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Putin’s parade cynically exploits WWII to justify his own criminal invasion

Peter Dickinson — Thu, 08 May 2025 02:13:09 +0000

Dozens of foreign leaders are expected in Moscow on May 9 for the largest international event in the Russian capital since Vladimir Putin launched the full-scale invasion of Ukraine more than three years ago. Officially, they are gathering for a military parade to mark eighty years since the World War II victory over Nazi Germany, but it is already apparent that the shadow of Russia’s current war in Ukraine will loom large over the entire spectacle.

The guest list for Friday’s Victory Day parade on Red Square reflects the dramatic geopolitical realignments that have taken place since 2022, and underlines the widening rift between Putin’s Russia and the democratic world. Prior to the invasion of Ukraine, Putin’s showpiece annual parade had been attended by many Western leaders including US President George W. Bush. This year, however, the guest of honor will be Chinese President Xi Jinping. He will be joined by the Brazilian president along with a host of Central Asian and African leaders. The sole representative from the European Union will be Slovakian Prime Minister Robert Fico.

Visiting dignitaries will be treated to a bold demonstration of modern Russia’s military might. The mood is expected to be far detached from the kind of somber tones more typically associated with World War II memorials elsewhere. Friday’s parade has been been carefully choreographed to emphasize Russian strength while projecting Putin’s supreme confidence in eventual victory over Ukraine.

The link to today’s war will be hammered home by the participation of numerous Russian military units accused of committing war crimes in Ukraine. Putin may also choose to surround himself with alleged war criminals from the ranks of his invading army, as he did last year. In his official address, it will be genuinely shocking if Putin does not attempt to draw direct parallels between the struggle against Nazi Germany and his own ongoing war in neighboring Ukraine.

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Even without the involvement of Russian troops fresh from the front lines of the current war, it would be virtually impossible to separate Putin’s parade from the Kremlin propaganda justifying the invasion of Ukraine. Ever since Russia first set out to subjugate Ukraine more than ten years ago, the Kremlin has portrayed its escalating invasion as a continuation of the World War II fight against Germany, with Ukrainians cast in the role of modern-day successors to the Nazis. Despite an almost complete lack of evidence to support these absurd and obscene claims, the “Nazi Ukraine” narrative continues to resonate among a Russia population that has been utterly saturated in an extreme form of World War II mythology that often borders on religious fanaticism.

From the very first years of his reign, Putin has sought to place the Soviet Union’s World War II experience at the very heart of modern Russia’s national identity. For the Kremlin, this emphasis on the immense suffering and ultimate triumph of the Soviet war effort has served as the ideal ideological antidote to the horrors of Stalinism and the humiliations of the Soviet collapse. It has proved a highly effective strategy, helping to rebuild Russia’s battered national pride and giving new meaning to the country’s twentieth century totalitarian trauma.

Putin’s war cult has centered around Victory Day, which has emerged over the past 25 years as by far the most important holiday on the Russian calendar. Many outside observers assume Victory Day always enjoyed similar prominence, but that is not the case. In fact, Stalin himself discouraged commemorations and made May 9 a working day in 1947. It remained so until the mid-1960s, when Victory Day was declared a public holiday. Nevertheless, there was none of the pomp and fanfare currently associated with the anniversary of the Nazi surrender. In the 46 years between the end of World War II and the fall of the Soviet Union, Moscow hosted a grand total of just four Victory Day parades.

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Putin’s cynical exploitation of World War II has also shaped Russian rhetoric on the international stage. This has been most immediately apparent in relation to Ukraine, which Kremlin propaganda has consistently portrayed as a Nazi state. Russia’s lurid claims have proved remarkably resistant to reality, with even the 2019 election of Jewish candidate Volodymyr Zelenskyy as president of Ukraine failing to force a change in tactics. Instead, Putin and other leading Kremlin officials have resorted to ever more ridiculous mental gymnastics as they have struggled to explain how a supposedly Nazi country could elect a Jewish leader. In one particularly notorious incident during the first months of the invasion, Russian Foreign Minister Sergei Lavrov dismissed Zelenskyy’s Jewish roots by declaring that Adolf Hitler also had “Jewish blood.”

When Putin announced the full-scale invasion of Ukraine on the fateful morning of February 24, 2022, it came as no surprise that he identified “denazification” as one his two key war aims. The true meaning of this chilling phrase has since become abundantly clear; “denazification” is actually Kremlin code for “de-Ukrainianization,” and reflects Putin’s end goal of a Ukraine without Ukrainians.

In areas of Ukraine that have fallen under Kremlin control since the start of the invasion, the occupation authorities are systematically wiping out all traces of Ukrainian history, culture, and national identity. Thousands of children have been abducted and subjected to indoctrination in a bid to rob them of their Ukrainian nationality, while anyone seen as potentially loyal to Ukraine has been detained and dispatched to a vast network of prisons where torture is reportedly routine. Europe has not witnessed atrocities on this scale since World War II.

For decades, most European countries have marked the end of World War II with solemn memorial services while collectively vowing “never again.” Under Putin, Russians have come to embrace an altogether more menacing form of militant remembrance accompanied by the unofficial slogan “we can repeat it.”

Putin has already succeeded in weaponizing the memory of World War II to consolidate his grip on power, garner domestic support for his expansionist foreign policy, and dehumanize his enemies. He is now poised to use this week’s Victory Day parade in Moscow to legitimize the criminal invasion of Ukraine among his foreign guests and place it in the same context as the fight against Hitler. This is staggeringly disrespectful. It is also historically illiterate. If anyone today is guilty of echoing the crimes of the Nazis, it is Putin himself.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

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Putin’s shamelessly self-serving call for a Victory Day ceasefire says much about his opportunistic approach toward the faltering peace process initiated by the United States in early 2025. Much like the 30-hour lull in fighting initiated by Putin over the Easter holiday, the three-day truce proposed this week is far too short to have any meaningful impact on negotiations to end the war in Ukraine. However, it does allow the Russian ruler to pose as peacemaker while continuing his invasion.

Putin’s headline-grabbing truces are also an important part of his stalling tactics as he seeks to drag out peace talks indefinitely without exhausting US President Donald Trump’s patience or closing the door on a potential broader thaw in bilateral relations with the United States. It is no coincidence that both of Putin’s recent ceasefire announcements have come in the immediate aftermath of critical comments from Trump indicating that the US leader is growing tired of Russian excuses. Indeed, news of the Victory Day truce emerged just hours after Trump had questioned Russia’s willingness to end the war and commented that he feared Putin was “tapping me along.”

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While Putin engages in dubious peace gestures, Russian Foreign Minister Sergei Lavrov has recently provided a far more realistic view of the Kremlin’s war aims and continued commitment to the conquest Ukraine. In an interview with Brazilian newspaper O Globo that was published on the same day as Putin’s Victory Day ceasefire announcement, Lavrov listed Russia’s conditions ahead of possible negotiations with Ukraine. These included international recognition of Russia’s right to five partially occupied Ukrainian provinces, the removal of all sanctions imposed on Russia since 2014, guarantees over Ukrainian neutrality, and the reduction of Ukraine’s army to a skeleton force.

Crucially, Moscow also insists on Ukraine’s “denazification,” which is recognized as Kremlin code for the comprehensive “de-Ukrainianization” of the country and the reestablishment of Russian dominance in all spheres of public life. If implemented, these punishing Russian terms would not lead to a sustainable peace. Instead, they would serve as an act of capitulation, setting the stage for the final destruction of Ukraine as a state and as a nation.

All this is a very long way from the Trump administration’s frequent assertions that both sides must be willing to compromise if they wish to achieve a viable settlement. While Ukraine has repeatedly backed calls for an unconditional ceasefire and has accepted the need for temporary territorial concessions, Russia continues to pursue maximalist goals that no Ukrainian government could possibly accept.

During the first hundred days of his presidency, Trump has sought to advance the peace process by pressuring Ukraine while offering Russia a wide range of incentives to engage. It should now be abundantly clear that this uneven approach has backfired. Far from persuading Putin to offer concessions of his own, Trump’s appeasement policies have convinced the Kremlin to escalate its demands further. We have now reached the point where Putin believes he can personally pause the war to host a military parade on Red Square before resuming his invasion three days later. This absurd situation makes a complete mockery of Trump’s peace efforts and threatens to leave him looking foolish.

If Trump is serious about bringing Russia to the negotiating table, he must first demonstrate a readiness to impose crippling costs on the Kremlin. The current US strategy toward Russia can be characterized as all carrots and no sticks. This is useless against a regime that only understands the language of strength and regards any attempts at compromise as signs of weakness. It also gravely underestimates the high stakes underpinning Russia’s invasion. Putin views the war in Ukraine as an historic mission to reverse the imperial collapse of 1991 and return Russia to its rightful place as a global superpower. He will not abandon this mission unless the alternative is defeat.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Pix and UPI: Initial development to growing pains

But first, it’s important to understand how immediate payment systems have developed into what they are today.

Over the last decade, India and Brazil launched their instant payment systems, UPI and Pix, on a national scale, reshaping their payment landscapes. With 350 million UPI users and 140 million Pix users, about 25 percent of India’s population and approximately 65 percent of Brazil’s population use the systems. One of every eleven adults in the world uses either Pix or UPI to send or receive immediate payments.

Brazil’s immediate payments policy is a payments-first approach. The Brazilian Central Bank (BCB) owns Pix and pushes it to cooperate with domestic private market players, focusing mainly on immediate payments and adjacent products. The system was launched in 2020 after a two-year ideation and development period.

Brazil – Pix QR codes and information at the Rio de Janeiro Cathedral, January 2025

Pix is the most quickly adopted immediate payment system in the world. As of the second quarter in 2024, it had reached 15.4 billion quarterly transactions. Its growth was fueled by a high degree of cooperation with the local financial ecosystem, as well as the fact that institutions with over 500,000 transacting accounts were required to participate, creating a network effect.

India developed UPI as a part of its Digital Public Infrastructure (DPI) program and implemented it as a part of a broad tech stack. Its approach to both DPI and UPI has long been for the state to develop the basic infrastructure, including a digital identity pillar, data exchange pillar, and payments pillar, allowing private sector innovation on top of the existing system.

UPI was developed under the National Payments Corporation of India, which is independent of India’s central bank and owned by various private banks. It became India’s most popular digital payment method, processing over 75 percent of the nation’s retail digital payments.

UPI QR code displayed at a store in a Mumbai market, January 2025

However, UPI’s growth was initially slow. It only reached 10 million monthly transactions in 2017 and took about three years to reach 1 billion monthly transactions. The growth was later expedited due to India’s demonetization, which started in 2016, the COVID-19 transition away from cash, and internationally backed payment providers entering the market.

Both Pix and UPI have significantly increased financial inclusion, supported growth in the fintech sector, and become the payment standards in their respective countries. However, their impact has not been entirely positive. Their use has also increased fraud and reshaped the power balance between different players in their markets.

Winners and losers: Market impacts in Brazil and India

Both systems transformed their respective markets, benefitting some players and reducing the market power of others.

The table below provides a snapshot of the market dynamics, highlighting each of the key players, their initial power and interest mapping (green for high, yellow for medium, and red for low) and the power shifts in the market caused by Pix. Power shifts are categorized into market share and decision-making power—red with a downward-facing arrow indicates a decrease, green with an upward-facing arrow signifies an increase, and yellow represents retained power or a mixed trend.

In Brazil, Pix has transformed the financial sector by benefiting new domestic players while challenging incumbents and credit card schemes.

Brazilian neobanks and fintech startups have grown significantly by leveraging Pix’s cost model to attract new customers. They take advantage of the optional fee structure for its value offer, including no fees for consumers and bearing the mandatory fees for businesses. Eliminated transaction fees and immediate payments increased consumer trust. It made digital payments more accessible, particularly for the previously unbanked population. Small businesses and micro-entrepreneurs have also gained access to low-cost, instant transactions, fostering financial inclusion and reducing reliance on cash. This, in turn, drove an increase in such banks’ target addressable market (i.e., relevant customer base).

However, traditional banks and credit card networks have been disrupted. Before Pix, Brazilian banks charged significant fees for interbank transfers, but Pix’s free and instant model eroded this revenue stream. As a result of Pix’s launch, traditional banks’ revenue from payments decreased by 8 percent between 2020 and 2021.

Credit card companies are seriously threatened by Pix. In 2022, BCB’s governor predicted that Pix would make credit cards obsolete. However, transaction data tells a more complicated story. With Pix introducing new consumers into the market, banks are leveraging “maturing cohorts” of consumers to offer them credit cards. Before Pix, credit card payment volumes were at a 12.7 percent annual CAGR (compound annual growth rate) between 2018 and 2020. After the launch of Pix, CAGR almost tripled, reaching 31.7 percent between 2020 and 2022.

UPI’s rapid adoption in India similarly transformed the power balance in the market and benefitted payment technology providers.

Large-scale third-party application providers (TPAPs), particularly Google Pay and PhonePe, dominate the UPI transaction space, accounting together for over 80 percent of UPI transactions. These players leveraged UPI’s no-cost model to gain significant user adoption. Consumers and merchants have also benefited from seamless, real-time payments without additional fees.

However, traditional banks struggle with UPI’s zero-fee structure, as it increases transaction volumes and associated costs without direct revenue gains. Some banks have pushed for the introduction of transaction fees to compensate for operational costs. For that reason, in 2022 RBI introduced subsidies for small transactions to banks, which they can share with TPAPs. In 2024, these accounted for 10 percent of PhonePe’s annual revenue. Credit card companies have also faced increasing competition. However, similar to Brazil, credit card usage volume has actually increased following UPI’s scaling. From a declining CAGR of 7.3 percent between 2018 and 2020 in payment volume, after UPI scaled, credit card growth reached a 24.2 percent CAGR between 2020 and 2022.

Big tech vs. local tech: Divergent approaches

A key distinction between Pix and UPI is their approach to global technology firms (“big tech”) and multinationals generally.

BCB has actively blocked big tech from entering the market, emphasizing the need for domestic control over digital payments. This approach is part of a general policy to strengthen the domestic ecosystem over incorporating multinational players. In 2020, for example, BCB suspended WhatsApp’s Brazilian immediate payments offering launch. It cited regulatory concerns and the potential risk to financial stability, launching Pix later that year. This strategy has helped the local fintech ecosystem and brought domestic players, mainly neobanks, to the front of the stage.

In contrast, India’s approach has allowed big techs and multinational players to participate in the UPI ecosystem and often relied on them for last mile delivery, and consumer onboarding, driving its scaleup. Google Pay and PhonePe, respectively backed by Alphabet and Walmart, quickly dominated.They could offer payments as a loss leader (i.e., sell at a loss to attract customers to other, profitable products) while benefiting from other products over time.

While doing so accelerated lagging adoption rates, it has also led to concerns about data privacy and market concentration.

The Indian government has since explored regulatory measures, such as imposing a 30 percent market share cap on individual TPAPs, though enforcement has been repeatedly delayed. Another claim voiced by government officials in the debate is that, given UPI’s universal nature, providers are interchangeable, thus eliminating anti-competitive claims.

This divergence in strategies and outcomes reflects the broader debate about whether emerging economies should embrace or limit big tech’s role in financial infrastructure.

Stages of implementation

Based on Brazil and India’s experiences, a three-stage framework emerges for countries considering immediate payment systems adoption.

The first stage of weighting prerequisites involves assessing the need for a state-led payments system based on three factors: the existence of alternatives (e.g., a strong credit card presence), expected change (primarily driven by the level of financial inclusion, development costs, and the size of the economy), and state capacity. As a result, countries with low banking penetration and high reliance on cash are more likely to benefit from such systems.

The second stage involves getting ready to hit the ground running, focusing on implementation and scaling. Understanding the existing market conditions and the shifts anticipated from the introduction of the system is crucial. Additionally, selecting an appropriate governance model—whether a central bank-led approach like Pix, a consortium-led model like UPI, or a provider model—plays a vital role in determining long-term implications. Lastly, the fee structure will also influence both adoption and market entry and should be actively established at this stage.

The final stage involves setting up a long-term process by establishing cooperation mechanisms and managing externalities. Policymakers must implement regulatory adjustments based on market responses to address issues such as monopolization and consumer protection against fraud. They should also explore engagement mechanisms for local players through forums and bilateral consultation schemes, focusing on gaining knowledge and legitimacy as well as efficiency considerations.

While many regions worldwide consider the future of payments, this framework can serve as an initial point of assessment. There is no perfect “one size fits all” solution. However, states’ varied ability to execute and enforce participation, the size of their economies, and the preexisting market structures significantly influence decisions concerning the “what” and the “how” of launching immediate payment systems.

Pix and UPI offer several additional insights into how state-led payment systems can reshape economies.

While Brazil focused on domestic financial players and regulatory control, India leveraged global technology firms for swift adoption. Consequently, Brazil fostered the expansion of its local fintech ecosystem, while India established an environment with significant multinational involvement.

In both cases, incentives for private market players aligned to support the growth of credit card provision as a subsequent step after initially introducing consumers to the financial system through Pix and UPI. While there is room for discussion about the implications of this step, it is a definitively critical point to consider when launching such systems and weighing their outcomes.

Lastly, the key lesson from these models lies in the decisions made by policymakers to initiate transformative processes. Both models illustrate the potential of such systems to enhance financial inclusion, disrupt traditional banking, and reshape economies, thereby aiding in their advancement. These lessons from UPI and PIX can be narrowly applied to public sector entities looking to create state-led systems, however, it is important to consider that market structure transformation might not be the ideal solution for every economy, especially more advanced economies which have a larger share of private sector players. Ultimately within a jurisdiction, policymakers bear the ultimate responsibility of acting to launch immediate payment systems.

Polina Kempinsky is a second-year Master of Public Policy student at the Harvard Kennedy School. This paper is part of Polina’s PAE (Policy Analysis Exercise) for her program, which explores the instant payment systems of Brazil and India.

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The post Fast payments in action: Emerging lessons from Brazil and India appeared first on Atlantic Council.

Want to understand the US-China trade war? Start with soybeans and batteries.

jcookson — Fri, 11 Apr 2025 15:06:18 +0000

The bottom has fallen out of US-China trade ties. The world’s two largest economies have imposed massive tariffs on each other that will sharply curtail trade between the two sides. While the disruption will undoubtedly have across-the-board effects on global supply chains, if it is sustained, two markets will be directly and immediately impacted: soybeans and lithium-ion storage batteries.

Though a major and sustained trade spat between Beijing and Washington would undoubtedly inflict major damage on the global economy, it could also provide limited, discrete opportunities for other actors. For example, Brazil could increase exports of soybeans to the People’s Republic of China, while Taiwan and South Korea could find it economically useful and politically convenient to ramp up purchases of US soybeans. Meanwhile, the US battery-storage sector faces profound uncertainty due to the tariffs, but it could emerge stronger over the long term.

Imposing large tariffs on China carries undeniable risks—and any decoupling of the two massive economies will bring pain, especially in the short term. Yet the crisis also presents opportunities to draw the United States and its allies and partners closer on discrete issues, even as broader, US-driven uncertainty continues to persist.

US-China trade is unbalanced

The US-China trade war doesn’t come from nowhere. Due to China’s export promotion policies, including subsidies, and the United States’ low savings rate, the bilateral goods trade deficit has exploded in recent years, peaking at $418 billion in 2018.

In order to reduce the bilateral goods trade deficit, the United States has imposed several waves of tariffs on Chinese exports. In response, China has, among other measures, targeted specific goods, such as soybeans, which are a major import it receives from the United States. China is betting that targeting soybeans will be a pain point for the White House: US soybean farmers are an important political constituency, about half of all their production is shipped abroad every year, and China is the largest single purchaser.

At the same time, China cutting its soybean imports from the United States could also present opportunities for other buyers and markets. Brazil, already China’s largest source of soybeans, could expand its exports. On the other side, the European Union, South Korea, and Taiwan could make politically useful and showy purchases of US soybeans as a way of trying to earn favor with the White House before or during their own negotiations on trade or other issues.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative; he also edits the independent China-Russia Report. This article reflects his own personal opinions.

SPOTLIGHT ON BRAZIL

Trade tensions between the United States and China have the potential to drive economic opportunities for Brazil, given its status as a global agribusiness powerhouse and one of the world’s leading agricultural exporters. However, the current global and domestic outlook for Brazil is more complex—and perhaps less optimistic—than it might initially appear.

During the first Trump administration, rising trade tensions with China prompted Beijing to reduce its dependence on US agricultural imports, turning instead to alternative suppliers such as Brazil. Brazil is the world’s largest exporter of soybeans and has China as its top destination. The latest round of tariffs and renewed US-China friction could once again stimulate Chinese demand for Brazilian soybeans.

Yet today’s trade conflict appears broader in scope and potentially more consequential, even encompassing tariffs against Brazilian products—though these are currently under a ninety-day suspension. At the same time, Brazil’s domestic economic fundamentals are under pressure: the country’s weakened currency and elevated interest rates heighten its vulnerability to external shocks. In addition, sustained global trade tensions threaten to dampen overall economic activity, not just in Brazil but also in China—its largest trading partner. This might undermine Brazilian exports, even in sectors where demand has historically been strong.

In this context, Brazil must navigate a delicate balancing act. Overreliance on China risks geopolitical and economic exposure, while alienating the United States could strain key trade and diplomatic ties. With turbulent global markets and a perhaps more fragile domestic economy, Brazil’s ability to manage these relationships strategically will be critical to mitigating risk and seizing opportunity.

—Valentina Sader is a deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Brazil.

Storage battery markets

Just as the US-China trade war could curtail or even halt soybean trade, the US battery complex could face severe disruptions if the United States and China continue down the road of decoupling. China is, by far, the largest exporter of batteries to the United States, accounting for over 70 percent of the United States’ lithium-ion battery energy storage system imports in 2024. These batteries, a single module of which can be as big as a truck, store electricity from the grid (often solar) and discharge power during peak demand periods.

If 145 percent US tariffs on Chinese goods remain in place, Chinese-produced lithium-ion batteries may be priced out of the market, especially since South Korean-made batteries are highly competitive and face only a 10 percent tariff (as of April 10). Accordingly, US tariffs may see a reorientation of storage-battery supply chains, with fewer imports from China and more from treaty allies such as South Korea, Japan, and Canada.

Without commenting on the other disruptions of the trade war, the reshoring and friendshoring of battery supply chains would hold significant national security benefits. Advanced batteries are strategically important: in addition to commercial uses, they hold military applications for drones, electronic warfare systems, and submarines.

A drone view shows California’s largest battery storage facility, as it nears completion on a 43-acre site in Menifee, California, U.S., March 28, 2024. REUTERS/Mike Blake

But it won’t be easy to shift battery supply chains, at least not in the near term. US allies have limited spare capacity. The international battery workforce disproportionately consists of Chinese nationals. China controls critical parts of the supply chain, such as graphite. And new factories—built in the United States or in friendly countries—will take years to complete. Significantly, the United States has no domestic manufacturing capacity for lithium iron phosphate batteries, which are highly suitable for grid-scale storage. It will take time for supply chains to reorient themselves.

If the United States and China move forward with hard decoupling, the US battery-storage sector will face immediate pain. At the same time, higher tariffs on Chinese-made batteries would incentivize greater manufacturing capacity in the United States and its allies and friends. In order to compete with China, the United States should pair any tariffs on China with investments in research, development, and manufacturing for batteries and other dual-use, militarily relevant energy technologies.

—Joseph Webster

The post Want to understand the US-China trade war? Start with soybeans and batteries. appeared first on Atlantic Council.

Latin America and the Caribbean in 2025: Ten predictions to shape the year ahead

Adrienne Arsht Latin America Center — Fri, 20 Dec 2024 15:00:00 +0000

2025 could redefine Latin America and the Caribbean’s political and economic future.

2024 was a transformative year for Latin America and the Caribbean. Elections brought some surprises, but the region also bucked the global trend as continuity was the theme in the Dominican Republic and Mexico, where Claudia Sheinbaum made history as its first female president. Further south, Brazil played a pivotal role as the host of the Group of Twenty and Peru welcomed the Asia-Pacific Economic Cooperation (APEC) Summit, asserting Latin America’s leadership on the global stage.

Meanwhile, the region faced enduring challenges—from Nicolas Maduro’s ignoring electoral results in Venezuela to the growing influence of transnational criminal organizations. The region remains trapped in a low-growth economic environment with considerable strains on fiscal revenue, while a strong hurricane season reinforced the importance of building greater resilience across the Caribbean. China’s influence surged, with increased, notable new investments and Colombia’s decision to join the Belt and Road Initiative (BRI).

What might be in store for Latin America and the Caribbean in 2025?

How might the incoming Trump administration engage with the region? Can economies across the hemisphere grow beyond current predictions? How will leaders address security challenges? Might new tech hubs emerge?

Take the quiz and see if you agree with our predictions for 2025!

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Four questions (and expert answers) about the EU-Mercosur trade deal

Atlantic Council experts — Fri, 06 Dec 2024 22:51:44 +0000

It’s been decades in the making. On Friday, European Commission President Ursula von der Leyen announced that the European Union (EU) and Mercosur, the South American economic bloc comprising Argentina, Bolivia, Brazil, Paraguay, and Uruguay, had struck a major trade agreement. The deal, which would create a free trade area covering more than 780 million people, came over vocal opposition from France and still needs to be approved by a qualified majority of EU member states and by a majority in the European Parliament before it goes into effect.

What are the economic and political implications of this massive trade agreement? And what hurdles remain before it can be finalized and implemented? Our experts freely exchange their insights below.

1. Why is the deal moving forward now?

On the one hand, this agreement has been in process for a long time, so at some point, the EU just has to move forward, and a fresh start with a new European Commission is a good excuse and as good a time as any. On the other hand, it’s hard to ignore that the main opponent of the agreement, France, is in a weak position politically, as is Germany, and that the portfolio structure of the new Commission gives von der Leyen more power to advance her priorities. Therefore, there is likely an element of “striking while the iron is hot” to the timing of the agreement.

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative from 2010 to 2023.

Both sides clearly felt the global circumstances made the deal even more important for their respective interests. From an EU perspective, it’s about having new destinations for EU exports if President-elect Donald Trump raises US tariffs and the Chinese economic slump continues. More broadly, it’s a win for the EU’s longstanding approach to economic security: instead of using economic coercion, the EU prefers to use the attractiveness of its single market to secure bilateral deals on market access. But this approach has become less and less fashionable, including in the EU, so von der Leyen felt the months ahead were the last chance to get a Mercosur deal ratified. But its passage is still far from certain.

—Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The deal is moving forward now in large part because the negotiations have produced a text that most parties believe they can live with; the deal is “ripe,” so to say. But three other factors have been influential in why the deal is being signed right now:

The most vocal opponent of the deal, French President Emmanuel Macron, has been politically wounded, perhaps mortally, by the collapse of Prime Minister Michel Barnier’s government, although it remains to be seen whether he can marshal a blocking minority in the European Council.
Von der Leyen is in a strong political position, and she knows there will be opposition, so she might as well get this done early in her term. This also allows her to give a gift to the country she knows best—Germany—which looks to the Mercosur countries as a valuable market.
The Commission is well aware that it needs to be seen as engaging with developing countries, and it needs to bring them on as economic and political partners, especially as relations with the United States could become difficult. If you see this as, in part, a signal to Trump, you are probably right.

—Frances Burwell is a distinguished fellow at the Atlantic Council’s Europe Center and a senior director at McLarty Associates.

The current geopolitical landscape—marked by rising global protectionism and economic uncertainties—has created momentum for finalizing the deal. Both blocs view this agreement as a strategic move to bolster economic ties and secure a stronger position in global trade.

—Abrão Neto is a nonresident fellow with the Atlantic Council’s Adrienne Arsht Latin America Center and a former secretary of foreign trade of Brazil.

2. What are the pros and cons for Mercosur members?

For Mercosur nations, the agreement unlocks significant access to the European market, a major importer of key Mercosur exports, such as food and critical minerals. It also positions these economies to attract greater investment, driven by the EU’s stringent criteria. On the other hand, the influx of European manufactured goods will challenge Mercosur industries to modernize, digitalize, and boost efficiency to stay competitive.

—Valentina Sader is a deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Brazil, gender equality, and diversity, and manages the Center’s Advisory Council.

The agreement improves market access for Mercosur exports, reduces costs for importing essential inputs and machinery, attracts foreign investment, and fosters economic growth and job creation. However, local industries might face heightened competition from EU manufacturers, and there is concern that EU-imposed environmental and sustainability standards could disproportionately affect Mercosur producers, potentially offsetting some benefits.

—Abrão Neto

3. What are the pros and cons for the EU and EU member states?

Improving trade integration with a significant part of the Western Hemisphere will be a useful diversification of the EU trade portfolio, as US-China and US-EU trade relations shift to a potentially more disruptive period with the incoming US administration. The other side of the coin is that providing agricultural market access to Mercosur has been very controversial, particularly in France (whose government is weakened, perhaps only temporarily, by political challenges from the left and the right). Some of the “sustainability” practices in Mercosur countries have also drawn controversy. So while this may be a wise economic choice, it could trigger significant political backlash.

—L. Daniel Mullaney

The pros are clear. In addition to better market access terms to Latin America for EU goods, the bloc hopes to access the critical minerals available in the ground in Mercosur countries and stymie China’s increasing influence in that sector.

The cons are supposedly a glut of cheap Argentine beef and Brazilian bananas. But there are tough quotas in the deal, including a limit equivalent to one Mercosur steak per EU citizen per year. So European farmers’ objections are not entirely justified, although the complaint that they have to follow more constraints (on emissions and the use of fertilizer and pesticides) than Mercosur farmers do is probably more reasonable.

—Charles Lichfield

This agreement has the potential to bring serious economic benefits to the EU in terms of new markets. In 2023, the EU had a slight trade surplus vis-à-vis Mercosur, and certain European countries had a significant surplus. Germany’s surplus was nine billion euros, Belgium’s was three billion euros, and even France had a two-billion-euro surplus. These countries are all in a position to benefit from the Mercosur arrangement. But in every trade deal, there are winners and losers, and clearly some of the losers in France, especially the farmers, are very powerful politically. It is also true that critics of Mercosur have ignored some of the provisions in the deal that answer their concerns, such as a ban on imports of hormone-fed beef.

In this partisan environment, the economic advantages of the deal may be cancelled out by the political disadvantages. The signature today will only exacerbate the anger of those in Europe who believe the Commission acts in its own interests and fails to protect the interests of European citizens. While the German government and mainstream parties may support the EU-Mercosur arrangement, there are many in that country who feel left out economically and who are likely to see this as another reason to vote for a Euroskeptic party. Thus, while the agreement brings many economic benefits, these might be outweighed by the political costs.

—Frances Burwell

4. What do the next steps look like for the deal?

The process involves legal scrubbing, translation into multiple languages, formal signing, and ratification by national parliaments in both blocs. While this agreement represents a historic milestone, significant political and stakeholder debates are anticipated, presenting challenges before full implementation.

—Abrão Neto

In the EU, the next steps are a likely challenging process of approval from the member states and consent by the European Parliament. The debate over the positive and negative aspects of this initiative will play out very publicly among relatively new actors in the EU institutions and member states. In the meantime, France’s and Germany’s political challenges may or may not endure. Fasten your seat belts and pass the popcorn!

—L. Daniel Mullaney

The post Four questions (and expert answers) about the EU-Mercosur trade deal appeared first on Atlantic Council.

Dollar Dominance Monitor cited by Reuters on the BRICS-led effort to reduce reliance on the dollar

irosales — Fri, 06 Dec 2024 20:40:42 +0000

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Divided COP29 and G20 Summits: A taste of things to come

Hung Tran — Wed, 27 Nov 2024 15:01:45 +0000

Weeks before taking office, President-elect Donald Trump’s views have already cast a long shadow over the twenty-ninth United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, and the Group of Twenty (G20) Summit in Rio de Janeiro, Brazil. What’s happening in Baku and Rio foreshadows the treacherous arena for international cooperation in the next four years.

Underwhelming COP29

Participants at COP29 managed to reach an agreement on international carbon market standards, a key step to establishing such a market under the United Nations (UN), as envisioned in Article 6.4 of the 2015 Paris Agreement. However, COP29 became stuck on the key objective of the meeting: producing a new collective quantified goal (NCQG) as a new climate finance target for the next ten to fifteen years. This is meant to replace the current $100 billion annual figure—a pledge of financial aid to developing countries made by developed countries in 2009, but viewed as totally inadequate.

The most important issue to be settled is the quantum of the NCQG. Participating countries have disparate expectations, which are unlikely to be bridged. Developing countries have coalesced around the target of $1.3 trillion a year of international climate finance aid, based on a report by the High Level Expert Group on Climate Finance. Developed countries spearheaded by the European Union (EU) have reportedly toyed with a range of $200-300 billion, but are reportedly leaning toward $200 billion and a 2035 deadline.

The issue of the contributor base has also been important. Developing countries want to stick to the Paris Agreement, which calls for developed countries to provide climate finance to developing countries. Developed countries want to widen the contributor base to include rapidly growing emerging market countries. These countries, such as China and the Gulf countries, are able to contribute and should do so because of their high levels of emissions. Many developing countries, in particular China, have strongly objected to these demands. As part of the debate, China announced that it has voluntarily provided 177 billion yuan ($24 billion) in project financing to help other developing countries deal with climate change since 2016. This statement highlights China’s preferences for a bilateral approach. China is using climate finance as a tool to further its geopolitical agenda, instead of contributing funds to multilateral efforts. If other countries decide to follow a similar bilateral approach, they could strike another blow against the unraveling multilateral world order.

A day after the COP29 officially ended, an agreement on NCQG was reached, calling for developed countries to provide $300 billion a year by 2035 to help developing countries in their climate efforts. No one is happy with the agreement. Developing countries have criticized it as too little. Developed countries have tried to lower expectations about official aid, emphasizing that the funding would have to come from a wide variety of sources, including the private sector. In any event, the agreements concluded at the COP29 will be overshadowed by the fact that Trump would most likely pull the United States out of the 2015 Paris Agreement for a second time—and could even withdraw from the 1992 UN Treaty that provides the framework for the COP process. This time around, Argentina could follow suit and quit the Paris Agreement. President Milei already recalled his negotiators midway through the COP29 meetings. Without the US and possibly Argentina, the rest of the world would have to struggle to come up with meaningful nationally determined commitments to achieve net zero emissions and to mobilize climate finance to help developing countries. This outlook does not augur well for the COP30 to be hosted by Brazil in 2025.

A divided G20 Summit

The G20 Summit in Rio de Janeiro has been described by media reports as chaotic and divided. Nevertheless, it managed to produce a Leaders’ Declaration, even though the debate about wording was cut short by Brazil’s President Lula—leaving a bitter taste among Western leaders. The Declaration contains watered-down language on practically all agenda items. A major result is the Global Alliance Against Hunger and Poverty, Lula’s signature project, which gathered support and was launched.

However, the facade of cooperation has been rocked by Argentina’s statement that while Milei did not want to prevent other leaders from signing the declaration, he strongly criticized key elements of the agenda. His targets included anything to do with the UN 2030 Sustainable Development Goals and strengthening the role of governments in fighting global hunger (which according to Milei should be promoted by removing the involvement of governments). At the same time, Milei stressed that he would prioritize economic development over environmental protection, having dissolved Argentina’s Environment Ministry after taking office. These arguments are in line with Trump’s views. They will likely be advanced more forcefully in future G20 meetings, undermining the chance of agreements for joint actions and weakening the G20 itself.

Prospects for international cooperation: more turbulence

President Trump will likely reverse or ignore many of Biden’s environmental and climate change initiatives. However, as several red states have seen job creation thanks to IRA programs, he may continue some programs on a case-by-case basis. Overall, Trump’s approach would weaken environmental protection home and disengage from international climate efforts.

In the vacuum created by the United States and Argentina, China has already stepped in to champion international climate efforts under the Paris Agreement and open trade, as Xi Jinping claimed in his speech at the Rio G20 Summit. China has appealed to the EU to “collaborate effectively on the COP29 agenda…(to) establish a strong foundation for re-aligning their broad green and economic initiatives and improve their bilateral relationship.” China’s approach may appeal to the EU when it’s confronted with Trump’s denial of climate change and his protectionist unilateralism. However, if the EU were to cooperate with China on climate and trade issues, it would find itself at greater odds with a Trump administration already unhappy with the EU for free riding the US security umbrella while posting a trade surplus with the United States. The EU would be in a very difficult position, as it still very much depends on Washington for security, especially against a revanchist Russia emboldened by its successes in Ukraine.

The rest of the world can find ways to deal with climate change without the US federal government, as it did during Trump’s first presidential term—including working with US states and cities still keen to promote a green agenda. But the whole exercise would be inefficient and more difficult, especially when mobilizing climate finance.

As summarized by Bloomberg, the Rio G20 Summit has shown “how quickly the guardrails are coming off the international rule-based order…(as) the looming return of Trump hung over the proceedings like the proverbial sword of Damocles.” Expect more of the same, at future summits—starting with the 2025 G20 under the presidency of South Africa.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance and a former deputy director at the International Monetary Fund.

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Kumar quoted by DevEx on US elections and the G20 Summit

irosales — Thu, 21 Nov 2024 14:14:49 +0000

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How Brazil, Mexico, and Argentina approached this year’s G20

Ignacio Albe — Tue, 19 Nov 2024 22:28:48 +0000

Latin America is taking center stage in global affairs this month as world leaders visited Brazil and Peru for the Leaders’ Summit of the Group of Twenty (G20) and the Asia-Pacific Economic Cooperation (APEC) forum. It does so, however, as disparate national priorities among the region’s G20 members—Argentina, Brazil, and Mexico—stand in the way of articulating a common agenda. Developments in Europe and looming political change in the United States present added challenges that may thwart some of the shared, yet limited, regional objectives.

Eight Latin American countries attended this year’s G20 leaders’ summit. Besides Argentine President Javier Milei, Brazilian President Luiz Inácio Lula da Silva, and newly inaugurated Mexican President Claudia Sheinbaum, delegations from Bolivia, Chile, Colombia, Paraguay, and Uruguay traveled to Rio as guest countries of the Brazilian G20 presidency. These countries face shifting international winds and are growing apart as governments respond in different ways to external developments, from growing US-China competition to the incoming US presidential administration.

Brazil’s G20 marks the third year in a row in which an emerging market is setting the G20 agenda, following the presidencies of Indonesia (2022) and India (2023). In this context, these countries have paved the way for greater harmonization of objectives between developed and developing countries, pushing for progress in key areas, including climate finance, hunger and poverty, digital public infrastructure, and reforming international financial institutions. Over the same period, Latin American G20 members have worked together to raise the importance of regional priorities, such as development and climate finance and the reform of multilateral institutions. This year, however, policy coordination has become more challenging as governments veer apart from one another in how they plan to adapt to a changing international landscape, risking a division of the region into competing groups.

Here is how the three Latin American countries in the G20 approached this year’s summit.

Brazil

Brazil faced the challenging task of balancing the disparate demands and priorities of all twenty-one permanent members of the G20 with its own priorities: social inclusion, global reform, and sustainability. The end goal, the successful signing of a (nonbinding) final declaration, was a complex task in a heavily divided world, and key Brazilian priorities such as promoting a billionaire tax to finance hunger relief faced opposition from the United States. The proposal, which was supported by France, Spain, and South Africa, was actually most vehemently opposed by fellow South American nation Argentina. Brazil ultimately succeeded in gaining consensus for a declaration that espoused its key objectives, including calls for multilateral reform, cooperation for more effective taxation of “ultra-high-net-worth individuals,” and a redoubling of efforts to end world hunger and fight climate change, among other topics.

Yet Brazilian leaders are also aware that they will have more opportunities beyond the G20 to shape the agenda. Next year, the Lula administration will host the 2025 United Nations Climate Change Conference (COP30) and will preside over the BRICS summit. It will be an important year for international climate negotiations that coincides with President-elect Donald Trump’s first year back in office, which has raised uncertainty about the United States’ continued participation in the Paris climate accords. This sentiment was perhaps best exemplified by Lula himself, who concluded in his final remarks that leaders had “worked hard,” but that they had “only scratched the surface of the deep challenges that the world has to face.”

Mexico

Under Sheinbaum, Mexico is reemerging as a more active participant in the G20 process and the world stage. This is the first time a Mexican president has attended the G20 in six years, ending that country’s limited presidential diplomacy under former President Andrés Manuel Lopez Obrador. During her participation, Sheinbaum signaled support for three areas of focus: gender equality, sustainable development, and digitalization. She also supported Brazil’s proposed Global Alliance against Hunger and Poverty—which was a high mark of the Brazilian presidency—and presented the Sowing Life program to divert 1 percent of global military spending to sustainable development and reforestation.

Mexico’s return to international fora pleased domestic and international observers, and images of Sheinbaum in meetings with world leaders have set a clear break from her predecessor. However, Mexico’s deep ties to the US economy present a different calculus for the Mexican president when compared to Lula for 2025 and beyond, likely inspiring greater caution in her approach to the international arena, particularly as she prepares her country for potential confrontation with the incoming administration in the United States. She did nonetheless use the stage to defend the government’s controversial judicial reform. Her first major international appearance in Rio de Janeiro set the stage for how she plans to move forward in years to come.

Argentina

The main source of regional misalignment among the three Latin American G20 members came from Argentina, which in past days had made a series of symbolic gestures at the United Nations (UN) to signal the country’s new course under Milei. The country had stood out as the sole vote against UN resolutions this month on indigenous people’s rights and combating gender-based online violence. Argentina also recalled its delegation from the ongoing COP29 in Azerbaijan, raising concerns over the country’s continued commitment to the Paris agreement and the international climate regime, echoing Trump’s own withdrawal of the United States from the agreement in 2017. (Milei was also the first foreign leader to visit Trump on the Thursday following the US presidential election.)

Brazil was quick to respond through Environment Minister Marina Silva and Vice-President Geraldo Alckmin, who criticized Argentina’s move. In Brazil, there was also apprehension that these moves by its southern neighbor set a bad precedent for what may happen during the leaders’ summit. Across negotiations over the G20’s final declaration, Argentine representatives sought to block the inclusion of references to gender equality, women’s rights, a tax for billionaires, and the 2030 Agenda for Sustainable Development. In the end, Milei decided not to block the leaders’ declaration but dissociated himself from those issues. An official involved in the negotiations told the Associated Press that Argentina adopted the statement “under intense pressure from world powers.” Other areas, such as the promotion of regional democracy, artificial intelligence governance, and the energy transition, fared better in exchanges over the communiqué. Underscoring the tensions between Brasilia and Buenos Aries, Argentina is the only country not to have requested a bilateral meeting with Lula in Rio.

Trade, Trump, and beyond

Developments in Europe are also changing diplomatic calculations in the region. For months, it was expected that the long-delayed trade deal between the European Union (EU) and Mercosur, a South American trade bloc, might finally be announced by European Commission President Ursula von der Leyen and her Mercosur counterparts during the G20 leaders’ summit. Brazil’s invitation of Paraguay and Uruguay, the bloc’s other members together with Argentina (plus Bolivia, which is completing its accession process), was partially inspired by this objective. France, however, has made its opposition to the agreement clear: French Prime Minister Michel Barnier warned last week that the government is “employing all means” to block it in its current form. French President Emmanuel Macron, who faces a steep legislative battle over France’s 2025 budget and is being pressured by farmers to block the deal, met Milei in Buenos Aires this past Sunday before traveling to Rio. After that meeting Maron told reporters that Milei “was not satisfied with the deal” and that he was “not satisfied with the way Mercosur worked.” Other EU members, including Austria, Hungary, Ireland, and Poland, may also step in to block the deal. Interestingly, French officials explained that Macron played an instrumental role to convince Argentina “to contribute to the international consensus” and refrain from blocking the G20 process.

Ultimately nothing transpired in Rio, although the agreement’s main proponents, including Germany, Spain, the Mercosur countries, and the European Commission, remain optimistic that significant progress may still be reached before the end of the year. This would constitute one of the largest trade agreements in history and would bring the two regions closer at a time when fears of renewed trade wars and higher tariffs are spooking international markets. Nevertheless, there is also concern that Argentina’s withdrawal from COP29 may still be used by the deal’s detractors in the EU to block progress over environmental policy, similar to how deforestation in Brazil has fueled anti-treaty momentum in previous years. European officials, including Kaja Kallas, the leading candidate to become the next high representative of the EU for foreign affairs and security policy, have made clear their belief that if the deal fails it will create a “void” that will be filled by China.

Meanwhile, Beijing presented a clear framing for Chinese leader Xi Jinping’s participation in the G20: “to champion cooperation, multilateralism,” a strategy meant to preemptively present China as an alternative to Trump’s “America First” approach to international affairs. The inauguration of the port of Chancay in Peru and the announcement of new economic cooperation agreements with partners in Latin America and the Caribbean further cemented the perception of China’s outsized competitive advantage vis-à-vis the United States in its ability to deliver tangible economic results.

As the G20 leaders’ summit concludes, its leaders should redouble their efforts to find common ground and work together, or they will face the risk of having their shared interests being swept away by rising global uncertainty and volatility.

Ignacio Albe is a project assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

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Brazilian, US public-private partnerships key to regional energy security

Bailee Mathews — Tue, 19 Nov 2024 15:39:11 +0000

Abrão Neto, the chief executive officer of AmCham Brazil (the American Chamber of Commerce in Brazil), signaled Brazil’s readiness to enhance collaboration with the United States on energy security by bringing the public and private sectors together to deliver concrete outcomes.

Speaking at an Atlantic Council Global Energy Center’s event on November 13 on the sidelines of COP29 in Baku, Azerbaijan, Neto and Landon Derentz, senior director and Morningstar Chair for Energy Security of the Global Energy Center, noted that Brazil and the United States are natural partners for strengthening cooperation given both countries’ historic leadership in innovation and research and development. Brazil’s robust biofuels sector and mature wind turbine manufacturing capacities demonstrate the country’s ability to drive energy sector transformation while meeting energy security needs.

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Both Brazil and the United States also understand that innovation is a key aspect of energy security. Looking ahead, both countries are well positioned to partner on enduring issues such as securing the supply chains central to energy security needs and energy transition efforts.

Following Neto and Derentz’s conversation, Cassia Carvalho, the executive director of the Brazil-US Business Council, moderated a panel with Allyson Book, the chief sustainability officer of Baker Hughes, Leonardo Botelho, the head of international and investor relations at the Brazilian Development Bank (BNDES), Jake Oster, the director of sustainability policy at Amazon Web Services, Owen Herrnstadt, a member of the board of directors at the Export-Import Bank of the United States (EXIM), and Anna Shpitsberg, the chief climate officer at the US Development Finance Corporation (DFC).

Unlocking climate and energy finance

Hernstadt of EXIM and BNDES’ Botelho emphasized that their institutions and DFC will continue to play critical roles in de-risking projects and promoting competitive markets.

In Brazil specifically, where DFC just opened its first Latin America office this past March, Shpitsberg was optimistic about the level of opportunity she sees in the country. In October, DFC signed a cooperation framework arrangement with BNDES to enhance co-investment opportunities in a number of energy and climate sectors such as innovation, infrastructure, mining, biofuels, decarbonization, and green hydrogen.

Private sector investment in the energy transition

Industry has a key role in developing and deploying the technology necessary for accelerating the energy transition. One area of opportunity in particular is in methane abatement. Baker Hughes’ Book said that not enough is being done to address this potent greenhouse gas, but this creates an opportunity. Investors must look closely at the tools necessary to tackle methane emissions in Brazil and elsewhere in the coming year.

Amazon’s Oster noted that technology companies are also in a position to lead on investments in renewable energy and sustainable practices.

Looking ahead: strengthening collaboration

On public investments, Brazil and the US are both looking to strengthen partnerships. Shpitsberg and Botelho both expressed optimism for future collaboration between their organizations, noting that the opportunity to drive investments in Brazil is still large. Working together will be crucial to ensuring that future investments lead to energy sector innovation efficiently and effectively.

Similarly, Book and Oster said the private sector will also focus on building partnerships across industry to advance energy and climate goals. This means using a range of finance instruments and expanding cooperation on clean energy technologies, including geothermal, hydrogen, and carbon capture, utilization, and storage.

The discussion in Baku signals that industry, finance, and government are continuing to push forward investments in clean energy and build coalitions in the year ahead with an eye toward COP30 in Brazil.

Bailee Mathews is a program assistant with the Atlantic Council Global Energy Center.

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Avoiding Entanglement: G20 Responses in a Taiwan Crisis report cited by the Wall Street Journal on how China would respond to trade restrictions from the West

irosales — Fri, 15 Nov 2024 20:41:17 +0000

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Biden’s first presidential visit to South America comes too late and with China gaining momentum

Jason Marczak — Fri, 15 Nov 2024 15:35:52 +0000

In the waning days of his term, President Joe Biden is visiting Peru and Brazil, his first trip to South America as president. The six-day tour, which runs through November 19, takes him to the Asia-Pacific Economic Cooperation (APEC) annual meeting in Lima and the Group of Twenty (G20) summit in Rio de Janeiro. At both stops he will seek to regain US momentum but without much to offer following Democratic Party losses last week. Moreover, Biden’s trip comes late and without much hope for policy continuity. On the flip side is Chinese leader Xi Jinping, who arrives in Peru to inaugurate a new megaport, built and run by state-owned Chinese companies, that further marks Beijing’s growing investments in large-scale regional infrastructure in the region.

What must the United States do differently in its approach to Latin America and the Caribbean? “Prioritize, invest, message, and align”—the four elements of a strategy the Atlantic Council released earlier this year to counter malign Chinese (and Russian) influence in Latin America and the Caribbean.

Prioritizing can mean a range of things across the US bureaucracy, but presidential-level visits are critical forcing and signaling mechanisms to the rest of the government of a country’s or region’s importance. When he came into office, Biden set high expectations that he would personally prioritize showing up in Latin America and the Caribbean, given his fourteen trips to the region as vice president. Until this week, no visits have materialized except for one trip to Mexico in 2023.

For the United States, the problem is that President Donald Trump likewise did not prioritize travel to the region in his first term. He only went once, to Argentina* in 2018 for a G20 meeting. Notably, a G20 meeting is also the reason behind Biden’s trip to Brazil this week. This means that until Thursday the past two presidents had made a total of two trips to any one of the thirty-three countries in the Western Hemisphere (notwithstanding Canada). This is the same number of trips that Xi made to the region in the same timeframe (Brazil in 2019; Argentina and Panama in 2018).

But prioritizing only goes so far as countries clamor for investment. The region’s economic potential is immense. It’s home to almost 20 percent of the world’s oil reserves, 57 percent of the world’s identified lithium, 37 percent of the world’s copper reserves, and 30 percent of the world’s primary forest, among other precious resources. Brazil, in particular, can be a global breadbasket and help to reduce food shortages globally.

And while China is ramping up its investments in the region—including in strategic sectors such as telecommunications, technology, and critical minerals—US companies do not make investment decisions in the same way as their Chinese counterparts and thus often choose not to even bid on key infrastructure projects. This includes the case of the expansion of the Bogotá metro, in which no US company actually placed a bid, while three Chinese firms and a Spanish firm were the final contenders for the project. Initiatives such as the International Technology Security and Innovation Fund, appropriated under the CHIPS and Science Act of 2022, was a step in the right direction, but the five hundred million dollars in funding for the State Department to focus on secure telecommunications development and semiconductor supply chains will only go so far. This is made clear by the fact that Costa Rica, Panama, and Mexico are the only countries in the region to have signed a partnership agreement under the initiative.

What will be critical is long-term continuity of US investment frameworks in the region. Biden launched the Americas Partnership for Economic Prosperity (APEP) in June 2022 to advance investment in the region, and Trump launched América Crece in December 2019 with similar objectives albeit with APEP bringing an additional bureaucratic framework that could transcend the administration. However, changes in administration mean that such programs can often have a limited shelf life. This is one reason why an effort such as an Americas economic security investment program should be launched early in the next administration to build on efforts to advance US economic ties.

The United States has many of the tools it needs to invest in the region—indeed, around half of the United States’ worldwide free trade agreement partners are in Latin America and the Caribbean. What is missing is a thorough review of how well those agreements are working to deepen US commercial ties with the region. Even though agreements are in place, businesses often do not maximize the potential they can offer.

Messaging and alignment on major issues are fundamental to rounding out an updated strategy to counter malign Chinese influence. This includes combatting disinformation and meeting the region on its own terms. Here, it’s welcome news that in Marco Rubio, whom Trump nominated this week to be secretary of state, the United States may soon have a Spanish-speaking top diplomat. That will elevate US messaging to its regional counterparts.

What will also be pivotal is the United States and its neighbors finding alignment on issues of mutual concern, with security being chief among them. This will be a tightrope for the incoming Trump administration in its quest to deter greater Chinese influence in the hemisphere. If immigration enforcement becomes the top hemispheric policy priority for the United States, it will only push more countries into the Chinese orbit. Alignment is fundamental for countering China.

Jason Marczak is the vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

Correction: A previous version of this article misstated the country Trump visited for a G20 meeting in 2018. It was Argentina.

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Avoiding entanglement: G20 responses in a Taiwan crisis

Matthew Mingey, Laura Gormley, and Logan Wright — Wed, 13 Nov 2024 04:00:00 +0000

Executive summary

G20 responses to Chinese and G7 economic statecraft

I. A Taiwan crisis: Situating the G20, China, and Taiwan

Escalation scenarios

Historical observations of China’s economic statecraft

II. China’s strategy toward the G20

III. Three case studies of G20 countries responding to China’s economic statecraft

Conclusion

Executive summary

This report examines three case countries from the Group of Twenty (G20), Brazil, South Korea, and Indonesia, and their likely responses to both US and Chinese economic statecraft in several hypothetical scenarios related to the escalation of tensions and risks of conflict over Taiwan. This study is designed to assess the policy trade-offs that countries outside of the G7 and US alliance networks may face. The report assesses Brazil, South Korea, and Indonesia’s economic and financial linkages with China, alongside a review of historical sanctions policies, and insights from selected interviews with key stakeholders. The report then identifies China’s likely goals for interactions with G20 nations under a Taiwan contingency, as well as each case country’s respective economic and policy reactions.

US and G7 foreign policy goals and requests for these countries would likely be limited to the enforcement of economic and financial sanctions. They will likely include consensus building among G20 members to express political support for China to de-escalate. Beijing would have its own set of economic statecraft tools that could potentially be deployed, which are discussed in our previous report, Retaliation and Resilience: China’s Economic Statecraft in a Taiwan Crisis.

China is unlikely to deploy punitive or “negative” economic statecraft tools such as sanctions or export restrictions against non-G7 countries in a Taiwan crisis scenario. China’s past statecraft practice, its diplomatic strategy toward developing economies, and its existing economic influence over much of the G20 reduce the need for such punitive measures, as Beijing would have interests in portraying its economy as open for business as usual, even as political tensions increase. Obviously, these calculations may change for Beijing depending upon US or G7 outreach to any country with which Beijing had an extensive economic relationship, where China may see threats as a more useful tool.

For the purposes of this study, we used the same definitions of “moderate” and “high” escalation as defined in our previous report:

In a “moderate” escalation scenario in which limited US or G7 economic sanctions are applied, China will primarily seek to preserve business as usual with G20 countries and focus on obtaining diplomatic support, or at the very least neutrality, from countries like Brazil. Compliance with China’s legal assertions of sovereignty over Taiwan—via possible customs requirements or navigation restrictions—could also prove important. China has little need to augment its existing economic influence over the countries in this study with punitive statecraft such as threatened sanctions or export controls.
In a “high” escalation scenario of more widespread financial sanctions on China’s banks and the central bank, coercive economic statecraft against the three case countries is marginally more likely, but still a low probability. As G7 pressure on the rest of the G20 to enforce secondary sanctions increases, China may be willing to use more direct measures to forestall a wider, comprehensive response to changing conditions in Taiwan. Of the case countries, South Korea is most likely to be affected by any negative statecraft.

It is difficult to predict with certainty how G20 nations are likely to respond overall to both US and Chinese diplomacy during these scenarios, and this is true for Brazil, South Korea, and Indonesia specifically. As Taiwan is not a central diplomatic or political issue for any of the case countries, responses will likely be dictated by each nation’s own existing policies and declared self-interest, as well as their perceptions of the importance of preserving relations with either China or the United States.

G20 responses to Chinese and G7 economic statecraft

All G20 members—including the three case countries—will be affected by a Taiwan crisis by tighter global trade and financing conditions regardless of their foreign policy decisions. A Taiwan crisis will affect multiple variables in the global economy from freight and shipping costs to commodity prices. In terms of trade linkages, G20 economies are generally more exposed to China’s economic statecraft tools than the G7, with 13 percent of exports or $541 billion in annual trade volumes potentially subject to disruption.¹ However, G20 economies are less exposed to China’s punitive statecraft in terms of financial linkages, given lower volumes of foreign direct investment in China (around $149 billion in outward direct investment stock from G20 economies excluding the G7 in 2022)² or cross-border portfolio flows, along with China’s incentives to extend options for financing and trade facilitation outside of potential US and G7 sanctions.

Brazil is most likely to face little risk of punitive economic statecraft from China, given its economic ties to China and shared membership in the BRICS grouping of economies along with Russia, India, South Africa, and others. Past cases suggest Brazil’s financial sector will seek to comply with any sanctions on Chinese entities or secondary sanctions, but with little fanfare. Compliance will be implemented as necessary to avoid any legal entanglement with the United States. However, Brazil’s policy response will likely be influenced by the nature and extent of the international response to escalation in Taiwan.
South Korea represents the most complex case in this report. Korean decision-making in a Taiwan crisis is most likely to align more closely with the G7 (compared to the rest of the G20, especially under the Yoon administration). It is, therefore, more likely to elicit a coercive economic statecraft response from China. At the same time, South Korea’s economic linkages to China are extensive, and supply chains in automobiles and semiconductors are still tightly bound to Chinese entities, despite recent efforts to diversify. Memories of previous negative statecraft by China—such as Beijing’s limits on tourism flows and other economic interactions when South Korea deployed a US missile defense shield in 2017—may also produce a more muted response.
Indonesia is not likely to face a significant punitive economic statecraft response from China in a potential Taiwan crisis. Though Indonesia is indirectly linked to Taiwan via overlapping territorial claims in the South China Sea, China’s trade and investment weight provide strong incentives for Indonesia to maintain its foreign policy stance of nonalignment in a Taiwan scenario.

