brazilian investment into the EU have been more important than flows in the other direction.
5.4 Outlook for the European Parliament
The European Parliament has always been engaged in Brazil’s political and social situation. It has pronounced itself on a number of issues, including the problems of homeless children on the streets, police brutality, impunity and corruption, threats to the environment and the Over the years, the violation of human rights and the principles of the rule of law.
32 Brazil: After years of social and economic progress, new challenges emerge
Parliament has focused The importance of the relationship to Brazil as a strategic partner for the on social problems, EU was stressed in the Parliament's recommendation to the Council on corruption, the violation the EU-Brazil Strategic Partnership, adopted on 12 March 2009, which of human rights and the stressed Brazil's role as a significant regional and global player and a threats to the key interlocutor for the EU. The EP observed that the mechanisms for environment in Brazil. political dialogue arising from the Strategic Partnership should provide a boost for relations with and between the various regional integration processes, with a view to strengthening multilateralism. Similarly, in the 'Resolution on the EU foreign policy towards the BRICS and other emerging powers: objectives and strategies', adopted on 2 The Parliament has February 2012, the EP underlined the increased relevance in foreign stressed Brazil's role as policy terms of Brazil (and the other BRICS countries), calling for a key regional and enhanced cooperation on all matters of international concern, global player and as a particularly with those BRICS that share and respect democratic values strategic partner for the and strive for a social market economy. The Resolution welcomed the EU. EU-Brazil Strategic Partnership Joint Action Plan 2012-2014, and the mutual commitments made in the areas of democracy promotion and reforms of the multilateral system of governance. It also urged both sides to contribute to the reform of the world's financial architecture, and recalling the offer made by President Rousseff regarding support for the EU to overcome its debt crisis. Parliamentary contacts and exchanges with Brazil take place directly with the Brazilian Congress, with the Brazilian members of the Mercosur Parliament (Parlasur) and in the framework of the EuroLat. The EU-Brazil Strategic Partnership agreement includes a provision on interparliamentary relations, aimed at further strengthening links between the EP and the Congress of Brazil. However, interparliamentary cooperation has not yet been institutionalised, although they have been strengthened in recent years. In its 2009 Resolution on the Partnership, the EP stated that that it should establish a regular structured dialogue between the Members of the Brazilian National Congress and the EP. Similarly, it recommended that provisions should be made for the EU institutions and the Brazilian Government to provide the EP and EuroLat with regular and detailed information on the state of play of the Strategic Partnership. In the same vein, the EU-Brazil Summit in July 2010 welcomed the intensification of the relations between the Brazilian National Congress and the EP. Similarly, the Summit in October 2011 agreed to, on one side, foster collaboration between the Parliament of Mercosur and the EP and, on the other, to support regular contacts between the Members of the Brazilian National Congress and of the EP on all subjects of common interest and the establishment of a regular structured dialogue between both parliaments. The 2012-2014 EU-Brazil Joint Action Plan reiterates the commitment to support the continuation of regular contacts and the effort aiming at the establishment of a regular, structured interparliamentary dialogue. The first interparliamentary meeting between the EP and the Brazilian Congress took place on 6 July 2011 in Strasbourg. On that occasion,
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the debate centred on the perspectives for an EU-Mercosur Association Agreement. The deputies expressed support for creation of a permanent forum to deepen the dialogue between the EP and the Brazilian Congress. In this respect, both chambers of the Brazilian Congress have put forward informal proposals concerning a regular forum for dialogue with the EP. According to these, such a forum could meet once or twice a year to debate issues of common interest, carry out the parliamentary follow-up of the implementation of the EU-Brazil Joint Action Plan and address recommendations to the EU-Brazil Summits. In addition, it should promote the exchange of best parliamentary working methods and, in this context, allow for the training of officials of both Parliaments, The latest EP visit to through the reciprocal temporary secondment of staff. Brazil took place in April 2013 (AFET delegation). The most recent visit of the Delegation for relations with the Mercosur countries to Brazil took place on 29 October-1 November 2012. It held talks with various Brazilian authorities (including the Minister of Foreign Affairs and of Agriculture, members of the Committee for Foreign Affairs and National Defence of the Brazilian Chamber of Deputies and of the Brazilian Delegation to the Mercosur Parliament, etc). The main topic of the meetings was the negotiations of the EU-Mercosur Association Agreement, the situation of Mercosur after the suspension of Paraguay and the accession of Venezuela and the EU-Brazil Strategic Partnership. Also addressed were the Brazil's relations with China and the other BRICS countries and the situation in the Middle East, particularly Syria. Since 2010, working groups from three Committees have visited Brazil (INTA in April 2010, DEVE in February 2011 and AFET in March 2013).