Where new economic statecraft (by China or the G7) might affect outcomes, it is likely to be via positive economic inducements such as investments or favorable trade arrangements well before any Taiwan scenario comes into play. Once a crisis is underway, even substantial promises of future economic benefit are unlikely to override established policies and perceptions of economic self-interest within G20 governments.

Against this backdrop, G7 asks of the rest of the G20 members are similarly likely to be modest. With the G7 likely fractured on questions about sanctions enforcement, the most likely requests will be to support G7 sanctions to the maximum acceptable extent and to avoid exports or transshipment (or even merely increased exports) of dual-use goods or critical technologies. Notably:

The G7 approach to G20 members that are US military treaty allies (e.g., South Korea, Australia) is more complicated, and the United States and G7 could ask for more substantive cooperation in these cases.
Requests for supportive statements calling upon China to de-escalate or reduce tensions would likely accompany any G7 request for sanctions compliance.
Coercive statecraft from the G7 related to sanctions compliance is unlikely, except as necessary to stop flows of critical goods, weapons, or technology to China in the event of escalation.

In a moderate escalation of tensions over Taiwan, maintaining economic ties with Beijing will be a lower-cost option for G20 economies, as China will have incentives to maintain the perception of business as usual and refrain from punitive statecraft tools. In a more extreme scenario, complying with US or G7 sanctions will likely be the lower-cost option for G20 economies given the more significant consequences to global trade and economic conditions that would unfold.

A Taiwan crisis: Situating the G20, China, and Taiwan

In any scenario for escalation of tensions over Taiwan, China’s approach to the rest of the Group of Twenty (G20) is likely to be very different from its approach to the G7. China’s economic statecraft tactics generally incorporate country conditions and dependencies upon trade and capital flows, deploying tools opportunistically to maximize incentives to align with Beijing’s preferred policies and minimize costs to China’s economy. G20 countries that are not part of the G7 have very different economic exposures and linkages with China, necessarily changing the contours of potential economic statecraft they face. Trade stands as one example; while G7 countries are exposed to China through trade channels, with over $358 billion³ in annual exports exposed to potential disruptions from economic statecraft,⁴ G20 countries are even more dependent on China as a source of export demand. China absorbed nearly 13 percent of G20 exports (ex-G7) in 2023, compared to roughly 7 percent of G7 exports in the same period (see figure 1). Although China’s lack of effective financial statecraft tools (to date) places some limits on its leverage against the G7, its existing (and well-honed) trade statecraft tools have the potential to be even more effective against G20 countries.

Figure 1

In comparison, Taiwan’s relatively small share of G20 trade and investment flows does little to counterbalance China. This asymmetry allows China’s economic statecraft measures to serve as significant mechanisms to counter G7 objectives and obtain alignment from third countries in a Taiwan escalation scenario.

Escalation scenarios

This report adopts the exact scenario framework we deployed for our 2023 report on G7 sanctions, Retaliation and Resilience: China’s Economic Statecraft in a Taiwan Crisis, to evaluate China’s likely statecraft responses in scenarios of escalating military tension over Taiwan. This scenario framework encompasses both past cases of economic statecraft as well as China’s response to new developments and the potential intensification of a crisis. The scenarios are characterized not by the severity of the initial events behind a Taiwan escalation—for example, whether China launches military exercises—but by the G7’s response to those escalatory steps. As before, we consider two scenarios:

Moderate-escalation scenario: China responds to the United States taking an escalatory diplomatic action in the Taiwan Strait, such as a substantial deepening of the political relationship with Taiwan, a step change in military aid, or a limited sanctions package in response to Chinese aggression toward Taiwan. In this scenario, China reacts with economic statecraft measures targeting the United States designed to impose relatively higher costs on the United States than China. China’s willingness to use statecraft is constrained by the necessity to maintain a strong business environment amid high geopolitical tensions.

High-escalation scenario: China retaliates against a maximalist G7 sanctions package that includes full blocking sanctions on China’s major banks and the People’s Bank of China (PBOC), sanctions on senior political figures and business elites, and trade bans on products relevant to China’s military development.⁵ China adopts a much stronger and broader set of economic statecraft measures against the entire G7, with the intent to impose costs as high as possible on the sanctioning economies.

Both scenarios stop short of war or the initiation of kinetic conflict between China and the United States or other G7 countries. Rather, they are meant to provide a context to evaluate the potential use of China’s statecraft tools. We consider only economic statecraft responses in a Taiwan escalation scenario, although China is also likely to consider military and quasi-military actions that are outside the scope of this paper, such as undersea cable cuttings, cyberattacks, quarantines of commercial ships, or blockades.

Table 1. China’s response and economic statecraft under moderate- and high-escalation scenarios

Although the report does not focus on inciting events, we note that the most likely triggers would still come from China, or alternatively, US or G7 action toward Taiwan, rather than a third country (from a G20 member, for example) acting unilaterally against China or deepening engagement with Taiwan. None of the case countries are seeking to substantially increase political ties with Taiwan or provide defense aid at present, making them more likely to begin as observers in any escalation scenario.

Historical observations of China’s economic statecraft

Several factors are likely to affect China’s use (or nonuse) of economic statecraft to influence G20 countries in the wake of a Taiwan escalation scenario. Historically, China has deployed coercive economic statecraft more frequently against G7 competitors—and Taiwan—than emerging and developing economies, or members of the G20. Negative or punitive economic statecraft—including the tools described in table 2—carries reputational costs for China and undermines its attempts to present itself as a generous economic partner and neutral force supporting global development and win-win outcomes for the Global South.⁶ Chinese analysts also point out that economic statecraft such as trade retaliation conducted on national security grounds—presumptively allowed under World Trade Organization (WTO) rules—risks expanding the scope of national security claims in ways that might backfire on China, allowing the United States to use similar justification against Chinese interests.⁷

Table 2. China’s negative economic statecraft tools

More broadly, China’s foreign policy toward developing countries in the G20 and beyond presumes that China’s economic weight and active engagement with the Global South will effectively incentivize it to align with China and adopt its preferred policies. This prioritizes positive economic statecraft—in the form of aid, sovereign lending, investment, and other tools—over coercive measures. It is somewhat misleading to directly compare instances of China’s negative economic statecraft with “instances” of positive statecraft, which involve long-term framework agreements and flows over time. Nevertheless, the fact that China committed an estimated 21,000 aid, loan, and other assistance projects between 2000 and 2021, compared to roughly sixty isolated cases of negative economic statecraft in the same period, illustrates the weight of positive and negative tools in China’s economic diplomacy tool kit.⁸

At the same time, G20 membership does not inoculate a country against economic or strategic coercion by China. G20 member South Korea was subject to some of China’s most costly coercive measures to date in 2017, primarily targeting retailer Lotte and the nation’s tourism industry. China’s de facto trade ban against Lithuania— A country represented at G7 and G20 meetings via the EU’s participation, and which is clearly seen as part of the Western, G7+ bloc on sanctions against Russia—in 2021 and 2022 was even more severe, cutting off almost all exports from Lithuania to China for several months. These measures have caused substantial economic damage. Estimates of the fallout from measures against South Korea in 2017 run as high as 0.4 percent of gross domestic product (GDP); in Lithuania, central bank estimates suggested damage as high as 0.5 percent of GDP in 2022 and 1.3 percent of GDP in 2023.⁹ These might form lower bounds for the potential fallout of a “high” Taiwan escalation, should China feel compelled to override past strategic practice to impose severe coercive statecraft.

What might prompt China’s officials to deploy more aggressive negative statecraft against G20 partners? Taiwan already represents the most critical of China’s “core” security interests—alongside Hong Kong and Xinjiang—going to the heart of the Chinese Communist Party’s legitimacy. Past cases suggest China generally has several simultaneous goals when it deploys economic statecraft related to its core interests. These involve coercing a target country to change perceived offensive policies (compellence); demonstrate the potential costs to other countries (deterring or dissuading); and, importantly, express its disapproval and resolve to domestic audiences. But as described below, China’s existing economic leverage over the G20 already strongly incentivizes member countries to align with (or remain publicly neutral toward) China’s issues and policy positions. Import restrictions on specific agricultural goods, such as China’s notorious “pineapple ban” against Taiwan in 2016 or the “banana ban” against the Philippines in 2012 lie somewhere in between: Though they target sectors with extensive reliance on China and are thus intended to cause some harm to target states, they also minimize overall economic costs to China and the intended target.

This means that If China were to deploy economic statecraft against G20 countries, it would primarily be to dissuade other countries from following suit—in say, enforcing US-led sanctions—or to mollify domestic audiences. Past cases of economic coercion are informative, but not instructive, and any of the tools in table 2 might theoretically be deployed. However, China’s toolkit is generally less effective against G20 countries because they feature lower levels of foreign direct investment (FDI) and other investment by multinational companies (MNCs) in China, providing very narrow targets for disruption or expropriation. For example, Brazil’s total stock of FDI in China and Hong Kong stood at less than $1 billion as of 2022,¹⁰ compared to more than $400 billion in G7 FDI assets in China that our previous report identified as at risk in a Taiwan escalation.¹¹ Likewise, G20 nations such as Turkey and India have few high-profile brands in China that are susceptible to consumer boycotts. Of course, investment linkages exist that may still provide some leverage. Brazil’s Embraer pulled out of its only manufacturing investment in China in 2016, a joint venture manufacturing narrow-body aircraft.¹² But sales to China’s airlines are still critical to Embraer’s growth prospects and Brazil’s wider aerospace industry.

China’s strategy toward the G20

In a scenario of escalating tensions over Taiwan, China’s goals in its approach to G20 countries would naturally depend on the conditions behind that escalation, as well as the response of G7 countries individually and collectively. As our previous report argued, China is likely to attempt to split or divide G7 countries to forestall a collective response, and limit the scope, duration, and intensity of that response. Nevertheless, some form of US or G7 response involving sanctions or other economic statecraft is likely, and the G20 will be key to China’s attempts to counteract or circumvent those measures. G20 countries are potentially valuable to China as sources of diplomatic cover, but also as economic nodes and alternative economic partners that will be necessary for China to minimize the damage to its own economy, whether from the market reaction to a Taiwan escalation, explicit G7 or G20 foreign policy, or other factors. The ways in which China might be expected to solicit G20 support in a Taiwan escalation, including in our case countries, are detailed in table 3.

Table 3. China’s asks in a Taiwan crisis

Although some of these asks are economic in nature, diplomatic support is also crucial. In the event of escalation over Taiwan, the United States and G7 will likely seek out statements of support for de-escalation and calls for China to reducing the resulting tensions, including from G20 members. China would also seek statements of neutrality or asking countries to respect Chinese sovereignty claims over Taiwan, while avoiding diplomatic engagement with Taiwanese officials that might imply greater recognition of Taiwan’s sovereignty.

Normative or legal compliance could be a tricky area as well for G20 countries, as China would likely request acknowledgements or acceptance of air defense identification zones and exclusion areas that may implicate commercial and trade traffic from G20 members. These are decisions that have significant implications for China’s sovereignty claims but require little cost for G20 members to implement.

China would have ample opportunity to deploy some of these economic statecraft tools against developing economies as part of an overall strategy to improve its economic and political position under a scenario of escalating tensions over Taiwan.

Three case studies of G20 countries responding to China’s economic statecraft

To explore G20 economic statecraft dynamics, this report examines three country case studies: Brazil, South Korea, and Indonesia. Each country represents a different category of potential exposure to China’s economic statecraft tools. Brazil is a robust commodity exporter. South Korea has an advanced economy with strong technological and manufacturing links to China. And Indonesia is a rapidly developing economy, deploying investment and other financing from China to drive an economic transformation, while at the same time actively contesting China’s territorial claims in the South China Sea.

For each country, the report outlines:

Existing and historical policy toward Taiwan and foreign conflict;
Economic relations between each country and China, including the composition and share of trade and investment flows;
The extent of sovereign finance from China to the country;
Supply chain interconnections and other economic factors;
Past sanctions practice and alignment, with either China or G7 countries. This includes recent international sanctions against Iran, Russia, North Korea, and Venezuela (where applicable).

We synthesize these data sources to identify China’s most likely asks of each country in “moderate” and “high” escalation scenarios, respectively, as well as each country’s most likely policy outcome(s). Where available, we supplement policy and data analysis with interviews of policymakers, former officials, and experts from each country.

Brazil’s experience with China is affected both by its robust trade relationship with and increasing trade dependence on China, which would likely ensure Brazil’s public neutrality in the event of a Taiwan-related scenario. However, its financial sector and strong linkages to global commodities markets provide incentives for Brazil to comply—overtly or quietly—with potential G7 sanctions.

In the case of South Korea, any Taiwan scenario—and Seoul’s reaction to both China’s and the G7’s economic statecraft in the wake of a Taiwan scenario—will be heavily colored by the prospects of wider regional conflict that might involve North Korea. Tightly interconnected value chains and the legacy of China’s measures in the wake of a 2017 dispute over a US missile shield (i.e., Terminal High Altitude Area Defense, or THAAD) deployed in South Korea would heavily impact Seoul’s response.¹³

Lastly, Indonesia’s robust trade and investment relationship with China—and its opportunistic approach to previous international sanctions regimes—suggest it would offer only moderate support for any G7 measures in the wake of a Taiwan escalation. But its own history of maritime disputes with China, as well as its burgeoning military partnership with the United States, might complicate that picture.

Brazil

Overview

Brazil is unlikely to embrace strong G7 measures against China in the wake of any Taiwan-related crisis. China’s economic ties with Brazil are extensive and incentivize Brazil to maintain neutrality. Accordingly, China is not likely to deploy punitive statecraft tools against Brazil.

But this economic relationship is more complex than is commonly understood, extending beyond commodity trade in soybeans and oil. Despite ties with China via the BRICS organization and widely publicized agreements to increase renminbi-denominated trade—a likely ask of China in a Taiwan escalation scenario—Brazil’s cooperation with China does have practical limits.

Brazil’s financial sector will likely comply with G7 secondary sanctions; greater degrees of alignment with either the G7 or China will likely depend on the scenario and the global response in emerging markets and the Global South.

Brazil is unlikely to actively support high-level G7 sanctions or economic statecraft in the wake of a Taiwan crisis, but also remains unlikely to accede to China’s political requests either. Brazil’s long-standing pursuit of neutrality in most international conflicts, the peripheral nature of the Taiwan issue to domestic policymakers, and its strong reliance on China as a trade and investment partner all would influence Brazil’s response to a Taiwan escalation and mute Brazil’s diplomatic and policy reaction. But discussions with Brazilian analysts and policymakers also suggest that Brazil would still enforce US secondary sanctions—if only to preserve smooth functioning of its financial sector—and would not seek to amplify China’s already-outsized influence in emerging-market blocs such as the expanded BRICS.

Stated positions on Taiwan

Taiwan is simply not a major foreign policy issue in Brazil. Since establishing diplomatic relations with the PRC in 1974, Brazil has professed adherence to the “One China” principle (distinct from the US description of a one China policy), and explicitly reaffirmed support for the principle in 2022 and 2023.¹⁴ More broadly, Brazil has pursued a global foreign policy based on neutrality, especially when it comes to extra-regional conflicts including Ukraine,¹⁵ although it has also been critical of Israel’s response in the wake of Hamas’s attack of October 7, 2023.¹⁶

Economic interaction with China

Economic and financial ties with China—and the latent dependence on China that those ties represent—would also likely incentivize Brazil to adopt a muted response to any Taiwan-related escalation. Brazil is a unique case among the G20: Although China is Brazil’s largest trading partner, like many other G20 countries (and BRICS countries, too), it is one of the few that runs a trade surplus with China.¹⁷ Brazil’s economy is thus highly exposed to China, which absorbs more than half of Brazil’s total exports (see figure 2) and a plurality of its top three exports: soybeans (70 percent), crude oil (40 percent), and iron ore (60 percent).¹⁸

This reliance has helped and hurt Brazil in the past. While Brazil was hit hard by China’s growth slowdown in 2015-2016, China’s outperformance in 2020 during its COVID-19 lockdown phase helped Brazil maintain export and current account performance. Brazil’s trade with China extends beyond commodities and primary inputs to metal ores and even aircraft (from Brazilian plane maker Embraer). This exposes Brazil to broader change in China’s investment and property market conditions, on top of its commodity exports.¹⁹ Importantly, despite a 2023 agreement meant to expand RMB-denominated trade and discussions of a new BRICS currency, much of Brazil’s trade with China is still transacted in US dollars.

China is also a substantial source of FDI for Brazil. Brazilian industry analysis estimates total investment by China in Brazil totaled $73 billion between 2007 and 2023, with three-quarters of that value going to FDI projects in electricity or oil. Chinese companies have ownership of 10 percent of Brazil’s national energy-generation capacity and about 12 percent of energy-transmission capacity.²⁰ Likewise, most Chinese loans to Brazil between 2010-2021 funded projects in the energy and mining industries (figure 2).

Beyond regular returns, the power sector has the most developed regulatory framework of all Brazilian sectors, which has contributed to new Chinese investment, particularly following a pullback in developed market investment after several corruption scandals in Brazil (e.g., the 2014-2021 task force probe called Lavo Jato, or Car Wash).²¹ These investments slowed during the Bolsonaro era in Brazil from 2019 to 2022, even as Bolsonaro‘s criticisms of Chinese economic engagement in critical Brazilian industries became more moderate after his election.²² Even though Brazil is one of the only countries in Latin America to receive significant new sovereign loans from Chinese banks since 2020, major loans to Brazil have similarly declined since 2016.

These economic relations remain in flux. Newly reelected President Luis Ignacio Lula da Silva has reemphasized bilateral ties and signed fifteen bilateral agreements with China totaling around $10 billion during his 2023 visit. But Brazil also launched trade investigations into Chinese imports, most notably steel and chemicals.²³

Figure 2. Snapshot of China-Brazil ties in exports and loans

As Brazil is a major supplier of commodity exports to China, should China attempt to stockpile soybeans and crude oil (as might be expected before a high-escalation scenario). Brazil’s trade exposure to China would only be expected to spike.

Past sanctions alignment

Brazil has grudgingly complied with previous US and United Nations (UN) sanctions regimes, including specially designated nationals (SDN)—the individuals/entities controlled, owned, or acting for or on behalf of targeted countries—designations related to Russia and Iran. The threat of secondary sanctions also has influenced Brazil’s defense relationship with China. This reflects Brazil’s status as a regional financial hub—including Latin America’s five largest banks by total assets—which would be squarely threatened by the imposition of strong secondary sanctions.²⁴ Brazilian authorities routinely collaborate with US and UN officials on sanctions targeting money laundering and transnational criminal groups.

Table 4. Brazilian cooperation with domestic and international sanctions (select cases)

However, US or G7 sanctions squarely targeting Brazil’s relationship with China would likely be much more fraught. The risk of negative or punitive economic statecraft against Brazil from China is low, as Brazil’s likely neutrality will probably suit China’s preferences in a Taiwan contingency. Several Brazilian foreign policy experts have argued that neutrality would be most strategically optimal for Brazil in a Taiwan escalation,²⁵ lessening the need for China to apply coercive leverage in a moderate or even high scenario. China would also likely be more reluctant to target a fellow BRICS member, especially during a tentative rapprochement between China and Brazil after Bolsonaro’s exit. Recent BRICS communiqués have explicitly condemned “unilateral trade measures” and perceived violations of the WTO system.²⁶

Brazil in a Taiwan escalation scenario

Table 5. Brazil’s anticipated activity by escalation level

The prospects of Brazil joining with the G7 to enforce strict sanctions in a “high” escalation scenario are also remote, though Brazilian financial institutions would still be strongly incentivized to enforce US secondary sanctions and retain access to US dollar clearing markets. The proportion of RMB-denominated trade and overall foreign exchange turnover between Brazil and China has risen in recent years (see figure 3),²⁷ but Brazil still overwhelmingly transacts and denominates its trade in US dollars.²⁸ In a Taiwan crisis, China might request that Brazil complete more transactions in RMB, as it has done in workaround trade with Russia since 2022. But the likelihood that China would limit global RMB liquidity during an escalation, in order to defend the stability of the currency, puts a ceiling on the volume of transactions that can be processed. China’s bilateral swap lines also are unlikely to come into play (see adjacent box).

Figure 3

Even in a moderate-escalation scenario, and absent any coercive trade actions by China, Brazil’s exports could be affected by disruptions to shipping lanes. For example, most soybean exports proceed either past the Cape of Good Hope in South Africa or through the South China Sea; only a small volume is shipped via the Panama Canal. During a moderate- or high-escalation scenario, this would leave Brazilian shipping exposed to the same higher costs (and possible diversions around the South China Sea or Taiwan Strait) facing European shippers.

In a high-escalation scenario, trade disruptions are likely to be even more severe in the form of increased shipping costs and route diversion. Under such conditions—especially if precipitated by military action or a blockade of Taiwan—China will likely have already stockpiled significant quantities of crude oil and soybeans. Though it would naturally seek to maintain trade flows, this would provide it with little need or desire to deploy coercive trade tools against Brazil. Instead, Brazil’s priorities would likely include keeping the BRICS grouping out of the explicit conflict and counterbalancing likely overt Russian support for China. Compared to other BRICS countries, Brazil would be more amenable to stricter international sanctions packages, though Brazil’s preference for UN sanctions authorization may be an insurmountable hurdle to supporting expanded trade and financial restrictions.

Box 1: China’s bilateral swap lines

China has signed several bilateral currency swap deals with its trading partners starting in 2010, designed at first to insulate China’s trade from risks of tightening US dollar trade finance during the global financial crisis. China’s first swap line with Brazil was signed in 2013 for a total of 190 billion yuan or 60 billion reals, designed to facilitate trade financing. Most of these swap lines were used very sparsely in their early years, and there are no available records of the swap line between China and Brazil being utilized over the past decade (although it may have occurred).

China and Brazil only proceeded to deepen their financial relationship with a memorandum of understanding to set up clearing arrangements for China’s currency in Brazil in February 2023.²⁹ In March 2023, the financial relationship expanded with an arrangement to trade directly in RMB or Brazilian real, bypassing the US dollar for settlement. The RMB became the second-largest component of Brazil’s foreign exchange reserves as of the end of 2022, at 5.3 percent of reserves or $17.4 billion, likely a result of the rising use of RMB payments by Chinese importers from Brazil.³⁰

Technically, trading with China in RMB is more feasible in Brazil than in other markets because Brazil runs a trade surplus with China, receiving more RMB as payments for its exports. China runs trade surpluses with most of its trading partners, making it difficult to facilitate trade in RMB (as countries would need to pay in foreign currencies for Chinese exports). The expansion of trade between China and Brazil in RMB can continue as long as Brazilian firms, banks, and the central bank are willing to accept the currency risk of holding RMB-denominated assets, which will involve more direct investments back into China’s financial markets.

Indirect data measures from the Bank for International Settlements (BIS) indicate that the proportion of Brazilian real currency trading relative to the US dollar is still around 95 percent of the total, with similar proportions for RMB trading against the dollar.³¹ Trading activity between the BRL and RMB was too small to be measured in the BIS Triennial Survey, but will probably have picked up marginally starting in 2023.

For economic statecraft purposes, the net effect of the currency swap arrangements and direct trading in China’s currency or the Brazilian real is minimal. The swap lines could be withdrawn, or Brazilian assets in Chinese markets could be frozen or immobilized, but US dollar trading remains highly active in Brazil. China’s leverage over Brazil is much stronger in terms of influence over trade activity and flows, given that China is Brazil’s largest export market.

South Korea

Overview

Escalation of tensions over Taiwan would likely move South Korea closer than other G20 partner countries to alignment with G7 priorities, but South Korea will likely prefer to comply with G7 regulations rather than implement complementary regimes nationally that directly target China, and will continue seeking exemptions for key industries for as long as possible.

South Korea will prioritize managing security risks posed by opportunistic attacks from North Korea and the potential for increasing China-North Korea cooperation. This will temper South Korea’s willingness to impose economic restrictions on China, but will increase South Korea’s reliance upon and acceptance of a US security presence in the Indo-Pacific region.

Extensive ties in critical technology supply chains that are at the forefront of current US technology restrictions continue to pose high costs and barriers for South Korean compliance on export and investment restrictions. Some industries are slowly decoupling, but are also slow to restructure.

Nonstrategic but high-revenue industries, such as consumer goods, will attempt to stay in the Chinese market for as long as possible and pose a continued risk for retaliatory statecraft.

Heightened risks of operating in the Chinese market under US restrictions will drive some decoupling and eventually reduce the costs posed by China’s economic statecraft.

South Korea’s stated positions on Taiwan

South Korea stands apart from US G7 allies for its historically more flexible and reserved position on cross-strait relations. South Korea does not maintain official diplomatic relations with Taiwan, yet it has never officially acknowledged the One China principle and maintains unofficial working dialogues with Taiwan through the Taipei Mission in Seoul. Recent South Korean presidencies have shifted closer toward a US-aligned position. In a 2021 joint statement, President Moon Jae-in stated South Korea’s intentions to work closely with the United States on preserving “peace in the Taiwan Strait,”³² and, in 2023, President Yoon Suk Yeol characterized cross-strait relations as a global issue, similar to North Korean relations, and stated his opposition to the use of force to change the status quo.³³ These statements, along with Taiwan’s participation in the 2024 Third Summit for Democracy, hosted alongside the United States in Seoul,³⁴ are a departure from South Korea’s passivity toward strategic balancing in the Indo-Pacific region and show initiative for consensus building among partners. At the same time, South Korea maintains a preference for rhetorically minimizing China’s role and relationship with Taiwan, and for approaching cross-strait relations collectively to reduce the risk of targeted repercussions.

Economic interaction with China

South Korea is a global leader in several industries that are covered by current or proposed US export and investment restrictions on China. Compared to other partners, South Korea’s compliance with US regulatory actions has a greater significance to the G7’s ability to restrict China’s access to advanced technology in sectors such as semiconductors, high-performance computing, and EV batteries. However, South Korea’s economic integration with China is significant, not only in terms of the magnitude of overall economic activity but also for its strong ties in critical goods supply chains. These economic ties pose steep costs for South Korean compliance with restrictions on these sectors.

China is South Korea’s largest export market, accounting for around 20 percent of total exports in 2023, although this share has declined since the 2010s. Two-way trade links in intermediate goods for electronics manufacturing supply chains are substantial, and South Korea depends on Chinese imports for a significant share of critical inputs to its industrial sectors (see figure 4). Electrical machinery and equipment, including finished electronics and semiconductors, is by far the largest class of goods for two-way trade, amounting to $53 billion in exports in 2023 and $50 billion in imports.³⁵ Semiconductors are the most significant component of the bilateral trade relationship, and the industry is an important source of revenue for the South Korean economy. China also is a large market for many nonstrategic South Korean export industries, such as processed plastics, cosmetics, and tourism, and for large consumer-goods MNCs, like Lotte, with substantial sales through affiliates in China. However, intrafirm transfers account for a large portion of China-Korea trade (see figure 4). Barriers to diversification are lower for this proportion of trade. A large share of intrafirm trade is between semiconductor MNCs, Samsung’s and SK Hynix’s manufacturing branches in China, and their domestic counterparts. Intrafirm trade is declining as these and other firms localize more of their operations.

South Korean investment in China is also extensive, particularly when including Hong Kong, and is largely dominated by investments in semiconductor manufacturing. In 2023, new South Korean investments in China dropped substantially, driven by record lows in semiconductor investment. As it becomes more challenging for these firms to equip their fabrication facilities in China, disinvestment may accelerate. However, manufacturing assets in China that rely on access to covered products contribute significantly to South Korea’s economy and require intensive capital investment to derisk, which will pose high costs for alignment on restricting these sectors. The South Korean government recently pledged $29 billion in subsidies over the next five years to help electric vehicle (EV) battery makers move their supply chains out of China to comply with US Inflation Reduction Act EV tax credits that prohibit sourcing from Chinese and other covered countries’ input suppliers.³⁶ This is a positive sign for South Korea’s willingness to invest in long-term access to the US market at the expense of diversification from China.

Figure 4. Elements and impact of China-South Korea trade

Past cases of Chinese economic statecraft have targeted nonstrategic South Korean industries that generate high revenues from the Chinese market, but where restrictions create minimal costs and risks to the Chinese economy (see box). In an escalation scenario, nonstrategic industries will be more likely to maintain their connections to the Chinese market because replacing the scale of Chinese demand with other markets is challenging and these industries are not the primary recipients of government support for diversification from China. These industries will present continued vulnerabilities to China’s economic statecraft tools.

Box 2: China’s economic coercion punished South Korea for deploying THAAD

South Korea was the target of one of the largest-scale cases of China’s economic coercion after its deployment of THAAD in 2016. China targeted South Korea’s tourism and entertainment industries and corporations based in China, and orchestrated national boycotts of South Korean goods from 2016 to 2017. Estimates of 5 to 12-month losses of revenue from the tourism industry alone range from $6.8 to $15.6 billion, while Lotte reported $1 billion in lost revenues from sales in the Chinese market (as shown below). The Bank of Korea estimated that these disruptions reduced South Korea’s GDP growth by as much as 0.4 percentage points.³⁷

Past alignment with US and G7 sanctions

Commercial interests limited South Korea’s initial response to G7 actions following the 2014 Russian invasion of Crimea. However, by 2022, South Korea adopted wide-ranging financial restrictions against Russia, in line with G7 sanctions packages (table 6). This was due, in part, to national security concerns over Russian support for North Korea. South Korea has ostensibly complied with relevant US restrictions on China but has sought carve-outs that limit the de facto results of South Korean cooperation. In 2024, South Korean semiconductor makers received an indefinite exemption from US export controls on the export of chips and semiconductor manufacturing equipment to China.

Table 6. South Korea’s alignment with the United States in past cases of sanctions

The Yoon presidency has been more willing to expand the use of economic security tools compared to previous administrations, expanding the scope of restrictions against Russia and North Korea. However, the current administration continues to avoid directly targeting China and future administrations may revert to a more conservative use of economic security tools. In an escalation scenario, South Korea is more likely to signal compliance with US sanctions, as seen in its belated chip alignment, while seeking carve-outs and exemptions that limit impacts on key industries and continue to avoid targeted restrictions on China.

South Korean in a Taiwan escalation scenario

South Korea’s significant economic ties to China in strategic and nonstrategic, high-revenue industries pose high costs and constraints for compliance with G7 actions. However, South Korea’s proximity to the escalation zone and exposure to Chinese economic coercion necessitate safeguards against the risks of a retaliatory and economically weakened China. Anxieties over an opportunistic North Korea and widespread regional supply chain disruptions are also likely to push South Korea closer to G7 alignment than other G20 members, yet South Korea will likely resist partner requests for complementary national restrictions.

Table 7. South Korea’s anticipated activity by escalation level

In a moderate- to high-escalation scenario, South Korea will prioritize mitigating national security risks posed by North Korea and preventing cross-strait tensions from spilling over into regional conflict. South Korea would seek to limit the risks of China mobilizing North Korea and be wary of passing its own economic restrictions that directly target China or conveying direct support for US military mobilization. South Korea’s official position is that it does not maintain a security dialogue with the United States on cross-strait relations. Under a scenario in which the US deploys troops from South Korea, Seoul may quietly provide support services and funding and may seek to expand its technology and security alliances, such as by joining AUKUS, the alliance of Australia, the United Kingdom, and the United States.

South Korea’s calculus for coordinated economic restrictions against China will place greater weight on commercial outcomes in a moderate-escalation scenario in which national security risks are marginally less severe. Yet even in a moderate scenario, under unilateral US actions, South Korean trade with China and affiliate firms in consumer goods industries are likely to face significant disruptions. Financial restrictions will cause a drop in China’s consumption and restrict a large portion of China’s trade finance, shrinking Chinese demand for South Korean industrial output. The declining prospects of the Chinese market will eventually reduce the opportunity costs of decoupling and risks of retaliatory statecraft, but these costs are still likely to remain at levels high enough to require any South Korean government to balance these economic and security risks.

Indonesia

Overview

China’s existing economic influence and engagement in Indonesia—especially its investments in infrastructure and mineral mining and processing—provide strong incentives for Indonesia to avoid alignment with the G7 in any scenario in which sanctions were imposed on China. Indonesia’s long-standing principle of foreign policy neutrality is also determinative. Indonesia is unlikely to execute complementary restrictions on China.

Indonesia’s derisking efforts are burgeoning and cooperation with the United States and other G7 partners is increasing, signaling a desire to rely more on the G7 for economic relations. Indonesia is likely to accelerate derisking from China to reduce entanglement in US/G7 sanctions networks, as well as quietly comply with secondary sanctions. However, Indonesia’s derisking efforts are more limited than other G20 partners, and co-investments with China and G7 countries in critical energy and infrastructure sectors would be directly exposed to G7 sanctions.

Indonesia is unlikely to face substantial punitive economic statecraft from China in the wake of a scenario in which tensions over Taiwan escalate.

Indonesia’s stated positions on Taiwan

Indonesia has consistently advocated for the maintenance of the status quo in the Taiwan Strait, for both practical and principled reasons. As China-Indonesia economic relations have deepened, Indonesia has consistently reiterated support for the PRC’s One China principle in public comments and diplomatic agreements.³⁸ Though Indonesia’s diplomatic and strategic priorities remain in Southeast Asia and within the Association of Southeast Asian Nations (ASEAN), Taiwan’s status has indirect implications for Indonesia’s own territorial claims against China in the South China Sea, as well as for other ASEAN claims.³⁹ As cross-strait tensions have increased since the Democratic People’s Party (DPP) took power in Taiwan in 2016, according to domestic media reports, Indonesian policymakers have begun developing contingency plans for a potential armed conflict.⁴⁰ Around 300,000 Indonesian nationals reside in Taiwan, primarily domestic workers;⁴¹ depending on the scenario, these nationals might require evacuation from Taiwan. At the same time, Indonesia’s foreign policy, like Brazil’s, follows principles of nonalignment.⁴² As a practical matter, Indonesia seeks to balance its relationship between China and the United States, pursuing close US defense cooperation and a strategic counterbalance to China in the Indo-Pacific region.

Economic interaction with China

Against this diplomatic backdrop, China’s economic influence in Indonesia is substantial, with China serving as Indonesia’s largest trading partner—by both imports and exports (figure 5)—and as a major source of foreign investment.

Figure 5. China-Indonesia trade ties

China’s FDI to Indonesia began with investment in low-skilled manufacturing sectors and raw materials in the 2000s and early 2010s, and shifted to tap Indonesia as an ASEAN production base, a valuable consumer market for Chinese automotives and tech firms, and expanded investments related to batteries and EV supply chains.⁴³ China’s firms have made major investments in coal, critical minerals, and infrastructure, such as Indonesia’s first high-speed railway and hydropower and geothermal generation projects. The most strategically important investments are likely those in aluminum and nickel supply chains, where Chinese firms have complied with Indonesian policy to use downstream processing in Indonesia (figure 6). Competition from cheap Chinese imports has prompted officials to moot heavy tariffs on certain products, including textiles, though the tariffs have not been implemented since they were first announced in July 2024.

Figure 6. The predominance of Chinese investment and processing in Indonesia

These economic ties are durable, as China’s investment base in Indonesia also relies on technical experts and skilled labor from China, especially related to mineral and metal processing.⁴⁴ Foreign labor and allegations of double standards in workplace safety and pay have been politically controversial in Indonesia.⁴⁵ Nevertheless, these workers play critical roles in metal mining and processing that may be affected in a Taiwan scenario.

Indonesia in a Taiwan escalation scenario

China’s outsized economic influence would likely limit Indonesia’s capacity and willingness to align with the most expansive G7 sanctions in a moderate- or high-escalation scenario, prioritizing trade continuity and minimizing economic disruption and spillovers elsewhere in the Indo-Pacific area. Yet Indonesia would also be reluctant to accede to China’s most significant consequential asks, especially if China requests that Indonesia fully ignore the potential impact of G7 or US secondary sanctions.

Table 8. Indonesia’s anticipated activity by escalation level

Indonesia’s past practice in response to political developments in Taiwan—such as high-level US legislative visits—has been to call for neutrality and de-escalation while nominally professing adherence to China’s concept of the One China principle. In a moderate-escalation scenario, this is the most likely outcome. Indonesia’s sanctions compliance is far from certain in this scenario, given the scope of trade finance and other two-way trade ties—especially if China’s state-owned mineral companies are placed on the sanctions list. Complicating the picture is Japan’s close economic relationship with Indonesia; Japan ranks second in FDI stock within the country, and Japanese firms are active in Indonesia’s infrastructure funding and the automotive industry. Japanese firms are also significant co-investors—with Indonesian and Chinese partners—in large nickel and critical mineral joint ventures in Indonesia, including investments in one of the country’s largest industrial parks, Indonesia Morowali Industrial Park (IMIP). If Japan and the rest of the G7 decide to comply with or directly implement complementary sanctions, this could directly strike Indonesia’s next-generation investments.

Despite Taiwan’s attempts to build closer ties with Indonesia and Southeast Asia as part of its New Southbound Policy, Taiwan simply does not have as much economic or political heft as China in Indonesia.⁴⁶ Any bilateral engagement with Taiwan thus would likely be done discreetly to avoid inflaming tensions with China, especially in a high-escalation scenario.

In a high-escalation scenario, where the G7 might sanction China’s major private banks and policy, stress on Indonesia’s stock of external debt to Chinese creditors—private and official—would become more acute. Indonesia’s external debt to Chinese creditors stood at $21.2 billion as of July 2024, with an additional $17.4 billion to Hong Kong-based entities.⁴⁷ This debt is not likely to be an effective tool of coercive statecraft for Beijing. There are no known cases where China has used the threat of debt acceleration effectively to force countries to adopt its preferred foreign policy positions. Moreover, China’s loan agreements allow for default to be declared only under certain circumstances, and even if successful, such efforts would likely do nothing but saddle the lending bank with sizable nonperforming loans that it would be unable to collect. These debts are more relevant as a source of G7 or unilateral US pressure. If G7 sanctions targeted major Chinese banks, Indonesia may not be legally permitted to service Chinese debt, which could have implications for its global creditworthiness and its relationship with China’s financial system.

Transit through Indonesian territorial waters could also become more crucial for international shipping—if ships needed to be routed well around Taiwan. The question of transshipment is also an open one. Indonesia is within reasonable sailing range of China, and its ports could, in theory, be used for sanctions evasion in the event of G7 measures against China. However, direct cargo routes between Indonesia and ports in mainland China are few, with most shipments routed through Singapore. Recently, China’s purchases of Russian crude oil in evasion of G7 sanctions were routed mostly through Malaysia, rather than Indonesia.⁴⁸

Table 9. Indonesia’s alignment with domestic and international sanctions (select cases)

Indonesia has approached past international sanctions efforts gingerly, particularly when dealing with unilateral US sanctions. As Indonesian officials were themselves targeted by US sanctions and travel bans during the Suharto era until 1998—including current President Prabowo Subianto—the use of sanctions remains controversial.⁴⁹ Indonesia has not been an unswerving supporter of G7 sanctions efforts. Indonesian entities have been placed on the US SDN list for allegedly transacting with Iran in drone parts.⁵⁰ Moreover, Indonesian officials have occasionally adopted a neutral and entrepreneurial approach to international sanctions against Russia. A circular from Indonesia’s trade ministry in 2014, following Russia’s invasion of Crimea, identified “opportunities to increase exports” and argued the country should take advantage of foreign trade bans to fill Russian trade needs.⁵¹ After Indonesia increased trade credit and export insurance, Indonesia achieved a trade surplus with Russia in 2020 for the first time since 2016 though the benefits were short-lived after a crash in global palm oil prices in the second half of 2022. Indonesia also did not support the expansion of sanctions against Russia as host of the G20 summit in Bali in 2022, instead calling merely for G20 “unity.” On China, however, media reports suggest Indonesia has complied, albeit in a limited fashion, with US economic statecraft threats to restrict trade if Indonesia’s navy followed through on plans to source patrol boats from a Chinese supplier in 2020.

Conclusion

Scenarios of escalating military tensions over Taiwan are already difficult to contemplate, given the enormous economic costs that would result for virtually every national economy. Political positioning for G20 governments is complex. Most have assiduously tried to avoid the perception that they are deliberately choosing sides between the United States and China in a Taiwan crisis scenario. Given China’s central position within global manufacturing supply chains, most G20 economies have significant economic ties with China that their governments will be loath to sever over early signs of rising tensions. Nonetheless, both the G7 and Beijing will have their own diplomatic interests at stake during any conflict scenario and will be actively soliciting cooperation and political support.

This report has outlined some of the economic and political factors that would inform those choices in three countries: Brazil, South Korea, and Indonesia. These three countries were selected because they all have different types of distinct economic linkages to China and are potentially vulnerable to different economic statecraft tools from Beijing. Importantly, their relations with G7 countries are also distinct. South Korea is a political and military ally of the United States. Indonesia is strengthening political and military cooperation with the United States and the G7. Brazil’s financial system and its access to US dollars remain vitally important for both Brazilian and other Latin American economies.

In contemplating scenarios of potential escalation over Taiwan, ambiguity about the economic costs and the eventual scale of escalation will likely introduce caution among G20 governments, including our examined case studies. But as that ambiguity fades and escalation continues, conditions become clearer that aggregate economic costs will rise, and demands from Beijing and the G7 for more concrete alignment will increase. A moderate escalation scenario naturally imposes fewer hard choices upon G20 governments and permits them to avoid conflicting entanglements.

However, in a scenario of significant military escalation over Taiwan and extensive financial sanctions on China, economic actors in all three countries would likely comply with US sanctions or reductions of trade to China to some extent, due to concerns about secondary sanctions risks. In a moderate escalation scenario, the scope of any compliance would likely be more limited, given that all of these economies maintain significant trade relationships with China subject to potential disruption from Beijing. All three countries will experience some immediate economic consequences from disruptions to China’s economy and capacity to maintain international payments. None would likely offer public expressions of support for economic sanctions, but rather defer to previous diplomatic statements related to Taiwan’s political status. South Korea would likely provide the highest level of cooperation or support for any US actions, given the countries’ military alliance.

Given the three countries’ economic relationships with China, this report argues that Beijing would have a limited interest in pursuing punitive or negative economic statecraft tools against Brazil, South Korea, or Indonesia. In the event of US or G7 sanctions, Beijing would have an incentive to maintain regular trade and financial transactions wherever possible, encouraging third countries to continue current levels of economic engagement with China despite their potential exposure to secondary sanctions risks. Beijing could also offer additional economic carrots or incentives to G20 countries to maintain economic engagement, such as additional concessions on market access, new investment, or credit via bilateral swap lines.

Nonetheless, the intersection of these two sets of competing forces in the event of escalating tension over Taiwan will create significant political pressures for all G20 governments. China’s economic statecraft tools have been deployed in the past against South Korea, Lithuania, Australia, and other economies, and any restraint from Beijing could be viewed as temporary or contingent based on cross-strait developments, given the centrality of Taiwan to Beijing’s political interests. The uncertainty of China’s response may have a chilling effect on G20 willingness to act or align with US consensus-building measures as they wait for China’s response or for more significant decoupling progress in key industries to manifest.

Similarly, no trade-oriented G20 economy could afford to see any major bank lose access to US dollar clearing facilities in the event of secondary sanctions from the United States, even if there are clear limits to the American usage of these tools. Access to US financial markets, financial market infrastructure, and transactions in US dollars are important gateways to the global economic system, and access to them is important enough to secure at least nominal compliance on US actions.

Yet as scenarios of military tensions over Taiwan have passed from the realm of the unthinkable to the potentially imaginable, G20 governments will be forced to weigh the significant economic costs of choosing between competing demands from Washington and Beijing. Publicly highlighting these costs and the political dilemmas they will inevitably create may help to reinforce a multilateral consensus to prevent escalation before it occurs, as well as develop pathways to ease tensions in the event an unfortunate scenario materializes.

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About the authors

Matthew Mingey is an Associate Director with Rhodium Group, focusing on China’s economic diplomacy and outward investment, including development finance. Matthew is based in Washington, DC. Previously, he worked on global governance issues at the World Bank. Matthew received a Master’s degree in Global Business and Finance from Georgetown University’s Walsh School of Foreign Service and a Bachelor’s degree from the University of Pennsylvania.

Laura Gormley is a Research Analyst with Rhodium Group’s China Projects Team, focusing on China’s innovation ecosystem and external economic engagement. Prior to joining Rhodium, she was a research assistant with the Global Development Policy Center – Global China Initiative at Boston University, where she contributed to the Center’s work on China’s development finance and decarbonizing the Belt and Road Initiative. Laura holds a Master’s degree in Global Policy from Boston University’s Pardee School of Global Studies and a Bachelor’s degree from McGill University.

Logan Wright is a Partner at Rhodium Group and leads the firm’s China Markets Research work. He is also a Senior Associate of the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies. Previously, Logan was head of China research for Medley Global Advisors and a China analyst with Stone & McCarthy Research Associates, both in Beijing. Logan holds a Ph.D. from the George Washington University, where his dissertation concerned the political factors shaping the reform of China’s exchange rate regime. He graduated with a Master’s degree in Security Studies and a Bachelor’s degree in Foreign Service from Georgetown University. He is based in Washington, DC, after living and working in Beijing and Hong Kong for over two decades.

Acknowledgements

This report was written by Matthew Mingey, Laura Gormley, and Logan Wright in collaboration with the Atlantic Council GeoEconomics Center. The principal contributors from the Atlantic Council GeoEconomics Center were Josh Lipsky, Benjamin Lenain, Charles Lichfield, Jessie Yin, Ananya Kumar, and Kimberly Donovan.
The GeoEconomics Center and Rhodium Group wish to acknowledge a superb set of colleagues and fellow analysts who shared their ideas and perspectives with us during roundtable research sessions and helped us strengthen the study in the course of these discussions. Our gratitude goes to Emily Kilcrease, John Hughes, Howard Shatz, Adam Tong, Charlie Vest, Reva Goujon, Agatha Kratz, Hugo Bromley, Eyck Freymann, Timothy Heath, Dan Rosen, and Richard Danzig.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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1 United Nations COMTRADE Database, Rhodium Group analysis. G20 total excludes European Union and African Union aggregates. International Trade Centre (ITC) Trade Map data based on Korea Customs and Trade Development Institute (KCTDI) statistics is used for South Korea’s exports in 2023.

2 International Monetary Fund, Coordinated Direct Investment Survey (CDIS) data, and Rhodium Group analysis. G20 total excludes European Union and African Union aggregates. Data for Saudi Arabia is not available. Data on Argentina’s 2019 position and Russia’s 2021 position are used, as data for more recent years is unavailable.

3 All values given in $ are in US dollars unless otherwise noted.

4 Logan Wright, Agatha Kratz, Charlie Vest, and Matt Mingey, Retaliation and Resilience: China’s Economic Statecraft in a Taiwan Crisis, Atlantic Council and Rhodium Group, April 2024, https://www.atlanticcouncil.org/in-depth-research-reports/report/retaliation-and-resilience-chinas-economic-statecraft-in-a-taiwan-crisis/.

5 Charlie Vest and Agatha Kratz, Sanctioning China in a Taiwan Crisis, Atlantic Council and Rhodium Group, June 21, 2023, https://www.atlanticcouncil.org/in-depth-research-reports/report/sanctioning-china-in-a-taiwan-crisis-scenarios-and-risks/.

6 See, for example, Audrye Wong, “China’s Economic Statecraft: Lessons Learned from Ukraine,” Washington Quarterly 46, no. 1 (2023): 121–36, https://doi.org/10.1080/0163660X.2023.2188830.

7 See discussion in Ketian Vivian Zhang, “Just Do It: Explaining the Characteristics and Rationale of Chinese Economic Sanctions,” Texas National Security Review 7, no. 3 (2024), https://tnsr.org/2024/06/just-do-it-explaining-the-characteristics-and-rationale-of-chinese-economic-sanctions/.

8 Positive statecraft estimates include loan and grant projects alongside other aid types as captured in AidData’s Global Chinese Development Finance Dataset (v3.0), https://www.aiddata.org/data/aiddatas-global-chinese-development-finance-dataset-version-3-0. Estimates of negative statecraft from Rhodium Group research, covering 2000–2022, exclude purported boycotts of foreign brands within China.

9 Estimates cited within Jonas Deveikis, “China Sanctions vs Taiwan investments–Lithuania’s Central Bank Weighs Economic Impact,” January 21, 2022, https://www.lrt.lt/en/news-in-english/19/1593215/china-sanctions-vs-taiwan-investments-lithuania-s-central-bank-weighs-economic-impact.

10 International Monetary Fund, Coordinated Direct Investment Survey (CDIS) data, 2024.

11 Ministry of Commerce of the PRC in Wright et al., Retaliation and Resilience, 17.

12 “Brazil’s Embraer Ends Business Jet Production in China,” Reuters, June 1, 2016, https://www.reuters.com/article/markets/us/brazils-embraer-ends-business-jet-production-in-china-idUSE6N177049/.

13 Darren Lim and Victor Ferguson, “Chinese Economic Coercion During the THAAD Dispute,” ASAN Forum, December 28, 2019, https://theasanforum.org/chinese-economic-coercion-during-the-thaad-dispute/; and Tucker Reals, “Why THAAD Is Controversial in South Korea, China and Russia,” CBS News, May 2, 2017, https://www.cbsnews.com/news/why-thaad-is-controversial-in-south-korea-china-and-russia/.

14 Marcelo Rech, “Brasil se mantém fiel ao princípio de ‘uma só China’ em meio às tensões na Ásia,” InfoRel, August 10, 2022, https://inforel.org/2022/08/10/brasil-se-mantem-fiel-ao-principio-de-uma-so-china-em-meio-as-tensoes-na-asia/; “Press Release: Joint Communiqué between the Federative Republic of Brazil and the People’s Republic of China on the Deepening of Their Global Strategic Partnership-Beijing, 14 April 2023,” Brazil Ministry of Foreign Affairs, April 14, 2023, https://www.gov.br/mre/en/contact-us/press-area/press-releases/joint-communique-between-the-federative-republic-of-brazil-and-the-people2019s-republic-of-china-on-the-deepening-of-their-global-strategic-partnership-beijing-14-april-2023; and “Brasil reitera posição contra independência de Taiwan durante visita de chanceler da China,” Jornal do Comércio, January 19, 2024, https://www.jornaldocomercio.com/internacional/2024/01/1139844-brasil-reitera-posicao-contra-independencia-de-taiwan-durante-visita-de-chanceler-da-china.html.

15 Ryan Berg and Carlos Baena, “The Great Balancing Act: Lula in China and the Future of U.S.-Brazil Relations,” Center for Strategic and International Studies (CSIS), April 19, 2023, https://www.csis.org/analysis/great-balancing-act-lula-china-and-future-us-brazil-relations. Brazil and China also unveiled a joint proposal for peace talks during the UN General Assembly meetings in September 2024. See Simon Lewis, “China, Brazil Press On with Ukraine Peace Plan despite Zelenskiy’s Ire,” Reuters, September 27, 2024, https://www.reuters.com/world/china-brazil-press-with-ukraine-peace-plan-despite-zelenskiys-ire-2024-09-27/.

16 Eléonore Hughes, “Brazil’s President Withdraws His Country’s Ambassador to Israel After Criticizing the War in Gaza,” AP News, May 29, 2024, https://apnews.com/article/brazil-lula-israel-ambassador-withdrawn-af9d295d989a86c4fcd8ca4531350f42; and “Brazil Postpones Israel Arms Deal for Second Time Over Gaza Genocide,” Middle East Monitor, August 13, 2024, https://www.middleeastmonitor.com/20240813-brazil-postpones-israel-arms-deal-for-second-time-over-gaza-genocide/.

17 As of 2023, most countries in the world—just over 150—ran a trade deficit with China. Large commodity exporters like Brazil and Angola were rare exceptions. See Jürgen Matthes, “China’s Trade Surplus–Implications for the World and for Europe,” Review of European Economic Policy 59, no. 2 (2024): 104–11, https://www.iwkoeln.de/en/studies/juergen-matthes-chinas-trade-surplus-implications-for-the-world-and-for-europe-eng.html.

18 Ministério do Desenvolvimento, Indústria e Comércio Exterior data accessed via International Trade Centre, 2024, https://www.trademap.org/.

19 This reliance is asymmetric. Brazil provides only a small portion of crude imports—Middle Eastern countries and Russia are now China’s primary suppliers of crude. For other goods, like soybeans and iron ore, China would have few alternative suppliers at scale save for the United States and Australia.

20 Tulio Cariello, “Chinese Investments in Brazil 2023: New Trends in Green Energy and Sustainable Partnerships [Investimentos Chineses No Brasil 2023: Novas Tendências Em Energias Verdes E Parcerias Sustentáveis],” Brazil-China Business Council, September 2024, 9–16, https://static.poder360.com.br/2024/09/estudo-investimentos-china-no-brasil.pdf.

21 Author interview with think tank researcher, Rio de Janeiro, July 2024; interviewees were promised anonymity and aggregated presentation of interview results. For more on the probe’s effects, see Amelia Cheatham, “Lava Jato: See How Far Brazil’s Corruption Probe Reached,” Council on Foreign Relations, last updated April 19, 2021, https://www.cfr.org/in-brief/lava-jato-see-how-far-brazils-corruption-probe-reached.

22 Guy Burton, “What President Bolsonaro Means for China-Brazil Relations,” Diplomat, November 9, 2018, https://thediplomat.com/2018/11/what-president-bolsonaro-means-for-china-brazil-relations/.

23 Bryan Harris et al., “Investigations Reflect Fears of Flood of Cheap Chinese Products but Could Strain Brasília’s Ties with Beijing,” Financial Times, March 17, 2024, https://www.ft.com/content/8703874e-44cb-4197-8dca-c7b555da8aef.

24 Samantha Lipan and Marissa Ramos, “Latin America’s 30 Largest Banks by Assets, 2024,” S&P Global Research, April 30, 2024, https://www.spglobal.com/marketintelligence/en/news-insights/research/latin-americas-30-largest-banks-by-assets-2024.

25 Gabriel Ronan, “Crise China e Taiwan: como o conflito afeta a economia do Brasil?,” O Tempo, August 4, 2022, https://www.otempo.com.br/mundo/crise-china-e-taiwan-como-o-conflito-afeta-a-economia-do-brasil-1.2710810.

26 The Ministry of Foreign Affairs of the Russian Federation, “Joint Statement of the BRICS Ministers of Foreign Affairs/International Relations, Nizhny Novgorod, Russian Federation, 10 June 2024,” June 10, 2024, https://mid.ru/en/foreign_policy/news/1955719/; and Department of International Relations and Cooperation of South Africa, “XV BRICS Summit Johannesburg II Declaration,” August 23, 2023, https://brics2023.gov.za/2023/07/05/summit-declarations/.

27 Author analysis of Bank for International Settlements (BIS) 2019 and 2022 Triennial Central Bank Survey data. BIS, “Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives Markets in 2022,” https://www.bis.org/statistics/rpfx22.htm.

28 Daniel Gersten Reiss, “Invoice Currency: Puzzling Evidence and New Questions from Brazil,” Banco Central do Brasil, Working Papers No. 382, March 2015, https://www.bcb.gov.br/pec/wps/ingl/wps382.pdf/. Data in this paper is from 2015 but indicates the strong reliance upon the US dollar for both invoicing of exports (around 95 percent) and imports (around 85 percent) in Brazil.

29 Reuters, “China Says It Will Set Up Yuan Clearing Arrangements in Brazil,” February 7, 2023, https://www.reuters.com/markets/currencies/china-says-it-will-set-up-yuan-clearing-arrangements-brazil-2023-02-07/.

30 Reuters, “Yuan Tops Euro as Brazil’s Second Currency in Foreign Reserves,” March 31, 2023, https://www.reuters.com/article/markets/currencies/yuan-tops-euro-as-brazils-second-currency-in-foreign-reserves-idUSL1N3632DU/.

31 Bank for International Settlements, Triennial Central Bank Survey, October 2022, data from tables 4 and 5 concerning foreign exchange turnover, https://www.bis.org/statistics/rpfx22_fx.pdf.

32 White House Briefing Room, “Remarks by President Biden and H.E. Moon Jae-in, President of the Republic of Korea, at Press Conference,” May 21, 2021, https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/05/21/remarks-by-president-biden-and-h-e-moon-jae-in-president-of-the-republic-of-korea-at-press-conference/.

33 Reuters, “China Lodges Complaint Over South Korean President’s ‘Erroneous’ Taiwan Remarks,” April 23, 2023, https://www.reuters.com/world/asia-pacific/china-lodges-complaint-over-south-korean-presidents-erroneous-taiwan-remarks-2023-04-23/.

34 Reuters, “China Protests Taiwan Minister’s Role at Seoul Summit Backed by U.S.,” March 18, 2024, https://www.reuters.com/world/china-protests-taiwan-ministers-role-seoul-summit-backed-by-us-2024-03-18/.

35 Rhodium Group analysis of Korea Customs and Trade Development Institute data (KCTDI), accessed via International Trade Center (ITC) Trade Map.

36 Heejin Kim, “South Korea Offers $29 Billion in Aid to Battery Makers amid Metals War,” Bloomberg, December 12, 2023, https://www.bloomberg.com/news/articles/2023-12-12/korea-offers-29-billion-aid-to-battery-makers-amid-metals-war?sref=H0KmZ7Wk.

37 Korea Times, “Damage from China’s Ban on South Korean Tours Estimated at 7.5 TLN Won,” December 3, 2017, https://www.koreatimes.co.kr/www/biz/2020/12/602_240286.html.

38 For example, during the visit by then-Speaker Nancy Pelosi to Taiwan in 2022, Foreign Ministry officials issued a statement calling on “all parties” to avoid escalation, while reaffirming Indonesia’s support for China’s One China principle. See Yvette Tanamal, “Indonesia calls for de-escalation after Pelosi’s Taiwan visit,” Jakarta Post, August 4, 2022, https://www.thejakartapost.com/world/2022/08/03/indonesia-calls-for-de-escalation-after-pelosis-taiwan-visit.html.

39 Yvette Tanamal, “Taiwan Tensions Cloud ASEAN Meetings,” Jakarta Post, August 5, 2022, https://www.thejakartapost.com/paper/2022/08/04/taiwan-tensions-cloud-asean-meetings.html.

40 Kris Mada, “Indonesia Siapkan Rencana Darurat Terkait Taiwan,” Kompas, April 14, 2023, https://www.kompas.id/baca/internasional/2023/04/14/indonesia-siapkan-rencana-darurat-terkait-taiwan.

41 Taiwan Workforce Development Agency and Ministry of Labor, “Foreign Workers in Productive Industries and Social Welfare by Nationality,” September 2024, https://statdb.mol.gov.tw/html/mon/212030.htm.

42 In current terminology, it is known as “independent and active” foreign policy, which eschews alignment with “super powers” and “military pact[s].” See Retno Marsudi, “Indonesia’s Non-Aligned Foreign Policy Is Not Neutral,” Diplomat, November 28, 2023, https://thediplomat.com/2023/11/indonesias-non-aligned-foreign-policy-is-not-neutral/.

43 Matthew Mingey et al., ESG Impacts of China’s Next-Generation Outbound Investments: Indonesia and Cambodia, Rhodium Group, August 24, 2023, https://rhg.com/research/esg-impacts-of-chinas-next-generation-outbound-investments-indonesia-and-cambodia/.

44 Angela Tritto, How Indonesia Used Chinese Industrial Investments to Turn Nickel into the New Gold, Carnegie Endowment for International Peace, April 11, 2023, https://carnegieendowment.org/research/2023/04/how-indonesia-used-chinese-industrial-investments-to-turn-nickel-into-the-new-gold?lang=en.

45 Former Chinese workers and media reports also allege poor working conditions for and abuse of Chinese workers in Indonesia. See Xu Zhenhua, “For Chinese Workers in Indonesia, No Pay, No Passports, No Way Home,” Sixth Tone, January 9, 2022, https://www.sixthtone.com/news/1009399.

46 See Bonnie Glaser et al., The New Southbound Policy: Deepening Taiwan’s Regional Integration, CSIS, January 2018, https://csis-website-prod.s3.amazonaws.com/s3fs-public/event/180113_Glaser_NewSouthboundPolicy_Web.pdf.

47 Bank Indonesia and Ministry of Finance, External Debt Statistics of Indonesia, September 2024, https://api-djppr.kemenkeu.go.id/web/api/v1/media/2DCFE7B5-51AE-417D-9505-67971C9A97F1.

48 Rogan Quinn and Logan Wright, “Discounts and Teapots Alter China’s Oil Trade,” Rhodium Group, May 18, 2023.

49 Prabowo Subianto—known mononymously as Prabowo—was denied entry to the United States until 2020 as part of US restrictions on Indonesian military officials. The de facto travel ban relates to Indonesia’s violent crackdown on pro-independence protestors in East Timor in 1992, as well as Prabowo’s connection to alleged human rights abuses by Indonesian military units. Indonesia was banned from US military training programs and arms sales until 2005. See Phil Stewart and Idrees Ali, “Pentagon Prepares to Welcome Once-banned Indonesian Minister, despite Rights Concerns,” Reuters, October 15, 2020, https://www.reuters.com/article/world/pentagon-prepares-to-welcome-once-banned-indonesian-minister-despite-rights-con-idUSKBN2700HR/; and Frega Wenas Inkiriwang, The Dynamic of the US-Indonesia Defence Relations: The “IMET Ban” Period, 2020, https://eprints.lse.ac.uk/103107/1/AJIA202_IMET_forfinalisation_FWI02012020.pdf.

50 BBC Indonesia, “AS jatuhkan sanksi ke pengusaha Surabaya, dituduh pasok komponen pesawat nirawak Iran-‘Saya tak pernah kirim ke Iran,’ kata Agung Surya Dewanto [US Imposes Sanctions on Surabaya Businessman Accused of Supplying Iranian Drone Components—‘I Never Sent to Iran,’ ” says Agung Surya Dewanto], January 17, 2024, https://www.bbc.com/indonesia/articles/c29y6ey701eo/.

51 Septika Tri Ardiyanti, Badan Pengkajian dan Pengembangan Perdagangan [Trade Analysis and Development Agency], “Peluang Ekspor Indonesia Di Tengah Sanksi Ekonomi Rusia [Indonesia Export Opportunities amid Russian Economic Sanctions],” 2017, https://bkperdag.kemendag.go.id/media_content/2017/08/Peluang_Ekspor_Indonesia_di_Tengah_Sanksi_Ekonomi_Rusia.pdf.

The post Avoiding entanglement: G20 responses in a Taiwan crisis appeared first on Atlantic Council.

Global DPI models: Lessons from India, Brazil, and beyond

Barbara Kotschwar and Colin Colter — Fri, 25 Oct 2024 14:21:48 +0000

The concept of digital public infrastructure (DPI), while relatively new, has rapidly gained traction among policymakers. Countries around the world have long attempted to digitize government service delivery. Some wealthier nations in the Global North build atop legacy systems that include public and private actors that offer essential goods and services, such as identification, payments, civil registration and vital statistics (CRVS), and data exchange.

In contrast, low- and middle-income countries of the Global South have built novel indigenous systems with new technologies and best practices, leapfrogging the Global North’s digital government systems. Models such as India’s highlight DPI’s potential as a tool for financial inclusion and economic development. Because of its initial success, DPI has gained traction as other Global South countries embark on their own DPI projects or adopt technology from counterparts such as India and Brazil, which offer open-architecture access. In contrast to some legacy systems, these new digital goods aim to employ open standards and protocols, be interoperable and non-excludable, use federated architecture, engage privacy by design, and offer the digital equivalent of physical infrastructure in providing access to each country’s overall digital economy. In building these sui generis digital systems, Global South countries are rethinking how to balance public and private-sector involvement, regulations for interoperability, the appropriate role and limits of markets, how to create trust in institutions, and how to build consequentially inclusive digital government goods and services.

Two key recent events have accelerated the interest in digital public infrastructure: the COVID-19 pandemic and India’s presidency of the Group of Twenty (G20) Summit. The COVID-19 pandemic exposed vulnerabilities and the urgent need for scalable, digital services, accelerating countries’ investments in offering goods and services digitally.
¹ India’s leadership at the G20 further galvanized this movement, positioning DPI as a crucial global conversation. International and multilateral groups from the Group of Seven (G7), the Quad, and now the United Nations (UN) Global Digital Compact have all been working to address and define DPI.
² The European Parliament is now holding conferences on a “Euro Stack” as it explores new ways to assert digital sovereignty and create equitable access to the digital economy.³

In the context of these developments, the Atlantic Council’s South Asia Center assembled working groups to research and discuss the definition of digital public infrastructure, what makes it “new,” learnings from historical examples, and key questions going forward. These working groups comprised digital government, trade, innovation, payments, foreign policy, industrial policy, and internet experts. They kindly shared their time and insights in a series of meetings and panels. The working groups also conducted structured interviews with DPI experts around the world. We graciously thank all participants and commentators for their openness and time given to the project.

This issue brief establishes the background of DPI development, discusses existing examples of DPI, and provides the policy recommendations essential for the next stage of DPI exploration, implementation and deployment. This brief is followed by two papers on cybersecurity and financial inclusion, addressing the fundamental issues affecting the development of DPI.

DPI: Scope and definition

The nomenclature “digital public infrastructure” is a new entrant in the government technology literature, but projects bearing elements of what we now consider DPI have existed for decades.⁴ As technologies have changed, so have the definitions of what is public and what is infrastructure.⁵ Although often credited to the Nobel Prize-winning economist Paul Samuelson, the concept of public goods extends back to John Stuart Mill, Italian writer Ugo Mazzola, and Swedish economist Knut Wicksell.⁶ Samuelson extended this definition to include non-rivalry (i.e., one person’s use of a good does not diminish another person’s use) and non-excludability (i.e., everyone has equal access to that good, such as air).⁷ Digital public goods (DPGs) are open-source software packages meant for governments to build digital tools that broadly fit these two criteria. ⁸ Not all DPI projects use DPGs, and using open-source software is neither necessary nor sufficient for a government DPI project to be truly open protocol, transparent, interoperable, and reusable, as many definitions of DPI require. The definition of DPI remains a topic of a vibrant and ongoing debate. For the purposes of this paper, we use the Global DPI Repository definition: “interoperable, open, and inclusive systems supported by technology to provide essential, society-wide public and private services.”

What is new about DPI?

DPI assumes that citizens have a right to access basic features of a country’s digital economy. These features typically include identification, civil registration and vital statistics, payments, and data exchange. Proponents of DPI argue that markets have not, or have not properly, provided these products and services to all members of the digital economy. Therefore, they argue, the government should step in to provide these basic goods and services in ways that allow societal reach.

The DPI movement asks what the role of the state should be in the digital economy. Has the private sector failed in delivering goods and services to the world’s poorest and most underserved?

Government involvement in payments systems provides the clearest example of digital domains historically run by the private sector, but there are also emerging attempts to deploy DPI models for open commerce, ride hailing, and even decentralized compute.

India stack

India’s leadership of the 2023 G20 catapulted the conversation about these digital government offerings to the international stage. The New Delhi Leaders’ Declaration defined DPI as “a set of shared digital systems that are secure and interoperable, built on open technologies, to deliver equitable access to public and/or private services at a societal scale.”⁹ Over the past decade, India has digitally and financially included millions of people and built a system of digital goods around a core group of IDs, payments, and data exchange. This set of government-led digital products, known as India Stack, enables access to the Indian domestic digital economy.¹⁰

As a result, India is often seen as the model for DPI implementation due to the successful launches of its Aadhaar digital identity platform, Unified Payments Interface (UPI) instant payments system, and civil registration services. Its ability to scale DPI is attributed to its large population, technological expertise, low mobile data costs, and supportive political and economic conditions.

For New Delhi, the development of the stack has been a project for more than a decade. In 2010, the Indian government launched Aadhaar, a biometric digital identity system. Enrollment centers across the country collected face and retina scans, fingerprints, and demographic data. The government of India has tied a variety of government benefits and account setups to Aadhaar, such as setting up a bank account. Although legally optional, having an Aadhaar card remains imperative for access to the digital economy in India.¹¹ In less than a decade, more than 1.3 billion people, nearly 90 percent of the population, have joined Aadhaar.

Digital payments form the second layer in the stack. The Central Bank’s Pradhan Mantri Jan Dhan Yojana (PMJDY), a project to bring a bank account to all Indian households, opened accounts for 166 million people in its first year. This grew to 510 million by the end of 2023, according to India’s Ministry of Finance. This allowed the introduction of the UPI, a new layer of the retail payments systems that allowed banks to exchange messages with each other and with non-bank firms, capitalizing on the financial technology (fintech) innovators that had developed tools to cheaply and easily store and transfer funds.¹²

Anyone with access to the system—including consumers and small merchants who previously found it difficult to make and receive payments—could now send or receive payments for goods and services through a digital app. A crucial feature of this system was its intra-system interoperability; users were able to transact with all actors on the UPI rails. The government accomplished this interoperability by establishing a single application programming interface (API)-based rail along which all payments providers had to transact.

Data verification and consented exchange represent the third layer of the stack. The Data Empowerment and Protection Architecture, launched in 2020, aims to facilitate the seamless and consent-based exchange of personal data. An Account Aggregator framework aims to enable atomized control over one’s personal data, whereby each individual user can track and consent to different digital actors accessing said data.¹³

India Stack has experienced several challenges and controversies since its rollout. The growth of account ownership hit a lull with the pandemic, even declining slightly from 80 to 78 percent by 2021. Some doubts have also been raised regarding the universal utility of the accounts, as India has one of the world’s highest percentages of inactive accounts. Additionally, several high-profile data breaches have raised concerns about the security of the Aadhaar system.¹⁴ Experts have flagged the potential security risks of centralizing such large quantities of identity information and the possibility that saved fingerprints could be used improperly.¹⁵ Others have worried that governments could use such large databases as tools to track and surveil citizens.¹⁶

Brazil’s digital payments system

Brazil’s new payment system, Pix, is another example of a DPI. Launched in November 2020 by the Central Bank of Brazil (BCB), the Pix electronic payment system aimed to reduce reliance on cash, increase financial inclusion, strengthen competition, and reduce the cost and ease the acceptance for merchants. Several features have ensured the success of Pix. First, the BCB made participation by banks and payments providers mandatory, allowing peer-to-peer usage to increase over time. Second, Pix payments settle in three seconds on average, faster than credit or debit cards.¹⁷ Third, the BCB set zero-fee transaction costs for individuals, with a cost to the merchant of 0.33 percent of the transaction amount. These dynamics led the largest banks operating in Brazil to work together to develop the network in a way that mandated interoperability. The BCB also established a Pix Forum, in which users and stakeholders can have a dialogue through its implementation cycle.¹⁸

Pix has had impressive results since its rollout. In its first two years, 140 million Brazilians—nearly 80 percent of the adult population—used Pix. By the end of 2022, more than 3 billion transactions took place on Pix per month, five times more than credit and debit cards. The head of Brazil’s central bank, Roberto Campos Neto, famously declared that the Pix system would result in “credit cards ceasing to exist at some point soon.”¹⁹ Pix has led to the growth of non-bank payments fintechs and a decrease in the price of payments.²⁰

In terms of its governance, Pix is more centralized than India Stack. The BCB both owns and operates the payment scheme, as well as the user address database that contains user identification. The BCB is also the regulator for the overall payments system and, thus, the regulator for Pix. The central bank has added several features to Pix since its inception, including payment scheduling, access to third-party payment providers, and the ability to withdraw cash from automated teller machines. Pix has also been the subject of controversy. As volumes and online account ownership have increased, so have instances of cybercrime and fraud.²¹

Estonia’s digital highway: The X-Road

More than half of the Estonian population voted in the 2023 election from their home computers. Estonia’s digitized government system—which allows access to government services, e-health records, and secure digital identity—made this feat possible.

Estonia’s DPI project began in the 1990s with a decision to rebuild the country’s economy on a digital basis. Through the so-called “Tiigerhüpe,” or tiger leap program, the government used public-private partnerships to invest in network infrastructure to modernize Estonia’s post-Soviet infrastructure, including providing internet to all Estonian schools and government agencies. An electronic identification (e-ID) program followed suit. The electronic governance platform also includes digital voting, an e-file system for access to the judicial system, and the government cloud, which, through partnerships with private companies, has put 99 percent of public services online.

The X-Road system represents the key infrastructure behind Estonia’s digital government. A secure data-exchange platform that connects more than 450 public and private-sector organizations, X-Road enables more than three thousand digital services. The Nordic Institute for Interoperability Solutions—a nonprofit organization created by the governments of Estonia, Iceland, and Finland—now manages the X-Road platform and its international adoption projects. More than twenty countries have adapted or plan to adapt the X-Road program through open-source access.

Working with the private sector proved essential for the success of the Estonian experiment. While the government ideated the digital ID card early in the 1990s, the first digital IDs were “only good for scratching the ice off the windshield of a car,” according to one of their developers.²² Working with banks to improve the user experience and creating incentives to use the cards proved essential to the system’s ultimate success.²³

In contrast to the payment systems in Brazil or India, X-Road has no single point of failure. X-Road’s peer-to-peer architecture is focused primarily on resiliency.²⁴ Because X-Road allows Estonia’s public agencies to share data securely with each other, every ministry manages access to its own database, which ensures data are not stored in a common pool that could become a single point of failure.

As with India and Brazil, Estonia has faced cyber threats to its DPI system. In 2007, the country faced a weeks-long attack by cyber criminals in which all government services were taken down. This led Estonia to develop a data embassy, which created a backup of critical data and services stored in a remote location.²⁵

The role of payment systems in DPI

India, Brazil, and Estonia offer distinct yet instructive models for implementing DPI. Their unique experiences reflect the different regulatory, technological, and governance choices that countries can make. India’s society-level approach, Brazil’s emphasis on speed and accessibility, and Estonia’s integration of security and privacy into digital services each provide lessons for how digital infrastructure can be developed to meet local needs. The recurring challenges of cybersecurity and privacy standards across these examples illustrate the need for secure and resilient digital architecture. These examples set the stage for a deeper exploration of a key component of DPI: payment systems.

Why study payments?

The term “payments” means moving value between actors across businesses, consumers, and governments. It is the process or service of exchanging units of value and was historically led by the private sector (e.g., by banks or merchants). Money is a discrete unit of value and governments historically play the role of enforcing that it has been spent only once at a time. Moving value digitally incurs transaction costs.²⁶ Someone must facilitate, clear, settle, and assume risk in the movement of that value from one account to another. Running a cash-based system also incurs costs to both the operator and the users of cash.²⁷ The advent of government-offered payment rails, such as India’s UPI and Brazil’s PIX, has raised new questions about the lines between the state and its citizens, the definition of “public” in public goods, and the long-term direction of financial exchange in the digital economy.²⁸

Types of DPI payments systems

For the purposes of this brief, we identified four major types of DPI payments systems. These different forms come from the different payment instruments they support and the participants among which they can transact payment instruments.

All the below DPI payments systems involve actors moving value between them and either charging to do so (via interchange) or being funded by some other mechanism (e.g., government funding/subsidies or value-add services such as telecommunications subscription services). Each of these methods is either:

a low-cost system linking a handful of banks or other institutions to do account-to-account (A2A) payments;
government-led facilitation like public rails (e.g., UPI or a central bank digital currency (CBDC)); or
involving entities that do not directly monetize the payment flow itself because they monetize another aspect of customer interaction (e.g., M-PESA).

In each of these examples, either government funding plays a role in facilitating the transaction or retail banks cover the cost and the issuing bank charges for the service. In all, some alternate source of funding (whether government subsidy or cross-subsidy) maintains the rails.

Cross-domain payment systems

The first payments system is the interoperable, or cross-domain, system. Cross-domain systems allow all accredited financial actors to transact payment instruments in near real time and on equal or progressive cost footing. They ideally allow for all-to-all switching, clearing, and exchange of instruments within one system between banks, microfinance institutions (MFIs), mobile money operators (MMOs), savings and credit cooperatives, and a government’s central bank. Cross-domain payment systems represent the aspirational goal of many DPI programs because they allow the most payments interoperability in an economy.

Bank instant payment systems

A bank instant payment system (IPS) allows for the instant messaging and transaction of payments instruments between member banks. Thus, this system only allows for transactions involving instruments associated with bank accounts (e.g., debit or credit electronic funds transfers). To facilitate instant payments between other parties, those parties would need to partner with a bank that is a member of the bank IPS.

Interoperable mobile money payments systems

Interoperable mobile money operator (I-MMO) payment systems allow for the messaging and transaction of payments instruments between or within mobile operators. These systems typically work in e-money instruments and are often run by the private sector. In contrast to centralized DPI payment systems, these I-MMO payments rely on a series of multilateral and bilateral agreements between MMOs to facilitate the transfer of funds between them. Sometimes the MMOs act as indirect participants in the instant payments system via a bank that is a direct participant in the settlement infrastructure (e.g., PesaLink in Kenya). Note that this type of interoperable payment system contrasts with closed-loop payment systems such as Venmo, in which a customer can only transact with other in-network participants. The ability of MMOs to move these e-money instruments depends on the legal architecture of the country in which they operate and whether it facilitates such private-to-private exchanges between non-banks.²⁹

Central bank digital currencies

Retail CBDCs are a way for governments to issue fiat as digital legal tender. The advent of blockchain and cryptocurrencies has increased interest in CBDCs as this kind of ledgered cryptography can increase the security of storing fiat digitally. CBDCs can be seen as a type of instant payments DPI. Both retail CBDCs and traditional DPI payments software systems can use cryptography and APIs to ensure security and accessibility. Because they both reduce transaction costs, they can enable the creation of private-sector entrants and increased competition. In contrast to other digital payments systems, CBDCs represent a claim on the central bank, not on the intermediaries.

Cross-border DPI systems

In a regional DPI system, various countries group together to allow for instant payments transactions across borders and, sometimes, between different currencies. In the case of regional DPI payments, clearing either occurs through an agreed-upon central bank or through a third-party hub. Each participant (MMOs, MFIs, commercial banks) connects to the hub either directly or through a national switch.

For example, two of the three regional IPS in Africa—Pan-African Payment and Settlement System (PAPSS) and Groupement Interbancaire Monétique de l’Afrique Centrale (GIMACPAY)—use hub arrangements, while Transactions Cleared on an Immediate Basis (TCIB) follows a hub-switch arrangement.

The public-private divide

As some countries look to use open-source software to build indigenous payments systems, they must make sure to use the correct tools to scale, meet their goals, and continue to innovate as consumer needs change. However, the political systems and civil society underpinning software design and implementation arguably play a larger role in determining that DPI system’s success than the technology itself. This working group emphasizes that a diversity of institutions and balanced trade-offs can create long-term sustainable payments systems that both include and serve their end customers.

Working group policy recommendations

Governance

While financial inclusion remains important, sound internal governance and oversight of DPI projects are paramount for their long-term success.³⁰ Governance will determine the success of DPI projects in serving all communities and replicating success globally. The working group members with experience studying industrial policy and trade protection raised questions about the role of the central bank and its mandate in a particular jurisdiction, and how to resolve potential conflicts of interest when governments act as both regulator and operator. The group felt that governance should be designed to enhance public-private collaboration to encourage competition and innovation, as well as to safeguard against government favoring specific technologies (that is, technology neutrality) and to prevent crowding out of private-sector solutions.

Cost

As excellent research from the World Bank’s Project FASTT group shows, cash-based systems also incur costs (on cash providers as well as users). It is, therefore, essential that governments and private-sector players are aware of the costs of upgrading and digitization, as well as the costs of opting out of these efforts. Research on pricing, interchange, and consumer elasticity in financial products can help illuminate the conversation on free or low-cost, instant, push-payments systems.

To ensure the success of DPI, particularly in the realm of financial inclusion, it is essential to enable digital readiness by investing in key infrastructure like internet access and cellular networks while also rigorously evaluating a country’s preparedness for digital transformation. This digital readiness should be complemented by strong privacy and cybersecurity frameworks that ensure user trust, safety, and resilience. By implementing internationally recognized standards for data privacy and cybersecurity (such as the National Institute of Standards and Technology or International Organization for Standardization frameworks), countries can safeguard user data, promote transparency, and ensure that financial inclusion efforts are secure, inclusive, and sustainable for the long term.

Design for users

DPI should be inclusive, affordable, and able to address digital divides. It should prioritize users and their needs like literacy, accessibility, and fraud protection.³¹ Consumer preferences and design should be at the center of DPI improvement, which will require continuous monitoring and evaluation even as these technologies are deployed.

Transparency, citizen involvement, and accountability are keys to a successful implementation. Sharing scheme rules and uptake data builds trust and establishes independent progress evaluation. Much of the leading research on DPI and instant payment systems comes from stakeholder interviews and not from public-access websites.³²

In conclusion, the exploration of digital public infrastructure (DPI) across various national models highlights the transformative potential of these systems in addressing key societal needs such as financial inclusion and service delivery. Countries from both the Global North and South are shaping DPI to suit their respective context, with developing nations often trying innovative indigenous systems. As India’s leadership at the G20 and Brazil’s Pix system show, DPI offers a critical tool for digital governance, enabling broad and public and private access to essential services. This working group’s findings underscore the need for continued international collaboration, robust governance, and strong privacy-oriented cybersecurity frameworks to ensure longevity and inclusivity in DPI. Policymakers and stakeholders ought to focus on building resilient, and interoperable systems to fully harness the benefits of DPI.

About the authors

Authors & working group co-chairs

Barbara Kotschwar, Georgetown University
Colin Colter, Atlantic Council

Working group members

Rob Atkinson, ITIF
Ravi Shankar Chaturvedi, Tufts University
Dan Chenok, IBM Center for The Business of Government
David Eaves, University College London
Arya Goel, ASG
Jeff Lande, The Lande Group & Atlantic Council
Mark Linscott, Atlantic Council
Srujan Palkar, Atlantic Council
Aparna Pande, Hudson Institute
Anand Raghuraman, Mastercard
Susan Ritchie
Kati Suominen, Nextrade Group
Atman M Trivedi, ASG & Atlantic Council
Tiffany Wong, ASG

Fulton quoted in CNN on Putin’s BRICS summit appearance amid the West’s attempts to isolate Russia

Atlantic Council — Mon, 21 Oct 2024 20:10:34 +0000

Original source

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China’s cleantech growth strategy sets its sights on Brazil

Joseph Webster, William Tobin — Wed, 02 Oct 2024 15:59:38 +0000

China is counting on three cleantech sectors to fuel future economic growth: electric vehicles (EVs), lithium-ion batteries, and solar photovoltaic (PV) panels. Exports of these so-called “new three” industries reached nearly $143 billion in 2023, up massively from $33 billion in 2019.

But China’s growing might in cleantech is stirring unease in recipient markets due to perceived economic and national security risks. The United States has all but banned imports of Chinese solar cells and modules, and EVs. Other advanced economies may follow suit—for example, on August 26, Canada imposed tariffs on Chinese-made products.

With several developed countries becoming increasingly reluctant to absorb imports from China’s new three industries, China’s cleantech sectors need alternative markets to secure future export growth. Accordingly, Latin American’s approach to China’s cleantech industries could prove consequential. For now, growth in China-Latin America ties in the “new three” is driven primarily by Brazil, although electric vehicle shipments to the South American country have softened considerably in recent months.

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China’s Brazil bonanza

New three exports to continental Latin America have surged. The region’s total imports of Chinese solar panels, lithium-ion batteries, and solar PV rose from $3.2 billion in 2019 to $8.9 billion in 2023, with Brazil absorbing 63 percent of these imports by value last year.

Exports of the new three are relatively minor compared to China’s total exports to the region, which nearly reached $230 billion in 2023. Altogether, continental Latin America accounted for 10 percent of China’s exports of the new three for the twelve months ending August 2024. The region features, however, as one of the options China is presented with to find a market for its exports amid rising manufacturing capacity domestically.

Electric vehicles are where Brazil’s outsized purchases of the new three are most striking. For the twelve months ending in August 2024, 73 percent of China’s exports of battery electric and plug-in hybrid vehicles to continental Latin America were directed toward Brazil.

Interestingly, there has been a sharp decline in EV exports to Brazil in recent months, while shipments to Mexico are rising sharply. Some of the recent decline is due to sales being brought forward to avoid an 18 percent tariff imposed by Brazil in July.

The same trend may be observed in Mexico, as its rising imports of Chinese EVs are likely tied to the phase out of a tariff exemption on October 1. Still, rising shipments to Mexico could also signal the start of a larger trend. Importantly, BYD is, for now pausing investment plans in the country.

Brazil’s market advantage

China’s apparent focus on Brazil for new three exports can be attributed to the size of the Brazilian market, strong environmental and policy fundamentals, and the influence of Beijing’s trade and investment diplomacy.

Brazil’s gross domestic product (GDP) measured $2.2 trillion in 2023, accounting for 34 percent of continental Latin America’s GDP. In a regulation-heavy region, China needs to prioritize markets for its early-stage exports.

In addition to Brazil’s size, the country is a favorable location for clean industry. Brazil is fertile ground for solar power, enjoying high solar irradiance in nearly all regions of the country. Since 2017, Brazil has added an average of 1 gigawatt per month of combined solar capacity in residential and utility-scale projects. The average price of solar electricity in the country has decreased by 68.6 percent since 2013, making it among the most competitive generation sources on the grid.

Brazilian policy supports domestic deployment of clean energy—and thus new three imports from China. Brazil provides import tax credits for electric vehicles, and has an emissions standards program known as Proconve, which mandates emissions limits for harmful pollutants. By extension, this program also incentivizes battery deployment, since electric vehicles perform well under this scheme.

The country has long-established solar support mechanism through its ProInfa tax credit scheme, and BNDES, the national development bank, provides cheap project finance. Brazil also incentivizes residential solar through a net-metering policy. Few other Latin American nations combine such sophisticated policy frameworks with favorable financing conditions, a key enabler of investment in a region beset with high interest rates. These policies have made Brazil an attractive market for Chinese cleantech firms.

Finally, China views Brazil as a valuable diplomatic partner in South America, and the relationship could provide Beijing a regional foothold. Brazil is also an important economic partner—in Latin America, it is China’s largest trading partner and the largest recipient of Chinese investment. Globally, Brazil is China’s principal source of soybeans and second-largest source of iron ore, which are central to China’s livestock and steelmaking industries, respectively. China is, in turn, a critical export market for Brazil.

Brazil’s policy tightrope

However, Brazilian policymakers face a dilemma in their economic relationship with China. To spur productivity growth needed to boost real wages, Brazil would benefit from moving up the value chain for its exports.

In 2021, capital, consumer, and intermediate goods accounted for 93 percent of Brazil’s total goods imports, while raw materials represented 55.7 percent of Brazil’s goods exports. Brazil’s trade specialization in raw materials and lesser value-added goods has only increased over time—manufacturing’s share of GDP has shrunk by 23 percent since 1980. For this reason, re-industrialization was recently cited as “essential” for Brazil’s growth by its minister of labor and employment, with the energy transition counted as one of the six pillars of Brazil’s new industrial policy plan.

Brazil has sought to invest in domestic production rather than imports. During Vice President Geraldo Alckmin’s recent trip to China, he obtained commitments for nearly $5 billion in infrastructure investment. While Chinese commitments do not always pan out, they do signal diplomatic intent.

Additionally, Brazilian diplomacy coaxed Chinese EV manufacturer BYD to invest in a facility in Bahia—at the site of a closed Ford plant—BYD’s first such establishment abroad. Still, Brazil has a vested interest to ensure the Chinese market remains open to their exports of raw materials. This means the Brazilian government is not likely to take a confrontational approach on trade, which limits its ability to alter the nature of its economic relationship with China.

Brazil’s posture toward Chinese cleantech imports must balance competing interests. Cheap cleantech could provide low-cost equipment to expand the grid and accelerate decarbonization, all while providing short-term economic benefits. On the other hand, unfettered imports could weaken domestic manufacturing and give Chinese companies monopolistic leverage they could exploit.

Additionally, while there is little risk from “dumb” solar panels and lithium-ion batteries that do not connect to the web, Chinese-made Internet-connected vehicles pose potential security threats. Brazil, a major non-NATO ally, and other Latin American countries can mitigate economic and security dangers by ensuring that Chinese firms site production locally and share source code for connected vehicles. Additionally, Latin American countries could ban “over-the-air” software updates for Chinese EVs, or otherwise airgap them from the Internet.

Brazil, China, and the new three

As Chinese goods increasingly face scrutiny across North America, Europe, and other markets, the Brazilian market will loom larger as an alternative. China’s economic ties with Brazil are an inescapable reality, but Brasília should ensure the relationship serves its own objectives and does not inculcate dependency. Policymakers in Washington should also elevate Brazil as a strategic commercial partner, and work with the private sector to offer a credible, competitive alternative to Chinese cleantech.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center.

William Tobin is an assistant director at the Global Energy Center.

This article reflects their own personal opinions.

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Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

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William Tobin

Former Assistant Director

Global Energy Center

Africa China

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Brazil 2050: A vision for global food security

Valentina Sader, Peter Engelke — Mon, 09 Sep 2024 13:00:00 +0000

Introduction

Global context

Forces that will shape the future global context

The Case of Brazil: A 2050 vision for global food security

Recommendations

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Infographic

Leia em português

Introduction

Feeding a growing world population is a significant global security concern. Geopolitical instabilities, climate change, and population growth are major challenges exacerbating global food insecurity. How can the world meet this growing demand for food while also adapting to climate change? Finding solutions will require innovation, imagination, sound investments, smart policies, and cooperation.

Only a few of the world’s breadbaskets have the potential to further meet growing global food demand. Here, Brazil is at the top of the list. Over the past half century, Brazil has established itself as one of the world’s largest producers and exporters of food and ranks among the great breadbaskets of the world. Its production and exports across a wide variety of agricultural commodities, such as soybeans and corn, are critical to world trade in food and essential to the security of global food supply. Owing to its incredible natural endowment, its advanced agribusiness and research sectors, its stability within an unstable world, and its well-developed integration into global agriculture and food markets, Brazil is now and will remain a leading agricultural powerhouse and a critical partner in addressing the global food crisis.

Global population growth, changing demographics, and decarbonization efforts will shape how food is produced in the years to come, increasing the need for solutions from leading breadbaskets such as Brazil. By 2050, the world population could increase to as many as ten billion people, with higher incomes and the more protein-heavy diet often associated with them. These factors prompt rising demand for food, while a warming climate could significantly impact agricultural productivity, and geopolitical disruptions could further exacerbate global food supply chains.

Brazil is already an important and reliable breadbasket for the world. But to help create a more resilient and sustainable food system for the future, Brazil must strategically prepare its domestic capabilities to meet the projected demands of 2050—and it should do so in partnership with the private sector and the international community.

Global context

Climate change, the COVID-19 pandemic, and Russia’s war on Ukraine have shed light on the vulnerabilities of the current global food system. The world has seen historically high temperatures and changes in precipitation patterns, impacting harvests and productivity,¹ along with significant supply chain disruptions, such as a shortage of fertilizer.² Today, the world has 8.1 billion people, every one of whom needs regular access to sufficient calories and nutrients. Although the world produces enough food to meet current demand, hunger and food insecurity remain high, especially due to conflict, income, and food loss and waste, among other issues.

In 2022, between 691 million and 783 million people worldwide faced hunger, with roughly 2.4 billion people—29.6 percent of the world’s population—experiencing either moderate or severe food insecurity.³ From this segment of the global population, nearly twenty percent of Africa’s population faces hunger, a significantly larger proportion compared with other world regions.

Worldwide, those experiencing severe food insecurity totaled about 900 million people in 2022, or 11.3 percent of the global population. In comparison with the previous year, Africa, North America, and Europe have shown worsening food insecurity levels, while Asia improved slightly and Latin America and the Caribbean, mostly driven by South America, saw significant progress in food security.⁴ Addressing the amount of food lost or wasted is also imperative to food security. In 2022 alone, 19 percent of all food available to consumers was wasted, in addition to the 13 percent of food lost in the supply chain.⁵ These figures underscore the persistent challenges faced in ensuring adequate access to food for a substantial portion of the world’s population, despite the abundance of food being produced at a global level.

Even so, the demand for food will increase as the global population grows, and as wealth increases, demand for protein typically increases as well. The United Nations Food and Agriculture Organization (FAO) projects that the global demand for food will increase by 60 percent over the next two decades,⁶ driven by population increases and shifts in dietary patterns. To meet this increased demand, projections suggest that global food production will need to provide 47 percent more crop calories in 2050 than in 2011 to feed 9.75 billion people. Increased production will be critical to ensure that people living in population growth centers—namely Africa, the Middle East, and Asia—are fed.⁷

Where is food produced?

Rice, wheat, corn, and soy make up almost half of the daily calories of the average global diet.⁸ These crops are mostly produced in a handful of regions located in the United States, Brazil, China, India, Ukraine, and Russia—often called the world’s breadbaskets. These producers have the agricultural capacity to grow at scale and to export the key crops to supply a significant portion of the current global demand for food. But given climate change and geopolitical disruptions (e.g., war and trade conflicts), only a few of these breadbaskets have the potential to meet 2050 food demand. Brazil tops the list.

Forces that will shape the future global context

How food is produced, consumed, and distributed will change significantly between now and 2050. While some of these disruptions pose significant challenges, others hold the promise of transformative change, offering new opportunities to enhance the resilience, sustainability, and equity of global food systems.

Geopolitical forces

The world is not a flat trading plane for agricultural products, owing in part to geopolitical forces that have made global trade in food much more challenging. Recent geopolitical disruptions have highlighted vulnerabilities of global trade systems for food. From the COVID-19 pandemic supply chain disruptions⁹ to wars, conflicts, and government-imposed trade restrictions, these disruptions pose a significant challenge to food security now and in the years ahead. And these forces are likely to continue, and perhaps, get worse.

Trade is an important factor toward global food security as it connects those who produce food to those who need it. “From 1995 to 2022, food and agricultural trade has more than doubled in volume and calories,” according to the UN FAO.¹⁰ Geopolitical disruptions, including trade restrictions and bottlenecks, can have significant implications for food access and prices, and could become more common. For example, Russia’s war on Ukraine had a significant impact on fertilizer exports, affecting agricultural production globally.¹¹ India, the largest exporter of rice, recently imposed an export ban on grain¹² to secure its own domestic supply, causing ripple effects to the global supply and price of rice. In the Red Sea, Houthi rebels’ attacks on commercial ships have caused shipping delays and a rise in transportation costs,¹³ and the route to the Suez Canal is of major importance to international trade between Europe and Asia. In the Americas, a drought has caused delays and raised costs for ships transiting the Panama Canal.¹⁴

Policymakers in national capitals around the world will need to redouble their focus on maintaining open trade in food, especially during geopolitical crises and other shocks that will induce many states to protect domestic supplies. This is why food security and the open trade in grains and foodstuffs should be a priority agenda item for countries’ domestic and foreign policy efforts. International cooperation is imperative for food security, including at multilateral forums such as the Group of Twenty (G20) and G7 summits, where the largest economies of the world, representing a great part of global trade, discuss global priorities and ways to jointly address global issues.

Climate change

A dramatically altered climate almost certainly will be a problem that policymakers, agronomists, researchers, agribusinesses, and farmers will be unable to avoid. Although scientists continue to debate the dates when global temperatures will broach the barriers of 1.5°C and 2°C, it is reasonable to expect that the first limit and possibly the second will be surpassed before 2050 even under lower emission scenarios.¹⁵ Under a median projection (called SSP2-4.5 in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change), Brazil in 2050 might be up to 2.81°C warmer than preindustrial averages, with precipitation dropping by up to a quarter, depending on the region and the time of year.¹⁶

Changes to climate are already being felt globally with direct implications for how and where food is produced. A recent example is the torrential rain that flooded most of Brazil’s southernmost state of Rio Grande do Sul in May 2024.¹⁷ In addition to the humanitarian consequences of those floods, Rio Grande do Sul produces 70 percent of Brazil’s rice and is a significant soybean and meat-producing state¹⁸—key Brazilian exports—which can create additional pressure on Brazil’s production and trade potential and the world’s food system.

Climate resilience and adaptation should be front and center of global policy action, including in efforts to address food security and create a more sustainable and resilient food system. This requires collaboration among governments and the private sector to find solutions, and provide the tools, resources, and policies for sustainable production.

Land use constraints

Perhaps the most obvious solution in meeting future food demand is to expand the amount of land dedicated to agriculture. But a significant portion of available arable land worldwide lies beneath grasslands and forests, which are crucial for carbon sequestration and biodiversity conservation. And while this way forward is not desirable, the pressure on forested land by 2050 will be immense.¹⁹

Over centuries, crop yields have increased consistently and dramatically. While the expansion of arable land has played a crucial role, productivity gains have been a central catalyst for enhancing food security globally.²⁰ Smart public policies, along with technological gains and changes in farming practices, could limit the pressure on agricultural land expansion (see figure 2).

Brazil is a particularly interesting case.

On land regulation, the country has robust forest protection laws that allow private land in forested areas, such as the Amazon, but stipulate that up to 80 percent of native vegetation must be protected.²¹ Despite recent reductions in deforestation levels in the Amazon,²² forests in the Cerrado and Amazon biomes—the two largest and most heavily forested regions of Brazil—have historically been retreating in the face of conversion pressures from multiple directions.²³ Here, enforcement of existing regulations and oversight is key, especially given illegal activities in the regions that contribute to deforestation.

Brazil is also uniquely gifted with conditions that allow farming practices that increase agricultural output without the need for more land conversion. Double cropping, for example, allows for Brazil to have two, sometimes even three crops out of the same plot of land in a season—a significant competitive advantage for global food production, which could be a model that can be adjusted for other regions of the world.

A few factors can explain these historical gains and be positive disruptors that will foster increased productivity in a more sustainable way.

Innovation and technological advancements: For centuries, technological adoption and innovation in agriculture have dramatically changed the way the world produces food. The mechanization of production, new crop rotation methods, and new inputs such as fertilizers, irrigation systems, and more have revolutionized how (and how efficiently) the world produces food. Brazil is an example of a country that was import-dependent for food, yet transformed itself through technological advancements, innovative practices, and targeted public policies (among other factors) into an agricultural powerhouse and leading food exporter.²⁴ To increase productivity efficiently, the development and adoption of new technologies for efficient and sustainable food productivity is imperative. These include biotechnologies, precision agriculture, on-farm robotics, and new innovations and practices (including farming practices).
Infrastructure: Infrastructure is critical for intranational and international trade. Lack of or unstable access to energy, poor transportation networks (i.e., roads, railways, and ports), or inadequate storage infrastructure are direct hindrances to agricultural productivity and economic growth through trade.²⁵ The lack of adequate infrastructure has been a significant challenge in Africa, for example. Investment in infrastructure is essential for more efficient agricultural production and better flow of products nationally and internationally, but also for sustainable economic development. For export-leaning countries like Brazil, strategic and early investment in transportation infrastructure will facilitate trade, and lower costs of production now and in the future.
Human capital: Skilled human capital leads to improved resource management and increased adoption of technological innovations. In the case of Brazil, human capital investments have positively impacted agricultural production of soybeans and maize as well as livestock operations,²⁶ while also improving responsiveness to external disruptions.²⁷ Investing in human capital going forward is important and building partnerships that facilitate the exchange of best practices, know-how, and skill sets among farmers from different parts of the world could contribute to a virtuous cycle toward more efficient and sustainable food production.
Capital investment: Access to capital helps drive agricultural growth. Increasing farmers’ access to credit and investment allows them to invest in modern equipment and adopt new technologies and practices, leading to increased productivity and profitability. In addition to government subsidies for agriculture, targeted government investments, private-sector investments, and microfinancing initiatives can shift incentives toward sustainability, land restoration, and collaboration,²⁸ while providing farmers with the necessary funding to expand their operations, diversify their crops, and adopt sustainable agriculture practices.

Given Brazil’s key role in the current global food system and, most importantly, its potential to become an even more important breadbasket to the world in the future, Brazil must be at the forefront of innovation and adoption of positive disruptors like access to capital and climate smart agricultural practices, while preemptively adapting to negative ones.

The Case of Brazil: A 2050 vision for global food security

The world might be facing challenges ahead when it comes to food security, but in this picture, Brazil is critical. Brazil, the United States, and other like-minded partners must work together to ensure that global food supply grows to meet rising demand in the future in ways that are both environmentally and economically sustainable. Here, Brazil’s agricultural sector must continue to serve as one of the world’s great breadbaskets, producing more food while also becoming more sustainable—reducing its impact on land and water resources and the country’s rich biodiversity heritage—and more resilient, especially in the face of climate change. If one could paint such a portrait of the future, what might a best-case scenario for Brazil look like?

A 2050 best-case scenario is a Brazil that produces more food and remains a reliable exporter of food, including during global food crises. Brazil would grasp the diplomatic mantle, becoming a forceful voice in ensuring that food security remains a priority issue on the global stage. At home, Brazil would produce more food while preserving the integrity of its natural endowment: its increased agricultural production would go hand in hand with protection of the natural environment, including protection of its forests and enhancement of the on- and off-farm natural resources upon which its agriculture depends (e.g., soils, surface water, and groundwater).

To achieve such a hopeful vision, Brazilian food producers have the markets, incentives, technical support and capital needed to adopt advanced farming and ranching practices that enable them to produce more and be rewarded for their nature-positive practices. A Brazilian Agricultural Research Corporation (Embrapa) foresight study correctly states that future “productivity increases [in Brazilian agriculture] should . . . be associated with a decrease in the carbon footprint, water conservation, the maintenance of soil nutrients, the controlled use of antimicrobials and pesticides, [and] the reduction of losses and waste” through advanced farming techniques including regenerative agriculture. “In this process,” the report continues, “digital solutions, robotics and automation will be fundamental” to realizing such a future vision, as will more generally remote sensing, biotechnologies, nanotechnologies, and advanced computation including artificial intelligence-based applications²⁹ Here both Embrapa, a state-owned research corporation, and Brazilian agribusinesses are uniquely positioned to lead the world toward 2050, given Brazil’s history at the cutting edges of finding agricultural technology, or AgTech, solutions to farming in tropical and subtropical regions.³⁰

Any scenario that portrays Brazilian agriculture in 2050 as productive, sustainable, and resilient must include the conservation of natural heritage, especially forests. However, such pressure can be alleviated in the coming decades if Brazilian agriculture increases yields through adoption of ecologically sensitive yet technologically advanced practices—per the above argument—and by expanding only onto land that already has been used for other purposes. Importantly, Brazil has the land available to avoid deforestation while dramatically increasing agricultural output through improved utilization of degraded pastureland—up to seventy million hectares are suitable for conversion to cropland—and intensification of existing cropland through expanded double cropping.³¹ Addressing illegal activities that are detrimental to the natural heritage of these regions, such as illegal mining, land grabbing, and logging, is also imperative to curb deforestation while also developing the region.

Recommendations

As the world grapples with ensuring that global food supply matches rising demand, Brazil’s agricultural sector can and must continue to serve as one of the world’s great breadbaskets, while also becoming more sustainable and resilient. Brazilian leaders in the public and private sectors must make choices and investments that both retain Brazil’s innovative edge and sustain the natural ecosystems that enable its agriculture to thrive out to the year 2050. But Brazil does not have to take on this task alone. As a global concern, ensuring food security in a sustainable way will require collaboration and sustained partnerships—between governments, with the private sector and multilateral institutions—to scale critical capabilities and solutions.

The recommendations that follow outline critical areas for bilateral and global cooperation to achieve such a vision.

Retain a commitment to global food security. Perhaps the most important single recommendation is to ensure that policymakers in Brazil and other countries, including those in the G7 and G20 forums, retain a commitment to global food security, in particular during geopolitical upheavals and climate-driven drought. Given their economic and diplomatic weight, these countries must be the vanguard for maintaining a global focus on food security and finding solutions to food insecurity. Brazil’s roles as host of the G20 and the UN COP30 climate talks in 2024 and 2025, respectively, give it important platforms for marshaling that resolve.

A critical component of global food security is ensuring food can move across borders. As climate change affects where and how food will be produced, the collective goal should be to ensure that there is sufficient production, done in the right way, in the right places, and to ensure that food can be traded from places of surplus to places of deficit. Brazil’s meteoric rise to the first rank of global food producers is in part due to its adoption of an outward-facing model that has embraced global trade. During global food security crises, Brazil’s policymakers have largely recognized the dangers of and resisted protectionist measures to restrict its agricultural exports, unlike several other major producers.

Policymakers in the United States, Brazil, and other major agricultural producers should sustain and deepen their leadership on sustainable food production within multilateral institutions and forums. Brazil’s President Luiz Inácio Lula da Silva has been forceful in placing hunger and food security atop Brazil’s foreign policy agenda.³² At the G20 Brazil Summit, Lula is expected to announce a Global Alliance Against Hunger and Poverty, the purpose of which will be to “raise resources and knowledge [globally] for implementation of public policies and social technologies” surrounding food security.³³ Such initiatives ought to be welcomed by policymakers in the G7 and G20, including by the United States and its allies and partners, and serve as a platform for collective action.

Global forums, such as the G20 and COP30 meetings, provide important platforms to gather the support of the largest economies of the world to place food security at the forefront of development and strategic priorities. But perhaps most importantly, given that the demand for food will mostly come from developing countries, these forums are an important space for knowledge transfer and shared best practices on how to increase food production and trade sustainably. Here, Brazil has a lot to teach the world.
Improve infrastructure. For decades, Brazil has been investing in its infrastructure to catch up with the rapid expansion of agriculture into the country’s interior.³⁴ A December 2023 report released by the US Department of Agriculture observed that the pacing of such investments has increased over the past decade, given the importance of reducing Brazil’s historically high transportation costs for export competitiveness. Fueled in part by Chinese capital, Brazil has sped up its investments in roads, railways, storage and processing facilities, and ports. The USDA report asserted that such investments have “significantly alter[ed] the relative competitiveness” of Brazil and the United States, in Brazil’s favor.³⁵ As Chinese investment continues to grow in Latin America and the Caribbean, the United States should prioritize Brazil not as a competitor but an ally, ensuring greater cooperation, increased investments, and technical exchanges of best practices for better and more sustainable solutions to agriculture. Continued investment in infrastructure would allow Brazil to become an even more competitive agricultural exporter in at least some major crops, including soybeans.
Partner to scale the adoption of regenerative farming techniques and technologies. Brazil has a rich history of embracing new approaches to farming, including innovative technologies, stretching at least as far back as Embrapa’s founding and its success in developing approaches to tropical grain production.³⁶ Despite this history, Brazil’s farms are by no means oversaturated with technology, as there appears to be significant room for on-farm growth and profit to derive from utilization of the latest technologies.³⁷

Advanced farming techniques present another opportunity. Regenerative agriculture and related approaches focus on integrating ecological principles into advanced farming operations to preserve biodiversity, improve soil health and prevent erosion, conserve water, and increase carbon capture and sequestration. Methods include agroforestry (introduction of trees into a farmed landscape), conservation tillage, integrated pest management (use of pest control methods beyond chemicals), integrated crop-livestock systems (the integration of animals into cropland), and intercropping (fielding multiple crops at once).³⁸ Brazil already is a world leader in utilization of some of these methods, for example, no-till farming (planting crops without tilling the soil), which has great potential to preserve soils while sequestering carbon.³⁹ Governments can play an important role in helping to facilitate the development of transparent and high-integrity markets that provide economic rewards to farmers for such investments and practices, generating both environmental outcomes and economic opportunity.
Prioritize underutilized pastureland. To minimize pressure on Brazil’s vast forest endowment while reducing carbon emissions, policymakers should incentivize farmers to prioritize expansion of grain and legume production (especially soybeans) on underutilized pastureland.⁴⁰ Such a strategy could succeed on all three fronts—increased production plus reduced deforestation and emissions. A recent Embrapa-led study estimated that some twenty-eight million hectares of Brazil’s degraded pastureland could be brought into grain production, increasing the total planted grain area in Brazil by a full 35 percent.⁴¹ Another study found that a combination of improved yields and expansion of production to current pastureland would generate one-third more soybeans with no additional deforestation and with significantly lower carbon emissions.⁴² Brazil has available arable land—from degraded pastureland and existing cropland—to increase its agricultural output without the need for further deforestation.
Expand double cropping. Brazil has a significant advantage over competitors in temperate regions owing to weather conditions that allow year-round planting and harvesting, leading to the country’s ability to produce more than one crop per year—two crops or even three, depending on the crop and conditions.⁴³ This practice has been growing in Brazil, as farmers have found it economically advantageous to do so, and should continue growing into the future.⁴⁴ This system should encompass as high a percent of Brazil’s farmland as practically feasible, given its dual roles to expand agricultural output and limit pressures on converting Brazil’s forested land to agricultural production. While Brazil has strong forest protection laws, more effective enforcement of land use controls to reduce forest conversion combined with an appropriate mix of incentives would help to mitigate illegal activity and support farmers in shifting toward improving production on existing cropland through succession cropping.⁴⁵ Brazil’s capacity to combine multiple cropping, utilizing existing degraded land, and adopting regenerative agricultural practices presents a unique and significant potential to produce food with lower carbon intensity.
Prioritize water-efficient irrigation. Irrigated farmland, whether in Brazil or anywhere else in the world, tends to increase crop yield.⁴⁶ According to Brazil’s water agency, the country has sufficient water resources to allow a tenfold expansion of its irrigated crop area.⁴⁷ However, the trouble with irrigation around the world, even in Brazil, lies mostly in overuse of scarce water resources.⁴⁸ Brazil has suffered from increasing drought and aridity in some regions, and from overuse of groundwater and surface water.⁴⁹Brazil should prioritize adoption and expansion of water-efficient irrigated systems in those regions that can sustainably support water withdrawals from underground and surface sources.

Brazil’s contribution to food security globally is undeniable—as is its potential to continue to be an even more important and resilient breadbasket for the world. But to secure sufficient food for a growing population in a sustainable way will require collaboration and global action. Ensuring that Brazil increases its food production while also protecting the environment will require the cooperation of Brazilian policymakers, the private sector, and farmers themselves as well as international support and investment. With the potential to be the largest exporter of food in the world, Brazil must strategically prepare for this role and the world should support it.

Acknowledgments

The Atlantic Council would like to thank Cargill for its support of this publication. We would also like to thank the numerous experts that provided invaluable insights and committed their time to participate in one-on-one discussions with the authors, and also offer special recognition of Marcos Jank, Tatiana Palermo, Rodrigo C. A. Lima, Alencar Zanon, and Jake Spring for their thoughts and feedback. Finally, thank you to Jason Marczak, vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center, for his guidance and comments throughout the drafting of this publication.

About the authors

Valentina Sader is a deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Brazil, gender equality and diversity, and manages the Center’s Advisory Council. During her time at the Council, Valentina has managed the launch of the Center’s Advisory Council, a high-level group of former policy makers, business leaders, and influencers from the United States and the region.

Peter Engelke is a senior fellow with the Atlantic Council’s Scowcroft Center for Strategy and Security as well as a nonresident senior fellow with its Global Energy Center. His diverse work portfolio spans strategic foresight, innovation and technological disruption, geopolitics and hard security, climate change and Earth systems, and urbanization, among other topics.

Sharing the post carbon economy means building a resilient EV supply chain

Sarah Bauerle Danzman — Mon, 09 Sep 2024 13:00:00 +0000

Executive summary
The EV transition as an economic security challenge
The G20 as a forum for EV policy dialogue
The current global EV supply chain: Six insights
From insight to policy dialogue: A blueprint for G20 action
Conclusion
Appendix

Executive summary

Wide-scale electric vehicle (EV) adoption creates substantial economic opportunities as well as complex threats to G20 economies. G20 countries account for over 90 percent of final production and 86 percent of value-added in global demand for automobiles—both internal combustion engine (ICE) vehicles and EVs. Their path toward EV production, however, has been uneven, with five companies capturing 55 percent of this rapidly growing market in 2023.

The EV supply chain also has serious vulnerabilities stemming from overconcentration of the upstream value chain for battery production. China’s market dominance over certain critical minerals—especially cobalt, lithium, and rare earth elements refining—and battery components has made other major economies feel vulnerable to potential supply chain disruptions. These fears are heightened by the PRC’s export ban on technologies related to the refinement and processing of these minerals as well as the country’s history of sanctioning other nations by imposing de facto bans on critical mineral exports. Countries such as the United States have responded to these threats with discriminatory industrial policies of their own, potentially creating defensive spirals even among otherwise friendly nations that believe they need to secure critical mineral autonomy because they cannot count on trading partners to fulfill their battery input needs as demand for such goods accelerates.

Until now, most policy discussions around EV supply chains have either been economy-specific—for example, the US EV supply chain, the EU EV supply chain, the Chinese EV supply chain—or have focused on the ways in which these three major economies’ EV transitions threaten one another. However, the collective challenges and opportunities of the electric mobility revolution extend beyond the “big three” economies, and demand dialogue among and solutions from a more inclusive set of players.

Collaboration among G20 economies can increase supply chain resilience, provide sustainable development and employment opportunities across G20 economies and beyond, and deliver on international commitments to achieve carbon neutrality. At the same time, the EV transition raises substantial questions of economic and national security, including how to ensure dominant positions in key parts of the supply chain are not used coercively, how to encourage rapid advancement of EV technology while continuing to safeguard related innovation that has military and surveillance applications, how to rapidly build charging infrastructure (Indonesia, for example, has only 700 public charging stations), and how to protect the vast amount of data that EVs collect against improper use. And, as governments embrace industrial policies to better position their economies for this major industrial transition, they run the risk of seeding unproductive subsidies wars, generating oversupply that creates profitability problems for private industry, and hurting diplomatic relations between allies and partners.

This report advances the policy discussion by compiling trade, investment, and EV industrial policy data across the G20 to illustrate six key insights:

EV production is more concentrated—both in terms of production site and the nationality of who owns production—than production of ICE vehicles.
The rapid pace of Chinese EV export growth has the potential to threaten other G20 members’ ability to transition their legacy ICE industry to EV manufacturing.
Even as G20 countries work to build domestic EV battery capabilities, their reliance on Chinese upstream battery inputs has grown.
Rather than facilitate the development of regional manufacturing clusters, Chinese EV-related foreign direct investment (FDI) across the G20 has largely reinforced its centrality to the battery supply chain.
G20 economies are rapidly expanding EV-related industrial policies that are uncoordinated and may be operating at cross-purposes.
The build-out of EV charging infrastructure is desperately needed to boost EV adoption, but it will also stoke contention as countries disagree over procurement policies and data security.

This report recommends that the G20:

Implement a task force on the electric vehicle transition to facilitate dialogue around key, transnational issues related to EV production and wide-scale adoption. It should also examine how to ensure the benefits of the EV industry are widely shared among diverse economies and that the related decline in the legacy ICE industry is managed in a manner that avoids long-term economic displacement, poverty, and political instability.

Build on the framework introduced in the May 2023 G7 Leaders Statement on Economic Resilience and Economic Security, and commit to cooperating on critical mineral supply chain resilience, especially by agreeing to refrain from restricting trading partners’ access to critical minerals, raw or processed, or to technologies for extracting or processing these critical minerals.

Jointly monitor critical mineral production, stockpiles, and prices; and coordinate on price stabilization efforts intended to ensure diversified ownership and supply of raw and processed critical minerals.