5.5 Policy options
As the most significant regional player and an increasingly important global actor, Brazil is a key partner for the EU. Sharing close historical, cultural and human ties, democratic values, the respect for human rights and the rule of law, and a commitment to international cooperation and effective multilateralism, Brazil is the most like-minded of the BRICS countries. Cooperation and dialogue with Brazil have progressed substantially, involving a wide range of issues. Based on common interests, there is however scope for deepening the partnership further in a variety of fields (security and conflict prevention, international Dialogue on the whole economic governance, energy, the environment and climate change, range of issues included development cooperation, education, science, technology and in the EU-Brazil innovation, business relations, etc.). Strategic Partnership — The Parliament has always been actively engaged in forging closer including on global links between Brazil and the EU. It should continue to play its role in governance and the Strategic Partnership, strengthening the dialogue with the international peace and Brazilian authorities and representatives of society, and particular security —should be working to further reinforce cooperation and dialogue with the pursued with the Brazilian Congress. Parliament's Brazilian
34 Brazil: After years of social and economic progress, new challenges emerge interlocutors. A fundamental objective of the Strategic Partnership is to reinforce cooperation to meet global challenges. While the EU and Brazil share a fundamental values and principles on international and multilateral cooperation and have similar positions on many issues on the international agenda, there are also differences, related to Brazil's adherence to the principles of non-interference and non- intervention. The decision of the January 2013 EU-Brazil Summit to establish a high-level dialogue on international peace and security, including peacekeeping and peacebuilding, offers an opportunity to The negotiations of the deepen dialogue and mutual understanding on these issues, which EU-Mercosur should also be included in the inter-parliamentary dialogue. Association Agreement A related topic that could be taken up is the fight against drug stand at a crucial trafficking (and organised crime in general), which may also hold juncture, immediately potential for cooperation, in view of Brazil's strategic position in the before the agreed South Atlantic. exchange of offers on market access. Also other topics and views concerning global governance — including the recent proposal to work towards a multilateral Brazil's expectations in regulation of the Internet in the UN framework — should be this regard and views on addressed in contacts with the Brazilian authorities and the way ahead for the parliamentarians. negotiation process will Brazil will cease to receive 'traditional' bilateral development be central topics for cooperation from the European Commission, while the country's talks during the visit. contribution to global development aid has expanded. This highlights the relevance of exploring new forms of EU-Brazil cooperation, particularly triangular development cooperation in other parts of Latin America and in Africa. The visit to Brazil takes place at a crucial moment for the negotiations of the EU-Mercosur Association Agreement, just before the agreed exchange of offers on market access. The preparation of the exchange of offers carried out in Brazil to should be addressed, and the Brazilian interlocutors should explain what the expectations on their side are to the further negotiation process. One objective of the talks may be to seek clarification as to whether Brazil at some point could favour differentiations for the Mercosur countries in pursuing the negotiations. Despite the EP's stated goal to establish a regular structured dialogue between the Members of the Brazilian National Congress and the EP — also included in the EU-Brazil Joint Action Plan 2012- 2014 — interparliamentary cooperation between the EP and the Brazilian Congress has not yet been fully institutionalised. The issue of how best to strengthen and develop a more structured dialogue between the EP and the Brazilian Congress could therefore be taken up again, with a view to reach agreement on the practical arrangements and allowing for giving a follow-up to the July 2011 interparliamentary meeting. In this regard, the need for the two houses of the Brazilian Congress to take coordinated positions on the mechanisms to strengthen and develop a more structured
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dialogue with the EP should be emphasised.
36 Brazil: After years of social and economic progress, new challenges emerge
6 Basic data
People and Source: geography
Population 201 032 714 2013 (estimate) Instituto Brasileiro de Geografía e Estatística 212 077 375 2020 (forecast) (IBGE) Capital city Brasília 3 703 312 Other major cities São Paulo 19 611 862 (metropolitan regions) Rio de Janeiro 11 793 174 Belo Horizonte 5 392 938 Porto Alegre 3 934 434 Total land area 8 514 877 km2 Poverty 20.9 % of population in poverty (2011) ECLAC: Social Panorama 6.1 % of population in indigence (2011) of Latin America 2012 Life expectancy at 78 ( women) World Health Organisation birth 71 (men) Literacy rate (adult) 90.4 % (2010) UNESCO Economy 2013 2014
GDP (billion USD; current IMF, World Economic prices ) 2 465 663 2 623 866 Outlook Database, April 2013 GDP growth 2.5 % 3.2 %
GDP per capita (USD 12 340 12 995 current prices) Inflation 5.5 % 4.5 % Unemployment Instituto Brasileiro de 5.6 % (July 2013) Geografía e Estatística (IBGE) Rankings Name of index: Ranking: Explanation and source: Human development 'High' United Nations Development Programme, index 85 / 187; 10 / 20 2013. LAC Corruption Perception 69 / 176 ; 5 / 20 Transparency International - Corruption Index LAC Perceptions Index 2012 Press freedom 91 / 197 / 7 / 20 LAC Freedom House - Freedom of Press index 2013 Competitiveness 56 / 148 5 / 19 LAC World Economic Forum: The Global Competitiveness Report 2013-2014 'Ease of doing business' 126 / 148 14 / 20 International Finance Corporation / World Bank - LAC Doing Business Index
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38 Brazil: After years of social and economic progress, new challenges emerge
7 Map
Source: http://www.nationsonline.org/oneworld/america.htm
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