Develop a framework to limit the profligate invocation of national security exceptions in the justification of trade, investment, and industrial policy measures related to EVs and their supply chains. Overuse of national security justifications risks undermining the rules-based, nondiscriminatory, free, fair, open, inclusive, equitable, sustainable, and transparent multilateral trading system with the WTO at its core to which the G20 reaffirmed its commitment in 2022.

Support and advance efforts to set shared digital privacy and safety standards for connected vehicles, especially with respect to whether and how public charging infrastructure collects, analyzes, stores, and provides access to EV data.

Facilitate ongoing dialogue about the composition and distribution of EV supply chains, including by regularly sharing information on country governments’ production and consumer supports and proactively addressing concerns about potential overcapacity and trade dumping.

The EV transition as an economic security challenge

Perhaps no single item more fully instantiates the opportunities and challenges of the emerging “economic security” consensus than an electric vehicle (EV). EVs incorporate advanced battery storage technology and substantially more semiconductors than internal combustion engine (ICE) vehicles¹—in addition to advanced integrated circuits to power artificial intelligence (AI) applications and sensors for autonomous driving and related safety features. Advanced steel, including electric steel, is also an important component of the EV supply chain. The push to increase battery electric vehicles’ (BEV) range and to reduce charging times also prompts EV manufacturers to continually innovate to secure efficiency gains across semiconductors, systems, and battery technology. All these technological developments rely on collecting and analyzing mountains of data produced by EVs. Moreover, while EVs will propel technological innovation, contribute to carbon neutrality, and create new sources of employment, they also present threats related to dual-use technology leakage, surveillance, and cyber sabotage and to players in the ICE supply chain who will no longer be relevant.

It is in this context that EVs—and the industrial policies governments are pursuing related to their development, manufacture, and adoption—are generating friction among major economies, including among allies. While semiconductor policy is also high on the policy agendas of most major economies, issues around integrated circuits are more easily understood through a national security lens. EV policy, on the other hand, touches on matters of security, industrial competition, climate change adaptation, infrastructure, and populist job programs. Trade-offs abound between climate and affordability goals and policy priorities rooted in security, self-sufficiency, and economic competitiveness. Initially governments viewed the EV transition as a market-making opportunity and focused public policy on subsidizing the consumer costs associated with EV adoption, but now more governments are expanding “behind the border” industrial policy subsidies to support domestic EV production as well as “at the border” tariff and non-tariff barriers to trade.

The urgent need for multilateral dialogue on these issues is clear. As Chinese exports expand rapidly, G20 countries working to help legacy auto manufacturers transition to EV production cannot afford to let cheap imports prevent domestic producers from developing EV manufacturing capabilities. An uncoordinated, expansive use of industrial policy is likely to create even more economic, political, and diplomatic challenges. Subsidy wars are distortive and expensive, tariffs raise costs and frequently lead to retaliation that can spill over into other industries, and expanding charging infrastructure will stress the current rules and practices around public procurement. They also only work for wealth countries with large internal markets with the fiscal resources to subsidize their auto industries, the local markets to support them, and diversified trade profiles that can weather trade retaliation from China.

What’s more, concerns about research and development integrity, intellectual property rights enforcement, and leakage of dual-use battery and autonomous driving technologies serve to heighten existing concerns over corporate espionage, critical technology leakage, and defense supply chain integrity. And, each of these issues threatens to complicate, delay, and add to the cost of a massive transition from high-carbon to low-carbon mobility systems. Despite the urgent need for discussion, standard setting, and mutually agreed upon rules to coordinate mutually beneficial cross-border research, development, production, and trade, multilateral institutions are poorly equipped to address these multi-layered concerns. The WTO system has been badly weakened by the absence of a working appellate body and by the continued disagreement among WTO members over whether national security exceptions are justiciable.

Even if the appellate body were fully functional, the structure of WTO dispute settlement is not well suited to resolving trade challenges that arise in the context of rapid technological change. That is, governments increasingly view the EV transition as one requiring a rapid response, not necessarily to facilitate widespread consumer adoption of such vehicles, but instead to ensure that their industrial base and largest auto manufacturers can be competitive in the domestic and global EV markets. The WTO system of identifying a harm before initiating a protracted legal process of restitution offers little help to countries worried that without swift and preventive action their auto manufacturing capacity—and its substantial contribution to GDP and employment—will be decimated by cheap imports.

The emergence and growth of the EV sector presents fundamental, complex policy choices that demand a degree of global governance. Lessons learned from, and institutional arrangements designed to meet, the challenges of EVs can then be transferred to other areas that straddle today’s most pressing geoeconomic issues: climate transition, national security, economic dependence and coercion, emerging technologies, economic competitiveness, and job creation.

The G20 as a forum for EV policy dialogue

There is no shortage of commentary on electric vehicle and battery supply chains. These tend to focus on fears within the United States and the European Union (EU) of a “China Shock 2.0,” in which Chinese EV companies’ overcapacity-driven exporting undercuts the major incumbent car manufactures, drives them into irrelevance, and guts the domestic automobile industrial base. It is for this reason that the United States, the EU, and a few other G20 economies recently substantially increased tariffs on Chinese-made electric vehicles.

The promises and challenges inherent in the EV transition are not limited to G7 economies. As an increasing number of countries develop policies to address their concerns, the economic and security implications of an EV supply chain dominated by China cannot be accomplished through a series of national-level policies implemented in isolation and without consultation, coordination, and compromise.

The G20 is the country grouping best able to bring the most relevant actors to the table. Collectively, G20 countries represent 80 percent of global world product, 75 percent of global trade, and 66 percent of global population. At the same time, 18 countries plus two regional bodies is a manageable number of capitals for effective policy dialogue and coordination. The grouping is trans-regional and contains some of the most important EV consumer markets—both mature auto markets and the largest emerging ones—and producer markets, including the biggest auto manufacturers, the largest emerging EV manufacturers, and the countries where the majority of the battery supply chain (beyond mineral extraction) takes place. This makes the G20 the smallest grouping of countries that represents the largest set of governments, corporate actors, and civil society relevant to the development of the EV industry and the managed decline of the ICE industry.

Trade data illustrates the importance of G20 markets in driving the global automobile industry. The G20, inclusive of the EU, represents 86 percent of value added in global demand for all automobiles—ICE and EVs—and over 90 percent of all vehicle sales.² Table 1 provides details about the role of G20 economies as both major producers and consumers of automobiles. The data combines statistics on traditional ICE vehicles with production and sales of EVs. Most G20 countries’ automotive sectors are both substantial drivers of their broader economies and also are highly integrated globally. Only China, Japan, India, and the EU single market have less than 20 percent foreign content on a value-added basis.³

The G20 also dominates the global market for vehicles: It accounts for over 86 percent of value-added in total global vehicle demand and exports roughly 7 percent of vehicles it produces (approximately 5.3 million) to non-G20 economies. It is also practically self-sufficient as a bloc, with less than 2 percent of value added in G20 final demand for vehicles coming from outside the economic club.

As the G20 transitions to low- and no-emission vehicles, it will have to manage a shift in industrial production that will inevitably create winners and losers. Car manufacturers and suppliers that can deftly switch from producing inputs to ICE vehicles to EV inputs will enjoy substantial economic opportunities, but not all suppliers will successfully manage this transition.

The G20 is the appropriate forum where component governments can discuss, possibly coordinate, and build governance expectations for how to manage this transition in ways that minimize trade, security, and diplomacy frictions while responding to the urgency of climate change, the importance of equitable and shared growth, and the need for cooperative international trade during the mobility transition in the face of increased wariness of economic interdependence.

G20-driven solutions will require hard conversations, tough bargaining, and deft diplomatic solutions. As is discussed further below, G20 countries are geopolitically divided on how to adapt to an EV future. Many domestic policy solutions generate costs for other G20 economies. But, an EV transition without G20 coordination would be chaotic, generate substantial domestic economic costs that could jeopardize global growth as well as domestic political stability, and further erode global economic governance. An inclusive EV future that works for all will require the G20 to find shared solutions and shared expectations about how governments will work to guide their countries toward a post-carbon economy.

The current global EV supply chain: Six insights

There is no lack of research and commentary on the challenges and opportunities created by the EV transition for major economies. What has been largely missing from this conversation, however, is a focus on how the EV trade, investment, and industrial policy spaces create challenges for the G20 as a whole. Below, we examine a range of data to extract six insights into how thinking about the G20 holistically reveals policy challenges that should be addressed through comprehensive strategic dialogues within the grouping.

Insight 1: EV production is more concentrated than ICE production.

The EV market, similar to the ICE industry, is dominated by five economies: China, the EU, Japan, South Korea, and the United States. As Figure 1 reports, the top 20 auto manufacturers by annual revenue are all headquartered within these five markets. But, the emerging EV production network is much more concentrated within a few companies compared to the ICE industry. According to estimates of global market share, BYD and Tesla accounted for roughly 35 percent of the global market for plug-in vehicles in 2023. These two brands, plus VW, Geely-Volvo, and SAIC (including its joint venture with GM), manufactured 55 percent of all battery-powered electric vehicles sold in 2023.

Because EV assembly is concentrated among a few global brands, most EV imports come from just a handful of economies.⁴ Figure 2 underscores the extent of this concentration by showing exports of battery electric vehicles (BEVs) from the five dominant countries to all G-20 economies in 2020 and in 2023.⁵ The number of imported BEVs across G20 economies increased by over 400 percent over this four-year period. Chinese EVs, in particular, have become an important component of imports not only in the EU and UK, but also in many other G20 economies, including Australia, Brazil, and Canada. Figures 3 and 4 illustrate that among smaller markets, there are important differences in EV import composition. Brazil and India both experienced a sharp increase in EV imports starting in 2020-21, but Brazil has become far more reliant on Chinese EV imports, while India has maintained a greater balance between Chinese, Korean, and EU imports.

Insight 2: The rapid pace of Chinese EV exports threatens EV industrial capacity in other G20 economies

G20 countries cannot afford to cede the global EV market to China. And for countries outside of the G7, they are the least able to mount an effective, unilateral defense because they have less fiscal capacity to support their auto industries, are more vulnerable to retaliation if they impose protective tariffs against Chinese EVs, and have smaller domestic markets to attract market-seeking FDI.

With the recent and rapid growth of EV exports, major exporting countries have displayed markedly different patterns in their overall growth and distribution of overseas sales. China’s EV exports, for instance, have risen sharply from a base of almost zero in 2020, with over half of its 2023 exports destined for the EU market (Figure 5). By contrast, the EU’s export trajectory has been more gradual, with EV sales more evenly distributed across G20 markets (Figure 6). The United States has seen more export volatility, with the value of its EV exports falling below its 2019 peak, largely due to declining sales to the EU and China (Figure 7).

Economies with major auto production and consumer markets are equipped to support their auto brands’ shift from ICE to EV production and to retain a substantial proportion of domestic vehicle manufacturing. They have the necessary resources and market size, even in the context of global overcapacity, but it is less certain that emerging markets will be able to weather such storms. As Figures 3 and 4 illustrate, rapid penetration of EVs into smaller and emerging economies is taking place. Research on EV adoption shows that widespread transition from ICE to EVs requires that EVs be made more affordable,⁶ and Chinese EVs are much less expensive, on average, than EVs produced in other major auto manufacturing economies. But, there are concerns that inexpensive Chinese EVs—bolstered by substantial subsidization—will displace sales of domestically produced autos and prevent local industry from transitioning from ICE manufacturing to EV manufacturing. In the past, a number of emerging markets, including Brazil, Argentina, Turkey, Mexico, and Indonesia, built their domestic car industries primarily by attracting FDI from global brand leaders. However, since Chinese car manufacturers have substantial overcapacity in China-based plants, the commercial rationale for offshoring production to these other countries is less clear. Indeed, as Table 2 reports, according to Rhodium data on Chinese FDI in the EV sector, less than 9 percent of Chinese EV-related FDI to G20 economies has been in vehicle assembly or component manufacturing. If emerging economies within the G20 were to be boxed out of the global EV manufacturing ecosystem, it could carry profoundly negative consequences because most of these countries’ GDPs are heavily reliant on the auto manufacturing industry. Approximately 4 percent of Indonesia’s GDP is attributable to the auto industry. In Mexico, the auto industry accounts for 3.6 percent of the country’s GDP and 18 percent of manufacturing output. In 2018, Brazilian officials estimated that the industry amounted to 4 percent of its GDP at and 22 percent of manufacturing output.

Insight 3: G20 economies remain dependent on the Chinese EV battery supply chain

Much of the commentary about the EV supply chain emphasizes China’s enormous market dominance in the upstream battery value chain.⁷ Chinese firms dominate every stage of the battery manufacturing supply chain—from extraction and processing to battery parts and battery packs. Figure 8 illustrates the reliance of G20 economies on China for batteries, a dependency that has increased in recent years.⁸ Figures 9 and 10 provide an even starker illustration of the growing reliance on imported Chinese batteries in emerging G20 economies like Brazil and India.

Many governments have issued policies to encourage domestic EV battery production (see Insight 5), but upstream trade in battery supply chain inputs is even more concentrated, both in terms of suppliers and buyers. As Figure 11 shows, most trade in processed minerals is highly concentrated in China, South Korea, Japan, and the EU. China is also the dominant supplier—not surprising given the fact that China controls at least 60 percent of the processed critical mineral market.⁹ Even as other countries become more important in trade of intermediate battery materials, China’s continued dominance in mineral refining is a critical chokepoint that has not been adequately addressed. Figure 12 illustrates this dynamic: South Korea has emerged as an important global exporter of battery materials, but it remains heavily reliant on China’s mineral processing input. Figures 13 and 14 show that Brazil and India’s imports of battery materials are more diversified than their imports of batteries, but this obscures how much of their battery material production is in turn dependent on Chinese processed minerals.

Insight 4: Chinese EV FDI may exacerbate concentration of industrial production and control

As previously mentioned, emerging economies have fostered domestic auto manufacturing through a combination of policies that include incentivizing FDI from major global car brands. One path to building local EV industrial capacity is by attracting FDI across the EV value chain—especially from Chinese car manufacturers that have rapidly developed high quality EVs that can compete on price and on quality. Figure 15 provides information on the value of Chinese EV-related FDI across the G20 from 2014 through 2023. It shows that Chinese FDI is aimed primarily at the battery supply chain rather than assembly and component part manufacturing. Across Argentina, Australia, Brazil, and Indonesia, these investments are concentrated in mining and refining and processing of mined materials, which may help diversify the site of critical mineral production but not who owns and controls these resources. China has concentrated its investments in the EU/EEA, the United States, Canada, South Korea, and Indonesia in battery manufacturing and related materials manufacturing.

While these investments help to transfer important technology and process innovation to these host economies, policymakers debate whether such investments also help to diversify the EV and battery supply chain or simply maintain China’s ownership dominance. The issue is particularly thorny when policymakers look at Chinese investments in countries with which they have preferential trade agreements. For example, does Chinese investment in Central and Eastern Europe battery plants help the EU become less reliant on Chinese EV battery imports? Or, do such investments make them more dependent on the continued interest of Chinese companies to maintain operations—and the unencumbered flow of related goods—in their economies?

Ensuring that a local industry does not become too dominated by companies from one foreign country has emerged as a key topic in discussions related to investment screening policies. Indeed, the United States’ keen interest in Mexico developing its own investment screening mechanism is directly linked to concerns that China may attempt to use Mexico as an export processing base through which to serve the North American market while avoiding US tariffs on Chinese batteries and EVs. However, as Figure 16 illustrates, almost all Chinese investment in the EV industry has been through greenfield FDI, and most investment screening mechanisms review only cross-border mergers and acquisitions.

Insight 5: G20 EV industrial policies are increasingly in conflict

Table 3 provides an overview of the industrial policies G20 economies have developed in recent years to support their EV industry.¹⁰ It is clear that countries differ quite a bit in terms of how much they prioritize and protect domestic manufacturing of EVs versus focusing on widespread EV adoption for climate change purposes. On the extremes, Australia’s EV policies are almost entirely geared toward adoption as they no longer have a domestic vehicle manufacturing industry to protect, while Argentina has an industrial policy designed to spur development of a domestic EV industry primarily for export, doing little to underwrite a domestic market for EVs. The data reveals that most G20 economies are using industrial policy to build capacity across the entire EV supply chain rather than to specialize in one component of it, and that a substantial number of these economies are crafting policies to support exports. Some are also willing to use tariffs to protect their EV vulnerabilities, which is in stark contrast to just a few years ago when many countries kept EV tariffs low to stimulate adoption. For example, Brazil set its EV tariffs at zero from 2015 through the end of 2023, when it allowed most favored nation (MFN) EV tariff rates to move up to 35 percent. Moreover, while almost all G20 countries have industrial policies for critical minerals and their processing, there are growing concerns that uncoordinated efforts to boost domestic production will make it harder to achieve supply chain diversification. For example, because Indonesia accounts for over 60 percent of nickel mining, its ban on unrefined nickel exports means that other countries cannot effectively build up diverse nickel refining facilities due to their inability to source adequate supplies of nickel ore from refining facilities located elsewhere. As governments across the G20 race to bring more mining and refining facilities online, they risk creating price instability that can make it challenging for the industry to stay commercially viable. Declines in critical mineral pricing in 2023 illustrate how uncoordinated industrial policy can backfire by increasing supply too quickly, thereby making new mines commercially unviable.

Insight 6: The charging infrastructure build-out will create discord over procurement policy and national security

Table 3 also shares data on the number of publicly available EV charging stations each G20 member possessed in 2023.¹¹ According to the International Energy Association, charging availability in most G20 countries remains low. Argentina has only 1,300 stations, and Indonesia has 700. The paucity of stations is a binding constraint to EV adoption.¹² At the same time, EV charging is data intensive and data intrusive. Just as 5G wireless infrastructure build-outs caused consternation over trusted (and untrusted) suppliers, data security, and what constitutes a level playing field when competing for government procurement, EV charging will spark the same policy fights. And these concerns will be further heightened by government directives regarding the security of connected cars, such as the Biden administration’s recent executive order seeking to protect against national security risks.¹³ Disagreements over EV data security and privacy will no doubt spill over into trade disputes when governments can point to data security concerns as a justification to prohibit vehicle imports they deem to be insufficiently secure.

From insight to policy dialogue: A blueprint for G20 action

The insights above provide a clear argument for why the G20 needs to engage in comprehensive dialogues to manage the complex challenges and opportunities of the EV transition. While different G20 working groups touch on issues related to EVs, such as the energy transition, climate change, employment, and trade and investment, there is no group with the G20 structure that is focused on EVs directly. This should change. The G20 should implement a task force on the electric vehicle transition to facilitate working- and high-level dialogue around key, transnational issues related to the production and wide-scale adoption of electric mobility as well as how to effectively ensure the benefits of the EV industry are widely shared among diverse economies and that the related decline in the legacy ICE industry is managed to avoid long-term economic displacement, poverty, and political instability. This task force should focus its efforts around three primary objectives:

Objective 1: Foster resilient critical mineral & battery supply chains

As described above, reducing dependence on Chinese battery materials, parts, and finished products has become a central component of many G20 economies’ EV industrial policies. Relying on Chinese supply creates multiple risks. The COVID pandemic and supply chain shocks exposed the fragility of overly geographically concentrated supply chains to exogenously determined disruptions. Moreover, the Chinese government has a history of using its control over this supply chokepoint as leverage for economic coercion. For example, China likely restricted Japanese access to rare earth minerals during a dispute over territorial waters in 2010.¹⁴ More recently, in retaliation for the United States imposing increasingly restrictive export controls on advanced semiconductor and supercomputing technologies, China placed its own export controls on several critical minerals (gallium, germanium, and graphite) in 2023. Concerns over the likelihood that the Chinese government could cut off access to essential battery inputs have heightened as sanctions and export controls levied against Russia for its invasion of Ukraine have reinvigorated discussions in Western capitals about economic war plans in the event of threat escalation across the Taiwan Strait and a retaliatory response from China.¹⁵

Coordinating critical mineral investment to avoid price volatility

Diversifying supply is challenging on multiple fronts and requires discussion and coordination among trade partners. First, as governments work to incentivize new mining and processing projects, there are legitimate concerns over the commercial viability of critical mineral plants over volatile price cycles. According to the International Energy Agency’s market outlook, prices for key critical minerals declined in 2023, which reduced investment in mining and processing projects. This price drop likely resulted from the swift build-up in uncoordinated industrial policies that rapidly increased supply. Commercial actors simply cannot make sound long-term strategic decisions in the face of such uncertainty. While the political and security arguments for investing in diverse sources, even if inefficient, are clear to governments, commercial actors will face market pressures to prioritize efficiency rather than maintain redundancy in their supply chains. When commercial actors can’t step in, state-backed actors can, confident their government will provide adequate price and budget supports to bolster weak commodity prices.

As a grouping, the G20 should provide an ongoing forum through which members can jointly monitor globally critical mineral production, stockpiles, and prices. Information sharing, particularly between strategic competitors such as the United States and China, will be challenging. However, providing an opportunity for governments to discuss industry trends as well as how members’ actions are affecting the long-term viability of each one’s mining and processing industries can help to address concerns quickly and multilaterally. Some have advocated for the creation of various clubs to develop allied solutions to price volatility such as price insurance or a critical minerals buying club. These smaller-N solutions may play an important role in solving the challenges of critical mineral supply chain diversification, but dialogue among all major players—even those with whom disagreement is likely and cooperation most challenging—is necessary.

Security of supply and access concerns

Because governments increasingly see access to critical minerals as a security of supply issue, the G20 should engage in dialogues intended to reassure countries they can rely on trade partners to provide continued access to these inputs. Without credible assurances that governments won’t exploit interdependency to extract policy concessions, and that they won’t hoard or ration supplies in response to extreme circumstances (similar to what happened during the pandemic), it will be hard for governments to make good on their desire to diversify supply chains through thicker trade networks and not retreat to self-reliance.

To strengthen trust in security of supply across the G20, its members should build on the framework introduced in the May 2023 G7 Leaders Statement on Economic Resilience and Economic Security and commit to cooperating on critical mineral supply chain resilience, especially by agreeing to refrain from restricting trading partners’ access to critical minerals, raw or processed, or to technologies to extract or process these critical minerals during peacetime.

Like many emerging technologies, EVs, their batteries, and their component parts and systems have both commercial and military applications. The US Department of Defense, for example, is investing in research and development to make EV technologies fit for battlefield requirements, especially around figuring out battery solutions that can be sustained in combat operations.¹⁶ In some of these areas, restricting access to such technologies for national security reasons may be justified. However, because EVs are so central to a post-carbon industrial transition, governments should be very cautious to avoid over-restricting the proliferation of technologies that can aid the speed of electric mobility adoption. For example, China retains export restrictions on technologies related to the processing of critical minerals for use in batteries, a technology that can be used for military purposes but is also of general use to the commercial EV supply chain. Similarly, as larger G20 economies roll out substantial research and development support for EV technology breakthroughs, concerns over research security may create barriers to disseminating technologies that are foundational to the EV supply chain. As a result, smaller, less wealthy countries, with modest domestic markets and fewer government resources to support research, are the ones most likely to be left behind when such technologies are tightly controlled.

The G20 should therefore hold dialogues aimed at developing a framework to limit the invocation of national security exceptions in justifying trade, investment, and industrial policy measures related to EVs and their supply chains. Overuse of national security justifications risks undermining the rules-based, nondiscriminatory, free, fair, open, inclusive, equitable, sustainable, and transparent multilateral trading system to which the G20 reaffirmed its commitment in 2022. Without trust that trade partners will not overuse national security exceptions to restrict or cut off trade in key components of the battery supply chain, governments will be less able to rely on trade diversification for supply chain resilience and instead be pushed toward policies of self-reliance.

In addition, the G20 should support and advance efforts to set shared digital privacy and safety standards for connected vehicles, especially with respect to whether and how public charging infrastructure collects, analyzes, stores, and provides access to EV data. Such standards could help mitigate some of the security concerns related to connected vehicles and the charging infrastructure on which they rely, which in turn, could allow for these issues to be addressed through a regulatory and standard-setting framework, rather than one based on essential security exceptions.

Objective 3: Avoid an industrial policy arms race

The G20 is an ideal forum for countries to engage in proactive dialogues about the trade-distorting effects of industrial policies. While the WTO remains the primary international institution for developing, contesting, and enforcing international trade rules, it is unable to execute these functions on a swift timeframe. The dispute settlement system is currently hampered by the appellate body not being operational—but even if the WTO dispute settlement process were fully functional, it is often unable to address unfair trade practices in time to prevent irreversible harm.

A task force could be the venue for government officials to jointly decide what kinds of industrial policies are considered acceptable and which should be avoided. It could also be a space to discuss controversial topics, such as friendshoring, strategic trade autonomy, and economic security, in a multilateral setting to determine what governments seek to achieve with these policies. To avoid an industrial policy arms race, in which countries’ desire to keep their EV industry competitive lead to ever increasing sizes of subsidies, the G20 task force should facilitate ongoing dialogue about the composition and distribution of EV supply chains; discussions should include shared information on country governments’ production and consumer supports and proactively address concerns about potential overcapacity and trade dumping.

Sticking points

Alongside the three policy objectives, there are three challenges the G20 dialogues recommended above should address and seek to resolve through diplomatic engagement:

Trade and investment restrictions are an obstacle to diversifying critical mineral supply chains: As governments contemplate increasingly aggressive use of export controls, financial sanctions, and entity listings of individuals and their businesses in support of a range of policy objectives, G20 members should consider how such actions may generate unanticipated and undesirable effects in critical mineral supply chains. For example, some in the US Congress are advocating for the use of full blocking sanctions on companies with ties to the PRC’s military. As more countries welcome Chinese FDI to enhance their domestic critical mineral capabilities, to what extent might the more aggressive use of specially designated nationals listings aggravate fragilities in critical mineral chains and generate layoffs and employment challenges in third countries?
Most G20 governments will need foreign investment and technology to build local EV capacity, which makes safeguarding national security and ownership in the industry challenging: Traditionally, governments have been keen to attract investment in emerging technology and manufacturing, as it helps generate employment and facilitate technology transfer, and enables domestic firms to move up industrial value chains. However, as governments become more attuned to overconcentration of ownership in critical supply chains, how should they balance a mandate to attract investment with a desire to prevent foreign companies from overwhelming the ability of domestic firms to develop their own capacities in industries with national security applications? Will the growing incidence of greenfield EV investment by China lead to increased review of these kinds of investments? How should governments evaluate these concerns with respect to outbound investment? Until now, the United States and the EU have been careful to omit battery technology from the list of outbound investment restrictions, but some political leaders have argued for restricting investment in such activities as well.
Location-based rules of origin concepts do not adequately address economic security concerns in a geoeconomic age: Tariff rules are built around a place-of-production concept of economic nationality. That is, what makes a battery Mexican is that it was assembled in Mexico and a certain percentage of its parts were also manufactured in Mexico. But, concerns over ownership in global supply chains complicates this place-of-production definition. As governments prioritize diversification not just of first-tier but also second- and third-tier suppliers, do rules of origin concepts need to change to address concerns that a battery assembled in a Mexican plant owned by a Mexican company generates more diversification in the battery supply chain than a battery assembled in a Mexican plant owned by a Chinese company? How would a change in the definition of economic nationality fundamentally change existing international trade law, and thereby multinational firms’ global operations?

Conclusion

The transition from ICE vehicles to EVs presents substantial opportunities for and threats to the G20 economies. While much of the policy conversation has focused on China’s dominance of the battery supply chain and related critical minerals, as well as their growing dominance in EV exports in the context of substantial domestic over-capacity, it is important for policymakers to expand dialogues beyond bilateral hand-wringing over what Chinese EV dominance means for the United States or the EU and to invite global leaders to grapple with far-reaching policy challenges that affect a broad community of nations. It is also vital that the dialogues take place not only among close friends but also among countries with differing views and preferences for how to resolve shared challenges tied to the electric mobility transition.

This policy report advances the discussion in three ways:

Establishes a reason why the G20 is an important forum for policy dialogues around the EV transition and related issues of supply chains, national security considerations, and supportive infrastructure.
Amasses data across various sources to provide intuitions about key features of the current EV trade and investment supply chain, as well as emerging trends in industrial policies designed to bolster domestic transitions from ICE to EV manufacturing.
Provides a set of core areas over which G20 dialogues should focus, along with a set of policy recommendations as well as thorny problems that will need sustained conversations to adjudicate.

As the G20 looks forward to South Africa’s 2025 presidency and the United States’ presidency in 2026, leaders will need to identify the group’s key priorities in the coming years. Attending to the multi-layered policy challenges posed by electric vehicles could generate real progress on a host of issues that are central to G20 economies and the global community: industrial transitions, supply chain resilience, climate change, national security, data privacy, critical infrastructure, trade, and investment policy. While existing G20 working groups may touch on EV policy from various angles, there is no single group that is devoted to this issue. And because EVs touch on so many of the G20’s concerns, the topic deserves a dedicated task force to promote meaningful dialogue across disparate G20 members in the service of reaching a mutual understanding of these contentious issues and agreement on how to effectively manage them.

Appendix

About the author

Sarah Bauerle Danzman is a resident senior fellow with the GeoEconomics Center’s Economic Statecraft Initiative. She is also an associate professor of international studies at Indiana University Bloomington where she specializes in the political economy of international investment and finance. From 2019 to 2020, she was a Council on Foreign Relations international affairs fellow, working in the US Department of State as a policy advisor and foreign investment security case analyst in the Office of Investment Affairs.

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Dispatch from Rio: Can Brazil set up the G20 leaders’ summit for success?

Ananya Kumar, Mrugank Bhusari — Tue, 30 Jul 2024 20:14:51 +0000

RIO DE JANEIRO—As the Group of Twenty (G20) finance ministers and central bank governors gathered here last week, they were met with a dense haze rolling off the mountains that morphed into bright winter sunshine by day’s end. It was a fitting metaphor for the struggle, and for some of the success, of the Brazilian G20 presidency in trying to work through the complex geopolitical morass—especially the one caused by Russia’s invasion of Ukraine—that has hung over these ministers’ meetings for the past three years.

While previous G20 meetings have been noteworthy for their disagreements, Brazil has emphasized substance and consensus over geopolitics during its G20 presidency. Felipe Hees, the Brazilian diplomat and sous-sherpa of this year’s G20 presidency, explained this strategy on July 25 at an Atlantic Council conference on the sidelines of the meeting. Brasília, he said, has sought to acknowledge fundamental disagreements on geopolitics between some members, and then to sidestep them entirely at the ministerial level. The big question now is: How long can this approach last?

So far, Brazilian officials have chosen to focus on economic development issues that already enjoy widespread support. Last week, this approach resulted in one of the few joint G20 ministerial-level communiqués in the past two years. Released on July 26, this communiqué displays G20 members’ alignment on launching the Global Alliance against Hunger and Poverty under the Brazilian presidency. It’s an important topic for the host country, since Brazil is the world’s leading producer of soybeans, corn, and meat, and Brazilian President Luiz Inácio Lula da Silva has emphasized his country’s role in alleviating global food insecurity. At the same time, the issue has a wider resonance. At the Atlantic Council conference, Cindy McCain, executive director of the World Food Program, emphasized that “food security is a national security issue, and it should be labeled as one.”

Climate finance and the energy transition were at the forefront in Rio last week as well. Discussions focused on how to mobilize the public and private sector in achieving climate goals. At the Atlantic Council’s conference, Renata Amaral, the Brazilian secretary for international affairs and development in the Ministry of Planning and Budget, formally called for technical assistance from multilateral development banks for catastrophic weather events, such as the floods in southern Brazil this May. Immediately following the summit, US Treasury Secretary Janet Yellen headed to Belém, the capital city of the northern Brazilian province Pará. Located near the mouth of the Amazon River, Belém was a symbolic choice for the unveiling of the US Treasury’s Amazon Region Initiative Against Illicit Finance, which is intended to help combat nature crimes.

Another issue that garnered attention last week was wealth inequality, which the Brazilian president spotlighted in his speech on June 24. “The poor have been ignored by governments and by wealthy sectors of society,” he said. Despite disagreements on whether the G20 is the right forum for the issue, it issued the first ever ministerial declaration on taxation. While Brazil’s ambition was to move the needle on a 2 percent global wealth tax, the declaration simply said that ultra-high-net-worth individuals must pay their fair share in taxes. While this fell short of Brazil’s hopes on this issue, the meetings in Rio have done more on building consensus than the past two presidencies, which have been rife with outbursts over geopolitical issues between member states.

In 2022, the then G20 president, Indonesia, saw its plan to build international cooperation for the post-pandemic recovery paralyzed by Russia’s full-scale invasion of Ukraine in February. When finance ministers and foreign ministers met in April and July of the year, officials from Russia and from the United States and Europe walked out of the room when their counterparts spoke. Ministers failed to agree on a communiqué, and negotiations on climate and education also broke down over criticisms of the war. Ahead of the leaders’ summit in November 2022, Western leaders balked at the thought of sharing a table with Russian President Vladimir Putin, who ultimately did not attend the summit. In the end, the leaders could only agree to a declaration that was a broad, noncommittal summary of approaches to addressing global challenges.

Last year, India focused its G20 presidency on depoliticizing the issue of the global supply of food, fertilizers, and fuels, as well as on addressing climate change and restoring the foundations of negotiations at the forum. Its strategy was to move geopolitics off center stage by highlighting perspectives from the “Global South,” including formally adding the African Union as a full member, and thus shaping the platform as an action and communication channel between advanced economies and emerging markets.

This was difficult. Shortly into India’s presidency, Russia and China withdrew their support for the text in the Bali statement on Ukraine. At the technical level, none of the ministerial meetings produced a joint communiqué, and New Delhi was forced to issue chairs’ statements instead. Since the leaders’ summit in New Delhi, the outbreak of war between Israel and Hamas in October 2023 has made the job of navigating geopolitical tensions all the more difficult for Brazil.

While the Russian and Chinese leaders did not attend last year’s leaders’ summit, the New Delhi Declaration was nevertheless bolder and more specific than its Bali predecessor. It set the agenda for the G20 for the years ahead but offered few specifics on how to achieve these goals.

Will Brazil’s strategy of sidestepping geopolitics work at the leaders’ summit scheduled for November 18-19 in Rio? Finance ministers and central bank governors can ignore geopolitics; presidents and prime ministers often cannot. If Brasília concludes technical negotiations on the various proposals ahead of the leaders’ summit, then consensus-building at the gathering will be easier, as geopolitics will remain just an elephant in the room.

If Brazil is successful, it can end the stalemate that the G20 has found itself in and remake it into a relevant economic coordination body—one that can adequately address the goals of its emerging market and advanced economy members. If Brazilian officials are not successful, however, the forum’s relevance may begin to wane.

It has been in the interest of the last few G20 presidencies to keep up the balancing act between the United States, China, and Russia. Moreover, it is likely that South Africa will follow this approach as it takes on its presidency in 2025. As many of the discussions in Rio noted, however, what happens in the US presidential elections this November could determine both the relevance and the tone of the G20 meetings going forward.

Ananya Kumar is the deputy director, future of money at the Atlantic Council’s GeoEconomics Center.

Mrugank Bhusari is assistant director at the Atlantic Council’s GeoEconomics Center.

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‘We’re back to square one’ in fighting the hunger crisis, warns Cindy McCain

Katherine Golden — Fri, 26 Jul 2024 16:52:03 +0000

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“We’ve lost all the progress that we’ve made in the past fifteen years” on lowering global hunger levels, World Food Programme (WFP) Executive Director Cindy McCain warned on Thursday.

McCain spoke at an Atlantic Council event hosted on the sidelines of the Group of Twenty (G20) meeting of finance ministers and central bank governors in Rio de Janeiro. She pointed out that one in eleven people globally faced hunger last year.

On Wednesday, Brazilian President Luiz Inácio Lula da Silva announced that Brazil—which holds the G20 presidency—will later this year launch the Global Alliance Against Hunger and Poverty to bring countries together in sharing knowledge and resources.

“We have the capability as a planet to feed everybody on the planet—we grow enough food,” McCain said, “but we don’t” due to funding and other coordination issues.

With those challenges, the Global Alliance is “a great opportunity for all of us . . . to get together, exchange ideas, brainstorm” and to “develop science and technology” tools to help, McCain said.

Below are more highlights from the conversation, moderated by Valentina Sader, deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center.

Food security

Food security is a “national security issue,” and “it should be labeled as one,” McCain argued, pointing out how access to food has shaped broader security crises in Somalia, Sudan, and Yemen.
Yet, food security “gets kicked down” the list of priorities every time “something else happens in the world,” McCain warned.
She said that the WFP and United Nations agencies, because they provide critical aid, are “on the front lines” of crises and the “first in and last out.”
The WFP previously got most of its grain from Ukraine. But it has had to diversify its sources in the wake of the agricultural disruptions caused by Russia’s 2022 invasion of Ukraine. WFP is also working with other countries to help them mitigate the effects of the conflict on global food supplies.
In the global hunger crisis, “women and children are taking the brunt,” McCain said. “You’ve never seen more of an example of it than in Gaza.”
She added that equity and gender inclusion are important to factor into food security efforts because “a woman will feed her family,” and while doing so, “she will make sure everybody else eats” before she does.
Moreover, with women making up around half of smallholder farmers, McCain argued that it is important to make sure that these women have the tools, expertise, seeds, and access to water that they need to farm effectively. “If a woman farms and can feed her family, she will wind up feeding the community,” McCain said.

Farm to negotiating table

McCain noted that G20 countries include not only the world’s leading economies but also some of the planet’s largest agricultural producers. That, she said, empowers these countries to work together to address the full spectrum of food-security challenges, from poverty to improvements in agriculture.
She added that the G20 is an optimal forum for raising the urgency around hunger because of how it brings together both governments and civil society organizations from countries that represent 85 percent of the world’s gross domestic product and over 60 percent of its population. “So the voice is huge,” she said, adding that “governments simply cannot do it all. We need everybody in on this.”
She urged global stakeholders to “continue to elevate the conversation” about the urgency of food security—and advised countries “most affected” by food insecurity to keep conveying the plight they face. “The problem is [that] around the world, people don’t understand what’s going on” or believe that hunger and malnutrition are only problems in Africa rather than globally, she said. “It’s all about. . . making sure that people understand.”

Katherine Walla is the associate director of editorial at the Atlantic Council.

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Webster quoted in InvestNews Brazil on Chinese electric car exports

aharrington — Thu, 25 Jul 2024 19:59:09 +0000

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Lipsky cited in Bloomberg on US efforts to persuade emerging market countries to publicly criticize China’s export practices during the G20

cfalkenek — Tue, 23 Jul 2024 19:37:56 +0000

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Infographic: Could Brazil be the future of global food security?

Adrienne Arsht Latin America Center — Mon, 08 Jul 2024 21:49:49 +0000

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With an expected global population of 10 billion by 2050, the world must adjust to meet growing food demands. Changes to climate and geopolitical disruptions—from war and conflict to trade—have significant implications to food security. Only a few places in the world have the potential to rise to this occasion. Brazil is top of the list.

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Dollar Dominance Monitor featured by Reuters on BRICS de-dollarization efforts

rmurphy — Tue, 25 Jun 2024 16:39:26 +0000

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Tobin quoted in Diálogo Americas on China’s influence in Brazil’s energy sector

Natalia Storz — Mon, 17 Jun 2024 20:48:51 +0000

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Brazil is buying lots of Chinese EVs. Will that continue?

William Tobin — Tue, 04 Jun 2024 18:32:48 +0000

In anticipation of growing demand for zero-emission transportation, China has become the world’s largest exporter of electric vehicles (EVs). China’s battery electric vehicle (BEV) industry is at overcapacity, producing an excess of 5 to 10 million vehicles annually beyond domestic demand, forcing China to find new markets to fuel continued growth.

Brazil offers a useful case study of China’s strategy—and whether it’s sustainable.

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Over the course of 2023, the value of Chinese BEV exports to Brazil surged eighteen-fold as automakers like BYD expanded their presence in the country. Chinese BEVs accounted for 92 percent of Brazil’s total BEV imports in this period.

This trend has continued durably thus far. As of April 2024, Brazil has surpassed Belgium as the top export market for China’s EVs.

Those aren’t the only numbers pointing to Brazil’s growing prominence as a market for Chinese BEVs, which constitute 88 percent of China’s total exports of electric vehicles, a category which includes both battery and plug-in hybrid electric vehicles (PHEVs).

In fact, Brazil imported $735 million worth of Chinese BEVs in 2023, nearly three times the value of Mexico’s imports of these Chinese vehicles. Despite increasing attention on Mexico as a destination for exports of Chinese BEVs, 2023 marked the second straight year that Brazil has ranked as Latin America’s largest importer of Chinese BEVs.

Furthermore, growth in Chinese exports of BEVs to Brazil far exceeded the overall rate of increase in exports across China’s “new three” industries—electric vehicles, lithium-ion batteries, and solar photovoltaic cells—that are critical pillars of China’s export-driven manufacturing plans. In 2023, China’s worldwide exports of these three industries increased by 30 percent—a significant jump amid sluggish global GDP growth overall, suggesting limited ability for markets to absorb this export growth.

Whether Brazil can continue to absorb China’s overproduction of BEVs, similarly, is increasingly in doubt.

Strong domestic sales, slacking foreign competition

In recent years, EV sales in China have been robust, with BEVs—which are almost entirely produced domestically—accounting for 25 percent of total car sales in 2023. It is worth noting that this includes foreign firms, however, such as Tesla and Volkswagen.

China’s manufacturing of BEVs has outpaced domestic demand. While this might have resulted in millions of cars sitting unsold in Chinese lots, the overproduction has coincided with Western automakers such as General Motors, Ford, and Volkswagen tempering their EV ambitions amid weakening demand growth in their core markets.

This confluence of trends created an opportunity for Chinese BEV makers to boost sales abroad, as demonstrated by the 70 percent jump in BEV exports during 2023. Chinese BEV firms, and BYD in particular, are making a concerted effort to expand outside of mainland China, offering products that outcompete peers on price, and sometimes compete strongly with internal combustion engine vehicles.

China’s growth ambitions cause concern

Rather than incentivize consumption, China is doubling down on its investment-driven growth model with an upcoming manufacturing stimulus program. Investment, expressed in World Bank data as gross capital formation, already represents 40 percent of China’s GDP, far above the global average of 25 percent and exceeding the emerging market average of 30 to 34 percent, illustrating China’s reliance on sectors like manufacturing to fuel growth.

China’s decision to expand its export-driven manufacturing sector is causing handwringing in target markets. The Brazilian government has opened a number of probes into China’s alleged “dumping” of goods. The European Union has also opened investigations into potential “non-market practices and policies” adopted by China.

China’s exports of its record surplus of manufactured goods beyond current levels will depend on other countries’ willingness to let China take market share from domestic industry. In an increasingly protectionist era, that seems far-fetched.

Will Brazil absorb China’s manufacturing surplus?

The surge in imports of BEVs from China has been rapid, offering little time to react. However, for Brazil, the stakes for its industrial competitiveness are high, and its tolerance for China’s encroachment on its automotive industry may be limited.

For one, automobiles are a critical cog in Brazilian industry. As of 2020, 89 percent of vehicles sold in the country were domestically produced, although this may have decreased slightly amid a surge of Chinese BEV imports. The car sector accounts for about 20 percent of industrial GDP, an area of critical importance to Brazil, where value-added manufacturing’s share of GDP has declined from 26 percent in 1993 to 11 percent in 2022.

Second, Brazil does not want to deepen its reliance on imports of high-tech and value-added products. In 2021, Brazil’s imports of capital, consumer, and intermediate goods accounted for 93 percent of total goods imports, a symptom of the country’s increasing trade specialization in the export of raw materials, which represented 55.7 percent of Brazil’s exports of goods. The government has expressed its discontent with this status quo, seeking to avoid trade arrangements that “condemn our county to be an eternal exporter of raw materials,” in the words of President Luiz Inácio Lula da Silva.

Furthermore, Brazil has made supporting the domestic auto sector a priority. In May 2023, the Lula administration unveiled a series of measures to promote domestic auto manufacturing via credit lines, tax breaks, and incentives for the use of domestic content.

A continued rise in cheap Chinese EV imports would not align with Lula’s top-down push for re-industrialization, designed to foster formal high-wage employment, innovation, and economic diversification. In fact, his administration has announced new tariffs on electric vehicles, which will ramp up to a 35 percent import tax by 2026.

As such, China will likely need to find more willing buyers of its surplus EVs. Although it is difficult to forecast where the next surge in imports will take place, South and Southeast Asian markets such as India, Indonesia, and Thailand could begin to exhibit stronger uptake, as could markets in Latin America such as Colombia and Mexico.

William Tobin is an assistant director at the Atlantic Council Global Energy Center.

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Brazil’s tragic floods should put climate adaptation at the top of the G20 and COP agendas

Valentina Sader — Tue, 14 May 2024 21:34:21 +0000

For the last two weeks, Rio Grande do Sul, Brazil’s southernmost state, has been the victim of the worst climate disaster in its recent history. Hit by torrential rain, five months’ worth of typical precipitation fell in a mere fifteen days in some areas. Cities and towns remain under water, and the rainfall continues. At least 147 people have died, another hundred are missing, and more than half a million are displaced, impacting more than two million people in the state. The ongoing flooding in Rio Grande do Sul is an unfortunate example of the urgent need for countries to focus on adaptation measures to climate change. Brazil has a unique opportunity to drive these commitments forward as it hosts the Group of Twenty (G20) Leaders’ Summit in November and the United Nations Climate Change Conference, also known as COP30, in 2025.

Severe weather is not a new phenomenon for the state, which has seen record-breaking rainfall in recent years. A foretold tragedy, the flooding in Rio Grande do Sul is the fourth weather-related crisis to hit the state in less than a year. At the end of 2023, Rio Grande do Sul saw a similar situation, when a heat wave exacerbated intense storms and major flooding.

The region is prone to weather-related disasters, and the current flooding has been linked to the periodic El Niño weather phenomenon. In the past few decades, the state’s capital city, Porto Alegre, has adapted to control the extent of the impact of torrential rains on the city. However, the infrastructure in place must be updated to the new reality of extreme weather events, which are more intense due to climate change. Designing suitable financial instruments for resilient infrastructure with support from international and domestic financial institutions will be crucial.

The extent of this disaster is immense. To put it into perspective, about 90 percent of the 497 municipalities in Rio Grande do Sul were impacted by the rain and flooding. Brazilians are bearing the immediate brunt of these floods, including on their economy. There will also be implications for global trade and food security in the weeks and months ahead.

Rio Grande do Sul is an important state for Brazil. It represents 6 percent of the country’s gross domestic product (GDP), the fifth largest state GDP in the country. A major agribusiness state, it accounts for 70 percent of Brazil’s rice production. It is a significant producer of soybeans—of which Brazil is a leading producer and exporter—and an important meat-producing state. And while in Rio Grande do Sul rain continues to fall, not too far from there, in other regions of Brazil, farmers are suffering through a winter drought.

The governor of Rio Grande do Sul, Eduardo Leite, estimates that a yearslong reconstruction plan costing some nineteen billion reais (around $3.7 billion) will be needed in his state. Private sector investments and insurance could play a crucial role in supporting the recovery of the region, implementing adaptation measures and building the resilience of the affected communities. This level of support now will be critical to reduce future losses and tap into the immense economic, social, and environmental benefits of investing in adaptation and resilience. According to one recent estimate, each dollar invested in resilience and adaptation could generate up to twelve dollars in economic benefits.

Local and federal governments must take on the responsibility to put climate adaptation at the core of their strategic plans and development efforts. Countries must prioritize adaptation and resilience investment plans that strategically crowd in private sector investments and ensure that subnational governments and local communities can access insurance and financing to adapt and build resilience. Brazil is in a unique position to do so. With Brazilian municipal elections in October, this is a crucial moment for Brazilians to institutionalize climate mitigation and adaption efforts as part of local governments’ agendas.

At the geopolitical level, the G20 Leaders’ Summit in Rio de Janeiro in November will be an opportunity for Brazil to drive the climate adaptation agenda forward and to obtain buy-in and financing from the largest economies in the world. COP30 in Belém, Brazil, in 2025 is another such opportunity. The site for COP30, located in the Amazon rainforest in Brazil’s north, was chosen in part to showcase the roles of biodiversity, sustainability, and conservation in climate action. The flooding in the country’s south will be a tragic reminder of the importance of adaptation being central to the climate agenda, as well.

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G7 pledges to end coal—but only inclusive action will make a real climate impact

Elena Benaim — Fri, 03 May 2024 20:13:34 +0000

Energy ministers from the Group of Seven (G7) met in Turin, Italy, on the 29th and 30th of April for the first time since the United Nation climate summit in Dubai. Two days of discussion at the Climate, Energy, and Environment Ministerial meeting resulted in a series of shared commitments to address climate change and energy security. The 35-page long joint communiqué includes a historic pledge to phase out coal power plants by 2035.

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The commitment of “phasing out coal by 2035 or on a timeline consistent with the 1.5 temperature limit” marks a further step in the direction indicated last year by the UN climate summit, known as COP28, to reduce the use of fossil fuels, of which coal is the most polluting. Mentioning the IEA’s Net-Zero Roadmap report, G7 countries say that “phase-out of unabated coal is needed by 2030s in advanced economies and by 2040 in all the other regions, and that no new unabated coal power plant should be built.” This represents the first agreement on a timeline for phasing out coal after the initiative had previously failed due to opposition by some members. However, it should be noted that, despite the positive step towards a common goal, by using the term “unabated” in the communication, members of the G7 leave open a potential path for the use of coal beyond the indicated timeline.

In addition to the importance of ending coal reliance, it is now widely recognized that the success of the energy transition is linked to a technology-inclusive approach both for reaching climate neutrality and strengthening energy security. The communication of the G7 promotes members’ increasing use of diverse low-carbon energy technologies including renewable energy, energy efficiency, hydrogen, carbon management, storage, nuclear energy, and fusion.

Energy ministers fully committed to the “implementation of the global goal of tripling installation of renewable energy capacity by 2030 to at least 11 terawatts (TW)” and to “double the global average annual rate of energy efficiency improvements by 2030 to 4%,” signaling the intention to create a strong connection with COP28 pledges.

On energy storage, G7 members agreed to a global goal in the power sector of 1500 gigawatts (GW) in 2030, a more than six-fold increase from 2022. Introducing this target for storage is very important to support renewable implementation and ultimately reach the installation capacity target set in Dubai.

The communication highlights the importance for countries to reduce reliance on civil nuclear technologies from Russia and commits to strengthening the resilience of the nuclear supply chain. Countries opting for nuclear energy would work to deploy next generation nuclear reactors.

Fusion made it in the final text with a strong emphasis on the potential of this technology to provide a lasting solution to the global challenges of climate change and energy security in the future, marking an important addition to the G7 joint communication, since in the Hiroshima Communique, fusion was not mentioned.

In order to implement these targets and scale technologies, the G7 countries this year also reaffirmed their commitment to jointly mobilize $100 billion per year until 2025 and their intention to scale up public and private finance. “We stress the need to accelerate efforts to make finance flow consistent with a pathway towards low greenhouse gas emissions and climate-resilient development,” and “we acknowledge that such efforts involve the alignment of the domestic and international financial system.” Attention is now directed toward the upcoming G7 finance meeting, the G20 in Brazil, and the “finance COP” in Azerbaijan.

Finally, convergence and cooperation with countries outside the G7 will play a crucial role in the success of the transition. The joint communication acknowledges that developing countries represent “an important partner in the just energy transition” and recognizes “the great potential of the African continent in becoming a global powerhouse of the future.”

At this year’s energy ministerial meetings, Azerbaijan’s Deputy Minister on Energy Elnur Soltanov (representing the 2024 COP29 presidency), Brazil’s Minister of the Environment and Climate Change Marina Silva (representing the 2024 G20 presidency), and Kenya’s Principal Secretary on Energy Alex K. Wachira, participated along with the G7 partners. This approach shows recognition of the fundamental role that inclusivity plays in a successful transition and the willingness to create strong synergies with the upcoming multilateral forums.

It would be difficult to overstate just how critical pragmatism and convergence are to the energy transition. But this message, in addition to being successfully incorporated in the communication was further reinforced during the Future of Energy Summit, a half-day event hosted by the Atlantic Council Global Energy Center, Politecnico di Torino, and World Energy Council Italy as part of Planet Week on the sidelines of last weekend’s G7 ministerial meeting. Experts and speakers at the Summit emphasized the need to strengthen a technology-inclusive, not exclusive, approach and cooperation among countries.

The IEA’s Net Zero Emissions by 2050 Scenario (NZE) envisages that by 2030, advanced economies would end all power generation by unabated coal-fired plants, making the new G7 historic commitment unfit for purpose. However, the overall success of the transition will not be determined by pledges, but more so by the will of countries to transform pledges into action. Whether G7 countries will be able to succeed in the energy transition will depend on their capacity to create resilient clean energy supply chains, implement diversified energy mixes, promote collaboration with developing countries, scale up public and private finance, and it seems like many steps are being taken in the right direction.

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center.

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EnergySource Apr 3, 2024

Central and Eastern Europe needs to rethink its approach to energy security

By Pawel Czyzak and Nolan Theisen

The upcoming Three Seas Initiative Summit is an opportune time for Central and Eastern European leaders to pivot toward clean, affordable, and local renewables to build energy security.

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EnergySource Dec 13, 2023

The US and NATO must clamp down on Russian fossil fuels to end the war in Ukraine

By Svitlana Romanko and Oleh Savytskyi

The US and its EU allies have made several attempts to diminish Russia’s fossil fuel exports, with mixed results. the West must do more to staunch the flow of Russian oil and gas—and restore peace for Ukraine.

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EnergySource Dec 5, 2023

The Oil and Gas Decarbonization Charter is a start, but more work remains

By David L. Goldwyn, Andrea Clabough

Although the Oil and Gas Decarbonization Charter is laudable, the pace of change for this industry (as represented in this charter) is not fast enough, deep enough, or broad enough to materially address the yawning gap between the Paris commitments and the present Dubai reality.

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IMF-World Bank Week events and G20 evening reception mentioned in Politico

stanleywu — Thu, 18 Apr 2024 18:14:36 +0000

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What should digital public infrastructure look like? The G7 and G20 offer contrasting visions.

Anand Raghuraman — Thu, 18 Apr 2024 16:59:38 +0000

The Group of Seven’s (G7) recent entry into the digital public infrastructure (DPI) debate marks an important shift in the winds of global digital governance. It’s as if the G7, which released its latest Industry, Technology, and Digital Ministerial Declaration in March, wants to send a not-so-subtle message: “We’ve arrived at the DPI party, and we’ve got some thoughts.” And indeed, they do.

For well over a year, DPI discussions have simmered in capitals around the world, drawing in policymakers, diplomats, and development experts alike. As a quick primer on DPI, think of it as the digital equivalent of laying down highways and bridges, but for the virtual world. Just as physical infrastructure drives economic growth, investing in DPI can propel inclusive development at a societal scale. Identity, payments, and data exchange platforms are often cited as the core building blocks of DPI, mirroring the multilayered structure of India’s famous homegrown technology stack.

India has been a trailblazer in deploying DPI at home and globalizing the DPI model. With its Group of Twenty (G20) presidency in 2023, New Delhi championed DPI on the world stage, securing political buy-in for the concept at the highest levels. G20 digital ministers endorsed a framework to govern the design, development, and deployment of DPI last August. And with the unanimous endorsement of G20 leaders, the New Delhi Leaders’ Declaration from last November set the stage for accelerated DPI development in 2024.

However, as the G7’s foray into the DPI arena reveals, the conversation is far from over. There are still different views of what DPI is and ought to be, as well as how it should shape the way markets function. Contrasting the G7 and G20 ministerial texts on DPI reveal three important areas of contention.

Differing visions

First, there’s the question of scope and purpose: Should DPI focus on enhancing public service delivery by governments or seek to restructure markets and delivery of private services? The G7 ministerial text opts for a narrower focus, solely emphasizing DPI’s role in enhancing citizen access to public services delivered by governments, while the G20 imagines a more expansive canvas, where DPI serves as a conduit for “equitable access” to both public and private services. This distinction is not merely academic; it gets to the core of what makes DPI novel and contested.

What does it mean to use DPI to enable equitable access to private services at a societal scale? It’s an evolving concept, but the basic thrust is to leverage the design, deployment, and governance of DPI to “dynamically create and shape new markets” and advance policy goals. For example, with a market-shaping DPI in place, a system operator, often the state itself, can define technical standards for private service providers to ensure interoperability. It can cap market share to give force to its vision of competition policy. It can influence pricing and business strategies through system rules and design features, with the DPI operator playing the role of “market orchestrator.” This is a different paradigm for the digital economy than a traditional market-led model—and to DPI champions, that’s precisely the point.

Second, consider the motivations for deploying DPI: Should these include advancing competition policy objectives? When describing the objectives for deploying DPI, G7 ministers borrow from the G20 framework but make a notable omission: There is no reference to “competition” as a core rationale for DPI. This omission is fully consistent with the G7’s vision of DPI, narrowly focused on public service delivery by governments. For the G7, the task of building competitive markets for the private sector is left to national regulators and antitrust authorities, not DPI builders and operators.

By contrast, the G20’s framework invokes the role of DPI in promoting competition twice, and that’s no accident. All governments want competitive digital ecosystems, but some see overexposure to Western tech giants as compounding the risks posed by pure market concentration alone. In this context, deployment of DPI serves two related purposes: disrupting entrenched incumbent positions while increasing state capacity to offer core digital services that reduce reliance on Western tech firms.

Third, what about design principles? Should DPI require open-source tech and open standards? The G7 ministerial statement omits all specific references to open source or open standards; instead, it vigorously defends the role of the private sector in building interoperable elements of DPI, presumably using open or proprietary technologies. In comparison, the G20’s DPI framework pointedly and repeatedly emphasizes the need for open software, open standards, and open application programming interfaces (APIs). Ultimately, however, the G20 statement hedges on this question, stating that DPI can be built on “open source and/or proprietary solutions, as well as a combination of both.”

Nevertheless, speak to DPI theorists shaping G20 and Global South thinking on DPI, and it’s clear they see “openness” as a defining principle of well-built DPI, citing the role open architectures, open-source tech, and open APIs play in enabling transparency, scale, interoperability, and reduced risk of vendor lock-in. Still, fuzziness around the term “openness” and its application in some of the largest DPI systems deployed to date suggests there is much left to unpack.

How will the G7 engage with DPI going forward?

It’s clear that the G7’s vision for DPI differs from the G20’s in at least three important areas. The question that remains is what comes next: How will the G7 (or its member states) assert their point of view?

The G7’s ministerial text offers some early clues. It acknowledges that G7 members will have “different approaches to the development of digital solutions, including DPI” and notes that the upcoming G7 Compendium on Digital Government Services will collect “relevant examples of digital public services from G7 members.” The compendium would also summarize factors that have led to “successful deployment and use of digital government services, such as national strategies, investment, public procurement practices, governance frameworks, and partnerships.”

Developing the compendium is a good start. But looking ahead, G7 members will need to weigh in this year at fast-moving multilateral discussions during Brazil’s G20 presidency, for instance, or within the United Nations’ multiple DPI workstreams. In each case, G7 perspectives on corporate governance, privacy, market disciplines, and regulatory best practices will strengthen discussions and outcomes, just as the G20’s and the Global South’s focus on inclusion, competition, and openness help ground the conversation in public interest concerns. The push and pull of the different visions for DPI could yield a better outcome for all—that’s the optimistic case.

A pessimist may insist that the gaps between the G7 and G20 views on DPI are tough to bridge. And it’s true, there is a real difference between a DPI scoped for public service delivery and one intended to shape the structure of digital markets and digital services offered by the private sector. If the latter view of DPI holds, G7 member states may need to find new ways to constructively participate in global DPI discussions. This could involve promoting individual layers of the DPI stack, as the G7 is already doing with digital ID governance, and emphasizing the need for sustainable public-private partnerships for DPI build-out.

Ultimately, time will tell how the G7 chooses to lean into the global DPI debate. The only certainty is that the G7’s active engagement isn’t optional anymore—it’s essential.

Anand Raghuraman is a nonresident senior fellow at the Atlantic Council’s South Asia Center, where he leads research initiatives on US-India digital cooperation and publishes expert commentary on Indian data governance and digital policy initiatives. He is also director of global public policy at Mastercard.

Mastercard, through its Policy Center for the Digital Economy, is a financial supporter of an Atlantic Council project on digital public infrastructure.

The views expressed in this article are the author’s and do not necessarily reflect those of Mastercard.

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Brazil’s approach to the G20: Leading by example

Hung Tran — Fri, 12 Apr 2024 13:36:26 +0000

More than four months have passed since Brazil took over the Presidency of the G20 from India. Judging by the outcomes of preparatory meetings leading up to the G20 Summit on November 18-19 in Rio de Janeiro, the headwind of geopolitical rivalry seems to have strengthened. The world is not only divided over the Russian war on Ukraine but also over Israel’s war in Gaza in response to the Hamas attack last October. Against the backdrop of heightened geopolitical tension, these divisions have prevented the ministerial meetings from issuing joint communiques. This has prompted some analysts to call 2024 one of the most unpredictable years of the G20, with an “outside chance it could all collapse into rancor,” according to Andrew Hammond of the London School of Economics. The G20 finance ministers and central bank governors will meet again on April 17-18 during the IMF/World Bank spring meetings in Washington DC.

Despite the headwinds, Brazil’s non-aligned, cooperative, and practical approach holds out the promise of a constructive outcome for this year’s G20 meetings—especially if progress is not being measured by joint communiques (which have become irrelevant) but by agreements on concrete global initiatives. Under the overarching theme “Building a Just World and a Sustainable Planet”, Brazil has worked with countries in the Global South as well as developed countries to build consensus in launching a variety of global initiatives by the time of the G20 Summit. These initiatives reflect the key concerns of the Global South but have built on previous international agreements and include practical proposals for implementation.

Brazil’s proposed initiatives

First is the push to reform the United Nations system and the Bretton Woods institutions like the IMF, World Bank, and World Trade Organization. Reforms to the UN Security Council—where five permanent members (P5) have veto power—have been on the international agenda for a long time. While widely acknowledged in principle, no specific proposal has gained any traction. Brazil has put forward the idea that a P5 member should not be allowed to use its veto power in cases directly relating to itself—somewhat similar to the Western judiciary practice of reclusion of judges in cases of conflicts of interest. This would have meant that Russia would not have been able to use its veto power when the Security Council discussed the war in Ukraine. Such a proposal will not get the backing of the P5, especially amid the current geopolitical rivalry. But it could gather support from many countries, and not only within the Global South—keeping pressure on P5 members to respond with counter-proposals.

Calls for reform of the IMF and World Bank have been widely shared by the Global South, reiterated most recently by China demanding a redistribution of quota and voting shares to “better reflect the weight a country carries.” The G24, representing developing countries at the IMF and World Bank, has circulated a paper proposing specific reforms. These and other ideas about quota reform are scheduled be discussed by the IMF in the year ahead.

Second, another of Brazil’s linchpins for this year is launching a Global Alliance Against Hunger and Poverty as a tool for reaching the UN Sustainable Development Goals by 2030. That initiative leverages Brazil’s position as the second biggest food-exporting country. Specifically, the alliance will not be about initiating new funds or programs but finding ways to coordinate numerous existing funds and programs to make them more useful to recipient countries and easier to solicit contributions from developed countries. It also will compile a basket of best practices in anti-hunger and anti-poverty policies to help other countries develop their own programs. In this context, Brazil will showcase its acclaimed Bolsa Familia family welfare program, which has helped significantly reduce the country’s poverty rate and has been adapted in almost twenty other nations.

Third, Brazil will launch a Task Force for the Global Mobilization Against Climate Change to spur the G20 to help create a conducive political environment for a new and robust goal on climate finance to be agreed at this year’s COP 29 in Azerbaijan as well as for countries to present their renewed and more ambitious Nationally Determined Commitments (NDCs) to reach net zero emissions at the 2025 COP30 under Brazil’s chairmanship. Brazil will also advance its proposed Global Bioeconomy Initiative to bring together science, technology, and innovation on the use of biodiversity to promote sustainable development. This initiative will also try to expand developing countries’ access to various fragmented climate funds including the Green Climate Fund, the Climate Investment Fund, the Adaptation Fund, and the Global Environment Facility.

Fourth, leveraging the momentum of the global corporate minimum tax (effective at the beginning of this year), Brazil wants to propose a global initiative to impose a minimum tax on the super-rich which France has endorsed. This will help Brazil rally support from Global South countries as well as others to advance the proposal.

Last but not least, in September 2023 Brazil and the United States signed an MOU for a Partnership for Workers’ Rights (in particular in the gig economy). They pledged to pass necessary national legislation to achieve that goal and hope to use it as an example to get other countries to join.

The themes across these initiatives are practicality, leading by example, and a willingness to bypass time-consuming, top-down international negotiations.

While Brazil’s proposals will not all be adopted at the G20 Summit, especially in their original versions, most probably will be with some modifications. This outcome, with or without a joint communique, would represent a serious contribution by a key member of the Global South to the global reform agenda. And it comes after the achievements of India in its Presidency of last year’s G20. If South Africa keeps up this track record when assuming the G20 Presidency in 2025 (when Brazil will chair the BRICS-10 and COP30), an important step forward will be made in establishing the leadership roles of the major countries in the Global South. They are showing the ability to rally their members and to reach out to developed countries to shape global reform efforts. And if those countries, working with their partners, can sustain the implementation of the initiatives they sponsored, that would begin to make meaningful changes in the current international political and economic system. The main risk, of course, is that geopolitical rivalry will derail cooperative efforts to address pressing global problems. It remains to be seen to what extent that will happen.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s Geoeconomics Center, a former executive managing director at the Institute of International Finance and former deputy director at the International Monetary Fund.

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Economic reform is crucial for growth in Brazil

José A. Scheinkman — Mon, 26 Feb 2024 14:00:00 +0000

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Evolution of freedom

Freedom to prosperity

The future ahead

Evolution of freedom

The evolution of the aggregate Freedom Index in Brazil is clearly hump-shaped. During the first half of the period of analysis, from 1995 to 2013, the freedom score either increased or was relatively stable, driven mainly by improvements in just two indicators of the economic freedom subindex.

The first of these is the women’s economic freedom, which shows a clear step-change in 2002, although the reasons for this are not clear. During that year, there was a change in government, and the Worker’s Party (Partido dos Trabalhadores) took office. They were very much committed, at least in rhetoric, to increasing women’s economic freedom. In 2003, some parts of the civil code were reformed, which did lead to an improvement in women’s rights. However, it seems unlikely that this one legislative change can explain the 17-point increase in this indicator. Around the same time though, married women’s property rights improved, and punishments for sexual harassment—especially in the workplace—increased.

The second positive trend began in 1996, an important year for the stabilization of the economy. The liberalizing reforms introduced by the government of President Fernando Henrique Cardoso led to significant improvements on the trade freedom indicator. Sectors such as telecommunications and energy were opened to competition. There were also proposals for trade liberalization, even if some of these did not pass into law. Even the early years of Lula’s (Luiz Inácio Lula da Silva’s) government were very favorable to trade freedom, and the data seem to suggest that trade freedom did not decrease until after 2018, with the election of President Jair Bolsonaro. Bolsonaro did not create any barriers to trade, but very soon it became apparent that European countries did not want to continue negotiations on a trade deal with Bolsonaro.

In terms of political freedom, elections in Brazil are superb, and this is well captured by the elections indicator. They are fast, efficient, transparent, and the system is very secure. Even in locations where the electoral process is computerized, it is completely offline, decreasing the security risk. There is a slight fall on this indicator, starting in 2015, which is possibly attributable to polarization: when society is very politically polarized, you will always hear claims about the “unclean” electoral process. This is something we have seen recently in the United States and other countries.

Similarly, the political rights indicator shows a decline in recent years that is hard to identify in reality. It may be that, when the level of polarization is high, there are always segments of the population that can feel disenfranchised. And perhaps the indicator is capturing the repression of protests against President Dilma Rousseff’s government in 2015–16, or President Bolsonaro’s rhetoric regarding the Supreme Court, both of which may have caused anxiety about political freedoms. But there has been no obvious objective fall in political rights. The same applies to civil liberties. For example, when President Bolsonaro was elected, he publicly attacked journalists and other groups, but he took no concrete action against them. So, the feeling that political and civil rights have been reduced is understandable, but there have been no substantive changes that would allow us to say that people in Brazil were less free—and certainly not enough to justify a 33-point fall in the score.

Legislative constraints on the executive increased in the last few years, and here the indicator score is an accurate reflection of reality. However, while progress on this indicator is generally intended to be read as a positive shift, in Brazil’s case there are reasons to see greater legislative power as problematic. In 2016, President Rousseff was impeached. People connected to the Worker’s Party would say it was a “legislative coup,” a common accusation in many Latin American countries when similar situations arise. I am not of that opinion, but it is clear that a nontrivial share of the population is. During the President Bolsonaro years, a group of legislators, mostly interested in pork-barrel projects, gained a lot of power, to the point that the Supreme Court had to intervene to shut down their “secret budget”—effectively a slush fund for paying off supporters. The same group of legislators has continued to hold power after Lula’s election. This situation may have increased the impression that political rights were deteriorating, because presidents elected by the people seem, in reality, to be constrained by Congress.

The evolution of legal freedom, especially concerning judicial independence, is easier to agree with. The judicial system has been affected by executive interventions, justifying a deterioration of judicial independence scores. Moreover, the same indicator also measures judicial effectiveness, and here too the worsening situation has been very evident since 2014. Even before this, Brazil’s scores—of between 85 and 90—seem unjustifiably high because the country has long suffered from an ineffective judicial system. Only 10 percent of murders in Rio de Janeiro end up with a trial, and the numbers have been bad since at least the 1990s, when I was looking at crime and social interactions in the city. The fact that the accused do not receive any punishment until the appeals process has been exhausted means that some court decisions are only implemented ten years (or more) after they are handed down.

On top of this structural problem, in the last decade the judicial system in Brazil has become very influenced by politics. As a result, we see the Supreme Court making a decision, only to completely reverse it two or three years later, with essentially the same set of judges. This appears to be captured by the clarity of the law indicator. Laws in Brazil are very badly written—a lawyer’s dream. To give just one statistic, the value of all the unresolved tax claims in Brazil’s judicial system equates to 75 percent of Brazil’s gross domestic product (GDP). The macroeconomic impact of the low level of clarity in the law is serious, but there are always those interested in the obscurity of the law.

From freedom to prosperity

The evolution of the Prosperity Index, and in particular the fall in Brazil’s score in the last decade, seems to be driven by the minority rights indicator, which is proxied by religious freedom. Brazil has been experiencing fast growth in the percentage of its population identifying as evangelicals and, in particular, neo-Pentecostals. This has created at least two sources of friction. Neo-Pentecostals complain about persecution from the Catholic establishment, liberal legislators, mainstream media, and tax authorities. For example, even though there is no income tax on the profits of religious organizations in Brazil, nonprofit organizations are not exempt from paying social security or taxes imposed on purchases. Neo-Pentecostals feel they should enjoy full exemption from tax and regulations such as city codes. Second, Catholicism and Afro-Brazilian religions are often thought to be connected to “progressive” politics in Brazil, while evangelicals are usually more right wing, so the increase in political polarization may also partly explain the evolution of this indicator. As evidence of this tension, there have been attacks on followers of African-rooted religions by some neo-Pentecostal groups, occasionally allied to local drug gangs.

There is no question that income in Brazil stagnated in the last decade. But Brazil’s economic performance has been mediocre for the last fifty years. In the early 1980s, labor productivity was around 55 percent of the US rate. Now it is less than 25 percent. An exception is the agricultural sector, which has experienced remarkable productivity growth. Development means catching up with the technology frontier, and that is something Brazil has been unable to do. Japan, South Korea, Spain, and many others were able to do so. India and China are doing it now. But not Brazil; we can say the country is, in fact, un-developing.

President Cardoso’s government (1994–98) implemented programs to help the poorest in the country. The effort was amplified during President Lula’s administration (2002–06), which explains the overall positive trend in equality. The problem is that Brazil started from a very high initial level of inequality. Short-run fluctuations are likely to be explained by the fact that inequality is counter-
cyclical: when the economy goes down, inequality goes up. Since the COVID-19 crisis, there has been some temporary expansion of social programs, which has helped decrease inequality, but the long-run fiscal sustainability of these programs is by no means clear.

There has been an improvement in health in Brazil since 1995, mainly due to programs aimed at ensuring that the very poorest have access to regular check-ups and vaccinations. These efforts bore obvious fruit during the rollout of COVID-19 vaccines, because the whole system was already in place, so the vaccine program was relatively effective and fast. Health often requires a small marginal investment to generate large benefits, as was the case here.

Finally, it is undeniable that there have been some improvement in terms of years of education and enrollment in Brazil, and these are the metrics captured by the education indicator in the Prosperity Index. However, with the exception of very few states, there has been very little improvement in educational achievement—something that is not captured in the indicator. Progress is even lower in terms of preparing youth for the labor market. This explains why labor productivity is falling despite years of schooling increasing, which may otherwise seem a puzzle. It is worth highlighting one state in particular, Ceará, which clearly outperforms all the others in terms of educational spending effectiveness, despite its relative poverty. My advice to everyone involved in education in Brazil would be to simply copy whatever Ceará is doing, because the results are encouraging. The current minister of education was the governor of Ceará, so we may see some improvements across the country. However, there is reason to remain skeptical because education leaders usually prefer to reinvent the wheel instead of just replicating whatever is working in other places. This seems to be a universal law of decentralized public systems of education.

The future ahead

Labor productivity in Brazil is a clear signal of the economic prospects for the country—though I think it is a symptom of those prospects rather than a cause. Businesses in Brazil face a huge number of hurdles: We have very high and inefficient taxes. Firms are more worried about paying less tax than producing in a more efficient way. Regulations in Brazil are also especially inefficient, and there are important difficulties regarding long-term financing, related to the legal risks and fiscal deficits in the country. The labor market is very rigid, and even if President Temer and President Bolsonaro tried to remove some of these frictions, President Lula has announced plans to impose more labor regulations. These regulations would hurt firms and the overall economic prospects for Brazil.

A second important challenge for Brazil is security. A special concern is the relatively new route for drug trafficking from producers in Colombia, Peru, or Bolivia to Europe, which goes through Brazil. It is similar to a negative technological shock. Gangs fight with each other for control of the new routes, and this increases crime. Some paramilitary groups are also gaining strength, and these are more organized than the gangs and often affect legal businesses. For example, Rio de Janeiro’s largest electricity company, Light SA, may go bankrupt due to the amount of electric supply that is stolen and then resold to consumers and firms. These groups also control the transportation and construction sectors in some urban areas. All these things have large economic effects. And many states in Brazil lack an efficient police force. The police in the states of Rio de Janeiro and Bahia are particularly violent and inefficient. Unless the security situation improves, it is hard to foresee improvements in other dimensions.

What is going to happen with Brazil? Well, some things will help, like the proposed tax reform, which hopefully will simplify the tax code and curb exceptions, loopholes, and litigation. The finance minister is also committed to tackling the fiscal deficit. It is not clear how he will do it, but an improvement of the fiscal situation inherited from President Bolsonaro would greatly help the country.

Top firms in Brazil are excellent and, if the cost of doing business in the country was smaller, they could truly contribute to growth. Brazil has the cleanest energy mix of any country, and should be able to deal effectively with the illegal deforestation in the Amazon. Reforestation of the Amazon forest could be a source of cheap carbon capture at scale. This could make Brazil a big exporter of goods that have an excellent climate footprint—an exceptional opportunity for the country. Brazil missed an opportunity in the 1980s, when they could have educated their growing labor force, and now it is presented with a similar opportunity again. But the country needs to deal with all of the challenges discussed here.

José A. Scheinkman is Charles and Lynn Zhang Professor of Economics at Columbia, professor of economics (emeritus) at Princeton, and research associate at NBER. Scheinkman is a member of the National Academy of Sciences, recipient of a Guggenheim Fellowship, docteur honoris causa from Université Paris-Dauphine, and board member of Cosan S.A. Scheinkman’s current research focuses on the economics of forest preservation in the Amazon.

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Katz in EconPol Forum: The Geopolitical (In)Significance of BRICS Enlargement

Atlantic Council — Thu, 22 Feb 2024 21:26:02 +0000

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What’s on Brazil’s G20 agenda? Start by looking at where India left off.

Mrugank Bhusari, Ananya Kumar, Pepe Zhang, and Valentina Sader — Wed, 21 Feb 2024 16:34:06 +0000

In 2009, the telenovela Caminho das Índias won Brazil’s first International Emmy award. The hit show depicted Indian and Brazilian characters coming to terms with social and economic upheaval in the rapidly modernizing countries in the 1990s and 2000s. The same year, leaders of Brazil and India met their counterparts from Russia and China in the first summit of the BRIC grouping in Yekaterinburg, Russia. At its inception, the founders of the BRIC grouping, who added South Africa the following year to become the BRICS, wanted to articulate a shared vision of economic priorities for emerging markets.

Fast forward fifteen years and Brazil and India continue to share views on key global issues. For the first time since its inception in 1999, the Group of Twenty (G20) will have four consecutive emerging economy presidencies (Indonesia in 2022, India in 2023, Brazil this year, and South Africa in 2025). As G20 foreign ministers kick off their meeting in Rio de Janeiro on Wednesday, expect to see the shared views of India and Brazil reflected in a high degree of continuity between their G20 agendas.

The members of the G20 collectively account for more than 80 percent of global gross domestic product, three-quarters of world trade, and two-thirds of the world’s population. Moreover, the forum remains the world’s premium platform for coordinating international policy. Over the next year, the Atlantic Council’s G20 programming and research will track how Brazil leads this group in addressing four key areas (presented below) and will work to promote continuity with South Africa’s presidency in 2025 and the United States’ in 2026.

Food security and hunger elimination

Both New Delhi and Brasília have sought to highlight the needs of emerging markets and developing economies through their agenda-setting role at the G20. Perhaps no need stands out as urgently and pervasively as food insecurity. According to the World Food Programme, 783 million people worldwide faced chronic hunger in 2023, and most are in emerging markets and developing economies.

Under the Indian G20 presidency, the New Delhi Declaration was adopted by all members at the leaders’ summit. Among other provisions, it committed members to cooperate on agriculture research, access to fertilizers, capacity-building, and market transparency to foster food security among vulnerable populations. In particular, India emphasized the export and provision of millets, aligning with the “International Year of Millets” initiated by the United Nations General Assembly. Indian Prime Minister Narendra Modi was even nominated for a Grammy award for his appearance in a song titled “Abundance in Millets.”

Brazilian President Luiz Inácio Lula da Silva has doubled down on the social dimension of development, with a focus on combating poverty, inequality, and hunger. Food security is front and center in his domestic and foreign policy. As president of the G20, he has announced Brasília’s intention to launch a Global Alliance Against Hunger and Poverty at the leaders’ summit in November. Brazil is the world’s second-largest exporter of agriculture and is central to global supply chains—and in particular supply chains for emerging markets and developing economies. Expect to see Brazil leverage its weight in global markets to build consensus on the path forward in addressing food insecurity this year.

Climate and development finance

On climate and sustainable finance, Brazil’s G20 presidency appears poised to build on the legacy of India’s, while offering notable innovations and customizations. The four priorities of 2024’s Sustainable Finance Working Group are illustrative of Brazil’s particular interests and this G20’s overall mandate of “Building a Just World and a Sustainable Planet.” For example, financial instruments for nature-based solutions are rightfully receiving greater attention than ever in Brazil, which should not be a surprise in a country that contains two-thirds of the Amazon rainforest and 15-20 percent of the world’s biodiversity.

Leveraging Brazil’s active participation in various international financial institutions, the Brazilian finance sherpas are also placing a sharp technical focus on streamlined coordination among multilateral development banks and vertical funds. The troika of India-Brazil-South Africa G20 presidencies will press on with key Global South development financing priorities, such as just transition plans and blended finance for adaptation (see Atlantic Council’s related work on this here). In addition, Brazil has a unique opportunity to bridge this year’s G20 with the UN climate change conference known as COP30, which it will host in Belem in 2025. Brazil can coordinate its presidencies of both platforms to spur continued progress in Belem on landmark accomplishments from recent COPs, including the Loss and Damage Fund announced during last year’s COP28, held in Dubai.

Digital public infrastructure

Another area of continuity and compatibility between the G20 presidencies of India and Brazil is the provision of digital public infrastructure through payments, identity, and other digital networks created by the state to digitize and upgrade the provision of public services. Through Brazil’s Pix and India’s Unified Payments Interface (UPI), for example, both countries have seen tremendous success in building digital payments ecosystems and increasing digital and financial connectivity.

Through the payments working group, G20 member states set targets for payments modernization for central banks and multilateral institutions. These targets address the cost, transparency, and speed of global payments. In 2023, the cost of retail payments to businesses and individuals across countries exceeded the previously set 3 percent target in a quarter of jurisdictions around the world. Similarly, the average cost of remittances is more than twice the goal of 3 percent. These metrics benchmark the G20’s progress and lay out the actions that member states still need to undertake to achieve these targets by 2027 (for cross-border retail payments) and 2030 (for remittances).

Both India and Brazil position themselves as leaders among emerging markets in the provision of digital public infrastructure, and the G20 provides a platform to showcase their digital payment and identity models to the rest of the world. While both countries view the adoption of these platforms as a mechanism to increase financial inclusion and digital democratization, the wider adoption of digital public infrastructure will also present challenges. The G20 will have to come together to provide robust frameworks on data privacy, consumer protection, cybersecurity, competition, and public-private collaboration. These are going to be ongoing discussions, to be reflected in targets to come in the future.

International financial institutions

During its G20 presidency, India initiated a set of processes and frameworks through the New Delhi Declaration that committed to “pursue reforms for better, bigger, and more effective Multilateral Development Banks.” The Declaration also included provisions to improve the multilateral development banks’ capital adequacy frameworks, which could yield an additional two hundred billion dollars in lending headroom over the next decade. India’s efforts focused on the quality and quantity of financing provided by international financing institutions and were supported by the United States, the largest shareholder at the International Monetary Fund (IMF) and the World Bank.

Brazil is adding to India’s priorities with a focus on governance and on augmenting the influence of emerging markets over decision-making at international financing institutions. However, divergent interests between the United States and China, the world’s two largest economies, and heightened geopolitical tensions between Russia and Western economies will make meaningful progress on economic global governance difficult.

India learned as much late last year in negotiations regarding an increase in IMF quotas—or the capital a country contributes to the institution, which correlates with that country’s voting power. The United States had proposed an increase in the quotas that would leave voting shares unchanged—a proposal that drew criticism from China and other emerging market economies who feel underrepresented at the IMF. Ultimately, the countries agreed to the US-backed “equiproportional” increase in quota resources that, in effect, pushed the issue of expanding voting power in the IMF for emerging markets to a future date.

Just like the Indian G20 presidency, Brazil’s achievements in this area will likely be incremental yet important. For example, Brazil might advance innovative ideas for increasing private finance partnerships and for making measurable improvements in international financial institutions’s operations and development impact assessments. These increments will accumulate, particularly as the G20 presidency moves in 2026 to the United States, by far the largest shareholder of various international financial institutions. Reform is a current priority for the United States, as stated by US Treasury Secretary Janet Yellen at the Atlantic Council in April 2022 and elsewhere, and the subject will be high on the agenda when G20 finance ministers meet next during the April IMF-World Bank Spring Meetings in Washington, DC.

Mrugank Bhusari is assistant director at the Atlantic Council’s GeoEconomics Center.

Ananya Kumar is the associate director for digital currencies at the GeoEconomics Center.

Pepe Zhang is a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

Valentina Sader is a deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center.

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Brazil aims to advance its bid for leadership of the Global South through food security

Josh Lipsky, Mrugank Bhusari — Wed, 14 Feb 2024 18:11:26 +0000

Brazilian President Luiz Inácio Lula da Silva has put food security front and center of the international agenda as his country convenes leaders for the G20 in 2024 and COP30 in 2025. Brasília is positioning itself alongside Beijing and New Delhi as a leader of the Global South. But while China and India have both focused on emerging technologies and digital infrastructure, Brazil is adding to those priorities with a focus on agriculture.

Brazil’s breadbasket to the Global South

Beginning in the 1970s, both the Brazilian government and private entities invested heavily in agricultural innovations, leading to the development of more resilient crop varieties. Along with the expansion of farmland and widespread adoption of double cropping, the investments significantly enhanced agricultural productivity and gave Brazil an edge over other farming nations.

Fast forward to 2022 and Brazil has become the world’s second-largest exporter of agricultural products. It leads the world in soy, meat, coffee and sugar exports and is the second-largest exporter of oilcake and corn. Several large economies, emerging markets in particular, now heavily rely on Brazil to secure their food needs.

The benefits granted by MERCOSUR, a regional trade bloc within South America, make Brazil a prime source of agriculture for Argentina. Many Asian and African countries in the G20 are large consumers of soybeans, corn, and meat—all commodities where Brazil has a large market share. The United States, Mexico, and Canada in turn barely source any agriculture from Brazil as they source the majority of their food imports from one another as a result of the benefits granted by USMCA. Most European countries similarly import the majority of their agriculture from other European countries in the single market.

Across the G20 economies, China is the most reliant on Brazil for agriculture, buying up a quarter of all Brazilian exports including most of its soy and beef. Brazil’s rise as an agripower since the 1970s aligned neatly with the population boom in China and the growing concern of the Chinese Communist Party over how to secure food for its population. But the real push came in the last decade as Beijing looked for agriculture suppliers other than the United States following intensification of trade tensions.

To help Brazil increase its capacity and to reduce logistical costs, the state-owned China Oil and Foodstuffs Corporation (COFCO) invested over $2.3 billion, amounting to about 40 percent of its worldwide investments, in Brazil’s agricultural infrastructure since 2014. A key investment is at the Port of Santos, where a terminal expansion will take the company’s own capacity from 3 million to 14 million tonnes. Further cooperation in Brazilian railways, waterways, and farmland restoration is on the agenda.

Lula’s leverage is his history

By itself, influence in the agriculture sector vis-a-vis emerging markets doesn’t provide a pathway to leadership of the Global South. Agriculture is not like semiconductors; food is an absolutely necessary resource for physical survival. Russia’s sudden blockage of the Black Sea in 2022, for instance, led to massive global grain shortages that created significant price spikes for food around the world. Moreover, the United States remains the world’s largest exporter of agriculture and for several countries in the G20, it remains the largest supplier. Lastly, although Brazil supplies about a fifth of global corn exports, it has relatively little weight in the global market for grains like wheat and rice, two critical food items for developing economies.

But Lula and Brazil nevertheless bring unique credibility with developing and advanced economies on the subject of food security.

When he first came to office in 2003, Lula launched the ‘Fome Zero’ (Zero Hunger) programme, a series of coordinated large-scale government interventions that resulted in Brazil’s removal from the United Nations’ Hunger Map in 2014. Throughout the 2000s, Lula’s Brazil also mobilized budgetary, legislative, organizational, and narrative channels to orient its foreign policy toward hunger-reduction abroad.

Since his return to power in 2023, Lula has once again made hunger a domestic priority. He has consistently raised the issue internationally. Now, his moment has come. As President of the G20, he has announced Brasília’s intention to launch a Global Alliance Against Hunger and Poverty at the Leaders Summit in November.

Both Brazil and the global economy have evolved since Lula was last in power. But the country possesses decades of trade and technical assistance relationships with developing economies, the know-how in the sector, and a track-record in hunger-reduction. Chronic hunger and famine remain real prospects for a tenth of the global population and developing countries will likely see Lula’s Brazil to act as a reliable representative in trying to bring together a global consensus on the path forward.

In recent years, China and India have both positioned themselves as leaders of the Global South. Now, the leader of the former is focused on his troubled domestic economy and the leader of the latter has an election on his hands. Meanwhile Lula is about to host the world twice—once for the G20 this year and then again for COP30 in 2025. If Brazil delivers tangible, material, and clearly observable benefits on food security, it will cement its position as a key leader of the Global South.

Josh Lipsky is the senior director of the Atlantic Council GeoEconomics Center and a former adviser to the International Monetary Fund.

Mrugank Bhusari is assistant director at the Atlantic Council GeoEconomics Center focusing on multilateral institutions and the international role of the dollar.

This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Dedollarization is not just geopolitics, economic fundamentals matter

Niels Graham, Hung Tran — Mon, 22 Jan 2024 21:27:12 +0000

Over the past decade, many countries—primarily emerging markets—have endeavored to reduce their reliance on the US dollar in global payment transactions. Some of the push for dedollarization is in reaction to the perceived overreach of US financial power—particularly following Russia’s invasion of Ukraine and the G7’s sanctions response. However, that is only part of the story.

Private firms around the world are the ultimate decision makers regarding the international use of the dollar and they respond to the incentives facing them, namely access to and costs of dollar financing. And, for the first time in nearly 20 years, it is substantially cheaper to conduct short-term borrowing in renminbi (RMB) rather than dollars. In other words, a portion of the dedollarization trend is driven not only by geopolitics but also by interest rate differentials.

Fluctuations in the dollar’s global dominance is not a recent phenomenon. As a reserve asset, for example, the dollar composed nearly 80% of global reserves in 1970. By 1980, that number fell below 58 percent. It then plummeted to 47 percent in 1990. The dollar recovered to around 71 percent of global reserves in 1999, though it has since declined gradually to 59 percent in 2020—not in favor of any replacing currency, but a number of smaller currencies including the RMB. Current trends in dedollarization in global payment must be seen with this historic context. While this is an important trend for policy makers to watch, given its underlying drivers, they should be careful not to attribute all the motivation to geopolitical tension, possibly leading to wrong policy conclusions.

The dedollarization story so far

The reluctance to use the dollar has not been driven by the rise of a competing currency such as the RMB, but more importantly by the growing trend of using local currencies in bilateral cross-border payments. However, because of China’s large footprint in international trade and investment, the RMB’s usage in international transactions has captured increasing attention as the primary challenger to the dollar, following a rapidly growing number of bilateral cross-border payment arrangements.

Analysts, including our Dollar Dominance Monitor, have pointed to a range of signs indicating a growing risk to the dollar. Last year, global payments settlements using RMB nearly doubled, albeit from a low base of 1.91 percent at the start of 2023 to 4.61 percent in November 2023. The SWIFT data may underestimate the RMB’s true international usage because it may fail to reflect uses of RMB in bilateral cross-border payments facilitated by central banks’ currency swap arrangements. On the other hand, about 80 percent of the use of RMB outside of China takes place in Hong Kong—without Hong Kong, the international use of the RMB remains quite small. More importantly for China, about half of its bilateral cross-border trade and investment transactions are now settled in RMB, reducing its vulnerability to US financial sanctions.

Some of this shift is in response to G7 sanctions imposed following Russia’s illegal invasion of Ukraine in early 2022. Those measures reanimated concerns across global capitals around the risks of overreliance on Western financial infrastructure and the US dollar and generated urgent demand for alternatives to the US-led financial system. But this is not the only explanation and too much focus on it can lead analysts to overestimate the costs of those sanctions. In fact, the dollar was also facing macroeconomic headwinds and its use in cross-border payments likely would have declined to some extent even without the Russia sanctions.

Macroeconomic headwinds for the dollar

Countries at risk of sanctions, like China and Russia, are the largest individual contributors to dedollarization but they are not alone. As Bloomberg’s Gerard DiPippo points out, Russia-China trade accounts for only 27 percent of the increase in trade settlement in RMB. The remaining 70 percent is likely RMB-denominated trade with Beijing’s neighbors primarily in Asia, but also abroad such as Argentina, Brazil, and the Gulf countries. Without the imminent threat of US sanctions on Beijing, this shift to RMB trade is likely motivated more by lending costs and availability.

It’s important to understand the integral role trade finance plays in facilitating global commerce. Payments are not made instantaneously; there is a gap from the time firms receive payments for the goods they ship and when they need to pay suppliers for those same goods. Firms often turn to banks to provide loans to help bridge the gaps. Because of this, firms seeking to minimize financing costs pay close attention to the relative cost of capital and available dollar liquidity. Rate hikes by the US Federal Reserve (Fed), which coincidentally began to take full effect in the months after Russia’s invasion of Ukraine, have caused borrowing in dollars to become more expensive and scarcer, encouraging emerging market firms to seek dollar alternatives—namely the RMB.

Relative costs of capital

For the first time in nearly 20 years it is substantially cheaper to conduct short-term borrowing in RMB rather than dollars. Borrowing costs, as measured by the proxy of a one-year government bill, imply short-term borrowing in RMB is around two percentage points cheaper than analogous borrowing in dollars. This is pushing firms, particularly those engaging with Chinese individuals and firms on either end of the transaction, towards RMB-denominated debt for trade financing to take advantage of efficiency gains.

This surge in dollar borrowing costs reflects the US Federal Reserve’s rapid rate hike campaign to rein in US inflation, which had hit 8.5 percent. China has not experienced the same sort of surging inflation, so was able to leave its short-term rates largely constant. Notably, this flip in relative financing costs happened in close proximity to Russia’s invasion of Ukraine. This may have caused some commentators to solely attribute firms shifting their trade finance arrangements from dollars to RMB to the overuse of US sanctions.

Dollar liquidity squeezes

A second, related, macrotrend disincentivizing dollar use in international trade is the appreciation of the dollar and its impact on dollar liquidity in emerging markets. In early 2022 the value of a dollar against a basket of global currencies jumped 19.8 percent from right before the start of the invasion to its peak in October 2022. While its value has dropped in the year since, the dollar’s value still remains elevated by around 10 percent compared to its pre-invasion average. This was also caused by Fed rate hikes; higher rates increased the value of dollar-denominated assets, which created strong incentives for global investors to buy dollars to buy those assets. The war amplified this. Investors also increased their dollar holdings as they view the dollar as a “safe haven asset” and expect the currency to retain, or even gain value during periods of global instability and economic downturn.

An appreciating dollar severely restricts dollar funding availability, particularly for emerging market firms who are more reliant on dollar-denominated credit. This is because a stronger dollar comes with incentives for lenders with large dollar liabilities to curb their willingness to provide new short-term dollar loans (such as the borrowing required for firms seeking to finance trade) and raise the rates they are willing to lend at—further amplifying the relative cost of capital effects discussed earlier.

The Bank for International Settlements (BIS) finds that after the dollar appreciates, “banks with high reliance on dollar short-term funding reduce supply of credit more to the same Firm relative to banks with low short term dollar funding exposures.” The BIS continues, pointing out, “firms that borrowed from short-term dollar-funded banks will suffer a greater decline in credit following dollar strengthening.”

Without abundant dollar financing alternatives, such as during the 2008 financial crisis, the impact of this would have subdued global trade. However, following concerted efforts by Beijing to promote RMB-denominated lending, firms seeking short-term finance can now turn to RMB lenders or RMB-denominated debt markets. Indeed, in the past year overseas units of Chinese firms, as well as Western companies like BMW and Crédit Agricole, have raised a record 125.5 billion RMB ($17.33 billion) selling RMB-denominated bonds during the January-October 2023, a 61 percent increase from the same period last year.

As rising dollar borrowing costs and decreasing dollar liquidity push firms to adopt the RMB for their trade financing needs, they are also more willing to engage with the alternative global financing infrastructure China is developing. In 2015, Beijing launched the Cross-Border Interbank Payment System (CIPS) to connect and control its own plumbing in the global financial system. The intention was to construct a new financial architecture to clear and settle transactions in RMB and facilitate the use of the currency in international business. Since 2015 CIPs has rapidly grown, settling just over 480B RMB ($75 billion) in Q4 2015 to 33.4T RMB ($4.6 trillion) in Q3 2023. While CIPS’ utilization growth has been largely steady since its inception, it does seem to experience substantial spikes following contractions in dollar lending availability. And though geopolitical trends may be integral in informing the strategic thinking around firms’ actions, outside of firms engaging with Russia, availability of liquid debt and efficient markets are a more likely proximate explanation for recent trends among emerging-market dedollarization.

Importantly, geopolitics and macroeconomic trends can work together to support dedollarization efforts. One example is China’s push to denominate more of its Belt and Road Initiative (BRI) lending in RMB. Since its inception in 2013, China has hoped to use the BRI as a tool to promote the international use of its currency. In its first five years Beijing had mixed success at best, with the majority of BRI debt denominated in dollars. This can be explained in part by discrepancies in borrowing costs over the same period. Similar to the large difference in short term lending which provided a cost advantage to US denominated debt throughout most of the 2010s, longer term borrowing was also skewed in the dollar’s favor. A $5 billion loan Beijing offered to Indonesia in 2017 demonstrates this. The loan is split between RMB and dollars with 60 percent denominated in US dollars, carrying a 2 percent interest rate, and 40 percent in RMB, carrying a 3.4 percent rate.

However, as rates converged in 2018 and onward, China had more success encouraging RMB-denominated debt. By 2020 loans in the Chinese currency overtook dollar denominated debt. While a convergence in interest is not the sole explanation for Beijing’s success, it’s undoubtedly easier to encourage countries to adopt debt in RMB if they cannot point to high opportunity costs by not borrowing in dollars.

The future of dedollorization

There are important structural limitations to the international use of the RMB. Prime among them is that the RMB is not freely convertible. Foreign firms that hold RMB or RMB-denominated assets are operating under the direct oversight of the Chinese government, whose interests may not always align with their own. This will give pause, particularly to firms based in advanced economies. China’s legal system also gives firms pause. As Chinese President Xi Jinping has centralized authority, the Chinese system has become increasingly opaque and volatile, offering little protection or recourse for firms who are harmed by central government actions. Finally, China’s financial markets remain less well developed and supervised than their Western counterparts. In particular, China’s bond markets are still far less developed and less liquid than US treasury markets. Though they have been valued at around $8 trillion in recent years, they pale in comparison to the US which is pushing $30 trillion.

Even so, in the coming year macroeconomic trends will likely continue to push emerging market firms towards RMB-denominated debt for trade financing in particular, amplifying the use of the RMB in international trade. While the Fed will likely begin to cut key rates later this year, decreasing the cost of US capital and borrowing, it’s unlikely Washington returns to the near-zero target rates that supercharged cost advantages for borrowing in dollars.

It will be key for policy makers to disaggregate these macro effects from the very real geopolitical backlash against sanctions and similar tools that are also pushing countries to explore dollar alternatives. Without understanding the relative importance of both trends, US and allied policy makers risk overestimating global sanctions backlash, possibly imperiling the G7 economic response to Russia’s illegal invasion of Ukraine.

Niels Graham is an associate director for the Atlantic Council GeoEconomics Center where he supports the center’s work on China’s economy and US economic policy.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance and former deputy director at the International Monetary Fund.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post Dedollarization is not just geopolitics, economic fundamentals matter appeared first on Atlantic Council.

2024 predictions: How ten issues could shape the year in Latin America and the Caribbean

Adrienne Arsht Latin America Center — Fri, 12 Jan 2024 22:22:24 +0000

2024 will be a highly consequential year for Latin America and the Caribbean, both politically and economically.

Following global trend lines, significant shifts in Latin America and the Caribbean—including presidential elections in Ecuador, Guatemala, and Argentina, unprecedented agreements with the Venezuelan government, a worsening security situation in many countries, and a pressing focus on climate change—set the stage for even more change to come in 2024.

Join the Adrienne Arsht Latin America Center as we explore top questions that may shape this upcoming year in the hemisphere.

What will the region’s newest presidents accomplish? How might Latin America’s ties with countries such as China and Russia evolve? What might be the role of the United States in an election year? Will the Caribbean see new, international attention to the specific threats faced by major climatic events?

Take our quiz to find out if you agree with what we’re predicting!

New Atlanticist Jan 10, 2024

Ecuador has declared ‘internal armed conflict’ against criminal gangs. What’s next?

By Isabel Chiriboga

Ecuadorian President Daniel Noboa has mobilized the military to fight criminal groups in his country, following two notorious criminal leaders’ escape from prison.

Civil Society Conflict

Report Nov 30, 2023

Advancing US-Colombia cooperation on drug policy and law enforcement

By Atlantic Council US-Colombia Advisory Group

Consumption and price of the drug has remained stable in the United States in recent years. However, the current trend of falling coca leaf and cocaine prices in Colombia present a natural incentive for coca growers to find alternative forms of income, which could mean a higher rate of success for alternative development programs.

Civil Society Colombia

Issue Brief Sep 26, 2023

A roadmap for the Caribbean’s energy transition

By David Goldwyn, Eugene Tiah, and Wazim Mowla

Caribbean countries are in desperate need of an energy transition. Disproportionately high electricity costs impede economic development, stress public finance budgets, and harm the competitiveness of tourism and other industries.

Americas Caribbean

The post 2024 predictions: How ten issues could shape the year in Latin America and the Caribbean appeared first on Atlantic Council.

Experts react: Did India’s G20 just crack the code for diplomatic consensus?

Atlantic Council experts — Sun, 10 Sep 2023 17:01:34 +0000

Last month, India successfully landed its Chandrayaan-3 spacecraft on the moon. This weekend, at a futuristic convention center in New Delhi that looks like a flying saucer, another landmark landing was achieved. The Group of Twenty (G20) approved an eighty-three-paragraph leaders’ declaration, covering issues ranging from plastic pollution to terrorism. While consensus among the world’s wealthiest countries is always difficult—and the absence of Chinese leader Xi Jinping and Russian President Vladmir Putin lowered expectations further—Indian Prime Minister Narendra Modi guided home the declaration, which welcomed the African Union as a new member to the group, among other important points.

Below, Atlantic Council experts explore the communiqué and other milestones from the G20 Summit, along with the new diplomatic frontiers that lie ahead.

Click to jump to an expert analysis:

Kapil Sharma: India forges a new model of inclusive diplomacy

Michael Schuman: Modi cemented his leadership of the Global South, while Xi ‘contained’ himself

Rama Yade: As it joins the G20, the African Union could accelerate its own reforms

Josh Lipsky: Don’t expect Xi to snub the G20 again next year

Jonathan Panikoff: New rail plans mark the end of a tumultuous US-Saudi period

Hung Tran: Modi delivers useful, if not spectacular, results

Nicole Goldin: The G20 communiqué was ambitious, but had a few major holes

Olga Khakova: G20 leaders should have called out Russia for global food and energy insecurity

Joseph Webster: Coal is the greater climate problem, but hydrogen takes center stage

Mark Linscott: India pulled off a well-managed G20 that found a way forward on trade

India forges a new model of inclusive diplomacy

In the lead-up to the 2023 G20 Summit, there was much focus on Putin and Xi choosing not to attend the meeting. Observers believed that their absence was a direct affront to India and would ultimately overshadow India’s presidency and its G20 objectives. But as the summit came to an end, it was clear that India’s objectives were not derailed, and three key themes emerged: consensus, inclusiveness, solutions.

Consensus: Russia’s war in Ukraine loomed throughout India’s presidency and had divided G20 countries. It was unclear if and how the conflict would be addressed and whether it would prevent the agreement of a final G20 communiqué. However, after three hundred bilateral meetings, two hundred hours of negotiations, and fifteen drafts, Modi and his team were able to bring consensus on the Russia-Ukraine paragraphs in the final G20 communiqué.

Inclusiveness: As part of India’s positioning to be the voice of the Global South, India shepherded the African Union’s inclusion as a permanent member of the G20. India also pushed for, and countries agreed to, major reforms at global institutions such as the World Bank and International Monetary Fund.

Solutions: India successfully promoted its Digital Public Infrastructure plan as an exportable tech solution for financial inclusion. While it’s unclear whether other countries are capable of replicating India’s digital plan, it has found a niche that goes above and beyond simple capital financing.

With more than two hundred meetings in over sixty Indian cities, Indian officials were intent to make their presidency about representing marginalized voices and the Global South. While India was disappointed not to have Putin and Xi present, this G20 Summit was not about how diplomacy has been done, but rather how diplomacy can be done. In the end, India’s diplomacy demonstrated its ability to take on current geopolitical disagreements and represent those countries who have felt marginalized for decades.

—Kapil Sharma is the senior director of the Atlantic Council’s South Asia Center.

Modi cemented his leadership of the Global South, while Xi ‘contained’ himself

This year’s G20 summit will be remembered not for who was there and what they did, but for who wasn’t: The absence of Xi was the big story and will cast the longest shadow over world affairs. Xi’s decision not to attend was likely an attempt to discredit the G20 as a forum for international cooperation and represents his intensifying opposition to the established world order and resistance to multilateral cooperation. Setting Xi’s G20 snub next to his appearance at the August summit of the BRICS economic grouping of Brazil, Russia, India, China, and South Africa, and the planning of the third Belt and Road Forum in October, suggests that he intends to promote alternative and competing organizations that he can more easily manipulate or control to serve China’s global interests.

This G20 also represents an acceleration in the contest between China and other major powers for influence in the Global South. Modi proved that he is becoming a more important figure in the Global South and a counterweight to Xi within the developing world. While Xi apparently plans to rally the developing world in support of China’s anti-American agenda, Modi is offering an alternative vision of North-South relations that is focused on enhancing the voice of developing countries in global governance while at the same time cooperating—rather than confronting—the West. Modi’s advocacy of G20 membership for the African Union was a wise geopolitical maneuver that makes the forum even more inclusive.

In that way, Xi turned out to be the biggest loser of the summit. By vacating the scene, he allowed Modi and Biden to promote their own views and influence. Rather than Xi’s snub spoiling the summit, the G20 went on without him. Chinese leaders seem to fear being “contained” by the United States and its partners; with his withdrawal, Xi is doing a pretty good job of containing himself.

The summit, therefore, highlighted China’s growing isolation from most of the world’s major powers. In that way, it could also be a worrisome sign that international cooperation on key issues such as climate change could become even more challenging.

—Michael Schuman is a nonresident senior fellow at the Atlantic Council’s Global China Hub and a contributing writer for the Atlantic magazine.

As it joins the G20, the African Union could accelerate its own reforms

The first decision of the G20 Summit held in New Delhi under the chairmanship of Modi was to admit the African Union (AU) as a member of the group. For India, it is a success: The country has proved its ability to promote the so-called Global South at the highest level. After almost a decade of advocacy, the AU, with its 1.4 billion people and three-trillion-dollar gross domestic product, will be seated at the same table as another regional organization, the European Union, and the world’s richest countries.

According to the G20 communiqué released by India: “We welcome the African Union as a permanent member of the G20 and strongly believe that inclusion of the African Union into the G20 will significantly contribute to addressing the global challenges of our time.”

Bola Tinubu, Cyril Ramaphosa, and William Ruto—the presidents of the leading African economies, Nigeria, South Africa, and Kenya—as well as the current chairman of the African Union (Comoros President Azali Assoumani), were present for this “historic moment,” as Senegal’s Ministry of Foreign Affairs put it. “Congratulations to all of Africa!” added Senegalese President Macky Sall, who chaired the African Union in 2022 and has never stopped being a vibrant advocate of AU integration with other multilateral institutions.

Until now, only South Africa, a permanent member of the club, could represent the continent, and the African Union was only invited as a guest. Africa’s entry into the G20 is a true success, coming a few days after the enlargement of the BRICS group. Given their strong presence in both the BRICS and the G20, Africans are embracing their culture of geopolitical neutrality that they have been advocating for in recent years, while also reaching a central position in multilateral discussions.

As a full member, the African Union will weigh in on G20 commitments and prioritize its primary interests, such as debt restructuring, the reform of the international financial architecture, and climate funding—as long as African countries, like European countries, overcome their divisions. It may take a stronger AU Commission to harmonize African countries’ various positions. AU Commission Chairperson Moussa Faki should be able to be a credible interlocutor for European Commission President Ursula von der Leyen.

The necessity to bring a more unified African voice in these international gatherings could accelerate African integration and stronger reforms of the African Union as the organization celebrates its twentieth birthday. The AU is still too dependent on foreign support, which makes up 65 percent of its budget. How can it occupy the G20 seat and make its own choices without budgetary sovereignty? The G20 is only a step, as Africans know that only a seat at the United Nations Security Council will position their continent to wield true political sovereignty. The charge is historic for African Union leaders. But anything less would do a disservice to a continent that, by 2050, will have 2.5 billion citizens emerging on the world stage.

—Rama Yade is senior director of the Atlantic Council’s Africa Center and senior fellow for the Europe Center.

Don’t expect Xi to snub the G20 again next year

The G20 proved its relevance and resilience this weekend. From World Bank reform to adding the African Union as a member to climate commitments, the group made progress on the issues it laid out over one year ago. US President Joe Biden stepped into the void left by Xi and secured new infrastructure deals aimed at connecting India, the Middle East, and Europe. The United States was even awarded the 2026 G20 presidency, reportedly over China’s objections.

But to be truly successful long-term, the question of what China wants from the G20 will have to be answered. In the wake of Xi’s decision to skip India’s G20 Summit (the first ever no-show from a Chinese leader), there’s speculation about what China’s engagement will be like for Brazil’s G20 presidency year—which officially begins Monday.

But it’s actually unlikely Xi will skip next year’s leaders summit. Why? Look at the numbers:

No one knows quite why Xi didn’t show in India. It could be the need to be seen focusing on domestic problems, or China-India rivalry, or a broader signal about how China wants multilateralism to work after BRICS expansion. But one thing is clear: Xi didn’t think there was a price to pay for missing the meeting.

Next year, when Brazilian President Luiz Inácio Lula da Silva convenes world leaders, Xi may not be able to make the same calculation.

—Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center.

This reaction is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org.

New rail plans mark the end of a tumultuous US-Saudi period

This weekend saw the announcement of the India-Middle East-Europe Economic Corridor (IMEC)—a ship-to-rail transit network that will connect India and Europe through the United Arab Emirates, Saudi Arabia, Jordan, and Israel. The plan is not just a win for US allies in Europe, for the Middle East, and for India. It also provides the most concrete effort to date by the West to counterbalance China’s economic investments in the Gulf.

Those in the region who remain concerned about the United States’ commitment to the Middle East may minimize the impact of such an agreement; perceptions can be harder to change than reality. If implemented fully in the coming years, however, IMEC has the potential to shift both.

It also should be seen as unofficially marking the end of one of the more tumultuous periods in US-Saudi relations since September 11, 2001. Just over a year ago, it was not clear that the relationship between Washington and Riyadh would improve much before the end of US President Joe Biden’s term, and the July 2022 fist bump between Biden and Crown Prince Mohammed bin Salman did little to calm tensions. Three months later, in October, relations appeared to get worse upon Saudi Arabia’s decision to cut oil output ahead of the US midterm elections.

But as engagement between Riyadh and Beijing heated up, and as Saudi Arabia sought to calm tensions with Iran to try to ensure its Vision 2030 would not be undermined by security threats, new US efforts to engage Saudi leaders also emerged. Most prominently, efforts toward a deal that would result in Saudi-Israeli normalization continued. That endeavor and a bevy of behind-the-scenes bilateral tracks, on issues such as 6G networks and space exploration, kept the relationship moving forward, albeit slowly.

The US strategic focus will remain on China and on Russia’s war in Ukraine. But the Biden administration clearly, and rightly, recognizes that the Middle East cannot be geographically wished away; this is reflected not only by IMEC but also, for example, by additional efforts to negotiate a deal to work with Saudi Arabia to secure lithium and other metals in Africa. The result may be a more realpolitik approach to the region than Biden promised when he campaigned in 2020. But it’s also one far more likely to ensure the United States’ economic and national security interests in the years to come.

—Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East Program.

Modi delivers useful, if not spectacular, results

The 2023 G20 Summit, without Xi and Putin, has delivered practically everything Modi had wanted, with many compromises. Those include a consensus declaration (by not mentioning Russia in the section about the war in Ukraine), the admission of the African Union as a permanent member (a good step forward), continued efforts to deal with climate change (but no hard commitments in phasing out fossil fuels), support for climate financing to assist developing countries (but no hard targets except extending the 2010 pledges by developed countries to transfer $100 billion a year to developing countries to 2025).

The G20 also took on reforms to the multilateral development banks (MDB) to include climate financing in their core missions (no capital increases now but optimizing the MDB balance sheets so they can lend $200 billion more over the next decade) and support for the improvement of the Common Framework for Debt Treatment to facilitate the restructuring of low-income countries’ debt. But the Common Framework remains vague without a roadmap specifying a sequence and timeline of steps to be taken once a debtor country asks for a restructuring. In addition, the group adopted several concrete and potentially helpful initiatives such as mapping the global value chain to help countries identify risks, the digitalization of trade documents to expedite trade transactions, and the development of public digital infrastructures to promote financial inclusion and productivity. Also notable is the launch of an India-Middle East-Europe economic corridor connected by railways and ports—in direct competition with China’s Belt and Road Initiative.

Overall, the outcomes of the G20 Summit will bolster India’s claim to be the voice of the Global South—being able to articulate the demands of developing countries and to engage in negotiations with developed countries to produce useful, if not spectacular, results. This is a good template for Brazil to take up the G20 presidency in 2024 and South Africa in 2025.

—Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance, and a former deputy director at the International Monetary Fund.

The G20 communiqué was ambitious, but had a few major holes

With expectations high, the G20 delivered a comprehensive communiqué with wide-ranging, ambitious commitments from digital infrastructure to debt treatments, climate finance to cultural preservation. The outcome is so broad that what is not included could be seen as more notable than what is—though certain detailed elements such as care infrastructure for women’s economic empowerment and the creation of an international reference classification of skills and qualifications did not go unseen.

For example, despite a focus on poverty reduction, inclusive growth, and jobs, the communiqué has no mention of informal work, which accounts for a significant share of employment in lower- and middle-income countries—especially among women, migrants, and marginalized populations. Similarly, the communiqué devotes ample attention toward reducing inequality generally and improving the economic and social wellbeing of women and girls, but is devoid of concrete discussion of generational demographic dynamics of older persons and youth who account for the majority of populations. This omission comes even as the G20 is expanding to include the African Union, representing the youngest continent where more than 60 percent of the population is under the age of twenty-five. By 2035 there will be more young Africans entering the workforce annually than in the rest of the world combined.

The addition of the African Union is nonetheless significant, bringing more voice from and relevance to the Global South, especially as the BRICS grouping expands in an effort to counter ‘Western’ economic dominance and bring more balance to the international order. Achieving—or even getting closer to—the United Nations sustainable development goals, inclusive prosperity, and peace will require inclusive governance at all levels, and India’s G20 took many welcome if not high-level steps in this direction. Whether we see real action to reach the destination remains to be seen as the conversation moves to the United Nations General Assembly and the G20 baton passes to Brazil.

—Nicole Goldin is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and global head, inclusive economic growth at Abt Associates.

G20 leaders should have called out Russia for global food and energy insecurity

The G20 leaders united around the importance of addressing food and energy insecurity as part of a broader fight against poverty in their declaration coming out of the summit in New Delhi. But no consensus was reached in calling out Russia’s outsized role in exacerbating these global challenges—derailing energy markets and triggering food insecurity to reach its genocidal agenda for Ukraine. This glaring gap in the statement is a missed opportunity to address Putin’s evident intention to cause economic and social harm to communities around the world. Europe has spent more than a trillion dollars addressing the energy crisis, money which should have gone to climate action at home and abroad.

Meanwhile, developing nations were outcompeted for energy supplies on the global market thanks to artificial supply shortages orchestrated by Moscow. Moreover, Russia’s sabotage of Ukraine’s agricultural exports will continue impacting access and affordability of food for millions, spreading famine in the most vulnerable communities. These developments are just the tip of the iceberg in the total bill of Moscow’s atrocities. Weak political statements, such as the G20 leaders’ declaration, embolden bad actors to continue pursuing egoistic geopolitical agendas at cost of the world’s poorest.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

Coal is the greater climate problem, but hydrogen takes center stage

Coal is a far dirtier and emissions-intensive fuel than oil or natural gas and accounted for approximately 44 percent of global emissions from fuel combustion in 2021. One might therefore anticipate that the official communiqué from the G20 convening would discuss coal at length. One would be wrong.

Coal remains too politically sensitive for the G20 to come to a consensus. While coal burn is widely acknowledged as a major contributor to climate change, as well as a cause of certain cancers and asthma, it is also cheap, reliable, and available. Consequently, many countries regard coal as a necessary evil for their energy mix.

The G20 statement’s only mention of coal states that it “recognizes the importance . . . [of] accelerating efforts towards phasedown of unabated coal power, in line with national circumstances and recognizing the need for support towards just transitions.”

The G20’s call for a “phasedown” of coal—versus a more aggressive “phase out”—is notable and a continuation of previous climate statements, including at the twenty-sixth United Nations Climate Change Conference of the Parties (COP26) summit in 2021.

Hydrogen earned an entire section in the G20 statement, but its prominence in the communiqué outstrips its importance in fighting climate change. Let’s be clear: Hydrogen is a vital decarbonization technology with many viable use cases, including for the refining sector, fertilizers, steelmaking, shipping, inter-seasonal electricity storage, and more. World leaders need to be talking about hydrogen and other decarbonization pathways. Yet hydrogen also has several limitations, while scarce decarbonization resources are often better deployed in removing coal and greening the electricity grid. That is especially true for China, which accounts for more than half of world coal consumption.

While energy access is undeniably critical for combatting energy and economic poverty, future generations will not be pleased with the G20’s failure to address coal more systematically.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, where he leads the center’s efforts on Chinese energy security, offshore wind, and hydrogen.

India pulled off a well-managed G20 that found a way forward on trade

While the G20 is not renowned for transformational outcomes, except when the occasional global economic meltdown occurs, it is the crucial forum for annual engagement among the world’s top economies. In the run-up to the leaders’ meeting, it appeared that the hoopla of the August 22-24 BRICS Summit might have stolen the show already, but India and Modi pulled off an extremely well-managed series of ministerials, working group meetings, and private sector engagements that deserve more attention.

The results on trade were respectable but limited. The consensus on World Trade Organization (WTO) reform is familiar and will have virtually no impact on what happens in Geneva. Beyond this, the trade ministers highlighted the importance of global value chains, but it is difficult to see real progress when one group aims to shift value chains away from a fellow G20 member (China). Transparency is welcome in assistance and facilitation programs for micro-, small-, and medium-sized enterprises, but there are no game-changer results in this area. However, the outcomes related to digitalization of trade-related documents could be important.

Trade facilitation and the digitalization of trade documents and importing and exporting procedures have been one of the few bright spots in the deteriorating environment of trade relations and trade negotiations for several years now. In 2014, WTO members concluded an historic agreement—the Trade Facilitation Agreement. The initiative pushed by India on digitalization builds on the WTO agreement and seeks to take it forward in collaborative ways. As the world’s major economies continue to fragment and regroup in their trade relationships, G20 efforts on trade facilitation show that there still can be common ground.

—Mark Linscott is a nonresident senior fellow with the Atlantic Council’s South Asia Center and former assistant US trade representative for South and Central Asian Affairs.

The post Experts react: Did India’s G20 just crack the code for diplomatic consensus? appeared first on Atlantic Council.

State of the Order: Assessing August 2023

sodal — Fri, 08 Sep 2023 14:21:26 +0000

Reshaping the order

This month’s topline events

US, Japan, and South Korea Trilateral Commitments. President Joe Biden’s first Camp David Summit brought together Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol to discuss trilateral security cooperation in the face of an increasingly aggressive China and assertive North Korea. The first high-level convening between Washington, Seoul, and Tokyo came on the heels of a rapprochement between Japan and South Korea. The trio of leaders committed to new areas of cooperation across security, technology, and the economy including establishing security-related information-sharing networks, collaborating on ballistic-missile defense, and conducting annual joint military exercises. They agreed to hold annual summits and reaffirmed a commitment to maintaining stability in the Taiwan Strait as well as addressing China’s economic coercion. The White House clarified that, although the three countries have not agreed to a formal mutual defense agreement, they have agreed to a “three-way hotline” for government administrations to more effectively communicate and “engage in critical circumstances.”

Shaping the order. The trilateral should, if realized, advance Japanese, South Korean, and American interests and security in the region. The three-way partnership adds to others that the US has forged in the region (e.g., the Quad) to shore up the international order and counter Beijing. The Camp David summit signals that the free world can organize and coalesce in the face of authoritarian threats.
Hitting home. Trilateral U.S.-South Korean-Japanese cooperation can be another means to constrain Chinese efforts to impose hegemony, both security and economic, in East Asia. It may strengthen US efforts to reach a sustainable set of norms with Beijing, including on trade, hopefully avoiding both confrontation and a weak position.
What to do. The Biden administration should maintain momentum coming out of the Summit by executing agreed immediate next steps. Chief among these will be scheduling and planning for the first of what are promised to be regular, named, multi-domain trilateral exercises to enhance coordinated military capabilities and cooperation.

Expanding BRICS. At its summit in Johannesburg, BRICS leaders from Brazil, Russia (Putin only remotely), India, China, and South Africa announced they would expand the group by inviting Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to join in January 2024. This comes as Russia and China push to establish the partnership as a counterweight to Western groups such as the G7, and emphasize the group’s geopolitical ambitions, as a champion for the Global South. Unsurprisingly, Russia and China used the meeting to push for anti-Western moves, including calling for increased intra-BRICS coordination to decouple members’ economies from the dollar. Saudi Arabia pursued BRICS membership despite efforts by the US and other Western nations to convince them not to join the grouping.

Shaping the order. The potential BRICS expansion signals that Russia and China continue to push for a counterweight to Western alliances like the G7. But it is not yet clear whether an expanded BRICS that includes both archrivals Saudi Arabia and Iran would be functional.
Hitting home. The expanded BRICS would collectively represent 43% of global crude oil production and control a combined 29% of global GDP as well as large portions of global critical mineral supplies, including 75 percent of manganese and 28 percent of nickel. Increased energy trading among the BRICS members could further bifurcate the oil market. BRICS nations, which have used individual critical mineral export restrictions over the last decade, could adopt a more coordinated response and thereby reduce American access to these raw materials.
What to do. While an expanded BRICS has potential power, previous efforts to develop counterweights to Western-oriented groups, like the G-77, have generally fallen short. The Biden administration should continue to deepen its relationships with India and Brazil. Doing so advances American trade and security interests and, as a secondary byproduct, can undermine collective action with the BRICS. US engagement with Saudi Arabia should include steps to prevent Riyadh from more closely aligning with Moscow.

Ukraine’s Southern Push. Ukraine continued its counteroffensive against Russia, with the Zelensky government committing significant troops across the South and, as a result, slowly pushing back Russian forces, like in liberating the Southeastern settlement of Robotyne. Ukraine achieved this progress despite not having the ability to provide air cover to its advancing troops. Leaked intelligence reports indicated that the US and others are frustrated with how Ukraine has executed the counter-offensive, including its approach to allocating forces. Despite purported Western misgivings about Ukraine’s strategy, however, the counteroffensive resulted in several military setbacks for Russia. Reports continue of frustration among elite Russian circles that the war is headed in the wrong direction; the apparent assassination of Evgeniy Prigozhin, head of the Wagner military group, two months after his mutiny, also suggests a brittleness within the Putinist system.

Shaping the order. The Ukrainian counteroffensive appears to be working, albeit slowly and at significant cost. It has helped the Zelensky government reclaim key territories, dealt military losses to Moscow, and seemingly is feeding discontent across elite circles in Russia. A successful offensive could change the balance of the war.
Hitting home. A successful Ukrainian counter-offensive would boost US policymakers and public confidence in support for Ukraine. A failed or only marginally successful counter-offensive would sharpen the US debate as the Presidential election campaign intensifies.
What to do. The US and allies must remain united in their support for Ukraine’s strategy, keep misgivings and questions behind closed doors, and focus on giving Kyiv the weapons it needs to win. The US was smart to greenlight F-16 fighter aircraft transfers from the Netherlands and Denmark and needs to make sure pilots have the training needed to operate the equipment when they arrive in 2024.

Quote of the Month

“Today’s world is increasingly complicated and condensed, and one in which humanity faces both peril and promise. We are in a transformative era marked by strategic competition, rapid technological change, and increasingly worrisome transnational threats.”
– CIA Director Bill Burns, reacting to the release of the 2023 National Intelligence Strategy for the Intelligence Community. August 10, 2023

State of the Order this month: Unchanged

Assessing the five core pillars of the democratic world order

Democracy ()

In Thailand, Srettha Thavisin, real estate tycoon and populist Pheu Thai Party candidate, won the backing of parliament to become the country’s 30th Prime Minister. The eleven-party government formed to rule the country and end a months-long political deadlock, however, noticeably excluded the progressive Move Forward Party, which won the most votes in the national election.
Fernando Villavicienco, an Ecuadorian presidential candidate who vocally denounced gangs and corruption, was assassinated weeks before the country’s elections. The elections head to a run-off in October, featuring leftist Luisa González—who secured 33% of votes—and center-right Álvaro Noboa—who secured 24% of the votes.
Bernardo Arévalo, son of a former president of Guatemala, won Guatemala’s presidential election, defeating former first lady Sandra Torres. However, hours before Arévalo’s victory, Guatemala’s electoral registry suspended his Seed Movement party, a move that could hinder the transition to an Arévalo government.
Zimbabwe’s President Emmerson Mnangagwa, who deposed President Robert Mugabe in a 2017 coup, won a second term in office. The opposition, however, claimed the presidential election was beset by “gigantic fraud.” International observers, civil society groups, and even the African Union cast doubt on the validity of the election.
Military officers seized power in Gabon and placed President Ali Bongo Ondimba under house arrest. The president, whose family has been in power for half a century, recently won a third term in a heavily disputed election.
Vladimir Putin extended the prison sentence of democracy activist and opposition leader Alexei Navalny by nineteen years. This follows the Putin government introducing trumped-up charges that Navalny was guilty of founding and funding an extremist organization.
On balance, the democracy pillar was unchanged.

Security ()

Niger remains at an impasse following last month’s military coup. ECOWAS threatened military intervention to restore democratic order but has not followed through. Mali and Burkina Faso pledged their support to Niger’s coup leaders.
The Netherlands and Denmark, in a move approved by the United States, announced they will deliver F-16 fighter jets to Ukraine, likely in early 2024.
Yevgeny Prigozhin, Wagner paramilitary group chief, reportedly died in a mysterious plane crash in the northwest region of Moscow. US intelligence officials report that preliminary findings indicate that, although the plane was not shot down by a surface-to-air missile, it did crash as a result of an assassination plot.
The Ukrainian navy announced a “humanitarian corridor” in the Black Sea to allow safe passage to cargo and civilian ships trapped in ports since the outbreak of the war. Ukrainian officials stressed that the corridor is a voluntary “humanitarian mission and has no military purpose.”
Eleven Russian and Chinese naval ships conducted joint patrols near the Alaskan coast. The Chinese and Russian ships did not enter US territorial waters but were flanked by US destroyers and aircraft until their departure.
President Biden issued an executive order restricting American investment in specific Chinese companies involved in the development of emerging technologies.
For the second time, North Korea failed to successfully launch its Malligyong-1 spy satellite into orbit. The regime is committed to trying again, however, as the spy satellite program is a critical part of Kim Jong Un’s five-year weapons strategy initiative.
On balance, the security pillar was unchanged.

Trade ()

US Secretary of Commerce Gina Raimondo visited Beijing to discuss US-China commercial ties and address challenges faced by US businesses in China. While the US and China did not announce any major breakthroughs, reports indicate Raimondo and her counterpart agreed in principle for Washington and Beijing to exchange export control information and establish a bilateral forum for dialogue on other economic and commercial issues.
The American credit rating agency Fitch downgraded the US rating from the highest rating, AAA, to AA+, based on the growing US debt burden, recession concerns, and erosion of governance relative to other top economies in recent decades.
Negotiations surrounding the Indo-Pacific Economic Framework—a fourteen-country trade deal—were jeopardized by US pressure to have Japan accept anti-commercial whaling provisions. While both governments refused to comment on the issue, one senior Japanese official said the subject was a “non-starter” and “issue of contention” for Tokyo.
On balance, the trade pillar was unchanged.

Commons ()

Recent wildfires ravaged parts of Hawaii, Greece, and Canada. The Maui wildfires claimed over a hundred lives—with over 1,000 still unaccounted for—and displaced thousands more. The fire in Greece is the biggest in Europe this century.
India is the first country to successfully land a spacecraft on the moon’s south pole, days after Russia’s attempt ended in an unsuccessful crash on the lunar surface.
Record high temperatures and environmental catastrophes induced by the climate crisis are pushing up food prices and exacerbating global inflation. Olive oil, certain grains, and soybeans are only some of the commodities already being impacted.
On balance, the global commons pillar was unchanged.

Alliances (↑)

President Joe Biden’s first Camp David Summit brought together Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol to discuss trilateral security cooperation in the face of an increasingly aggressive China and assertive North Korea. The leaders agreed to cooperate on a range of issues across the security, economy, and technology spheres.
Mongolian Prime Minister Oyun-Erdene Luvsannamsrai visited Washington in an attempt to strengthen the country’s economic ties with the United States and diversify away from its autocratic neighbors, China and Russia. While in Washington, Prime Minister Luvsannamsrai and US Secretary of State Antony Blinken committed to a new Economic Cooperation Roadmap, as well as signed an Open Skies Agreement.
Finland’s defense ministry announced that it would spend 2.3% of its GDP on defense in 2024. This followed all NATO members, in July, re-committing to spending a minimum of 2% of their GDP on defense. Prior to the July re-commitment, only seven NATO members had met this target.
Vladimir Putin confirmed to Indian Prime Minister Narendra Modi that he will not be attending the G20 Summit in Delhi in September due to a “busy schedule”. Xi Jinping also confirmed he would not be attending the Summit.
Ahead of the upcoming G20 Summit in Delhi, Indian Prime Minister Narendra Modi proposed inviting the African Union to join the group. This is part of the Prime Minister’s vision to enhance the “inclusiveness” of the bloc.
Saudi Arabia convened senior officials from nearly 40 countries to discuss potential avenues to reach a peaceful end to the war in Ukraine. Notably, Russian representatives did not make an appearance, but counterparts from the four other BRICS countries attended. While the meeting produced no significant breakthroughs, it does showcase Saudi Arabia’s rising prominence on the global stage.
On balance, the alliance pillar was strengthened.

Strengthened (↑)________Unchanged ()________Weakened (↓)

What is the democratic world order? Also known as the liberal order, the rules-based order, or simply the free world, the democratic world order encompasses the rules, norms, alliances, and institutions created and supported by leading democracies over the past seven decades to foster security, democracy, prosperity, and a healthy planet.

This month’s top reads

Three must-read commentaries on the democratic order

C. Raja Mohan, in Foreign Policy, argues that the expansion of the BRICS alliance will likely galvanize increased Western engagement in the Global South, threatening China’s largely uncontested influence in key strategic regions.
Kelly Sims Gallagher, in Foreign Policy, contends that, despite their respective differences, the United States and China can pragmatically collaborate to advance green financing and development in the Global South.
Hannah Rae Armstrong, in Foreign Affairs, argues that the United States, unlike its European allies, must preserve the relatively positive reputation it has in the Sahel by pushing for peaceful mediation, rather than military intervention, in the aftermath of the coup in Niger.

Action and analysis by the Atlantic Council

Our experts weigh in on this month’s events

Dan Fried, in The Ripon Forum, makes the case for Ukraine’s inclusion into the NATO Alliance, citing its shared interests in the West in defeating Russia and Putin.
Matthew Kroenig and Emma Ashford, in Foreign Policy, debate the impetus of coups in fragile states, using the 2023 Niger coup as an emblematic case study.
Andrew Michta, in the New Atlanticist, opines that the United States must reassess its strategy towards Europe to be more future-oriented and reflective of US interests on the continent.
Imran Bayoumi, in the Globe and Mail, argues for the need to update Canada’s National Security Strategy to accompany the country’s newly created National Security Council.
Aleksandra Gadzala Tirziu, in a Geopolitical Intelligence Service (GIS) report, details how India and China’s infrastructure-building competition along their disputed border region is heightening risks of conflict between the two nuclear-armed powers.

__________________________________________________

The Democratic Order Initiative is an Atlantic Council initiative aimed at reenergizing American global leadership and strengthening cooperation among the world’s democracies in support of a rules-based democratic order. Sign on to the Council’s Declaration of Principles for Freedom, Prosperity, and Peace by clicking here.

Patrick Quirk – Nonresident Senior Fellow
Dan Fried – Distinguished Fellow
Soda Lo – Project Assistant

If you would like to be added to our email list for future publications and events, or to learn more about the Democratic Order Initiative, please email pquirk@atlanticcouncil.org.

The post State of the Order: Assessing August 2023 appeared first on Atlantic Council.

Atlantic Council Experts cited by the Hinrich Foundation on the BRICS expansion

hyeung — Tue, 05 Sep 2023 07:27:29 +0000

Read the full article here.

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Stefanini featured in Formiche arguing that the West should keep a close eye on the enlargement of the BRICS bloc

Stefano Stefanini — Sat, 26 Aug 2023 19:44:00 +0000

original source

On August 26, Transatlantic Security Initiative nonresident senior fellow Stefano Stefanini wrote in Formiche arguing that the West should keep a close eye on the enlargement of the BRICS bloc (text in Italian).

Fellow

Stefano Stefanini

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

English Europe & Eurasia

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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BRICS is doubling its membership. Is the bloc a new rival for the G7?

Atlantic Council experts — Thu, 24 Aug 2023 17:38:19 +0000

This bloc goes to eleven. At its summit on Thursday in Johannesburg, the BRICS group of Brazil, Russia, India, China, and South Africa announced that its membership is more than doubling. Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates (UAE), and Saudi Arabia have been invited to join the group in January. A formidable rival to the Group of Seven (G7) democratic powers could reshape geoeconomics and geopolitics across a range of issues, from Russia’s war in Ukraine to the status of the US dollar as the world’s reserve currency. Does the yet-to-be-acronymed group amount to such a rival? Atlantic Council experts share their insights below.

Click to jump to an expert analysis:

Hung Tran: With six new members, BRICS is tilting toward China

Jonathan Panikoff: New Middle Eastern BRICS members highlight shifting geopolitical winds

Rama Yade: BRICS has big ambitions, but it also faces new challenges

Colleen Cottle: Beijing’s vision for the bloc is driving BRICS expansion

Michael Bociurkiw: On the ground in Johannesburg, Putin’s absence stuck out

Valentina Sader: The summit may have pushed US and Brazil further apart

Kapil Sharma: For the BRICS to be effective in the long term, India and China must resolve their disputes

Holly Dagres: With BRICS membership, Iran is furthering its ‘Look to the East’ strategy

Mrugank Bhusari: Expansion is a double-edged sword for BRICS’ ambitions

With six new members, BRICS is tilting toward China

At the BRICS Summit, the group has just agreed to admit six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE; and to consider other prospective countries. Strongly supported by China and Russia, the inclusion of Iran has strengthened the anti-US axis in the BRICS—probably making it more antagonistic and more challenging for the United States and the West to deal with it as an organization which contains two internationally sanctioned members. This decision reflects the sway of China together with Russia in the group and could not be very comfortable for moderate members like India and Brazil.

Saudi Arabia and the UAE would add important economic heft to the group, which now includes several important Organization of Petroleum Exporting Countries members as well as Russia—giving it a relevancy in the geopolitics of the global oil market. Saudi Arabia and Argentina, both members of the Group of Twenty (G20), could enable the BRICS to help coordinate the views of most of the emerging market G20 members. In this sense, the group could serve as an informal counterpart to the G7, which coordinates developed countries’ positions in advance of G20 meetings. However, with a strong China-Russia-Iran axis, the group may end up pushing for anti-Western positions, making compromises in the G20 more difficult to reach.

The fact that Saudi Arabia, Iran, and the UAE will be members would have been unthinkable until recently and shows another facet of the diplomatic reconciliation among the three countries—with intermediation by China.

The BRICS also agreed at the summit to accelerate the use of their local currencies to settle trade and investment transactions among themselves—continuing to reduce their reliance on the US dollar-based global payment and financial system.

Given these outcomes, it is understandable for Chinese leader Xi Jinping to say that “this is a historic occasion . . . that brings new rigor to the bloc.”

—Hung Tran is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center.

New Middle Eastern BRICS members highlight shifting geopolitical winds

The decision by the BRICS nations to invite four Middle East countries to join their ranks—Saudi Arabia, the UAE, Egypt, and Iran—highlights shifting geopolitical winds as much as it reflects an opportunity for closer economic integration with those states.

For Saudi Arabia and the UAE, inclusion in the group is potentially symbiotic, as both are looking to engage and deepen cooperation with non-Western countries and diversify their economic partnerships as an additional hedge against the United States. Riyadh and Abu Dhabi would probably view a decision to join as furthering their goal to be viewed as not just important regional leaders, but global ones. For the BRICS states, the inclusion of Saudi Arabia and the UAE would bring new investment and trade opportunities as the former seeks to quickly diversify and scale up its economy across a range of new, non-fossil fuel industries and the latter is home to the region’s leading financial hub in Dubai.

Egypt, which currently faces a massive financial and economic crisis, would not appear to be a prime candidate for inclusion on paper, but Moscow and Beijing probably view inviting Cairo as akin to taking a flier—enhancing relations now in hopes of being able to strategically leverage Egyptian assets in the coming decades. Cairo’s key strategic location, control of the Suez Canal, and newly discovered gas fields are all probably viewed by the BRICS group as potentially lucrative, both economically and politically, over the coming decades.

The decision to include Iran was almost certainly driven by Russia and China, as the country’s massive gas and oil reserves were likely a selling point for Beijing in convincing Brasilia, Pretoria, and New Delhi to go along with the invitation, knowing it will further fuel tensions with Washington. Inclusion in the BRICS won’t transform Iran’s economy overnight. Iran views relations with China as providing an economic lifeline, given the poor state of the economy, which continues to reel from a bevy of US sanctions. But over time, groupings such as the BRICS have the potential to undermine Washington’s power when it comes to punishing or isolating countries pursuing policies that contradict US interests, especially if they seek alternative systems and methods for trade and payment over which Washington lacks the same leverage that it has today over SWIFT, for example.

In the view of the BRICS states, including the newly invited members, reducing global US economic and financial leverage would create a more level playing field, while countries such as Iran would view it as a way to further reduce the impact of sanctions. For Washington, it should be a warning: the need to strengthen and renew relationships with allies has never been more important. The emerging world might be multipolar, but some poles will be closer than others.

—Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East Program.

BRICS has big ambitions, but it also faces new challenges

They will be eleven now. Six new countries, including two African countries, Egypt and Ethiopia, will be added to the five BRICS members on January 1, 2024. It was a priority of this fifteenth BRICS Summit in Johannesburg. “The BRICS are starting a new chapter,” said South African President Cyril Ramaphosa, who hosted the summit.

The current five-member BRICS group represents a quarter of the world’s wealth and brings together 42 percent of the world’s population. But now, the BRICS will face new challenges. First, this group is very diverse, with unequal growth and rivaling interests. The importance of China, which represents 70 percent of the group’s gross domestic product, is a problem for India. Some of the BRICS countries, including South Africa, want to save its trade relations with the United States and don’t want to be dragged into the Cold War strategy pursued by Russia. Meanwhile, Putin decided not to join the summit in person, most likely due to an international arrest warrant for alleged war crimes committed in his brutal invasion of Ukraine. And with the new membership of authoritarian regimes such as Iran, the question arises: Do Africans really need the Middle East’s problems brought into this group? If they want to do business with Israel, what will Iran say?

Beyond this membership issue, the BRICS group should be taken seriously. The high-level attendance, from Xi to Modi, reveals a lot of the bloc’s big ambitions to build an alternative multilateralism, starting with challenging the dollar and strengthening the New Development Bank without conditionality. Washington is monitoring the situation closely: at the opening of the summit, the Biden administration announced its willingness to strengthen the financing capacities of the International Monetary Fund and the World Bank on the occasion of the next G20 summit in India on September 9 and 10. US National Security Advisor Jake Sullivan explained on Tuesday: “Our IMF and World Bank proposals will generate nearly $50 billion in lending for middle income and poor countries from the United States alone. And because our expectation is that our allies and partners will also contribute, we see these proposals ultimately leveraging over $200 billion.” The emergency will probably require much more.

—Rama Yade is senior director of the Atlantic Council’s Africa Center and senior fellow for the Europe Center.

Beijing’s vision for the bloc is driving BRICS expansion

With the addition of six new members and a ninety-four-paragraph leaders’ statement teeming with coverage of priority issues for emerging and developing countries, the BRICS grouping is trying to cement its position as a platform for and champion of the Global South. This aligns particularly closely with Beijing’s vision for the grouping, and the six new members—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE—probably also accommodate Chinese preferences. Representation from the economic heavyweight region of Southeast Asia is notably missing, potentially reflecting Beijing’s strained ties in the region. Indonesia would have been a logical choice, having attended the “Friends of BRICS” event in June. Instead, four of the six new members hail from the Middle East, a region into which Beijing has steadily expanded its economic, military, and political ties in the past few years.

Ironically, the expanded BRICS group will make it harder to operationalize its mission of advancing Global South interests. The BRICS has always been a grouping heavier on symbolism than on substance. Even its tangible outputs, such as the painstakingly negotiated and coordinated New Development Bank, have not notably shifted the global governance landscape in the ways the group hoped. Adding more diverging voices to the BRICS will only increase the challenge of reaching agreement on key areas the group hopes to make progress on, such as reducing the use of local currencies in trade and expanding their correspondent banking ties.

Nonetheless, the group is clearly gaining traction across the Global South, with more than forty countries interested in joining the BRICS, according to this year’s chair, South Africa, and with BRICS leaders leaving open the possibility for further expansion in their joint statement. Perhaps simply offering developing countries the chance for a seat at the table—regardless of whether that seat comes with tangible benefits—will be enough for the group to continue appealing to and garnering support from the Global South.

—Colleen Cottle is the deputy director of the Atlantic Council’s Global China Hub and previously spent over a dozen years at the Central Intelligence Agency serving in a variety of roles covering East and South Asia.

On the ground in Johannesburg, Putin’s absence stuck out

Wednesday had delegates at the BRICS Summit—the first to be held in person since the outbreak of the COVID-19 pandemic—here in Johannesburg looking up and down. With a proud Indian Prime Minister Narendra Modi present, they applauded the landing of the Chandrayaan-3 spacecraft on the moon. And hours later, news broke of the crash of a private jet in Russia said to be carrying Wagner Group boss Yevgeniy Progozhin and his deputy.

While Russian President Vladimir Putin’s absence stuck out like a sore thumb, not to be outdone by the India lunar fest and Xi showering host country South Africa with money, he managed to steal the news cycle by neutralizing a main opponent just as leaders were sitting down to dinner yesterday. One wonders if any of them had food tasters present.

Fireworks aside, the summit managed to generate headlines on Thursday with an expansion that would more than double the group’s membership. Saudi Arabia and the UAE will be appreciated for their financial heft and ability to inject cash into the New Development Bank, the bloc’s lending facility. The expansion also furthers Saudi leaders’ efforts to become a global heavyweight and powerwash their image after the ghastly 2018 murder of journalist Jamal Khashoggi. The admittance of Argentina, Egypt, and Ethiopia gives South America and Africa more representation. Iran’s membership helps burnish BRICS’s image as an all-inclusive club—one that lets in countries no matter how appalling their human rights record. Indonesia was expected to join, but is said to have asked for more time to prepare.

Over the longer term, BRICS leaders have pledged to sort out intra-African trade. Trade among African countries makes up only 14.4 percent of African exports, and there’s a push to get that to increase by facilitating trade between countries in their own respective currencies. For instance, if Kenya wants to trade with Djibouti, why does a third currency like the US dollar have to be involved? If BRICS can sort that out in a continent that uses more than forty different currencies, it will be a major achievement.

Finally, with the G7, G20, and Asia-Pacific Economic Cooperation degenerating into boxing rings for tantrum diplomacy, where final communiques either get watered down or not issued at all, perhaps it is worth giving BRICS a chance to reinvent multilateral cooperation. This reinvention cannot come soon enough—especially for poorer countries who need help the most.

—Michael Bociurkiw is a nonresident senior fellow at the Atlantic Council’s Eurasia Center. He is in Johannesburg, South Africa, for the BRICS Summit.

The summit may have pushed US and Brazil further apart

Brazilian President Luiz Inácio Lula da Silva has been walking a fine line in his foreign policy. The BRICS Summit might have just pushed Brasília and Washington further apart.

Lula’s foreign policy approach is consistent with priorities from his past two terms in office. These include the need for a more democratic global order in which countries such as Brazil, India, and South Africa have equal footing. But the current geopolitical dynamics have shifted significantly.

Lula and Finance Minister Fernando Haddad publicly defended the role of the BRICS not as a counterpoint to the United States or the hegemony of the G7, but as a contributor to a more diplomatic and inclusive global order. However, given current geopolitical sensitivities, to what extent aren’t alliances—as indirect as they may be—with countries such as Russia and Iran not harming Brazil’s credibility abroad further?

The expansion of the BRICS to include countries like Iran is challenging. Earlier this year, Brazil allowed Iranian warships to dock in its coast, which caused discomfort in Washington. And that is heightened by Brazil’s position with regard to Russia’s war on Ukraine, seen as not strong enough for Washington, and its friendly relationship vis-à-vis China.

Lula’s positions are consistent with Brazil’s long-term nonalignment and noninterventionist principles. Brazil was the only country of the BRICS to condemn Russia’s invasion of Ukraine at the United Nations last year; China is Brazil’s main trading partner and former President Dilma Rousseff is the new president of the BRICS’ New Development Bank. On the other hand, Brazil pursues stronger ties on trade, investment, climate, and other mutual priorities with the United States, which Lula visited within his first month in office. Brazil has also been pursuing stronger ties with Europe, with continued negotiations of the Mercosur-EU trade agreement.

As Brazil pushes for a reshaped UN Security Council, Lula’s possible upcoming meeting with US President Joe Biden in New York becomes even more significant. What’s on Washington’s agenda?

—Valentina Sader is a deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Brazil, gender equality, and diversity, and manages the Center’s Advisory Council.

For the BRICS to be effective in the long term, India and China must resolve their disputes

In the run-up to the BRICS Summit, Indian leaders had continually expressed their intentions for the platform, including issues like the response to the COVID-19 pandemic, the supply chain and energy crisis, the impact of the invasion of Ukraine, and the inability of Western-led multilateral platforms to manage global crises. For countries like India, the BRICS represent an important bloc that reflects 40 percent of the global population and $27.7 trillion of the global economy. However, with the concentration of economic power in Western-led institutions since World War II, India and other members of the Global South felt largely overlooked. Indian leaders believe that the BRICS Summit could be the platform that can bring a new and more equitable perspective to global cooperation and problem solving. Thus, India would position the 2023 BRICS Summit to raise the de facto voice of the Global South.

The timing of the BRICS Summit could not have been better for Modi. Nestled between his state visit to the United States and India’s G20 presidency, Modi has used the global stage to declare and reinforce India as the “voice of the Global South” and the new growth engine of the world.

Before this year, generally speaking, the BRICS was a grouping in name only. There was some headline overlap between the countries, but they diverged to different degrees in their long-term strategic and economic interests. The expansion of BRICS from five countries to eleven may result in India and the group gaining leverage (at least optically), as the expanded bloc includes a greater concentration of energy-producing countries, as well as potential collaboration on shifting trade transactions away from the dollar. The members will try to use the expansion to push for changes at the United Nations and other global institutions. However, for the BRICS to be effective over the long term, India and China will need to resolve their border challenges and collaborate on tough global issues as well as the deployment of capital for developing economies. If India is truly to take on the role of the “voice of the Global South,” managing these disparate interests with one voice may prove to be a greater task than what it bargained for.

—Kapil Sharma is the senior director and a senior fellow at the Atlantic Council’s South Asia Center.

With BRICS membership, Iran is furthering its ‘Look to the East’ strategy

“Neither West nor East” was an ethos adopted by the founder of the Islamic Republic of Iran, Ayatollah Ruhollah Khomeini. However, Tehran leaned West after signing the 2015 multilateral deal known as the Joint Comprehensive Plan of Action (JCPOA). When the Donald Trump administration withdrew from the JCPOA in 2018—despite Tehran not violating the deal at the time—it quickly became apparent that Iran could not rely on the West—that is, on European countries—to help circumvent reimposed US sanctions.

Tehran has since adopted a “Look to the East” strategy, which incorporates increased economic, political, and defense ties with China and Russia. Just this July, Iran joined the Shanghai Cooperation Organization (an Eurasian political, security, and economic organization founded by China and Russia) after obtaining observer status in 2005. It’s not surprising that a BRICS membership would follow suit.

—Holly Dagres is a nonresident senior fellow with the Atlantic Council’s Middle East Programs.

Expansion is a double-edged sword for BRICS’ ambitions

Expansion will alter the fabric of the BRICS institution in two major ways. First, it could change the structure of negotiations internally. The new members vary tremendously in economic size, macroeconomic context, and their ties with non-BRICS economies. BRICS makes decisions through consensus, and achieving consensus among eleven countries with diverse economies, geographies, and interests is far more difficult that achieving it among five. The members may all agree on principles, such as increasing trade in non-dollar currencies. But the addition of new members will significantly slow down some of their more ambitious aspirations once they begin negotiating the nitty-gritty of those projects, for instance, that of a shared currency. To ensure utility and coherence of the institution over the longer term, BRICS may instead choose to stick with low-hanging fruit.

Second, the addition of new members could move the institution away from its geoeconomic origins of five countries on similar growth trajectories to a more geopolitically charged organization made up of different kinds of economies. Russia and China led the calls for accelerated expansion, and attempts to position BRICS as a counterweight to the G7 will make countries such as India and Brazil, which are already walking a delicate balance with the West, uncomfortable.

The addition of six new full members will nevertheless make BRICS the premier convening for emerging markets, at least in the short term, when the disadvantages of scale will not yet be apparent. More than twenty countries had already formally applied to join BRICS prior to this year’s summit, and more will likely be interested for fear of missing out.

—Mrugank Bhusari is an assistant director at the Atlantic Council GeoEconomics Center.

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Piece by piece, the BRICS really are building a multipolar world

Hippolyte Fofack — Wed, 23 Aug 2023 17:14:26 +0000

Since its origin in 2001 as shorthand for a set of fast-growing, populous emerging markets, the BRICS group of Brazil, Russia, India, China, and South Africa has emerged as a formidable economic and geopolitical power. The fifteenth BRICS summit this week in Johannesburg, South Africa, will be one of the most consequential in the bloc’s history. What comes out of the summit has the potential to fast-track the transition to a multipolar world through the expansion of the group and the forging of a new financial architecture not dependent on the US dollar.

Together, the BRICS countries have already overtaken the Group of Seven (G7) advanced economies in terms of their contribution to global gross domestic product, with the group now accounting for almost a third of worldwide economic activity measured by purchasing power parity. The consequences of this economic rise have reverberated through a number of areas, including trade. While trade between Russia and the G7 has fallen by more than 36 percent since 2014 under the weight of economic and financial sanctions, trade between it and the other BRICS nations has soared, increasing by more than 121 percent over the same period. China and India have become the largest importers of Russian oil following bans imposed by the European Union. China’s trade with Russia hit a record of $188.5 billion last year, a 97 percent increase from 2014 and around 30 percent greater than in 2021. The surge occurred as Russia more than doubled its rail exports of liquefied petroleum gas as part of a drive to diversify its exports under the harsh sanctions regime.

By opting not to comply with western-led economic and financial sanctions, the solidarity of BRICS has been a balm for Russia. The bloc has offered trade diversion and other relief to one of its founding members and, in the process, weakened the effectiveness of US-led sanctions as a tool for advancing economic and geopolitical interests.

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A multipolar magnet

Thwarting the sanctions regime has had consequences that reach far beyond the impact of the crisis in Ukraine. Bolstered by their success on the economic and geopolitical fronts, the BRICS group is increasingly viewed by a growing number of countries in the Global South as an attractive agent of multilateralism. More than forty nations—including Algeria, Egypt, Thailand, and the United Arab Emirates, but also key Group of Twenty (G20) countries such as Argentina, Indonesia, Mexico, and Saudi Arabia—have formally expressed their interest in joining the BRICS in the lead-up to this week’s summit.

If the effectiveness of trade diversion by BRICS nations in weakening the impact of western sanctions against Russia is any indication, sanctions could become less effective as a tool for advancing the economic and geopolitical interests of the G7 after the admission of new BRICS members. In a zero-sum global trading environment, the bloc’s expansion would also accelerate the diversification of demand away from G7 countries and reduce members’ exposure to future geopolitical risks.

The focus in Johannesburg will certainly be on the admission of new members, as well as trade and investment facilitation in a challenging global environment where the escalation of trade and tech wars—along with the “friendshoring” of supply chains—has increased the risk of global growth deceleration and a hard landing in China. BRICS members are likely to discuss sustainable development in the climate change era, global governance reform, and an orderly process of increasing trade in local currencies. On the latter point, more and more emerging economies are exploring ways to conduct trade in non-dollar currencies following the imposition of sanctions against Russia.

The dollar remains the global reserve currency, and the pace at which other currencies have chipped away at its dominance has been incremental. But a growing number of experts, including senior US government officials, recognize that the aggressive use of economic and financial sanctions to advance US foreign policy could threaten the dollar’s hegemony in the years ahead. US Treasury Secretary Janet Yellen recently emphasized this point: “There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar.”

A new reserve currency?

The significance of dedollarization takes on greater importance in light of rumors that the bloc might attempt to develop a BRICS-issued reserve currency to be used by members in cross-border trade. While the BRICS nations—which collectively enjoy a comfortable balance of payment surplus—have the financial wherewithal to establish such a currency or unit of account, they lack the institutional architecture and the scale to sustainably achieve this end.

Even assuming that its members are fully aligned geopolitically and more inclined to co-operate than to compete, adopting a common currency presents several challenges. As the creation of the euro, now the world’s second largest reserve currency, illustrated, hurdles will include: achieving macroeconomic convergence, agreeing on an exchange rate mechanism, establishing an efficient payment and multilateral clearing system, and creating regulated, stable, and liquid financial markets.

The United States was able to persuade other countries to use the dollar owing to its hegemonic position as the world’s industrial powerhouse and single-largest trading nation following the end of World War II, reinforced in the decades since by the size of the market for US treasuries, which are often considered to be the world’s leading reserve asset. If they wish to provide a competitive alternative, the BRICS countries would need to agree upon a state-of-the-art bond market. It would need to be big enough to absorb global savings and provide assets with low risk of default where surplus funds could be parked when not used for trade.

Reflecting on these challenges, Anil Sooklal, South Africa’s ambassador-at-large to BRICS, reiterated in July that a BRICS currency will not be on the agenda during the summit, though expanding trade and settlement in local currencies will be. In fact, BRICS countries are already making strides in the use of local currencies in cross-border transactions. Their use is helping to sustain and boost cross-border trade between members, even amid a challenging operating environment of heightened geopolitical risks. It is also loosening the balance of payments constraints associated with dollar funding, bolstering local economies.

Although China and India may have diverging security interests, they each stand to benefit from the increased use of local currencies. BRICS nations are already using their own currencies for some bilateral trade payment settlement, and Saudi Arabia is considering signing a deal with China to settle oil transactions in renminbi. Meanwhile India is expanding the use of local currencies for bilateral trade payment and settlement beyond the BRICS group, inviting more than twenty countries to open special vostro bank accounts to settle trade in rupees. In a history-making move, India made its first oil payment to the United Arab Emirates in rupees earlier this month.

If the BRICS group expands its membership, then it could increase the risk of a divergence of interests and raise more coordination challenges—but it could also dramatically expand the group’s consumption power, with significant economic and geopolitical implications. Expansion could create scale and enhance the transition from bilateral to multilateral clearing, and perhaps ultimately toward a common BRICS currency. This would address one of the major challenges associated with the use of local currencies for bilateral trade payment settlement: the difficulty of deploying these currencies once imbalances arise. Lately, such challenges led to the suspension of bilateral trade arrangements that had allowed India to settle imports of Russian oil in rupees, with Russia accumulating billions of Indian rupees that it could not use.

Meanwhile, membership expansion could further weaken the effectiveness of US-led economic sanctions and accelerate the multipolarization of the global monetary order. Several members of the Organization of Petroleum Exporting Countries have already said they wish to join the BRICS group, which would increase the shared benefits associated with the use of local currencies for cross-border transactions and could further curtail the volume of global trade conducted in dollars.

To be sure, the stickiness of institutional arrangements, along with the breadth and depth of US financial markets is such that dollar dominance will remain a key feature of the global financial architecture for some time. But following membership expansion, the BRICS group could set in motion its transformation into an even more powerful geopolitical coalition that could accelerate the process of dedollarization and the transition to a multipolar world.

Hippolyte Fofack is the chief economist and director of research at the African Export-Import Bank (Afreximbank).

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Tran quoted by NBC News on BRICS’ efforts to diminish USD dominance

hyeung — Wed, 23 Aug 2023 15:26:17 +0000

Read the full article here.

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Tran quoted by Barron’s on the rift in BRICS over push for new members

hyeung — Wed, 23 Aug 2023 14:58:26 +0000

Read the full piece here.

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What Brazil’s “multipolar” foreign policy means for the Bretton Woods institutions

Jack Tapay-Cueva and David Dong — Wed, 23 Aug 2023 13:18:46 +0000

This Econographic is part of our Next Gen Fellowship which aims to cultivate a new generation of young economists to rethink the pillars of economic global governance. These undergraduate Fellows researched governance of the international financial system with the Bretton Woods 2.0 Project in Summer 2023.

Nearing the first year of his latest term, Brazilian president Lula da Silva has solidified an eyebrow-raising foreign policy meant to restore Brazil’s standing on the world stage. Whether it be his refusal to arm Ukraine against Russia, efforts to normalize relations with Venezuela’s Nicolás Maduro, or the decision to authorize the docking of Iranian naval ships, Lula has signaled a willingness to break convention in pursuit of “the creation of a multipolar world”—a far cry from the isolationist approach of his predecessor, Jair Bolsonaro. However, as much friction as these one-off encounters have generated, the brunt of Brazil’s current strategy lies in its empowered relationship with China and economic initiatives across Latin America. Combined, these factors have the potential to not only cement Brazil as a powerbroker in the region but also to upend the role of Bretton Woods Institutions (BWIs) when international polarization is at an all-time high. If BWIs fail to adapt to this changing landscape, they risk diminishing relevance and influence, paving the way for alternative financial institutions to dominate the global economy.

Since outpacing the United States as Brazil’s largest trading partner in 2009, China has invested more than $36 billion towards projects related to the country’s infrastructure, utilities, and natural resources. These investments transformed Brazil into a cornerstone of China’s engagement with Latin America—all while the momentum surrounding BRICS affirmed the country’s influence over the global economy. Even as Bolsonaro’s presidency chilled Brazil’s diplomatic ties, Chinese investments totaled $20 billion over the span of his administration. Although the United States has maintained a dominant financial presence in Brazil, with annual investment inflows surpassing $60 billion for the past decade, the acceleration of China’s investment signifies a strategic evolution in a bilateral relationship once defined by trade alone.

Lula made this evolution clear during his long-anticipated trip to Beijing this April, signing agreements with President Xi Jinping to bolster bilateral efforts in trade, innovation, and social development. Specifically, the state visit culminated in commitments to promote mutual investments in infrastructure, energy, and agriculture, to facilitate scientific and technological exchanges, and to deepen collaboration in the digital economy. On the heels of renewed negotiations over a free trade agreement between Brazilian-backed Mercosur, the South American trading bloc, and the European Union, Xi expressed interest in engaging with the bloc to deepen China’s ties with the rest of Latin America.

The most consequential moment of the visit came when Lula shared the spotlight with protégée-turned-successor Dilma Rousseff during her inauguration as president of the New Development Bank (NDB). Describing the multilateral bank as a tool to “finance infrastructure, sustainable development, as well as social and digital inclusion,” Rousseff framed the NDB as an alternative to BWIs for emerging economies that “respects and reaffirms the sovereignty of each country.” Less willing to parse his words, Lula hailed the bank for its potential to free countries from “submission to traditional financial institutions,” comments that resonate with the $822 million he has secured from the NDB since taking office.

As Brazil maneuvers the international stage with its “multipolar” approach, the rest of Latin America is also witnessing a rise of leftist administrations, a phenomenon known as the Second Pink Tide. For BWIs, the implications are two-fold. First, these governments have expressed more interest in diversifying their trade and financing options, including beyond the current geopolitical fault lines. Second, while remaining interested in multilateralism, many Latin American leaders have voiced frustration with BWIs due to their governance structure and lack of country-specific policy flexibility. For BWIs to remain relevant and effective in this changing scenario, they must do three things:

Flexible lending protocols: The traction gained by institutions like the NDB highlights the allure of financial organizations that offer terms acknowledging the unique challenges of each member country. Recognizing the economic dynamism of countries like Brazil, BWIs ought to introduce countercyclical lending. Such a system would tie loan repayments to a country’s GDP performance or export earnings, serving as a buffer against economic volatility. This would not only make loan portfolios more resilient, but also enhance the role of BWIs as stabilizers in the global economy.

Collaborative financing: Brazil’s burgeoning relationship with China and stake in the NDB signal its move towards diversified financial sources. BWIs should respond in kind by creating instruments that pool resources. For instance, the World Bank and the NDB could jointly finance sustainable infrastructure projects in the region, combining their expertise and financial resources. Likewise, financial packages that combine grants, equity, concessional loans, and non-concessional financing would allow BWIs to cater to the specific needs of countries. Beyond direct financing, sharing data and analytical tools would foster a deeper understanding of market trends, risks, and opportunities—enhancing the predictive power and response time of these institutions.

Overhaul of Governance Structures: The power dynamics of BWIs, primarily determined by economic contributions, have historically favored high-income countries. To account for the rise of emerging economies like Brazil, China, and India, BWIs should recalibrate voting rights to allow these countries more significant influence over decisions. Similarly, leadership roles within BWIs have traditionally come from the internal deliberations of their respective Executive Boards. To foster trust and global collaboration, leadership positions should be open to candidates from a broader range of member countries, ensuring representation from different regions and economies.

With Brazil embracing multipolarity and deepening its alliances with global powers, the landscape of international finance is poised for a seismic shift. The onset of the Second Pink Tide across Latin America emphasizes the region’s turn to diversified economic partnerships and departure from the conventions of BWIs. For these institutions to remain impactful, they must adapt—prioritizing flexible lending protocols, promoting collaborative financing, and ensuring more inclusive governance. Only by acknowledging and addressing the evolving attitudes of countries like Brazil can BWIs hope to sustain their relevance in an ever-changing global order.

Jack Tapay-Cueva is a former Next Gen Fellow with the GeoEconomics Center’s Bretton Woods 2.0 Project.

David Dong is a former Next Gen Fellow with the GeoEconomics Center’s Bretton Woods 2.0 Project.

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Stefanini featured in Andkronos discussing BRICS Summit and the future of the bloc

Stefano Stefanini — Tue, 22 Aug 2023 20:12:00 +0000

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On August 22, Transatlantic Security Initiative nonresident senior fellow Stefano Stefanini was interviewed in Adnkronos, discussing the BRICS Summit and the future of the bloc (text in Italian).

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Stefano Stefanini

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

English Europe & Eurasia

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What the Lula-Xi partnership means for the world

Atlantic Council experts — Fri, 14 Apr 2023 20:51:18 +0000

He brought an entourage. Brazilian President Luiz Inácio Lula da Silva traveled to China this week along with dozens of political representatives and more than two hundred business leaders for a visit that focused on improving trade and economic ties between the largest countries in Asia and South America. His meeting with Chinese leader Xi Jinping on Friday in Beijing followed February’s meeting with US President Joe Biden in the White House, as Lula is using the early months of his term to set a new tone abroad. Our experts are here to answer the burning questions about what this trip tells us about the two Global South heavyweights.

1. What does Lula come away with from Beijing?

In addition to the fifteen agreements signed between Brazil and China, Lula also leaves Beijing with a path toward greater cooperation even beyond trade. Given that China is Brazil’s number one trading partner, this visit was an important seal for Lula, wrapping up his first hundred days in office having visited Brazil’s top three economic partners: Argentina, the United States, and now China.

Recent comments by Brazilian Finance Minister Fernando Haddad reflect Brazil’s intent to deepen economic relations with both China and the United States. “Brazil has the size to make bilateral agreements,” Haddad told journalists during the China trip.

—Valentina Sader is an associate director and Brazil lead at the Atlantic Council’s Adrienne Arsht Latin America Center.

2. During the trip, Lula called for BRICS countries to trade in their own currencies and end the dollar’s trade dominance. How real is this threat?

In calling for an end to the dollar’s dominance in world trade during his China visit, Lula was singing to a choir whose theme song is renminbi (RMB) internationalization. His advocacy of a “BRICS currency” to replace the dollar in settling trade transactions among leading emerging-market countries (Brazil, Russia, India, China, and South Africa make up the informal BRICS group) likely won’t come to much—at least in the foreseeable future. Nonetheless, it does underline the opportunities for Beijing to increase the international use of the Chinese currency. As Brazil’s trade with China hit a record $150 billion last year, the RMB emerged as the country’s second-largest reserve currency (representing 5.37 percent of foreign-exchange holdings). That’s an indication of a trend of increasing RMB-real transactions, which likely will continue in the future as the two countries have signed several agreements aimed at expanding trade. However, Brazilian imports and exports continue to be settled overwhelmingly in dollars, and the US currency still occupies over three-quarters of Brazilian reserves.

At the end of March, a Brazilian bank (controlled by a Chinese parent) became the first financial institution in Latin America to join China’s Cross-Border Interbank Payment System, which settles trade deals in the Chinese currency. But most Brazilian companies continue to use the dollar-based SWIFT messaging system. Even as the RMB’s global share of trade transactions doubled to 4.5 percent in 2022, the dollar remained the currency of choice in 84 percent of all trade deals worldwide.

—Jeremy Mark is a nonresident senior fellow with the GeoEconomics Center. He previously worked for the IMF and the Asian Wall Street Journal.

3. What did China gain from this visit?

From what we have seen thus far, Lula and Xi gained crucial “wins” from their bilateral meeting. The two signed fifteen bilateral agreements in everything from agriculture to technology, demonstrating further development of the China-Brazil comprehensive strategic partnership. Lula even visited a Huawei technology development center and received a presentation about how 5G can revolutionize telemedicine and education; this suggests Lula’s willingness to accelerate China’s 5G expansion in Brazil, despite US efforts to slow China’s 5G advance in the region due to espionage concerns.

Both leaders also successfully projected themselves as champions of the Global South, professing their desire to “balance world geopolitics,” advocating for their countries as mediators in Ukraine, and upholding the BRICS mechanism as a counterweight to the US-dominated international system. However, Lula’s most inflammatory statement that BRICS countries ditch the US dollar and trade in their own currencies was likely bluster, especially given the fact that the US dollar still accounts for 60 percent of global central bank reserves.

—Leland Lazarus is a nonresident fellow at the Global China Hub and associate director for national security at Florida International University’s Jack Gordon Institute of Public Policy. He formerly served as special assistant and speechwriter to the commander of US Southern Command and as a US State Department foreign service officer in China and the Caribbean.

4. What do Lula’s visits to both Washington and Beijing reveal about his foreign policy approach?

Differently from the trip to Washington in February, Lula’s visit to Beijing had a more clear and concrete purpose. The trip to Washington was aimed at reestablishing relations and discussing cooperation on common challenges, such as democracy and climate. The visit to Beijing had an important business component. Both were significant in consolidating Lula’s foreign-policy goals.

Brazil will continue its traditional non-alignment, non-interventionist approach to foreign policy, seeking to maintain close diplomatic relations with strategic partners, which include both the United States and China. At the same time, Lula will continue to push for the rethinking of the global order to reflect current times, carving out that relevance for Brazil. A few examples include Lula’s interest in leading peace conversations between Russia and Ukraine, hosting the Group of Twenty (G20) summit in 2024, questioning the reliance on the dollar, proposing changes to the United Nations Security Council, and sending a special foreign policy advisor to Venezuela for meetings with the Maduro regime and its opposition. The question that remains is whether or not Lula is picking the right battles—and if he will have the support, domestically and internationally, to be successful.

—Valentina Sader

5. How can the Lula visit be seen within the context of Xi’s renewed outreach to the Global South?

Lula’s visit to China and meeting with Xi reflects Lula’s desire to again—as in his previous times in office—be at the center of the global stage. And it is a visit that is squarely within China’s priorities to deepen ties with Brazil as part of its quest for greater leadership in the Global South. China is Brazil’s number one trade partner. And this visit is a clear signal that those economic ties will only deepen in the years to come.

What cannot be missed is the difference in pomp and delegation size between the China visit and Lula’s trip to Washington two months earlier. Whereas the US visit was a short, two-day stop without a business contingent, the China trip is twice as long with a large delegation of businesspeople looking for new commercial opportunities now that China has reopened after its COVID-19 lockdowns. It’s also reflective of Lula’s inauguration: China sent then Vice President Wang Qishan—a close ally of Xi—to lead its delegation, while the US delegation was led by Interior Secretary Deb Haaland.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

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An imperative for women’s political leadership: Lessons from Brazil

Valentina Sader, Isabel Bernhard — Tue, 21 Mar 2023 13:00:00 +0000

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In politics and positions of power, the lack of equitable representation of women is striking. Women represent 49.7 percent of the world population, yet only twenty-seven countries have a female leader as of February 2023.2 Brazil, which elected its first and only woman president in 2011, has seen slow progress in ensuring greater female participation in politics. Political violence against women, among other factors, is a deterring factor for women’s political participation.

Political violence is not a new phenomenon, nor it is exclusive to women. However, evolving analysis has identified differences between political violence generally and political violence against women. The latter is directed at women with the intent of restricting their political participation and active voice, while also generalizing women’s participation as “wrong.” In the Brazilian context, political violence against women is a “physical, psychological, economic, symbolic, or sexual aggression against women, with the purpose of preventing or restricting access to and exercise of public functions and/or inducing them to make decisions contrary to their will.” As such, political violence against women plays an important role in deterring women’s active participation in politics—and even more daunting for black, indigenous, or LGBTQI+ (lesbian, gay, bisexual, transgender, or queer) women.

Brazil has a unique opportunity to adjust its legislation and reframe the incentives in the political sphere tackle this issue now, ahead of municipal elections in 2024. Doing so will ensure greater and more equitable political participation, enrich the political debate, strengthen the legislative agenda, and further solidify the country’s democratic ethos, even if other challenges to democracy remain. This report presents solutions Brazil could take to reach this more representative and resilient version of democracy.

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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Lula is back. Are Brazil’s climate credentials?

Lizi Bowen, Maia Sparkman, William Tobin — Fri, 24 Feb 2023 14:50:43 +0000

Following Luiz Inácio “Lula” da Silva’s presidential win in Brazil, Lula and President Biden met at the White House this month to set out a new agenda to further decarbonization and climate change efforts in the Western hemisphere. Early actions taken in Lula’s return to office show positive signals that Brazil is committed to implementing environmental and energy policies to address climate change while balancing economic development and environmental justice.

These actions are welcome, given the troubling environmental legacy of the prior administration. Deforestation rates surged under former President Jair Bolsonaro’s term, reaching the highest levels in 2021 since 2008. The Bolsonaro administration weakened environmental agencies intended to protect the Amazon rainforest, eased protections on protected land, and fired the head of Brazil’s National Institute for Space and Research (INPE) after it released data showing that deforestation rates had increased. Lax environmental policies resulted in land robbery and the increase of illegal activity, particularly related to logging and mining. Illegal mining saw a 46 percent increase in the Yanomami Indigenous territory in northern Brazil from 2020 to 2021, raising environmental justice concerns as the uniquely impacted Yanomami community experienced increased violence and diseases due to polluted rivers as a result of ore processing.

Lula’s return to office marks a return to the protection and conservation of the Amazon and its people while balancing the sustainable development of the region. The president created the country’s first Ministry of Indigenous Peoples, representing 307 indigenous groups. Lula also welcomed Marina Silva back to the federal government as Minister of Environment, the position she held during Lula’s first term as president. A well-known environmentalist from the Amazon state of Acre, Silva’s return to the Ministry signals Lula’s commitment to prioritizing environmental protection.

The return of the Amazon Fund

Deforestation of the Brazilian Amazon has made the forest a net carbon emitter since 2016, accelerated by Bolsonaro’s policies and the shuttering of the Amazon Fund. Soon after Lula’s victory, however, Brazil’s Supreme Court ruled to reactivate the fund, which he signed on his first day back in office. With this reversal, Brazil is taking steps to once more be a clean energy and decarbonization leader in the region. But in order to reach these goals, expanding and diversifying funding is crucial.

Deforestation is a major factor in driving up greenhouse gas emissions, with tropical deforestation being responsible for roughly 20 percent of annual emissions. The Amazon rainforest holds 48 billion tons of carbon and its preservation is essential in the global fight against climate change and reaching ambitious net-zero goals. To assert low-carbon leadership in the region, Brazil should take advantage of the momentum behind the Amazon Fund right now.

The fund has historically been supported by Norway and Germany, but its support is set to grow. The Norwegian government—after backing out of the fund while Bolsonaro was in power—is keen on resuming donations immediately, and Germany signed a new pledge committing to donations following Lula’s October win. Additionally, following President Lula and Biden’s meeting this month, the two leaders released a joint statement in which Biden committed to work with the US Congress to contribute funds to conserve the Brazilian Amazon, including directly to the Amazon Fund. France, the European Union, and the United Kingdom have also announced their intentions to contribute to the fund.

While the addition of some of the world’s wealthiest countries are a significant step to broaden the fund’s scope, it is not enough. At COP27 in Glasgow, over one hundred world leaders representing more than 85 percent of the world’s forests pledged to halt deforestation by 2030, but little momentum has been seen since. As governments raise their ambition in forest preservation and funding, the focus must next turn to industry whose spending power and contributions in technology will be vital to expanding conservation efforts.

Private-sector participation in conservation funding would prove beneficial for Brazil, where although early satellite data shows deforestation in the Amazon has been declining since Lula’s return to office, experts say it may take years to show major progress following environmental setbacks under Bolsonaro. This progress will more effectively be accomplished with a suite of multi-sectoral funders. The fund’s potential for impact should be marketed to a broad coalition of funders from government, finance, and industry alike, with the option to contribute using verifiable carbon credits.

Building an even cleaner energy mix

Brazil’s environmental leadership need not be confined to the management of its ecosystems, however. Brazil already has one of the world’s highest shares of renewable energy in primary energy consumption, where clean energy sources meet 46 percent of total energy supply—not just electricity—in Brazil. By such a measure, Brazil is a clean energy powerhouse. Nonetheless, there are areas for Brazil to expand its low-carbon leadership.

Much of Brazil’s high share of clean energy in its energy supply is owed to biofuels, which are used in the industrial and residential heat, and transport sectors, at 50 percent and 25 percent, respectively. The country has been a pioneer in the use of biofuels for transportation, and in 2017 issued the RenovaBio policy which links the use of biofuels in transportation with Brazil’s Nationally Determined Contribution (NDC) under the Paris Agreement to reduce its emissions by 43 percent from 2005 levels by 2030. The country has committed under its NDC to increase the use of bioenergy, with high blending standards to support this. However, as an alternative to biofuels, Brazil could benefit from more targeted investment and policy support for electromobility, which does not pose the same concerns associated with the carbon intensity of land use. Brazil surpassed 100,000 cumulative electric vehicle sales in 2022, but deployment is limited by a lack of charging infrastructure. The country has less than 5,000 charging stations, while Germany, for instance, has over 1 million.

Furthermore, the country has a genuine opportunity to increase the share of clean energy in the power grid above 86 percent. Much of this share is owed to hydropower, which accounts for about 65 percent of total generation. Brazil is being eyed as a prime destination for wind development, with a potential of 1.8 terawatts (TW) onshore and offshore. The Ministry of Mines and Energy has taken steps to clarify the regulatory and legal frameworks for offshore wind development, which are severely lacking across Latin America, and could be catalytic for investment beyond the 17 GW of offshore wind already planned in Brazil.

However, the integration of intermittent renewables onto the electric grid will require more power system balancing to ensure generation matches demand. This comes amid a troubling outlook for hydropower in Brazil, historically a reliable baseload energy source, but whose generation is forecast to be more variable, as climate change leads to abnormal weather patterns. Increasingly frequent droughts and less predictable rainfall may increase the need for energy storage or gas peaker plants, if necessary, to ensure the consistent delivery of electricity to consumers.

Another area for Brazil to lead is by modernizing Petrobras and orienting it towards the energy transition. Petrobras is the largest oil company in Latin America and Brazil’s flagship state-owned enterprise. Prior to Lula’s victory, core energy advisors expressed a desire to make Petrobras more active in investing in renewable energy assets. After his election, Lula appointed Jean Paul Prates to the role of CEO, a senator and political ally of Lula. Prates has a history of introducing sustainability-focused legislation, even during Bolsonaro’s term. This background could bode well for the management of Petrobras at a critical juncture. Debt-constrained Petrobras will need to find innovative models if it desires to pair energy-transition ambitions with returns for the Brazilian public, but if it succeeds, it could offer lessons for national or state-owned oil company modernization on a global scale.

Bolstering Brazil’s environmental and clean energy leadership will require careful planning in the years ahead. The re-emergence of Lula does not seal this fate. While it can showcase its clean electricity sector, Brazil will need to balance using resources for conserving the Amazon and expanding electrification amid competing domestic economic and political priorities. For instance, Brazil will need to invest to maintain its social welfare state, amid a high benchmark interest rate of 13.75 percent and conflict between the Lula administration and the Central Bank of Brazil over fiscal policy, challenges which will impact the investment climate and Lula’s domestic political efficacy in tandem. Despite these challenges, Brazil has the potential to act as a first mover among emerging markets in making progress towards net-zero.

Lizi Bowen is associate director for digital communications and community engagement at the Atlantic Council Global Energy Center.

Maia Sparkman is an assistant director at the Atlantic Council Global Energy Center.

William Tobin is a program assistant at the Atlantic Council Global Energy Center.

EnergySource

Meet the authors

Staff

Lizi Bowen

Former Associate Director, Digital Communications and Community Engagement

Global Energy Center

Latin America Media

Former staff

Maia Sparkman

Former Associate Director, Climate Diplomacy

Global Energy Center

Africa Climate Change & Climate Action

Former staff

William Tobin

Former Assistant Director

Global Energy Center

Africa China

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By Sharmila Bellur

Productive use appliances can mitigate emissions while encouraging climate adaptation and resilience in sub-Saharan Africa. They can push households up the energy ladder and stimulate economic development, if managed correctly.

Africa Energy & Environment

EnergySource Feb 14, 2023

Hydrogen in the MENA region: Priorities and steps forward

By Giampaolo Cantini

COP27 marked a major escalation in the MENA region’s hydrogen ambitions. With several international partnerships now underway, sustained support and forward-thinking policymaking will be key.

Energy & Environment Energy Transitions

EnergySource Jan 31, 2023

Africa and the global LNG crunch: Balancing energy security, development, and decarbonization

By Robert F. Ichord, Jr.

As Europe looks to replace Russian gas and Asia looks to switch off coal, African LNG could play a central role. Gas development in Africa could unlock new revenues and, in turn, drive development across the continent.

Africa Energy & Environment

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Aviso LatAm: February 18, 2023

elardizabal — Sat, 18 Feb 2023 13:27:31 +0000

What you should know

Nicaragua: On February 9, the Ortega-Murillo regime released and expelled 222 political leaders, priests, students, and other dissidents to the United States.
US-Brazil relations: Presidents Biden and Lula da Silva met on February 10, during which they underscored the importance of strengthening democracy, promoting respect for human rights, and addressing the climate crisis.
Ecuador: Ecuadorians rejected all eight items on a constitutional referendum backed by President Lasso, signaling anti-incumbent sentiments and the clout of pro-Correísmo opposition political forces.

Monitoring economic headwinds and tailwinds in the region

Argentina: Annual inflation reached 98.8 percent, while activities in the construction and manufacturing sectors continued to decline.
Brazil: The government met with Mexico, Germany, Colombia, Chile, the World Bank, and the Inter-American Development Bank (IDB) to explore issuing green bonds this year.
Belize: The government launched two new projects in cooperation with Taiwan, a business support program focused on women and micro, small, medium-sized enterprises (MSMEs), and a flood warning system for disaster prevention.
Colombia: 2022 GDP growth is estimated to be 7.9 percent, down from 2021’s 10.8 percent growth. In 2023, growth is expected to further decline to 1.05 percent.
Peru: Continuing protests and supply shortages have led several mines to suspend or reduce operations, threatening copper production.
Suriname: President Santokhi expressed willingness to collaborate with neighboring Guyana on oil and gas exploration and development to position the Caribbean as an energy hub.

In focus: Inflation and infighting

As regional inflation continues, political pressures are leading to criticism of central bank policy in Brazil and Colombia. Recently-elected presidents Lula and Petro have both questioned rate hikes as a method to tackle inflation, suggesting more flexible targets and alternative policies. The governor of Colombia’s Central Bank, Leonardo Villar, expects the region to require continuing tight monetary policy, which critics argue may complicate other policy goals such as growth. Roberto Campos Neto, president of the Central Bank of Brazil, has expressed his willingness to coordinate with the Lula administration to achieve growth and control inflation.

Despite the public clashes, central bank policy in both countries remains independent. In Brazil, a 2021 law protects central bank autonomy and is unlikely to be repealed. In Colombia, the central bank has maintained a course independent of presidential advice for two decades.

Health + Innovation

Colombia: President Petro presented a health reform to Congress that seeks to improve primary care, expand access to treatment, raise healthcare worker salaries, and fight corruption by eliminating private sector management of payments.
Brazil: Nearly three years since COVID-19 claimed the life of its first victim, the country has for the first time registered zero pandemic-related deaths in a day on February 12.
Jamaica: The Bureau of Standards launched the Jamaican Standard Specification for Telemedicine, which provides the framework through which telemedicine may be safely practiced while upholding the integrity of the medical profession.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

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What came out of the Lula-Biden meeting?

Caroline Arkalji — Sat, 11 Feb 2023 01:36:11 +0000

US President Joe Biden welcomed Brazilian President Luiz Inácio Lula da Silva to the White House on Friday by noting that “both of our democracies have been tested of late.” As the two nations rekindled relations with Lula’s trip to Washington a little more than a month after he returned to the presidency, the January 8 riots in Brazil and their similarities to the US insurrection on January 6, 2021, topped the agenda. But the symbolism and the substance of this visit go beyond democracy. Here are four takeaways from Lula’s big day in Washington:

1. Lula pitches a global sustainability fund

Lula proposed the creation of a new global fund for sustainability, which would designate funds from developed nations to sustainable efforts across the world. There seems to be a willingness from the United States’ side to contribute to the existing Amazon Fund, joining Norway and Germany, on efforts to protect the Amazon rainforest.

Brazil is home to the largest portion of the Amazon and is an indispensable partner for the United States on climate and sustainability. As Biden prioritizes sustainable infrastructure and equitable clean energy domestically and more ambitious climate goals abroad, Brazil is an important ally in the hemisphere. Of Brazil’s available energy resources, around 80 percent are from renewables, and, as an agricultural powerhouse, it has the potential to be an even greater asset in solving the global food crisis. The US-Brazilian cooperation on climate and the environment is expected to deepen as the United States Special Envoy for Climate John Kerry plans to visit Brazil soon.

2. UN Security Council reforms are on the table

Lula has proposed to be a peace broker in Ukraine by pushing the rhetoric around the conflict to be about finding peace rather than continuing the war. He told reporters after the meeting that he and Biden discussed “the need to create a group of countries that are not involved directly or indirectly in the war with Russia in order to find a way to make peace.”

In this context, Lula also advocated for the need to reform the United Nations Security Council to become more representative of current geopolitical dynamics—a long-standing demand of the Brazilian president—to which Biden seemed to agree, Lula said.

3. Lula embraces progressive stardom

Lula met with prominent progressives on Friday morning before heading to the White House. With Senator Bernie Sanders (I-VT), Lula discussed ways to increase international cooperation to protect the Amazon rainforest and preserve the environment for future generations. The Brazilian president also met with Reps. Alexandria Ocasio-Cortez (D-NY), Pramila Jayapal (D-WA), and Ro Khanna (D-CA). They discussed shared commitments to environmental, social, and economic justice—and US-Brazil cooperation to fight authoritarianism and strengthen relations between the two countries’ legislators. The meetings represent an important effort to extend cooperation beyond the executive level, but in order to be effective and long-lasting, this kind of outreach must be bipartisan.

4. The presidents have a small window for cooperation

Lula’s Washington visit opens a new chapter as he seeks to position Brazil as a critical player regionally and internationally. Next month, he will travel to China, and he is also planning a trip to Angola, Mozambique, and South Africa.

But both Lula and Biden face challenges at home, as expectations rise for Lula to deliver on key campaign promises and Biden prepares for the 2024 elections. The window of opportunity for furthering cooperation is slim, but the stage is set for both countries to capitalize on new momentum. Particularly on the environment, Friday’s visit was a promising start.

Caroline Arkalji is a Young Global Professional with the Atlantic Council’s Adrienne Arsht Latin America Center.

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TotalEnergies’ CEO: Europe should pass its own green subsidies to compete with the US

Katherine Golden — Fri, 10 Feb 2023 20:03:02 +0000

Since the passage of the Inflation Reduction Act (IRA), the United States is becoming a “land of excellence” when it comes to green energies and infrastructures, said Patrick Pouyanné, chairman and chief executive officer of French oil major TotalEnergies.

“It’s a good incentive… to invest in all these green infrastructures,” Pouyanné said at an Atlantic Council Front Page event on Thursday.

Pouyanné agreed with many Europeans that the IRA is protectionist and undermines the transatlantic relationship, saying that this is part of a “trend” in which the United States, by creating its own rules, seems to be believing less and less in the multilateral trading system built on World Trade Organization agreements. But he also said that the law is a “clear political decision by the United States” made because “they want that green industries will take place on their territory.” For example, he noted, nearly 90 percent of solar panels are manufactured in China, creating “another problem of dependency” for both Europe and the United States in the future.

According to Pouyanné, the United States took advantage of an “opportunity” in the energy transition by passing the IRA, so “let’s do the same in Europe.” To avoid a future in which Europe relies heavily on imports, he said, the continent “must take decisions” to guarantee “that green industries [will] be located in Europe.”

Below are more highlights from the event, moderated by Atlantic Council President and CEO Frederick Kempe, where Pouyanné discussed the role of oil and gas in the energy transition and the energy impacts of Russia’s war in Ukraine.

“No way to escape” natural gas

Pouyanné said that because this year’s United Nations Climate Change Conference of the Parties (COP28) in the United Arab Emirates is being hosted by a major oil-producing country, “it raises the bar for the whole oil and gas industry… [We have] to engage, as a lot of stakeholders are expecting us to do.”
At COP26 in Glasgow, US President Joe Biden released a plan to tackle methane emissions from the oil and gas industry; Pouyanné said that TotalEnergies can lower methane emissions by 80 percent by 2030, while keeping an eye on lowering all other emissions from the production process. “If I can produce oil and gas with no emissions, I’ve done my job in production” to cut emissions, he argued.
“Natural gas is a fundamental energy for the transition” because it emits half the methane that coal does, Pouyanné explained. Natural gas, he added, will also help provide a consistent source of energy to fill the gaps of intermittent wind and solar power while new infrastructure to support energy storage and transmission is brought up to scale.
This year, with Russia’s war in Ukraine raising questions about the global energy supply, Pouyanné said that the world discovered how important energy reliability, affordability, and sustainability are—and how much reliability depends on gas. “On one side, the Biden administration [said] one year ago, ‘you need to diminish your emissions,’ and then we hear ‘you need to drill more.’” That, Pouyanné said, shows how the world will “need gas for very long.”

The global divide

While TotalEnergies had invested fifteen billion dollars in Russia, it has begun withdrawing from its Russian investments. “We have impaired almost all of our Russian assets,” Pouyanné explained. “We have step-by-step progressively retracted from almost all of our business in Russia.”
As Russia’s war in Ukraine continues, Pouyanné warned, the West must “be careful” to avoid believing that the rest of the world sees the conflict as a fight between democracy and autocracy. “It’s not the dominant [narrative] today in the Middle East, in Asia, [or] in Africa,” he said, explaining that leaders in the Global South are more focused on developing their economies than the war. He recalled how there have been mixed responses from countries to imposing sanctions on Russia and to voting on condemning Russia in the United Nations.
Pouyanné noted that he sees a similar division between the West and the rest in the climate debate with each passing COP. “It should not be” so divided, he said, “Let’s avoid antagonism. Let’s keep humility. Let’s listen to these [Global South] leaders.”

Investing in renewables—and fossil fuels

A day after TotalEnergies posted a record yearly net profit, Pouyanné talked about the French oil major’s plan to spend the increased profits. The company plans to invest sixteen to eighteen billion dollars of its capital, with around five billion going toward low-carbon energies and about twelve billion going toward hydrocarbons. “With twelve billion dollars,” Pouyanné explained, the “objective is to continue to maintain… stable production for this decade and continue to grow our liquefied natural gas business.”
But, he noted, it will be “very important” to “continue to invest in oil and gas” to keep profits and investments high across the energy sector: “If I can invest five billion dollars in low-carbon energy in 2023, it is because I have made money from oil and gas,” he explained.
Pouyanné said that the biggest investment opportunities lie in emerging economies such as Brazil, India, and African countries. TotalEnergies, he explained, has invested in new oil fields in Brazil and new projects, including a $3.5-billion pipeline, in Uganda.
While people in the West “complain about the Chinese influence in Africa,” he said, that influence is growing because of China’s more long-term approach to investing in the continent—rather than exporting natural resources right away.
The TotalEnergies head said the company will take some of the profits made in Uganda, Mozambique, and elsewhere to “invest in Africa.” That includes the electric grid. “When you don’t have electricity in the country, it is difficult to [improve] economic growth,” he said.
Pouyanné explained that with technologies such as electric vehicles gaining in popularity, “the oil market at a certain point will begin to decline… this is why we invest in electricity, because this is a growing market.”

Katherine Walla is an associate director of editorial at the Atlantic Council.

Watch the full event

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Biden and Lula must discuss fortifying their democracies—but that’s just the start

Valentina Sader — Thu, 09 Feb 2023 20:14:07 +0000

Brazilian President Luiz Inácio Lula da Silva’s trip to Washington this week marks a historic occasion in the US-Brazil relationship. More than ever before, the Western Hemisphere’s two largest democracies find themselves on similar ground: On January 8, supporters of Brazil’s former president invaded the buildings of Brazil’s three branches of government in a scene that drew a striking resemblance to the January 6 insurrection in the United States two years prior.

While it is simplistic to compare the two, such public threats to democratic stability may have created a shared concern that could realign US and Brazilian foreign-policy objectives and ultimately the bilateral relationship. With Lula’s visit with US President Joe Biden at the White House on Friday coming just weeks before March’s Summit for Democracy, the leaders should talk through ways to address the common threats to democracy they face, such as cooperation and knowledge-sharing on legal and defense issues related to Brazil’s January 8 investigations. That conversation can also be a jumping off point for discussing other shared priorities including grappling with the changing geopolitical landscape, protecting the environment and addressing climate change, and increasing trade across the Americas.

The synergies are there, but the window of opportunity for Biden and Lula to capitalize on the moment is disappearing as ordinary citizens, amid rising polarization, are losing the sense that democracy is valuable. That makes the strength of the US and Brazilian democracies—collectively serving almost seven hundred million people—all the more important.

The geopolitical agenda

Lula’s reemergence onto the regional and global stage can turn Brazil into the United States’ preferred partner in the Western Hemisphere. Brazil could prove a valuable diplomatic and trade entry point to a region where Washington has faced challenges—and even downright hostility—in pursuing its interests. Lula, who has the support of both the emerging and older generations of left-wing leaders and touts a pragmatic approach to the economy and foreign relations, has the type of clout that can convene Latin American and Caribbean leaders for frank discussions on the future of the hemisphere. One of Lula’s top foreign-policy priorities will be to strengthen ties across Latin America and Caribbean. This could also present an opportunity for Brazil to play a mediating role with regard to the Venezuela crisis, for example.

In addition, Brazil’s number one trading partner is China, with the United States a close second. Recently, US foreign-policy positions toward Latin America have prioritized outcompeting China in the region. But in that competition, the United States has been losing. It is important for the United States to present Latin American and Caribbean countries such as Brazil with alternatives to some of China’s key investments, particularly in renewables and technology.

Lula is positioning Brazil as a potential diplomatic force in proposing peace negotiations on the Russia-Ukraine war. Bringing to mind the negotiating role that Brazil played in the Iran nuclear deal, Lula proposed a club of non-aligned nations to find peace through diplomatic means, although that is not a very popular option in Western capitals. Lula could be an important ally in eventual conversations about Russia’s war in Ukraine, especially because Brazil will take the Group of Twenty (G20) presidency in 2024.

Progress on the environment

Beyond the geopolitical sphere, Biden and Lula should discuss how they can work together to protect the environment and address the effects of climate change. In one of the Biden administration’s first moves, the president issued the Executive Order on Tackling the Climate Crisis at Home and Abroad. But doing so abroad requires partners, and in Lula, Biden may have found one. These two leaders should work together immediately and with urgency, as the Western Hemisphere is significantly affected by the climate crisis: Latin America and the Caribbean is the region second-most prone to natural disasters (behind the Asia-Pacific), and the United States is a frequent target of intense hurricanes that result from warming waters.

The fact that Lula is bringing Minister of Environment Marina Silva with him to Washington is a sign of how much he is prioritizing the issue. There is great expectation that under Lula, Brazil can push forward efforts to address the climate crisis, particularly because the country houses the “lungs of the Earth”—the Amazon, which is one of the most biodiverse zones on the planet. Protecting the forest while also sustainably developing the region is a key element in capping and potentially reducing carbon emissions while also furthering the country’s—and the region’s—economic prosperity. The United States could take a big step forward by contributing to the Amazon Fund, which Norway and Germany already do.

The first leader-to-leader meeting between Biden and Lula is full of symbolism. It shows the resumption of stronger US-Brazil relations, a willingness to leverage opportunities for cooperation on the environment, and the United States’ recognition of Brazil as a more strategic partner—and a more significant actor in the region and the world. And, following the January 8 events, the meeting shows that the United States and Brazil are a united pro-democracy front invested in strengthening their democratic institutions and promoting democratic values globally.

Valentina Sader is an associate director and the Brazil lead at the Atlantic Council’s Adrienne Arsht Latin America Center.

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Aviso LatAm: February 6, 2023

elardizabal — Mon, 06 Feb 2023 14:28:37 +0000

What you should know

PAHO: Dr. Jarbas Barbosa took office on February 1 as the health organization’s new director, pledging to work in partnership with member states to end the pandemic and ensure that the region’s health systems recover stronger than before.
IMF: The organization raised its global growth forecast to 2.9 percent, up from its original 2.7 percent. The outlook is also better for the region’s two major economies: up 0.2 percent for Brazil, to 1.2 percent, and a half point for Mexico, to 1.7 percent.
Migration: The 250,000 migrants that irregularly crossed into Panama through the Darien Gap in 2022 represents a record high that is nearly double the 133,000 entries recorded in 2021.

Monitoring economic headwinds and tailwinds in the region

Mexico: The national statistics agency reported that the economy grew 0.4 percent in Q4 of 2022 compared to the previous quarter.
Argentina: The government will leverage new gas exports to Chile, and potentially Brazil, to improve its trade balance and pay down debt.
Brazil: Alongside Argentina, the government is floating the development of a common currency linking the two countries to facilitate trade.
Colombia: The Minister of Mines and Energy Irene Velez announced at Davos that the country will no longer approve new oil and gas exploration contracts.
Jamaica: Third-quarter GDP grew by 5.9 percent over 2022 due to a resurgent tourism sector, which has boosted hotels, restaurants, and services, among other sectors.
Peru: Ongoing protests and road blockades have cost the country $550 million since the ousting of President Pedro Castillo last December.
Transatlantic ties: German Chancellor Olaf Scholz visited Argentina, Brazil, and Chile, to discuss the EU-Mercosur trade agreement and support for Ukraine.

In focus: Energy expansion in Trinidad and Tobago

On January 24, the United States licensed Trinidad and Tobago to develop a natural gas project off the coast of Venezuela in the Dragon field region. The project will support overall Caribbean energy security, with a requirement that some of the produced gas must be exported to Jamaica and the Dominican Republic. To comply with US sanctions, Trinidad will pay for the gas with humanitarian aid.

Atlantic Council experts reacted immediately, emphasizing the importance of this move towards meeting Caribbean energy demand. You can read more here.

Health + Innovation

Haiti: As of January 17, the Ministry of Public Health and Population has reported over 24,400 suspected cholera cases.
Education: A World Bank study shows that by 2045, nearly 5 million people across LAC would fall into poverty due to pandemic-induced learning losses.
Brazil: The Health Ministry announced that it will roll out bivalent COVID-19 booster shots as early as February 27.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

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Aviso LatAm: January 21, 2023

elardizabal — Sat, 21 Jan 2023 15:40:27 +0000

What you should know

Brazil: The Supreme Court will investigate whether former President Jair Bolsonaro incited the January 8 attack on Congress and other government buildings in Brasilia.
Peru: People—mainly from remote Andean regions—descended on the nation’s capital to protest against President Dina Boluarte in support of her predecessor and demand elections and structural change in the country.
Trade: The value of goods exported from Latin America and the Caribbean (LAC) increased at an estimated rate of 18.8 percent in 2022, a downward trend from 27.8 percent in 2021, due to higher prices and low volumes.

Monitoring economic headwinds and tailwinds in the region

Argentina: The government will buy back overseas bonds equivalent to over $1 billion to improve its debt profile, looking to send a positive signal to markets despite low reserves levels.
Brazil: Vice President Alckmin said that Lula’s administration wants to remove a key tax on manufacturing and importing, the IPI, as part of a broader tax reform package.
Guyana: The government announced $43.4 billion in funding for a new natural gas power plant, alongside distribution infrastructure improvements, to promote business and development.
Multilaterals: During his inauguration, new Inter-American Development Bank (IDB) president Ilan Goldfajn announced three key priorities for the bank: social issues, climate change, and sustainable infrastructure.
Mexico: The 2023 North American Leaders Summit concluded with new agreements to promote sustainability, strengthen supply chains, and respond to migration.
Peru: The national statistics institute (INEI) said the economy expanded 1.7 percent year-on-year in November, marking a slight slowdown from the rise of 2.0 percent in October.

In focus: LAC in Davos

Latin American and Caribbean public- and private-sector leaders gathered alongside their counterparts from across the world in Davos, Switzerland, for this year’s Global Economic Forum. Colombia’s finance minister Jose Antonio Ocampo used the opportunity to push for a stronger agreement on minimum taxes for multinational companies. Brazil’s finance minister, Fernando Haddad, and environmental minister, Marina Silva, discussed Brazil’s positive economic outlook, environmental stewardship, and desire for regional integration.

Spanish prime minister Pedro Sánchez also delivered a speech, in which he emphasized Spain’s role in building ties between Europe and Latin America, as Spain prepares to take over the Presidency of the Council of the European Union later this year.

Health + Innovation

Vaccines: The Canadian government will donate $33.4 million to the Pan American Health Organization (PAHO) to increase access to COVID-19 immunizations for populations across the region. This donation is in addition to a prior contribution of $40 million in 2021.
Belize: The country will celebrate 34 years of relations with Taiwan through the construction of a new general hospital in San Pedro.
Nutrition: A new United Nations report found that 22.5 percent—or 131.3 million people—of the region’s population cannot afford a healthy diet, citing a country’s income level, the incidence of poverty, and level of inequality as contributing factors.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

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Six ‘snow leopards’ to watch for in 2023

Andrea Ratiu — Fri, 20 Jan 2023 10:00:00 +0000

Six ‘snow leopards’ to watch for in 2023

We don’t see them, but they’re out there.

Rare, elusive, and well-camouflaged, snow leopards are exceptionally hard to spot. When sighted, these majestic cats seem to have come out of nowhere. And yet they were around us all along.

In the discipline of global foresight, as the Atlantic Council’s Peter Engelke wrote last year, a “snow leopard” is “a known but underappreciated—perhaps even forgotten—phenomenon” that has the potential to change the world and shape its future even though appearances might suggest otherwise.

The snow leopards discussed here are not predictions, but rather prompts for us to scrutinize overlooked phenomena. A technological breakthrough, for example, may not seem world-changing when still in development. Other phenomena might be so woven into our daily lives that they’ve become invisible to us, as with the recommendation algorithms highlighted below. The actors involved also influence how much weight we give to events and trends: If a head of state were to announce a country’s economic disengagement from China, we would sit up and pay attention, but companies deciding one by one to proceed with such “decoupling” may fly under the radar.

Our next-generation foresight experts at the Scowcroft Center for Strategy and Security brought a fresh perspective to the task of spotting the hard-to-spot. Check out their list of six snow leopards to watch closely in the year ahead.

The tightening regulation of algorithms

Algorithms are everywhere yet almost invisible, serving as the silent sifters and sorters of our lives. Their influence is baked into everything from email and smartphones to GPS and government services. On search engines and social media, “recommendation algorithms” leverage user data and history to curate information for billions of people. In their simplest form, algorithms are instructions or sets of rules—often used by computers—for completing a task. At their most complex, they drive machine learning and enable artificial intelligence (AI) to grow smarter and more sophisticated by the second.

With such sweeping capacity to shape how individuals and societies order and consume information—from the mundane recommendations of photo feeds and shopping lists to the grave amplification of extremist conspiracy theories that cause real-world terror—algorithms (and their designers) hold some responsibility for the social and political consequences of the content they propagate and the decisions they advance.

The need for AI governance, particularly to rein in algorithms, is increasing—and policymakers have demonstrated an appetite for it. This October, the White House published an AI Bill of Rights with a blueprint for addressing “algorithmic and data-driven harms” and potential remedies. Lawmakers in the US Congress have proposed legislation to limit algorithmic promotion of extremist content by holding social-media platforms liable if certain forms of amplified content lead to offline violence, with other bills on the subject under consideration as well. China implemented a law in 2022 to reduce algorithmic influence on public opinion by enabling users to decline algorithmic recommendations on websites and apps. (The law was part of China’s pursuit of “positive energy” online, under the country’s aggressive censorship.) The EU’s Artificial Intelligence Act, the first major, still-pending regulatory framework for AI that could set global standards, strives to curb algorithmic bias. The EU’s General Data Protection Regulation (GDPR) also offers guidelines on when companies can and can’t use algorithmic automated processing for decision-making—for example, regarding who to offer a loan to or at what interest rate.

Regulating algorithms is a broad and complex challenge, and pushback by the tech industry along with legal hurdles could halt even the most ambitious regulators. The public, and even policymakers, often lack the conceptual clarity to identify, define, and classify algorithms. And because it can be difficult to prove causation between algorithmic decision-making and the behavior or opinions of individuals influenced by it, accountability is hard to track.

Further breakthroughs may happen below the national level. New York City is reviewing the use of algorithms in decision-making across its government agencies and offices. The City Council curtailed the use of AI algorithms in decisions about hiring and promotion. And these steps are just the beginning, as state houses and activists energetically join the race to shape this new frontier.

Danielle Miller, Assistant Director, Scowcroft Strategy Initiative

Prior to joining the Atlantic Council, Miller worked in the US House of Representatives and was a research assistant at the University of California Berkeley’s Institute of European Studies.

The rise of preemptive corporate decoupling from China

In the days after the Kremlin launched its illegal war on Ukraine, Western companies based in Russia started fleeing the market, fearing unprecedented transatlantic sanctions, consumer backlash for continuing to do business with an invader country on an imperialist bender, and investor pressure to maintain profit margins. Now, as tensions between the West and China escalate, wary investors and multinational corporations may be starting to preemptively shift their market presence, supply chains, and investments away from China to insulate themselves from similar future impacts should the Sino-transatlantic relationship deteriorate.

Among the most interesting early developments: Apple, which has a huge production footprint in China, has decided to shift production of its iPhone 14 model to India, while some of Google’s production for the new Pixel phone will likely be heading to Vietnam. Another space to watch is pension funds, as growing concerns about political risks are prompting discussions about potentially exiting or at least reducing exposure to the Chinese market.

While it’s still early to call such decisions formal decoupling, these signs point to Western companies’ unease about the state of the Sino-transatlantic relationship, as well as a preemptive, corporate-led fragmentation of markets and supply chains in case tensions between China and Western countries bubble over. The private sector’s concerns about China’s restrictive zero-COVID policies, which have led to recurring lockdowns and disruptions at factories, may also be a factor in these developments, but the roots of these corporate moves can be traced back further to extensive tariffs and other economic tit-for-tat measures between China and the West—as well as nervousness about China’s own pursuit of self-sufficiency via efforts such as its “Made in China 2025” initiative. At stake in how these trends play out is nothing less than the future of globalization as we know it, along with the shape of the multipolar geoeconomic order, in which countries such as India will likely play an enhanced role.

Anca Agachi, Associate Director, Transatlantic Security Initiative

Previously, Agachi worked for the EU’s European Defence Agency on defense capability development projects in the information security and space domains, and served as a United Nations Youth Representative for Romania, focusing extensively on the UN 2030 Agenda and sustainable development goals.

The battery revolution that will democratize electric vehicles

The two main reasons why consumers are reluctant to buy electric vehicles? They cost a lot and can’t get very far on a charge. But a battery that could make electric cars cheaper, more efficient, and thus more popular may be on the horizon. The next breakthrough could come not by way of an updated lithium-ion battery—the kind that powers most electric vehicles on the road today—but rather by using current battery technology in different form through structural batteries built into a car’s frame. This has the effect of reducing the car’s weight (a chassis made of battery cells isn’t as heavy as a chassis plus a separate battery) and a lighter car can travel farther on a single charge. The potential benefits go far beyond increasing range. Integrating the battery into a car’s chassis could also cut down on manufacturing costs and make cars cheaper, while strengthening the body of the car as well.

Tesla has experimented with structural batteries in its Model Y cars and GM used them in the electric model of its Hummers, but their versions have yet to yield broader adoption. Yet technical development among automakers and other actors is ongoing and promising. Researchers at Sweden’s Chalmers University of Technology, for example, recently developed a more efficient structural battery that performs ten times better than its predecessors. Right now, electric vehicles are driven mostly by the wealthy: In the United States, for instance, 78 percent of federal electric-vehicle credits go to those with incomes over $100,000. If structural batteries can deliver on their promise, it will result in many more electric vehicles on the road around the world, democratizing ownership.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

Bayoumi graduated with his master’s degree in global affairs from the Munk School at the University of Toronto where he held a Joseph-Armand Bombardier Canada Graduate Scholarship. He also holds a BA from Queen’s University in political studies.

The early glimmers of a global, platform worker-driven labor movement

An uneven post-COVID-19 economic recovery has stoked a labor-rights movement in the United States and efforts to unionize in some of the country’s largest corporations—from Starbucks to Amazon to Trader Joe’s. Around the world, meanwhile, similar fallout from the pandemic has produced another phenomenon: Platform workers—those who work for organizations that provide services directly to consumers through an online platform—are leading efforts to create better working conditions for themselves. Strikes and other protests from Brazil to the United Kingdom to the Philippines and beyond speak to rising unrest among these workers. The causes for disputes and the types of protest vary across regions, but concerns about pay are often a primary driver of the activity.

Such developments are significant in part because platform workers are a subset of the informal economy, which encompasses economic activities that are not monitored by the state. These activities include a wide range of work—from domestic labor to rideshare driving to market stands. More than 60 percent of the world’s adult labor force operates, at least part-time, in the informal sector, and on average that sector represents 35 percent of gross domestic product in low- and middle-income countries. In many cases, particularly in emerging markets and developing economies, platform workers are not aiming to formalize their economic activities. But their budding efforts to improve their working conditions could alter the world of work for the better, more strongly linking them with government protections and helping curb global poverty and precarious employment.

Caroline Multerer, Deputy Director of Operations, Scowcroft Center for Strategy and Security

Prior to joining the Atlantic Council, Multerer was a program associate at Jones Group International, a global consulting firm owned by General James L. Jones.

The risky promise of geoengineering

One approach to combating climate change is geoengineering, or deliberate, large-scale, technologically based interventions in the environment to mitigate some of the effects of climate change. These include removing carbon dioxide from the atmosphere and reflecting the sun’s rays back into space. Futuristic though it may sound, geoengineering is already here. China and the United Arab Emirates have undertaken efforts to “seed” clouds by artificially increasing the amount of precipitation they hold and creating rain. Researchers from the UAE’s National Center of Meteorology have looked into creating an artificial mountain that would induce cloud formation and rain. Other countries, including China, India, and the United States, are making steady progress in advancing their geoengineering capabilities. The 2022 federal appropriations act, for example directed the US Office of Science and Technology Policy to develop a multi-agency group for coordinating research on solar geoengineering. This form of climate engineering, where sunlight is sent back into space, seems most likely to have the biggest impact on limiting the consequences of climate change and thus most likely to be pursued.

But along with its promise solar geoengineering also brings numerous risks, including the potential alteration of regional weather patterns. There’s also the increasing likelihood that, given the pace of climate-driven impacts such as floods, droughts, severe storms, and heat waves, a country or multiple countries will attempt to geoengineer the planet unilaterally, before the underlying science is solidified and before adequate global governance mechanisms are in place.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

The Japan-South Korea rapprochement that could shake up the Indo-Pacific

Although Japan and South Korea normalized diplomatic relations in 1965, their relations have continued to be complicated by the legacy of Japan’s colonization of Korea from 1910 to 1945, memories of World War II, and disputes over how to compensate Korean women who were forced into wartime sexual slavery by the Japanese military.

Despite this history, deeper reconciliation between the two countries, while politically difficult, is not an impossibility. In one indicator of a coming thaw, a meeting between South Korean President Yoon Suk-yeol and Japanese Prime Minister Fumio Kishida on the sidelines of the 2022 United Nations General Assembly, framed as a brief, informal gathering to avoid setting off domestic opposition at home, marked the first bilateral meeting between the leaders of these nations in three years. In another sign, the Japanese and South Korean publics are coalescing around concern about China. Were such a rapprochement to occur, it would dramatically alter the geopolitical environment in Asia while delivering significant benefits to both countries. Japan and South Korea face common and acute threats from China, North Korea, and Russia. With better relations, the two countries could pursue closer bilateral military ties, reach mutual understandings of regional threats, and develop responses to crises as they emerge. South Korea, one of the world’s leading advanced economies, could get more involved in the Quad grouping of Australia, India, Japan, and the United States. The United States would be able to count on both nations to counterbalance China’s influence in the region, while the three could promote shared values throughout the Indo-Pacific.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

Global Foresight 2023

In this year’s edition of Global Foresight, the Atlantic Council’s senior experts identify the top risks and opportunities for 2023. Our foresight team spots “snow leopards” that could have major unexpected impacts in 2023 and beyond. And we share findings from our survey of global strategists and foresight practitioners on how human affairs could unfold over the next decade.

Learn more Full survey

Atlantic Council Strategy Paper Series Jan 9, 2023

Welcome to 2033: What the world could look like in ten years, according to more than 160 experts

To survey the future, we polled global strategists and foresight gurus on our most burning questions about the biggest drivers of change over the next decade. Check out their forecasts on everything from the prospect of nuclear proliferation to the probability of great-power war to the potential for more global volatility.

Atlantic Council Strategy Paper Series Jan 20, 2023

Six ‘snow leopards’ to watch for in 2023

Atlantic Council foresight experts spot the underappreciated phenomena that could have outsize impact on the world, driving global change and shaping the future.

Brazil China

Atlantic Council Strategy Paper Series Dec 23, 2022

The top 23 risks and opportunities for 2023

The war in Ukraine changed the world in 2022. How will it continue reshaping global affairs in 2023 and what else looms on the horizon? The Atlantic Council’s top experts brought their globe-spanning expertise to the task of forecasting the near future.

Africa Americas

The post Six ‘snow leopards’ to watch for in 2023 appeared first on Atlantic Council.

As Brazil investigates Bolsonaro’s role in anti-democratic riots, should the US kick him out?

Gissou Nia, Thomas S. Warrick — Wed, 18 Jan 2023 19:00:00 +0000

Brazil’s former president Jair Bolsonaro was more than three thousand miles away in Florida when his supporters rioted in Brazil’s capital on January 8, a week after his rival, Luiz Inácio Lula da Silva, replaced him as president. But Bolsonaro clearly stoked the thousand-plus rioters with his false, denialist rhetoric, and Brazilian prosecutors are investigating whether his role rises to the level of criminal conduct. If it does, it will be important that he be held legally accountable.

The Biden administration is under increasing pressure from progressive leaders in Latin America and the US Congress to compel Bolsonaro to leave the United States. While the Biden administration needs to demonstrate moral leadership in upholding democracy and the rule of law, acting too hastily could fuel the flames of Brazil’s increasingly polarized politics and do more damage to democracy in the long term. In order to navigate this politically sensitive situation, the US government must follow established legal processes and ensure Bolsonaro does not undermine Brazilian democracy from US soil.

Ideally, Bolsonaro—who may have entered the United States on a diplomatic visa, which would have expired when his successor was sworn in on January 1—would simply return to Brazil voluntarily. He has said he plans to accelerate his planned departure at the end of January, which would resolve the problem.

Should Bolsonaro not leave voluntarily, it may take years to compel his departure, as the history of high-profile extradition requests to the US government shows. However, today there is hope that Bolsonaro will be persuaded to leave the United States of his own accord because of the possibility that he could face years of shameful publicity trying to stave off the extradition the Brazilian government, when it decides the time is right, is almost sure to seek.

While Bolsonaro would have ample opportunity to challenge the evidence against him in US courts before any action is taken to extradite or remove him, the Brazilian government would have an equal opportunity to make the case for Bolsonaro’s responsibility for the riots before the world’s media. The US government also would have the opportunity under US law to provisionally arrest Bolsonaro for at least several months, an indignity he may prefer to avoid.

Since 1964, the United States and Brazil have agreed by extradition treaty that each country must “deliver up” those charged with or convicted of certain enumerated crimes—which include destroying government property, as happened in Brasília—when committed within the territorial jurisdiction of the requesting country and when criminalized in both countries.

While there are some exceptions for when the offense is of a “political character,” the treaty notes that “[c]riminal acts which constitute clear manifestations of anarchism or envisage the overthrow of the bases of all political organizations will not be classed as political crimes or offenses.” It is unlikely that a court would rule that the exception for acts of a “political character” would apply in Bolsonaro’s case, if he is found culpable, because the incitement resulted in violence.

To avoid getting mired in political sensitivities, the Biden administration would be wise to pursue three immediate priorities.

1. Follow the law—even if it moves slowly

First, the White House should demonstrate what the rule of law looks like. If Bolsonaro chooses to stay in the United States, the Biden administration should urge the Brazilian government to initiate a formal extradition request. While it could be appealing to swiftly end Bolsonaro’s presence in the United States by exercising the authority that the president and the secretary of state have to declare him persona non grata (if he actually entered on a diplomatic visa) or to revoke his visa and have the Department of Homeland Security remove him, Bolsonaro would still have the right to contest that in court. In the end, little time would be saved if Bolsonaro wants to delay his return.

The question over Bolsonaro brings to mind one faced by the Obama administration in 2016, when Turkey’s government requested the extradition of Fethullah Gülen, a Turkish religious leader living in Pennsylvania, following a failed coup against Turkey’s government by some of Gülen’s supporters. However, despite repeated urging (including from then-Vice President Joe Biden) and expert-level consultations in which the Department of Justice explained US extradition requirements to Turkish counterparts, the Turkish government never presented evidence sufficient to convince a US magistrate to turn Gülen over to Turkey for trial.

Insistence on following established legal processes in the Gülen matter allowed the US government to navigate a politically sensitive situation without eroding the rule of law, even under serious pressure from the Turkish government.

While a formal extradition process for Bolsonaro would take several years to unfold, starting with the issuing of a warrant and a hearing to establish whether sufficient evidence exists to sustain the charge, this would keep Bolsonaro out of Brazil and, perhaps, allow for restrictions on his access to media and electronics that could be used to incite supporters to further violence.

From there, the process involves several layers of preliminary review by the US Department of State and a probable cause determination by the US Department of Justice before the case is forwarded to the US attorney for the district where the individual is located. An extradition order is not appealable, but Bolsonaro could petition for a writ of habeas corpus to ensure that he gets a hearing. The US secretary of state then makes the final decision whether to extradite.

The Biden administration should be clear that the length of the process is not any indication of US government reluctance to turn Bolsonaro over or interest in delaying the process. Bolsonaro’s status as a former head of state does not privilege or penalize.

2. Provide US law enforcement and intelligence support to Brazil

Second, the Biden administration should also support efforts to hold those responsible for the January 8 attack accountable for their assault on democracy by promising total cooperation from US law enforcement and intelligence agencies to share what they know, including any information regarding Bolsonaro’s role in instigating, directing, or supporting it.

A public announcement of US law enforcement’s full cooperation would have a chilling effect on Bolsonaro’s capacity to machinate disruptions to Brazil’s democracy from his current location in Orlando, Florida, given the ability, and obligation, of US law enforcement and intelligence agencies to prevent acts of violence or crime emanating from a foreign national on US soil.

3. Allow civil cases to run their course

Third, Bolsonaro no longer holds any official position, so in the United States, he is subject to US laws for civil damages—and the Biden administration should not shield him from culpability. His assets can be tied down or even frozen while US courts decide whether he is liable for the January 8 riots and subsequent events. He could also be required to give depositions and provide evidence about his own actions even outside of any criminal or extradition proceedings.

Life in the United States could quickly look less and less attractive for Bolsonaro. The threat of being cut off from his supporters while under the watchful eye of US law enforcement agencies may be the deciding factor in whether Bolsonaro decides to stay in the United States or go home. Either way, he will face justice.

Gissou Nia is a human rights lawyer and director of the Strategic Litigation Project at the Atlantic Council. Follow her on Twitter: @GissouNia.

Tom Warrick is a senior fellow at the Scowcroft Center for Strategy and Security’s Forward Defense practice at the Atlantic Council. He served in the Department of State from 1997 to 2007 and as a deputy assistant secretary in the Department of Homeland Security from 2008 to 2019. Follow him on Twitter: @TomWarrickAC.

The post As Brazil investigates Bolsonaro’s role in anti-democratic riots, should the US kick him out? appeared first on Atlantic Council.

How Brazil can respond to its democracy stress test

Atlantic Council — Mon, 09 Jan 2023 17:21:37 +0000

GET UP TO SPEED

It’s a shock to the system. One week after new Brazilian President Luiz Inácio Lula da Silva was sworn into office, thousands of supporters backing former President Jair Bolsonaro—who falsely claimed that October’s election had been stolen from him—descended upon the country’s Congress, Supreme Court, and presidential palace, leaving shattered windows and overturned furniture in their wake. Now that authorities have cleared the protests and launched an investigation into security failures, our experts break down what’s to come.

TODAY’S EXPERT REACTION COURTESY OF

Jason Marczak (@jmarczak): Senior director of the Adrienne Arsht Latin America Center
Iria Puyosa (@NSC): Senior research fellow at the Digital Forensic Research Lab
Valentina Sader (@valentinasader): Associate director and Brazil lead at the Adrienne Arsht Latin America Center

Failures abound

Brazil’s January 8 triggered comparisons to the United States’ January 6 attack. “But that is an oversimplification,” Jason says. “In Brazil, rioters were focused on absolute destruction of Brazil’s legislative, judicial, and executive buildings without the ability to disrupt the democratic order.”
Iria points out that Bolsonaro’s supporters had been planning publicly for days, and the call to action “was not made on fringe or secret sites but in public groups and channels” on TikTok, YouTube, Telegram, and WhatsApp. Security forces “had the chance to take preventive measures,” she says, calling it “inexplicable” that Brazilian authorities never “established strong security controls.”
Calls rose on Sunday for stronger regulation of social media, Iria tells us, even though Brazil has one of the more “vigorous” regulatory regimes in the region. One way Brazilian policymakers can tackle the problem, she says, is to improve intelligence agencies’ capabilities to monitor open-source data that provides “early warnings” about extremist threats—but in a way that doesn’t “limit freedom of expression and association of citizens.”
While Lula wasn’t even in Brasília at the time, Jason says that the riots are still a “wake-up call” for the Lula government because they highlight the risks that lie ahead for “the continued peaceful functioning of Brazil’s institutions.”

Lula’s moment

“Democracy prevailed, but it’s cracked,” Valentina tells us. While Brazil’s democratic institutions have proven resilient, “they still must be strengthened.”
According to Valentina, the fact “that some police forces, officials, and financial backers appear to have enabled this anti-democratic vandalism underscores the danger to Brazil’s democratic system.”
But politicians from across the political spectrum have responded to the riot with an “eagerness to defend democracy,” a rare moment of “common ground,” Valentina says. “Lula must seize the opportunity to pacify the country and gain political power in Congress” to show the strength of democracy, punish wrongdoers, and enact key planks of his policy agenda.

Friends in need

US President Joe Biden quickly condemned the attack on Sunday. Jason tells us that next, his administration should “take action to reassure the new Lula government that US support will not be in statements alone.”
That could take the form of a Lula visit to Washington early this year. “That visit should be prioritized and scheduled as soon as possible,” Jason says, “to show Lula and allies around the hemisphere that the United States is here to help when partners are in need.”
Valentina says the United States can view January 8 as “yet another failed attempt by the extreme right to undermine democracy.” But “amid global trends of declining democratic freedoms and political instability across Latin America and the Caribbean, which country is the next target?”

The post How Brazil can respond to its democracy stress test appeared first on Atlantic Council.

Experts react: Brazil has suffered its own attack against democracy. Here’s what the government and its allies can do next.

Atlantic Council experts — Mon, 09 Jan 2023 15:06:58 +0000

January 8: A new date of infamy. Supporters of right-wing former President Jair Bolsonaro who falsely allege last year’s election was stolen stormed Brazil’s Congress, Supreme Court, and Presidential Palace in Brasília on Sunday. The images were eerily similar to the January 6, 2021 assault on the US Capitol, though Congress was not in session and newly inaugurated President Luiz Inácio Lula da Silva was away. Police cleared the buildings and made hundreds of arrests. But as the tear gas clears, substantial questions remain about the state of Brazil’s democracy and institutions—and what the United States can do in response to the riot. Our experts are on the case.

Click to jump to an expert reaction:

Jason Marczak: January 6 comparisons are an oversimplification, but the US has a role to play now

Valentina Sader: It’s Lula’s time to show strength as democracy is challenged

Iria Puyosa: Brazilian intelligence agencies failed. Here’s what they can do now.

January 6 comparisons are an oversimplification, but the US has a role to play now

Brazil is a divided nation. But hopefully, unlike in the United States, those divisions do not play out in holding accountable those responsible for Sunday’s attacks. Leaders across the Brazilian political spectrum have condemned the violence; what is needed are swift actions to hold responsible those directly and indirectly complicit in the ransacking of Brazilian institutions. That started on Sunday with the arrest of hundreds of looters and the order by Supreme Federal Court Justice Alexandre de Moraes calling for the ninety-day removal of Federal District Governor Ibaneis Rocha following the absolute failure of Federal District security.

Comparisons will continue to be made to January 6. But that is an oversimplification of what happened in Brazil. The January 8 rioters took their cues from the United States, but, in Brazil, rioters were focused on absolute destruction of Brazil’s legislative, judicial, and executive buildings without the ability to disrupt the democratic order. Lula had taken office one week earlier and was not even in the capital city at the time. Still, for the Lula government, the Brasília violence is a wake-up call regarding the forces that will continue to undermine the continued peaceful functioning of Brazil’s institutions.

What should the United States do? Unlike the reaction to the recent self-coup in Peru, from left to right, governments across the Americas and Europe voiced a loud and resounding condemnation of the Brasília attacks. Multiple US officials, including President Joe Biden, forcefully spoke out. This is the moment for the United States to take action to reassure the new Lula government that US support will not be in statements alone. A potential Lula visit to Washington is in the cards for early in the year. That visit should be prioritized and scheduled as soon as possible to show Lula and allies around the hemisphere that the United States is here to help when partners are in need.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

It’s Lula’s time to show strength as democracy is challenged

January 8, 2023 will go down as an ugly day in Brazilian history. The past few months have been clouded by the fear that a January 6-like event would take place in Brazil, and that fear sadly came to fruition on Sunday. One week separates Lula’s inauguration, a celebratory moment for the democratic process and the peaceful transition of power, and this weekend’s violence.

Inspired by the United States’ January 6 riots, the attacks in Brasília targeted all three branches of government. The fact that some police forces, officials, and financial backers appear to have enabled this anti-democratic vandalism underscores the danger to Brazil’s democratic system. The repercussions of this day will be long-lasting.

The United States and the West should see what happened in Brazil as yet another failed attempt by the extreme right to undermine democracy. But amid global trends of declining democratic freedoms and political instability across Latin America and the Caribbean, which country is the next target?

In Brazil, democracy prevailed, but it’s cracked. The country proved that its democratic institutions are resilient, but they still must be strengthened. Lula has an even greater opportunity to do that now. The horror of the day and the eagerness to defend democracy pushed politicians from across the political spectrum to find common ground. That’s a rarity in Brazilian politics, and Lula must seize the opportunity to pacify the country and gain political power in Congress, backed by a pro-democracy front, to show the strength of his government and of Brazilian democracy, to punish those involved, and to move the needle forward on key policy priorities.

—Valentina Sader is the associate director and Brazil lead at the Adrienne Arsht Latin America Center.

Brazilian intelligence agencies failed. Here’s what they can do now.

Brazil’s security and intelligence agencies failed to take effective measures to prevent the assault on the National Congress, the Federal Supreme Court, and the Presidential Palace. They are not the first security forces taken off guard by a popular uprising or an attempted coup d’état. But they had a chance to take preventive measures, given the amount of open-source data available.

Contrary to what typically occurs in attempted coup d’états, the assault on the Brazilian government was publicly announced. The call was not made on fringe or secret sites but in public groups and channels with thousands of followers. Videos, flyers, and texts indicating places and times of departure for Brasília, age requirements to participate, necessary supplies for the trip, and the objective of the mobilization circulated on TikTok, YouTube, public Telegram groups, and public WhatsApp groups for several days.

It is inexplicable that the Brazilian authorities have not investigated these calls and established strong security controls to prevent pro-Bolsonaro extremists from taking over the Square of the Three Powers.

On Sunday, calls began to rise for greater regulation of social media and messaging platforms, even as Brazil has been among the more vigorous countries in Latin America in restricting the circulation of misleading or polarizing content on messaging platforms. Policymakers should consider how intelligence agencies can activate resources for open-source monitoring that do not limit freedom of expression and association of citizens but provide early warnings about actual threats from extremist activities.

—Iria Puyosa is a senior research fellow at the Atlantic Council’s Digital Forensic Research Lab.

The post Experts react: Brazil has suffered its own attack against democracy. Here’s what the government and its allies can do next. appeared first on Atlantic Council.

Aviso LatAm: January 7, 2022

elardizabal — Sat, 07 Jan 2023 15:47:39 +0000

What you should know

Brazil: On January 1, Luiz Inácio Lula da Silva was sworn in as president for a third term after defeating incumbent Jair Bolsonaro.
Outlook: According to the Economic Commission for Latin America and the Caribbean (ECLAC), economic growth will continue to slow in 2023 and reach 1.3 percent.
Venezuela: The opposition-led legislature dissolved the interim government led by Juan Guaidó. The vote signaled that members of the opposition had lost faith in Guaidó’s ability to oust Maduro. The United States will continue recognizing the 2015 National Assembly as the last remaining democratic institution in Venezuela.

Monitoring economic headwinds and tailwinds in the region

Brazil: In 2022, trade surplus reached a record high of $62.3 billion. Total exports also reached a 335 billion high, helped by a boost in prices in the agriculture and livestock sector.
Argentina: The IMF disbursed a tranche of $6 billion from its $44 billion program with Argentina, citing positive indicators including falling inflation, a better trade balance, and foreign reserves.
Colombia: Minimum wage will increase by 16 percent this year, to $242.7 per month. President Petro said the move would boost an economy slowed by inflation.
Dominican Republic: The S&P upgraded the country’s credit rating from “BB-“ to “BB,” highlighting its strong recovery from the pandemic and long-term growth potential.
El Salvador: The government will receive a $150 million loan from the CAF development bank, designed to strengthen its education system in the wake of the pandemic.
Peru: The government launched a $1.6 billion plan to increase welfare and investment in regions gripped by protests following the ouster of former president Pedro Castillo.

In focus: Nearshoring opportunities in the Americas

With the next North American Leaders Summit (NALS) set for this incoming week (January 9 and 10), nearshoring – the relocation of supply chains closer to the United States – is rising in importance.

Rising costs of and delays during shipping, coupled with the pandemic, have made businesses in the United States wary of relying on supply chains across the Pacific. As a result, some 400 companies explored reshoring to Mexico from Asia in 2022. Mexico’s manufacturing sector is now larger than it was before the pandemic, and Mexican exports to the United States have rapidly increased. Firms such as Walmart have already relocated some business to Mexico, while Tesla is planning a new factory in northern Mexico. NALS will pay particular attention to the electric vehicle production chain in North America.

Health + Innovation

Chile: In an effort to curb the spread of the BF.7 COVID-19 subvariant, travelers coming from China are now required to show a negative PCR test.
Haiti: Over 14,700 suspected cholera cases have been reported since December. Nine in every ten cases are from areas hit hard by food insecurity.
PAHO: Most countries in LAC invest less than the minimum 6 percent of GDP in health and allocate less than 30 percent of the health budget to the first level of care as recommended by the regional health organization.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

The post Aviso LatAm: January 7, 2022 appeared first on Atlantic Council.

What might be ahead for Latin America and the Caribbean in 2023? Take our ten-question poll and see how your answers stack up

Adrienne Arsht Latin America Center — Tue, 20 Dec 2022 17:43:26 +0000

2023 might very well define the trajectory for Latin America and the Caribbean (LAC) over the next decade.

While many countries are still on the rebound from the COVID-19 pandemic, new crises—and their effects—are emerging, and are expected to continue into the next year. From global inflation to a costly energy crisis, and from food insecurity to new political shifts, how can the region meet changing dynamics head-on? And how might risks turn into opportunities as we enter a highly consequential 2023?

Join the Adrienne Arsht Latin America Center as we look at some of the key questions that may shape the year ahead for Latin America and the Caribbean, then take our signature annual poll to see how your opinions shape up against our predictions.

How might new regional collaboration take shape across Latin America and the Caribbean with a wave of new leaders? What decision points might shape government policy? Will Bitcoin continue to see the light of day in El Salvador? Are the harmful economic effects of Russia’s war in Ukraine in the rearview mirror for the region, or is the worse yet to come? Will China’s new foreign policy ambition translate to closer relations with LAC?

Take our ten-question poll in less than five minutes!

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Issue Brief Sep 20, 2022

PACC2030: Quick wins for a US-Caribbean partnership on climate and energy resilience

By Wazim Mowla, Riyad Insanally

PACC2030’s success is crucial for CARICOM countries and the United States, and it needs to deliver in the short term to generate confidence that the United States is committed to a sustainable partnership.

Caribbean Economy & Business

Experts react Nov 27, 2022

Experts react: As the US eases oil sanctions, is Venezuela coming in from the cold?

By Atlantic Council experts

With Chevron expanding operations and talks ongoing between the government and the opposition, what’s next for Venezuela? Our experts drill down on the details.

Economic Sanctions Economy & Business

The post What might be ahead for Latin America and the Caribbean in 2023? Take our ten-question poll and see how your answers stack up appeared first on Atlantic Council.

Aviso LatAm: December 17, 2022

jkaufhold — Sat, 17 Dec 2022 14:00:00 +0000

What you should know

Peru: President Castillo was ousted by lawmakers after he sought to dissolve Congress ahead of an impeachment vote.
Brazil: The Economy Ministry rejected assertions by President-elect Lula’s transition team that Bolsonaro’s outgoing administration was leaving government finances “bankrupt.”
Social outlook: A recent Economic Commission for Latin America and the Caribbean (ECLAC) report projects that by the end of 2022, LAC will have 201 million people living in poverty – an increase of 15 million compared to the pre-pandemic situation.
ICYMI: On December 7, the Atlantic Council launched a paper on improving tax policy in LAC. Read it here.

Monitoring economic headwinds and tailwinds in the region

Argentina: signed a new information-sharing agreement with the US designed to root out tax evasion. It could increase tax revenue for Argentina by $1 billion US.
Barbados: concluded new funding arrangements with the IMF, $113 million US to continue its fiscal reform package and $189 million US towards its climate change response.
Brazil: President-elect Lula announced that Fernando Haddad, former minister of education and mayor of São Paulo, would be his finance minister.
Mexico: announced that additional consultations on the USMCA energy dispute would be held through early January, to ensure continued investment and confidence.
Peru: was placed under a state of emergency after protests gripped the country. Political upheaval led S&P to lower the country’s economic outlook to “negative.”
Transatlantic relations: Argentina called for reviewing the potential EU-Mercosur trade agreement, highlighting threats to local auto industry and barriers to agricultural exports.
Uruguay: criticized Mercosur’s inaction on trade agreements with large economies, drawing criticism for its own independent negotiations with China and to join the TPP.

In focus: Guyana’s carbon credits

Guyana is the first country to issue carbon credits designed to prevent forest loss and the first under the ART’s REDD+ Environmental Excellence Standard to ensure integrity and independent verification. The Hess Corporation, which is a partner in an oil consortium led by ExxonMobil that operates in Guyana, will purchase $750 million US of these credits. This move reflects how resilient growth, balancing between the opportunities in the energy sector and protecting its valuable environment, has become a priority in light of climate change and stresses like the COVID-19 pandemic.

These credits will support Guyana’s Low Carbon Development Strategy, with 15 percent of the revenues set aside for indigenous communities. With some 18 million hectares of forest, Guyana is a major carbon sink, and has previously worked with Norway to protect this resource. The new credits reflect Guyana’s status as a “High Forest, Low Deforestation” country, another first.

Health + Innovation

Argentina: Transport Ministry officials recommended all passengers travelling on public transportation to return to wearing face-masks amid a spike in COVID-19 cases.
Universal Health Day: The Pan American Health Organization (PAHO) director called on the region to redouble efforts towards achieving universal health as they begin to rebuild from the pandemic.
Mexico: The state of Nuevo Leon reintroduced the mandatory use of face masks in closed public spaces as the number of COVID-19 infections and other respiratory diseases rise.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

The post Aviso LatAm: December 17, 2022 appeared first on Atlantic Council.

Aviso LatAm: December 3, 2022

elardizabal — Sat, 03 Dec 2022 08:19:00 +0000

What you should know

Economic outlook: The head of the UN Economic Commission on Latin America and the Caribbean (ECLAC) said that the region’s stagnation is ”worse than the 1980s” due to weak investment, low productivity, and inadequate education.
Mexico: Remittances sent from workers abroad surpassed $5.35 billion in October, beating economists’ forecast on US job strength.
#ProactiveLAC: On Wednesday, December 7, the Atlantic Council will host a virtual conversation on LAC’s economic outlook, fiscal policy, and small and medium-sized enterprises in uncertain times. Register here.

Monitoring economic headwinds and tailwinds in the region

Argentina: Upcoming legislation is set to encourage investment in its liquified natural gas sector, as demand, driven by the war in Ukraine, continues to grow.
Bolivia: The country lowered its 2023 growth forecast from 5.1 to 4.8 percent, as an ongoing strike in Santa Cruz has led to over $780 million in losses.
Chile: During the recent high-level dialogue with the United States covering migration and sustainable development, both parties agreed to relaunch their bilateral Science, Technology, and Innovation Council.
Dominican Republic: The United States will block sugar imports from Central Romana, the Caribbean nation’s largest employer, accusing it of using forced labor.
Ecuador: The government is considering a new financing deal with the International Monetary Fund (IMF) for 2023, as its current agreement is set to expire at the end of 2022.
Guyana: According to new ECLAC data, the country recorded the highest FDI growth in the Caribbean in 2021, and now accounts for half of all Caribbean FDI, thanks to its booming hydrocarbon sector.
Peru: Farmers and truckers set up roadblocks to protest rising gas and fertilizer prices, driven up by the war in Ukraine.
FDI: In a 2022 ECLAC report, Foreign Direct Investment (FDI) in Latin America and the Caribbean (LAC) rose by 40.7 percent in 2021 but fell short to achieve pre-pandemic levels.

In focus: Venezuelan thaw

Last weekend, the United States granted Chevron a six-month license to expand operations in Venezuela after the Maduro government agreed to resume talks in Mexico City with the country’s opposition. The two sides signed an agreement to use frozen Venezuelan assets for humanitarian relief as well.

The United States has framed this policy shift as a “targeted” response to promote “concrete steps” forward by the parties meeting in Mexico City. At the same time, the energy crisis driven by Russia’s war in Ukraine has elevated Maduro’s–-and Venezuela’s –-importance in a time of rising oil demand.

Health + Innovation

ICYMI: On November 16, the Atlantic Council launched a report with actionable recommendations for improving immunization program outcomes and financing in the region. Read it here.
Uruguay: Health authorities issued a recommendation that immunocompromised patients and over 50 year-olds should take their fifth dose of the COVID-19 vaccine.
Food insecurity: An ECLAC report found that 56.5 million people in LAC are impacted by hunger.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

The post Aviso LatAm: December 3, 2022 appeared first on Atlantic Council.

The big success and bigger failure of COP27

Atlantic Council — Mon, 21 Nov 2022 14:12:54 +0000

GET UP TO SPEED

The Global South won, but did the climate? Negotiators at the UN climate-change conference known as COP27 extended their stay in Sharm el Sheikh, Egypt to hammer out a final agreement that will create a loss and damage fund to compensate developing countries harmed by climate change. But the deal barely addresses other urgent topics such as reducing greenhouse-gas emissions, even as the consequences of climate change become clearer by the day. Have negotiators done enough to help save the planet and the people on it? What other surprises cropped up at COP? Our experts, who were on the ground in Sharm el Sheikh, are here to weigh in.

TODAY’S EXPERT REACTION COURTESY OF

Kathy Baughman McLeod (@KBMcLeodFLA): Senior vice president and director of the Adrienne Arsht-Rockefeller Foundation Resilience Center
Jorge Gastelumendi (@Gasteluj): Director of global policy at the Adrienne Arsht-Rockefeller Foundation Resilience Center and former climate negotiator for the government of Peru
Landon Derentz (@Landon_Derentz): Senior director of the Global Energy Center and former director for energy on the US National Security Council and National Economic Council

A damaging loss?

While the creation of the loss and damage fund was “immensely welcome,” Kathy tells us, the lack of new emissions-reduction commitments by the countries gathered at COP27 represents an “utter failure” that is “devastating to plans to keep global heating to no more than 1.5 degrees Celsius” above pre-industrial levels, as pledged in the 2015 Paris Agreement.
Jorge says ”current major emitters” such as China, India, Brazil, and Indonesia are let off the hook by the lack of those commitments—and by the fact that, as developing nations, they won’t have to contribute to the loss and damage fund, “which could have been one other leverage point to” make them cut emissions. As a result, countries like these are poised to replace developed countries as the primary cause of climate-related loss and damage.
The structure of the loss and damage fund “also lacks a clear focus on the most vulnerable, which poses fundamental questions about the future use of the funds by recipient countries,” Jorge notes.

Fossil flip-flop

Kathy attributes much of the conference’s failures to attack global warming to the fact that “the fossil-fuel industry is still so deeply influential over country delegations,” with more than six hundred fossil fuel-tied delegates in attendance according to the advocacy group Global Witness.
Vladimir Putin had a say too: Russia’s invasion of Ukraine has contributed to a near-term global energy crisis that at times has sidelined long-term climate concerns. The COP results “did not match the level of urgency many in the climate community were hoping for,” Landon tells us, because “climate action appears to have an energy-security problem.”
Fossil-fuel geopolitics also helped deliver the Global South’s big win. “Europe’s present hunt for conventional oil and gas resources in Africa and Latin America,” a major break from the West’s recent anti-fossil fuel stance, may have “served to disarm” long-running Western efforts to block a loss and damage fund, Landon says.
That’s because this year’s mad hydrocarbon dash is forcing Western countries “to grapple with the consequences of failing to move more swiftly to abate global emissions,” Landon adds.

Adapt or die

For real progress, Kathy says, you have to look beyond the negotiators: “NGOs and civil society, young and indigenous activists, philanthropy and the private sector (particularly the finance and insurance sectors), and mayors and governors played their largest role yet in driving new solutions for climate mitigation and adaptation.”
One example, as Jorge points out, is the Sharm el Sheikh Adaptation Agenda (SAA), a commitment from non-state actors to build climate resilience for four billion of the world’s most vulnerable people. The Resilience Center team helped secure a commitment in the SAA to mobilize some three thousand insurance companies to finance climate-adaptation projects. “In short, we managed to elevate a business-led effort into a global policy platform,” Jorge adds.
Next year’s COP will be a short hop away in the United Arab Emirates, and Kathy says the agenda “will need to focus on adaptation and resilience, and taking the next steps in detail on the loss and damage facility.” But once again, she adds, the formal negotiations will only be part of the story: “I expect action by the non-state actor community, especially around finance, to outpace the official process.”

The post The big success and bigger failure of COP27 appeared first on Atlantic Council.

Lula is back in Brazil. Here’s what’s coming.

Atlantic Council — Mon, 31 Oct 2022 03:56:36 +0000

JUST IN

It’s back to the future. Left-wing former Brazilian president Luiz Inácio Lula da Silva defeated right-wing President Jair Bolsonaro on Sunday in a closely contested runoff election that portends a huge policy shift for Latin America’s largest country on everything from protecting the Amazon rainforest to social justice. How will Brazil reposition itself on the world stage? Our experts peer into the future that awaits.

TODAY’S EXPERT REACTION COURTESY OF

Jason Marczak (@jmarczak): Senior director of the Adrienne Arsht Latin America Center
Tatiana Prazeres: Director of trade and international relations for the Federation of Industries of the State of São Paulo and columnist for the Folha de São Paulo newspaper
Valentina Sader (@valentinasader): Associate director and Brazil lead at the Adrienne Arsht Latin America Center

Left turn?

Lula joins a growing set of left-leaning leaders across the continent, including Andrés Manuel López Obrador in Mexico, Gabriel Boric in Chile, Gustavo Petro in Colombia, and Alberto Fernández in Argentina. But Jason says that “characterizing Lula’s election as part of a shift to the left in the region oversimplifies the state of regional politics.”
Instead, the voters’ verdict is about the need for leaders who can deliver. “People want leaders who they think will govern with a deeper interest in making the average person’s life better, especially as inflation and high food and energy prices take hold,” Jason adds. The “clear frustration in Brazilian society with the status quo”—reflected in the fact that Bolsonaro has now become the first president since Brazil transitioned to democracy to not win re-election— mirrors results “in democracies around the world.”

Southern hospitality

When he was in office the first time, from 2003 to 2010, “Lula cast himself as the leader of the Global South,” Jason tells us, and we can expect a return of that brand of “South-South diplomacy.” But at the same time, look out for a Lula-led Brazil to deepen its partnerships with the United States and Europe “in the areas of trade and environmental cooperation,” he adds.
Tatiana predicts that Lula will see the BRICS grouping of emerging economies—Brazil, Russia, India, China, South Africa—as “an important platform not only to improve dialogue among its participants but also to influence global discussions,” though she notes that “it is unclear how the new administration will see China’s push to expand BRICS and shape it as a counterweight to the West.”
While Tatiana expects more cooperation between Brasília and Beijing relative to the Bolsonaro years, she said the jury is out on whether Brazil will join China’s Belt and Road Initiative (BRI): “Brazil could consider collaborating with or supporting BRI projects, including in other countries, without formally joining the initiative, in a [show of] somewhat hedged support.”
More broadly, “a key challenge for Lula is to leverage Chinese investments and technologies to help reinvigorate Brazilian industry,” Tatiana adds.

Sigh of relief—for now

While there were outbreaks of violence late in the campaign that had the world “on edge,” Jason notes that election day “passed without major incidents.”
And Valentina said the biggest winner may have been Brazil’s electronic voting system. “It allowed for confidence in the results being released within hours of voting sites closing, effectively constraining any credible questioning of the result,” she says.
The results showed that Lula won with about 51 percent of the vote, a margin of some two million votes, but as of this writing Bolsonaro had yet to concede—after intimating for months that he planned to challenge any loss at the ballot box.
US President Joe Biden issued a congratulatory statement within minutes of the election being called in Lula’s favor by the Superior Electoral Court, helping legitimize the result. It was, Jason tells us, “an important step” to “shore up the importance of US-Brazil ties.”
To seal the deal, Jason hopes that the Biden administration will “send a steady stream of high-level representatives” to meet with the incoming administration, just as it has done in Colombia.

The post Lula is back in Brazil. Here’s what’s coming. appeared first on Atlantic Council.

Experts react: Lula defeats Bolsonaro in Brazil. What should the region and the world expect?

Atlantic Council experts — Mon, 31 Oct 2022 02:13:27 +0000

It’s back to the future. Luiz Inácio Lula da Silva, the left-wing former president of Brazil, recorded a narrow victory over right-wing current president Jair Bolsonaro in a runoff election Sunday. Lula, as he is known, called the victory a “resurrection;” after he served two terms as president, he spent time in jail for corruption before the conviction was overturned. The new administration will initiate an abrupt policy shift for Latin America’s biggest country both at home and abroad—and the transition could be rocky, as Bolsonaro has sought to undermine the legitimacy of the vote. How will this all play out on the world stage? We turned to our Latin America experts for the answers.

This post will be updated as the news develops and more reactions come in.

Jump to an expert reaction

Jason Marczak: A critical moment to shore up US-Brazil ties

Tatiana Prazeres: Expect closer cooperation between Brazil and China

Valentina Sader: The biggest winner? Brazil’s electronic voting system

Abrão Neto: Lula’s environmental stance will bring closer US ties

A critical moment to shore up US-Brazil ties

Brazilians and the world were on edge on Sunday, uncertain of how voting would play out following violence and polarization during the campaign. While there were a few incidents—which included highway police making it difficult to get to the polls in certain Lula strongholds—the day passed without major problems.

Lula’s win by over two million votes is a major development for Brazil: Bolsonaro is now the first president in the democratic history of Brazil to not win re-election. The rejection of an incumbent president—although by smaller margins than expected—shows the clear frustration in Brazilian society with the status quo, which continues to play out in democracies around the world.

When Lula becomes president again on January 1, 2023, his third term will signal a likely return to the South-South diplomacy that characterized his previous terms, in which Lula cast himself as the leader of the Global South. It is expected that he will increase collaboration between Brazil and other governments with similar perspectives such as those in Argentina, Chile, Mexico, and Colombia. Characterizing Lula’s election as part of a shift to the left in the region oversimplifies the state of regional politics. Rather, the shift is a sign that people want leaders who they think will govern with a deeper interest in making the average person’s life better, especially as inflation and high food and energy prices take hold.

As in Colombia, the Biden administration will hopefully send a steady stream of high-level representatives to Brazil to meet with Lula and his team. It’s an essential moment to shore up the importance of US-Brazil ties. The White House took an important step in that direction with a quick statement congratulating Lula soon after he was declared the winner. With concerns about whether the results would be as expected, this was an important move by the United States; many European and Latin American governments have done the same. Lula has made it clear that he sees the United States and Europe as valuable partners for Brazil, especially in the areas of trade and environmental cooperation. In the next administration, Brazil’s engagement with Latin America and the Caribbean will depend on ideological affinity but also on pragmatic areas of collaboration.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

Expect closer cooperation between Brazil and China

Under Lula, two new priorities are likely to emerge in Brazil’s foreign policy: sustainability, from a substantive standpoint, and South America, from a geographical one. Both priorities mark a departure from Bolsonaro’s worldview; both reflect Lula’s understanding that Brazil needs to rebuild its international reputation as well as its ability to influence global and regional discussions. Lula’s narrative is likely to put significant emphasis on restoring Brazil’s credibility abroad.

In addition, Lula is expected to take a different approach to China-Brazil relations, deepening bilateral relations in areas beyond the economy.

Despite negative rhetoric against China during the Bolsonaro administration, trade and investment between the two countries evolved largely undisturbed. However, the political noise generated by the anti-China discourse prevented the deepening of bilateral relations in other policy areas, such as science and technology. The strong economic relationship between the two countries does not match their less intense political relationship; this deepened in Bolsonaro’s years. Under Lula, we can expect Brazil and China to explore other areas for cooperation.

The future of the BRICS grouping of developing economies may also take a different turn under Lula. While Bolsonaro has never rejected fellow BRICS countries, his priorities focused elsewhere, particularly on promoting Brazil’s accession to the Organisation for Economic Co-operation and Development. It is unclear how the new administration will see China’s push to expand BRICS and shape it as a counterweight to the West. It is clear though that the Lula administration will see BRICS as an important platform not only to improve dialogue among its participants but also to influence global discussions.

Some analysts are betting that, under Lula, Brazil would join the Belt and Road Initiative (BRI). It remains to be seen how far Lula would go in that regard. It may well be that Brazil takes a more positive approach toward the Chinese initiative. Having said that, Brazil could consider collaborating with or supporting BRI projects, including in other countries, without formally joining the initiative, in a somewhat hedged support.

Lula’s efforts to promote Brazil’s reindustrialization may cause some friction with China but, by and large, that should not derail bilateral relations, in part because of the powerful agribusiness sector. A key challenge for Lula is to leverage Chinese investments and technologies to help reinvigorate Brazilian industry. Sustainability also provides renewed opportunities for cooperation with China, which Lula would be keen to explore.

—Tatiana Prazeres is director of trade and international relations for the Federation of Industries of the State of São Paulo and a columnist for the Folha de São Paulo newspaper.

The biggest winner? Brazil’s electronic voting system

With a two-million-vote difference between Lula and Bolsonaro, Brazil is clearly split down the middle. The hyperpolarization that marked the months leading up to the election was reflected in tonight’s results. As such, the biggest winner tonight may not have been Lula, but Brazil’s electronic voting system. It allowed for confidence in the results being released within hours of voting sites closing, effectively constraining any credible questioning of the result. The once again newly elected President Lula will be tasked with uniting a country that is split in half, and he must confront much more difficult economic and political circumstances than he faced when he was first elected in 2002. But if there is anything Brazilians should appreciate tonight, it is the efficiency and reliability of their voting system.

—Valentina Sader is the associate director and Brazil lead at the Adrienne Arsht Latin America Center.

Lula’s environmental stance will bring closer US ties

The election of Lula as president for a third term will lead, among other things, to a substantial change in Brazil’s environmental agenda. As a consequence, this is likely to benefit Brazil’s external image and improve its relationship with several countries, including the United States.

US-Brazil economic relations will continue to be driven by pragmatic mutual interests. The fact that bilateral trade and investment flows are so important to each of the countries is favorable for continuous and constructive engagement. A renewed stance from the Brazilian government on climate change and other environmental issues might offer an extended avenue for bilateral cooperation, with positive spillovers for the overall political and economic relationship between the United States and Brazil.

—Abrão Neto is a nonresident senior fellow at the Adrienne Arsht Latin America Center, executive vice president of Amcham Brasil, and former secretary of foreign trade of Brazil.

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Aviso LatAm: October 30, 2022

jkaufhold — Sun, 30 Oct 2022 19:45:00 +0000

What you should know

Regional recovery: Of the 20 million people in Latin America who fell into pandemic-induced poverty, only 7 million have escaped it during the recovery.
Nicaragua: The United States announced new sanctions on its mining industry in response to continued repression, targeting its largest export, gold.
Brazil: Incumbent President Bolsonaro and former President Lula de Silva will face off in a second-round run-off election this Sunday. Join us Monday for post-election analysis.

Monitoring economic headwinds and tailwinds in the region

Brazil: The government nominated its former central bank director, Ilan Goldfajn, for the presidency of the Inter-American Development Bank. Also nominated is Alicia Bárcena, former head of ECLAC, by Mexico.
Cuba: The United States granted $2 million in humanitarian assistance to assist in the country’s recovery from Hurricane Ian last month.
Ecuador: The government secured joint IDB-EU funding for an energy interconnection project with Peru, estimated to save $61 million annually through reduced fossil fuel use.
Jamaica: The country welcomed a $300 million investment by Huawei in an effort to double down on its goal of digital transformation.
Peru: Ongoing political instability prompted a new negative rating for its credit outlook, attributed to cabinet reshuffling and impeachment attempts against President Pedro Castillo.
ECLAC: This week, the Economic Commission for Latin America and the Caribbean (ECLAC) redoubled its commitment to transform development models for productive regional transformation during its thirty-ninth session.

In focus: Transatlantic ties

A recent report highlights the potential for strengthening European investment and connections with LAC, focusing on three main pillars: digital connectivity, cybersecurity, and digital rights. Emphasizing the key opportunity of Spanish leadership through Spain’s upcoming presidency of the EU, the report also explores the potential of the EU-LAC Digital Alliance planned for 2023.

At the same time, the EU High Representative for Foreign Affairs, Josep Borrell, attended the fourth EU Investment Forum in Montevideo this week. He used the opportunity to reaffirm European commitment to a free trade agreement with Mercosur.

Health + Innovation

Ecuador: The latest country to drop all travel restrictions and return to pre-pandemic entry policies for foreigners.
Brazil: Brazilians paid tribute in São Paulo to COVID-19 victims. To date, Brazil has lost 680,000 lives to the pandemic.
Recovery: The World Bank granted Guatemala a recovery loan for healthcare and social services in the wake of the COVID-19 pandemic.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

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Lula vs. Bolsonaro: Your expert breakdown of Brazil’s presidential election runoff

Atlantic Council experts — Mon, 03 Oct 2022 03:21:57 +0000

And then there were two. On Sunday, Brazilian voters sent left-wing former President Luiz Inácio Lula da Silva and right-wing current President Jair Bolsonaro to a runoff to determine who governs Latin America’s largest country for the next four years. The results—Lula earning about 48 percent to Bolsonaro’s 43 percent and other candidates in the low single digits—set up a four-week sprint to the finish and a test for Brazil’s democracy. To make sense of the results and fill us in on what’s next, we turned to our top Brazil and Latin America experts.

What do the first-round results, with Bolsonaro closer to Lula than polls had indicated, tell us about the runoff?

If there is a winner from this first round of presidential elections in Brazil, it is Bolsonaro. Polls indicated that Lula could get close to winning in the first round by securing 50 percent of the vote. Not only did he not—which is not necessarily a surprise—but Bolsonaro had higher percentages than some may have anticipated. In addition to the presidential race, Bolsonaro’s former ministers and key supporters were successfully elected. Marcos Pontes and Damares Alves were elected senators to São Paulo and the Federal District, respectively; General Eduardo Pazuello was one of the highest vote-getters among federal deputies for the state of Rio de Janeiro, and Tarcísio de Freitas, although not elected, is leading heading into the second round for governor of São Paulo against Fernando Haddad from the Workers’ Party—ending almost thirty years of the Brazilian Social Democratic Party’s reign in the state. These results may ignite more energy for Bolsonaro’s supporters, increasing his chances on October 30. Lula will likely appeal to Simone Tebet of the Brazilian Democratic Movement for support after she finished in third place with about 4 percent of the vote. But if Lula is elected, with these newly elected Bolsonaro supporters in Congress, it could be challenging for him to pass legislation and govern effectively.

—Valentina Sader is an associate director and Brazil lead at the Adrienne Arsht Latin America Center.

What are the primary differences between the two candidates’ platforms?

We’ll know the night of October 30 who will be the next president of Brazil. Even though Lula received nearly 5 percentage points more votes tonight, that is by all means not an indication that he will have the same margins later this month. With a highly contentious electoral cycle, which will become even more polarizing in the next few weeks, Bolsonaro and Lula will each take extra steps to show differences in how they would govern.

On the economic front, Bolsonaro proposes a continuation of his economic priorities, doubling down on a business-friendly, open-market economy and diminishing the size of the state through privatizations. Lula’s campaign has focused on how he would bring back the prosperous economic times under his watch when in office. His economic approach will aim to tackle hunger and poverty levels.

For both, regardless of who wins on October 30, the priority should be on fostering economic growth and sustainable development, while also maintaining fiscal responsibility. Guaranteeing a stable political environment and an attractive business climate will be critical for attracting foreign investment and advancing long-term prosperity.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

How would each candidate likely work—or not work—with the United States, Europe, and Latin America and the Caribbean once in office?

If the polarization that marked this electoral cycle is indicative of the next four years, what’s clear is the extremely different ways in which Bolsonaro and Lula would govern—and foreign policy is no exception. International affairs were not a central topic in this year’s debates, and the lack of attention to the implications of global developments is a testament to the inward gaze of Brazil in recent years. Don’t expect that to change as the campaigns dig in deeper for the second round.

Looking back to the prosperous economic times under his watch, Lula would again prioritize cooperation across the Global South and would work to regain the prominent role Brazil once had internationally. Lula would often prioritize a mutually beneficial relationship with the United States and Europe, but, as during his previous presidency, moments of tension are likely to arise. Common ground would certainly be found when it comes to adopting more ambitious climate commitments.

Bolsonaro would continue to lead Brazil’s foreign policy with an economic focus, prioritizing steps focused on an open-market economy. In Latin America and the Caribbean, where recent elections have shifted the political tendencies to the left, Bolsonaro’s right-leaning approach would be met with skepticism from some of the region’s newest leaders. Bolsonaro would have to either compromise to find common ground regionally or risk being an outlier. The next president must align his foreign policy to meet domestic demands and international challenges.

—Jason

Bolsonaro has already sowed seeds of doubt in Brazil’s electoral integrity. What can we expect to see from him during this runoff, and what does that say about Brazil’s democratic trajectory?

Bolsonaro’s questioning of the political system has ignited democratic institutions in Brazil to double down on their efforts to raise awareness and regain public confidence in their proper functioning. The United States and the international community have also recommitted their trust in Brazil’s electoral system and in the legitimacy of results. Sunday’s first round was a testament to how the Electoral Superior Court, among other institutions, have been getting ahead of any potential crisis by tackling disinformation and bringing in international observers at polling stations. These efforts will continue in the runoff. As democracies across the world experience declines in democratic freedoms and questioning of democratic principles even beyond elections, this is an opportunity for Brazil to strengthen its democratic institutions to ensure an even more robust democracy.

—Valentina

The post Lula vs. Bolsonaro: Your expert breakdown of Brazil’s presidential election runoff appeared first on Atlantic Council.

Aviso LatAm: October 1, 2022

elardizabal — Sat, 01 Oct 2022 14:04:44 +0000

What you should know

Brazil: Incumbent Jair Bolsonaro and former President Luiz Inácio Lula da Silva will face off in presidential elections this Sunday, October 2. See more below.
4.1 million: The number of people facing food insecurity in the English and Dutch-speaking Caribbean. This amounts to 57 percent of the total population.
Diplomatic relations: Colombia and Venezuela reopened their border to vehicles transporting goods following several years of politically-induced closure.

Expert take: Looking ahead at Brazil’s presidential election

From state-level representatives to Congressional members to the next president, Brazilians have their work cut out for them this Sunday. Brazil’s economy is rebounding but new challenges still lie ahead. Political leadership and the innovative economic policies that come with it will be vital to navigating these challenges, particularly in an uncertain and evolving global context.

Clouded by an extremely polarizing political campaign, polls suggest the contest will be between former President Luiz Inácio Lula da Silva and incumbent President Jair Bolsonaro. On the economic front, President Bolsonaro proposes a continuation of his economic priorities, doubling down on a business-friendly, open-market economy. On the other hand, former President Lula will adopt a pragmatic approach with a focus on a social agenda, targeting hunger and poverty levels. The challenge, regardless of who wins on October 2 or October 30 (if there is a second round), is in Congress, which will likely be highly fragmented. In that regard, the pandemic will continue to play a role in politics with the economy – and fiscal responsibility – at the top of the priority list for the next administration.

Staff

Valentina Sader

Deputy Director, Impactful Programming and Brazil Lead

Adrienne Arsht Latin America Center

Brazil Corruption

Monitoring economic headwinds and tailwinds in the region

Honduras: The Central American Bank for Economic Integration (CABEI) issued a $200 million loan in order to mitigate fuel price pressures.
Brazil: Despite a boost in activity as COVID-19 infections drop worldwide, real GDP growth projections for 2022 and 2023 are set to slow from 2.5 percent to 0.8 percent, respectively.
Cuba: Hurricane Ian made landfall as a Category 3, knocking out power for the whole island. This comes after several months of intermittent blackouts due to failing power generators.
Mexico: AMLO announced an agreement with companies to freeze prices on key foods as the country battles inflation of 8.8 percent.
Paraguay: Officials met with the US for the first trade and investment council under their bilateral Trade and Investment Framework Agreement (TIFA) to discuss ways to deepen trade ties along intellectual property, agriculture, and the digital economy.
Ecuador: The government announced it reached a debt agreement with Chinese lenders, delivering $1.4 billion in debt service relief over the next three years.
Argentina: The International Monetary Fund (IMF) reached an initial agreement on reviewing the country’s debt restructuring, and is set to make $3.9 billion available upon completion.

In focus: LAC-Europe Relations

Several meetings covering transatlantic relations with Latin America and the Caribbean convened on the sidelines of last week’s United Nations General Assembly, including the Fifth Forum on Latin America, the United States, and Spain in the Global Economy, and AALAC’s side event “From Ukraine to the Americas: Fortifying recovery against global shocks.”

Spain’s Prime Minister, Pedro Sánchez, spoke with Colombian president Gustavo Petro about issues affecting both Latin America and Spain, including climate change and supply chains. Spain is set to hold the next presidency of the European Union, and hopes to revitalize EU-LAC ties. At the Atlantic Council’s event, Josep Borrell, Vice President of the European Commission, spoke about the EU’s willingness to work with LAC on key issues worsened by the Russian invasion of Ukraine, such as food insecurity and gas shortages. Both discussions focused on the importance of relocating supply chains to ensure stability.

Health + Innovation

Argentina: A laboratory manufacturing Russia’s Sputnik V COIVD-19 vaccine announced it would halt the production line to target other types of diseases.
PAHO: Ministers of Health and other high-level authorities from around the Americas met on September 26 for the organization’s 30^th Pan American Sanitary Conference. At the conference, Dr. Jarbas Barbosa da Silva Jr. of Brazil was elected new Director for PAHO.
COVID-19: Life expectancy in LAC for 2022 fell 2.9 years, from 75.1 years in 2019 and 72.7 years in 2021.

Geopolitics of vaccine donations: US vs. China

The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

See more from Aviso Latam:covid-19

The post Aviso LatAm: October 1, 2022 appeared first on Atlantic Council.

Democratic institutional strength before and beyond elections: The case of Brazil

Valentina Sader — Thu, 15 Sep 2022 13:00:00 +0000

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Introduction
The case of Brazil: A young, yet resilient democracy
A stronger democracy in the long run
The role of the United States and the international community
Conclusion
Acknowledgements

Brazil—Latin America’s largest economy and the fourth-largest democracy in the world—will elect its next president, governors, congress, and state-level assemblies in October 2022. This is one of the most momentous elections in recent years, a result of the inflection point that Brazil faces alongside concern about what may transpire on the day of the election and in the days afterward. This uncertainty, combined with global trends of declining democratic freedoms in recent years, suggests that in the aftermath of the October elections, Brazil has an opportunity to reinforce efforts to strengthen its institutions and recalibrate its democracy to meet domestic and global challenges. This issue brief compiles actionable recommendations for Brazil to do just that.

Introduction

At the 2022 Summit for Democracy, President Joe Biden noted that democratic backsliding is the “defining challenge of our time.”¹

Democracy, as a system of government, is ever evolving. However, democratic freedoms have been waning worldwide for the past sixteen years.² In 2021, twice as many countries lost civil liberties and freedoms compared to those that improved them.³ Today, more than two-thirds of the world population lives in nondemocratic regimes, or in countries that have seen democratic backsliding in recent years.⁴

U.S. President Joe Biden convenes a virtual summit with leaders from democratic nations at the State Department’s Summit for Democracy, at the White House, in Washington, U.S. December 9, 2021. REUTERS/Leah Millis

This trend also holds true in Latin America and the Caribbean. Authoritarian regimes in Venezuela, Cuba, and Nicaragua have survived for years. Other countries in the region have seen a dramatic decline in civil liberties. According to 2021 data, half of the countries in Latin America and the Caribbean are experiencing some degree of democratic erosion.⁵

Brazil is no exception to these global trends. The October elections offer an opportunity to begin addressing concerns about the resilience of its democracy. From the state to the national level, Brazilians will have an opportunity to choose the future trajectory of their democracy. The challenges that Brazilian democracy has confronted in recent years—beginning with the massive demonstrations of 2013 and continuing through questioning of the democratic model among some sectors in recent years—suggest that, regardless of which parties and politicians are elected, Brazilians must prioritize strengthening their democratic institutions now, and in the years to come.

The case of Brazil: A young, yet resilient democracy

As the world undergoes a wave of democratic questioning, and even backsliding, Brazilians head to the polls as the country is at a crossroads, making it important to shift its gaze from the headlines of the day to thinking about longer-term solutions to the country’s political crisis.

Brazil is a young democracy. It was not until 1989 that the country held its first direct presidential elections, after the end of the military dictatorship. Since then, Brazilian democracy has made great strides, establishing a well-regarded electoral system, overcoming hyperinflation and economic crises, and consolidating around a vibrant party system.

The October 2022 elections are a crucial test for Brazilian democracy. Although the elections will be another opportunity to see democracy in action, increasingly high levels of polarization and disinformation have contributed to extremist narratives, episodes of violence, and the questioning of democratic principles.

Workers from Electoral Court check performance of electronic voting urns in Curitiba, Brazil June 24, 2022. REUTERS/Rodolfo Buhrer

The Brazilian electoral process has been regarded as one of the fastest and most reliable in the world. But the turbulent run-up to the election has raised concerns that the transparency and fairness of democratic processes may be undermined, and that the resiliency of the electoral process and democratic institutions will be tested. Ensuring the integrity of this process, while also mitigating the risk of political violence, is imperative. Any action to further strengthen the resilience of Brazil’s democratic system is contingent upon an electoral process that fosters the proper function of institutions, and protects civil society and an independent media. This critical moment presents a unique opportunity for Brazil to further bolster its democratic system and public trust in its democracy in the years to come.

Over the past generation, Brazilian democracy has fluctuated between moments of high confidence in the democratic system and periods of political and institutional crisis, in which the strength and resilience of its democracy were in doubt. In recent years, Brazilian democratic institutions have risen to the challenge of recalibrating their capabilities to face new challenges.

Three examples illustrate their resilience. First, in response to the COVID-19 pandemic, Brazil was able to delay the electoral process and shift the date of municipal elections, all within the bounds of its constitution.⁶ Further, state and local governors adopted a variety of strategies to respond to the pandemic, with democratic federalism contributing to a panoply of experiments for addressing isolation and lockdown measures.⁷ Second, following antidemocratic protests in September 2021 that included messages threatening the Supreme Court and elections, a variety of representatives of democratic institutions (such as the Supreme Court, the House of Representatives, the Senate, civil-society organizations, and the media), came together to publicly condemn such proposals.⁸ The backlash forced President Jair Bolsonaro to change his tone and back down from his more extreme positions.⁹ Lastly, the manifestation of professors, jurists, students, civil-society representatives, business leaders, and former and current government officials, through a letter with more than nine hundred thousand signatories in favor of democracy in Brazil, is yet another example of the esteem for democratic principles and respect of civil liberties, especially when institutional credibility is questioned.¹⁰

Demonstrators take part in a protest for democracy and free elections and against Brazil’s President Jair Bolsonaro, at Paulista Avenue in Sao Paulo, Brazil, August 11, 2022. The sign reads “Democracy” REUTERS/Carla Carniel

Brazilian institutions are already taking concrete steps to fortify their capabilities ahead of, and beyond, the upcoming electoral cycle. Such efforts are, and will continue to be, important to ensure a healthy democracy. But as we look ahead, even beyond the October elections, what mechanisms are needed to prevent backsliding and foster the resilience of democratic institutions and the strength of Brazilian democracy in the coming years?

A stronger democracy in the long run

In July 2022, the Atlantic Council held individual consultations and convened a group of key Brazilian and international experts from civil-society organizations, the public and private sectors, academia, the press, and others to discuss concrete ways in which Brazil could further support its democratic system ahead of, and beyond, the upcoming elections. Below are actionable recommendations for next steps, including suggestions for the role the United States and the international community could play to support a prosperous Brazilian democracy in the long run.

Institutionalize unwritten democratic norms that ensure independence. In recent years, many unwritten democratic norms have been taken for granted and, in some cases, flaunted. One example is the nomination of the prosecutor general of the republic (PGR), the lead of the federal prosecutorial service (Ministério Público Federal, MPF). Constitutionally, the nomination of the PGR must follow a process that includes presidential nomination and approval by the Senate.¹¹ Customarily, however, since 2003 the president selects a name from a list of three names chosen by prosecutors. The benefit of this so-called lista tríplice is that it ensures some coherence within the MPF, as well as ensuring that the prosecutor general is more independent from the other branches of government.

To reinforce checks and balances, institutionalizing such norms and consolidating the autonomy of institutions with political oversight is imperative. The practice of selecting the PGR via a lista tríplice guaranteed an initial layer of independence to the prosecutor general’s role. This was especially important because the MPF should remain autonomous given its oversight role, including in the electoral process.¹² Thus, institutionalizing such norms would ensure the impartiality of the prosecutor general’s nomination and foster the autonomous role of the MPF within the political system, while also reaffirming the independence of the Brazilian judiciary and its prosecutors. Using the example of the lista tríplice for the MPF, instilling processes in other democratic organs—such as the Federal Police, the Federal Accountability Office (TCU), and the Comptroller General of Brazil (CGU)—could be internal mechanisms to guarantee checks and balances, and the appropriate indepence of these offices from established political forces and interested groups.

Address challenges for effective rule of law. To ensure a vibrant democracy, the rule of law must be effective. In Brazil, 17.6 people were killed daily by police forces in 2020, with such violence rarely leading to consequences.¹³ Data show that 28 percent of federal officeholders have been investigated or indicted for criminal behavior, while only a handful have been held accountable.¹⁴ In the case of the state of Rio de Janeiro, for example, members of militias and organized-crime groups also have ties to the political system.¹⁵ These data imply that strengthening the rule of law remains a key challenge. Better trainings for police forces to address abuses, reforms to oversight agencies to improve the accountability of Brazil’s judicial system, and fostering a lawfulness culture through the school system and civil-society activism could help ensure the effectiveness of the rule of law, while also targeting the younger generations as positive agents of change, and promoters of democracy and the rule of law.

Depoliticization of the armed forces. The armed forces are a state institution responsible for protecting the sovereignty of the state, the order of the democratic system, and the safety of citizens, while also guaranteeing the ability of the three branches of government to properly function.¹⁶ As such, the armed forces must remain impartial in politics. In recent years, active military officials have taken civil positions within the Brazilian political system. As a way of example is Minister Eduardo Pazuello, a three-star general, as Minister of Health.¹⁷ Even in the constitution, deepening and solidifying the impartiality of the armed forces is imperative for the proper control of powers within the democratic system. Congress should take a more active role in ensuring this impartiality, as it began to do with a bill introduced in 2021 that aims to clarify the role of the armed forces and active military in the political system.¹⁸ It is critical for the military, the police, and members of any state institutions to refrain from any interference in political and political party-based activities—including, but not limited to, the elections.

Ensure equitable political representation. There has been long-standing dissatisfaction with the lack of representativeness of the political system. Women represent more than 50 percent of the Brazilian population, yet account for only about 15 percent and 13 percent of representatives in the House and the Senate, respectively. The data are just as concerning for other groups. Ensuring better representation and equal participation in politics by women, indigenous communities, black Brazilians, and other marginalized groups would be a first step in having a better representation of Brazilian society at the decision-making table and, thus, more effective public policies to target their needs. More ambitious goals and affirmative action would help to move Brazil in that direction. However, enforcement is also imperative. Brazil has a gender quota requiring that women make up 30 percent of candidates for political parties. But lack of incentives for further engagement of women in politics, in addition to the high number of cases of violence against women in politics and structural imbalances, limit the potential for women’s equitable participation.¹⁹ New legislation that aims to punish violence against women in politics, in effect for the 2022 elections, is a first step in that direction.²⁰ Civil society has an important contribution to make in monitoring and denouncing cases of violence against women in politics, including those happening virtually. In addition to monitoring, electoral agencies should follow through on the enforcement of this legislation. Establishing the means through which more women could take on leadership positions in political bodies and parties could help push Brazilian politics toward more realistic representation and actual participation.

Safeguard a welcoming environment for a vibrant civil society. Among many actors in healthy and vibrant democracies, civil society and the media play key roles in ensuring a healthy public debate and a democratic political system. In Brazil, journalists and activists often face dangerous threats against their activities, and even their lives. Journalists Conrado Hubner and Patricia Campos Mello faced intimidation for criticizing political figures, while journalist Dom Phillips and activist Bruno Pereira were killed in 2022 during an excursion in the Brazilian Amazon, apparently for photographing illegal fishing in the area.²¹

Indigenous people attend a protest demanding justice for journalist Dom Phillips and indigenous expert Bruno Pereira, who were murdered in the Amazon, in Sao Paulo, Brazil June 23, 2022. REUTERS/Carla Carniel

In addition to further bolstering safeguards for press freedom, respect for and inclusion of perspectives from civil-society organizations, among other stakeholders, is imperative to promote effective public policies—and a democratic system that delivers to its citizens. Further cooperation among civil-society organizations, domestically and internationally, could boost the role and significance of these voices within Brazil. More coordinated efforts—from local associations to leading international civil-society organizations in country—would help promote a louder and more cohesive voice for civil society in Brazil. This was recently done through a letter with more than three thousand signatories, including former Supreme Court justices, actors, musicians, and even executives, expressing their support for democracy and trust in the Brazilian voting system.²² In addition, guaranteeing penalties for intimidation against civil-society representatives, as well as members of the media, is also imperative to safeguarding a prosperous environment for independent civil society and media.

Further strengthening institutional capabilities to manage the challenges of disinformation. Disinformation and misinformation are global challenges. As such, Brazil’s Electoral Supreme Court (TSE, in Portuguese) has prioritized disinformation as a challenge to the electoral processes in 2022 and beyond. Brazilian institutions, civil-society organizations, fact-checking bodies, and news outlets should work together to mitigate impact and risks. Based on the developments that unfolded after the US elections in 2020—including, but not limited to, January 6—as well as the role that disinformation played in Brazilian elections in 2018 and 2020, TSE established partnerships with social media and messaging platforms, creating a united front to mitigate risks and raise awareness to the known challenge of disinformation.²³ This is a proactive initiative to promote and endure the credibility of electoral bodies. To go one step forward, Brazilian news outlets could use already-established COVID-19 data-gathering strategies and go directly to local and state governments to identify disinformation and its sources. This strategy could facilitate and speed up the work of fact-checking institutions in explaining disinformation, of the media (and TSE itself) in countering and spreading it, and of social media platforms in removing it, as appropriate. Overall, having a more coordinated civil society and safeguarding an independent media will result in greater checks against authoritarian tendencies.

Re-establish trust in the political system and foster civic engagement beyond electoral cycles. In recent history, corruption cases among politicians, disinformation, misinformation, and other factors have exacerbated distrust in political institutions in Brazil.²⁴ Polarization has also deepened political and social divides. Regaining confidence in the democratic system is an uphill battle. However, in the long run, revigorated trust in the political system is imperative to foster civic engagement beyond electoral cycles. As a fundamental principle of democracy, broad and active civic engagement is essential to fortify an established and well-functioning democracy in Brazil. This educational effort must begin in schools, to educate the next generations to be active and engaged citizens, and to tackle the question of what democracy means.

17-year-old Vitoria Rodrigues de Oliveira takes a photo of a young woman to register her to vote for Brazil’s upcoming elections in Sao Joao de Meriti in Rio de Janeiro state, Brazil April 5, 2022. Picture taken April 5, 2022. REUTERS/Pilar Olivares

But developing a comprehensive awareness-raising campaign—led by government agencies, in coordination with civil-society organizations and other key actors—could be a first step in the right direction to clarify the roles and responsibilities of elected officials and other public figures, as well as individuals’ rights and duties. In a country where voting is mandatory (with a few exceptions), society must have the tools to make well-informed decisions about its political representatives. Most importantly, only a well-educated society with access to transparent and accurate information, and comprehension of the political game, can hold politicians and democratic institutions accountable.

The role of the United States and the international community

Support immediate recognition of results and quick confirmation of the legitimacy of the electoral process. Given Brazil’s electronic-voting system, electoral results are determined and announced on the same day elections are held. The agility of the system and the seal of credibility given by international recognition curbs potential unrest in the expectation of results. As such, the international community, represented by individual countries and international organizations, must be able to recognize the legitimacy of results immediately after their announcement.

Continuing the long tradition of welcoming international electoral-observation missions, the upcoming elections will include missions from the Organization of American States, Mercosur’s Parliament, and the Inter-American Union of Electoral Organizations (Uniore).²⁵ These missions should aim to release their verdicts on the freedom and fairness of the electoral process quickly, ideally no more than forty-eight hours following Election Day. Beyond the electoral cycle, countries should be explicit in recognizing the historical respect of Brazil toward its democratic system and principles, as well as efforts to improve their capabilities. The United States, for example, recently endorsed trust in the Brazilian electoral system, following questions about the legitimacy of this process.²⁶

Establish a US-Brazil high-level dialogue on democracy promotion. In the context of recent commitments made by both the United States and Brazil on the occasion of the Summit for Democracy, both countries restarted the US-Brazil Human Rights Working Group. This is one step forward in both countries’ efforts to strengthen their own democracies and promote the principles of a rules-based order globally. Given similarities and the strong, historic partnership between the United States and Brazil, both countries could benefit from a more direct dialogue in terms of best practices and lessons learned with regard to common challenges to democracy, and potential common solutions. More broadly, high-level cooperation on this front would safeguard principles of a rules-based democratic order, in addition to deepening the bilateral relationship and fostering similar practices across the hemisphere. Within this framework, further cooperation with the US Department of State, and even the US Departments of Justice and Defense, could help move the needle forward, while also including civil-society and private-sector representatives from both countries.

Conclusion

The next Brazilian government will face a critical moment to strengthen the country’s democracy and its institutions to prove effective in addressing citizens’ needs, especially in challenging times both economically and socially. A key ingredient for democratic crisis is the growing belief that democratic government does not serve citizens’ needs. Addressing this issue and rebuilding trust in the political system are vital for long-term domestic stability in Brazil.

This issue brief aimed to suggest a path forward to begin this task.

Beyond Brazil itself, the country’s democracy is a bellwether for democratic health in the Western Hemisphere. The polarization, concerns of electoral violence, marginalization of minority voices, and other patterns occurring in Brazil must be addressed and condemned. Only through systemic analysis and prevention can all stakeholders work to guarantee democratic health presently, and in the years to come.

Acknowledgements

Many of the ideas in this spotlight were informed by a July 27 strategy session organized by the Atlantic Council, which featured the participation of key Brazilian and international experts from civil-society organizations, the public and private sectors, academia, the press, and others. We thank the many participants in the strategy session, including those who gave permission to be publicly acknowledged: President Laura Chinchilla, Ambassador Michael McKinley, Ambassador Liliana Ayalde, Miriam Kornblith, Feliciano Guimarães, Patricia Campos Mello, Flávia Pellegrino, Guilherme Casarões, Bruno Brandão, Emilia Carvalho, Thiago Esteves, Cintia Hoskinson, and Francisco Brito. This document is also a product of independent research and consultations carried out by the Atlantic Council’s Adrienne Arsht Latin America Center. We thank those who took the time to share their insights with us, including Daniela Campello and Cesar Zucco. A special thank you also goes to our Brazil nonresident senior fellow, Ricardo Sennes, for the countless advice through the years and during the production of this publication. Isabel Bernhard provided invaluable writing and editorial support. Thank you to Jason Marczak, senior director of the Adrienne Arsht Latin America Center, and Maria Fernanda Bozmoski, deputy director for programs, for their guidance. Finally, the Atlantic Council would like to thank Action for Democracy for the partnership and generous support, as well as the Brazilian Center for International Relations (CEBRI) for its continued collaboration, as an institutional partner to this initiative.

About the author

Valentina Sader is associate director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the center’s work on Brazil, gender equality, and diversity, and manages its advisory council. She has co-authored publications on the US-Brazil strategic partnership and coordinated events with high-level policymakers, business leaders, and civil-society members in both Brazil and the United States. Valentina provides regular commentary in English and Portuguese on political and economic issues in Brazil to major media outlets. Prior to joining the Atlantic Council, Valentina worked at the Eurasia Group, the embassy of Brazil in Washington, DC, and the mission of Brazil to the Organization of American States (OAS). Valentina holds a bachelor’s degree in international studies from American University. Originally from Brazil, Valentina is a native Portuguese speaker, fluent in English, and proficient in Spanish.

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Issue Brief Jun 18, 2021

Colombia’s national strike: Overview of the situation and strategies moving forward

By Camila Hernandez, Jason Marczak

Amid the third peak of the COVID-19 pandemic, Colombia faces the longest and most destructive mass protests in recent history. The protests, which began on April 28, 2021, were triggered by a tax-reform bill proposed by the government to stabilize public debt and fiscal deficit. Despite the bill’s removal on May 2, 2021, protests continued […]

Americas Civil Society

In-Depth Research & Reports Jun 1, 2022

Advance democracy, security and rule of law

By Bill Brownfield

Colombia Latin America

Online Event Mon, April 11, 2022 • 3:30 pm ET

Brazil’s choice in 2022: A conversation with presidential pre-candidate Ciro Gomes

A conversation on Brazil’s upcoming elections, democratic institutions, and post-pandemic future with presidential pre-candidate and former Minister and Governor Ciro Gomes.

Americas Brazil Civil Society Coronavirus

1 Joe Biden, “Remarks by President Biden at the Summit for Democracy Opening Session,” White House, December 9, 2021, https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/12/09/remarks-by-president-biden-at-the-summit-for-democracy-opening-session/.

2 Sarah Repucci and Amy Slipowitz, “Freedom in the World 2022: The Global Expansion of Authoritarian Rule,” Freedom House, February 24, 2022, https://freedomhouse.org/article/new-report-authoritarian-rule-challenging-democracy-dominant-global-model.

3 Ibid.

4 “Global State of Democracy Report 2021: Building Resilience in a Pandemic Era,” International Institute for Democracy and Electoral Assistance, 2021, https://www.idea.int/gsod/global-report.

5 “The Americas 2021: Democracy in Times of Crisis,” International Institute for Democracy and Electoral Assistance, 2021, https://www.idea.int/gsod/las-americas-eng-0.

6 “Amendment enacted postponing Municipal Elections to November,” Agência Câmara de Notícias, July 2, 2020, https://www.camara.leg.br/noticias/673100-promulgada-emenda-que-adia-eleicoes-municipais-para-novembro/.

7 Márcio Falcão and Fernanda Vivas, “Supreme Court Decides that States and Municipalities Have Power to Set Rules on Isolation,” G1, April 15, 2020, https://g1.globo.com/politica/noticia/2020/04/15/maioria-do-supremo-vota-a-favor-de-que-estados-e-municipios-editem-normas-sobre-isolamento.ghtml.

8 “Bolsonaro’s Threats in Speeches on September 7,” BBC Brasil, September 7, 2021, https://www.bbc.com/portuguese/brasil-58479785; “STF, Chamber and Senate Respond to Bolsonaro’s Speech During September 7 Protests,” Canal Rural, September 8, 2021, https://www.canalrural.com.br/noticias/stf-camara-e-senado-repercutem-discurso-de-bolsonaro-durante-manifestacoes-de-7-de-setembro/.

9 Josette Goulart and Diego Gimenes, “Bolsonaro Retreats, Apologizes and Stock Market Shoots in the Same Second,” Veja, September 9, 2021, https://veja.abril.com.br/coluna/radar-economico/bolsonaro-recua-pede-desculpas-e-bolsa-dispara-no-mesmo-segundo/.

10 “Letter for Democracy is read at USP, and Act has a protest against Bolsonaro,” CNN Brasil, August 11, 2022, https://www.cnnbrasil.com.br/politica/cartas-pela-democracia-sao-lidas-na-faculdade-de-direito-de-usp/.

11 Erick Mota, “Choice of the PGR: Understand how the MPF Triple List works,” Congresso em Foco, September 9, 2019, https://congressoemfoco.uol.com.br/area/congresso-nacional/premio-incentiva-as-boas-praticas-politicas-afirma-conselho-federal-de-contabilidade/.

12 “About the MPF,” Ministério Público Federal, http://www.mpf.mp.br/o-mpf/sobre-o-mpf.

13 Leandro Machado, “’Police in Brazil Are Not Trained with the Idea of Protecting the Citizen,’ Says Researcher,” BBC Brasil, June 5, 2022, https://www.bbc.com/portuguese/brasil-61601495.

14 Matthew M. Taylor, Decadent Developmentalism: The Political Economy of Democratic Brazil (Cambridge: Cambridge University Press, 2020), 151.

15 Joana Oliveira, “Rio’s militias increasingly articulate with city halls and legislatures, study points out,” Pais, October 26, 2020, https://brasil.elpais.com/brasil/2020-10-26/milicias-do-rio-se-articulam-cada-vez-mais-com-prefeituras-e-casas-legislativas-aponta-estudo.html.

16 “Estado-Maior Conjunto das Forças Armadas,” Governo do Brasil, Ministério da Defesa, last visited August 24, 2022, https://www.gov.br/defesa/pt-br/assuntos/estado-maior-conjunto-das-forcas-armadas.

17 Giulia Granchi, “Jungmann: ‘Military Will Not Embark on Any Coup Adventure,’” BBC Brasil, August 19, 2022, https://www.bbc.com/portuguese/brasil-62600301.

18 “Project Makes It Clear in the Law Nonpartisan Character of the Armed Forces,” Portal da Câmara dos Deputados, January 31, 2022, https://www.camara.leg.br/noticias/846116-projeto-deixa-claro-na-lei-carater-apartidario-das-forcas-armadas/.

19 Renata Galf and Paula Soprana, “Law on Political Violence Against Women Premieres with Up to 6 Years in Prison,” Folha de S. Paulo, July 30, 2022, https://www1.folha.uol.com.br/poder/2022/07/lei-sobre-violencia-politica-contra-mulher-estreia-com-pena-de-ate-6-anos-de-prisao.shtml.

20 Ibid.

21 Paulo Roberto Netto, “Judge Rejects Aras’ Appeal in Case Against Conrado Hübner,” Poder360, October 21, 2021, https://www.poder360.com.br/justica/juiza-rejeita-recurso-de-aras-em-processo-contra-conrado-hubner/; “Brazil: Journalists Face Intimidation During Election Campaign,” ABRAJI, October 25, 2018, https://www.abraji.org.br/noticias/brasil-jornalistas-enfrentam-intimidacao-durante-campanha-eleitoral; Dom Phillips and Bruno Pereira, “Three Charged in Brazil with Murder of Dom Phillips and Bruno Pereira,” Guardian, July 22, 2022, https://www.theguardian.com/world/2022/jul/22/three-charged-brazil-murder-dom-phillips-bruno-pereira.

22 Michael Pooler, “Brazil’s Civil Society Defends Democracy against Jair Bolsonaro Attacks,” Financial Times, July 27, 2022, https://www.ft.com/content/858e34de-cd74-4902-bb02-8bbad747c286.

23 “Presidente Do Tse Institui Frente Nacional De Enfrentamento à Desinformação,” Tribunal Superior Eleitoral, March 30, 2022, https://www.tse.jus.br/comunicacao/noticias/2022/Marco/presidente-do-tse-institui-frente-nacional-de-enfrentamento-a-desinformacao.

24 “Confiança do Brasileiro Nas Instituições é a Mais Baixa Desde 2009,” Ibope Inteligência, August 9, 2018, http://www.ibopeinteligencia.com/noticias-e-pesquisas/confianca-do-brasileiro-nas-instituicoes-e-a-mais-baixa-desde-2009/.

25 “Eleições 2022: TSE Assina Acordo e Formaliza Missão de Observação da Uniore,” Tribunal Superior Eleitoral, August 2, 2022, https://www.tse.jus.br/comunicacao/noticias/2022/Agosto/eleicoes-2022-tse-assina-acordo-e-formaliza-missao-de-observacao-da-uniore.

26 “U.S. Again Defends Brazil’s Voting System Questioned by Bolsonaro,” Reuters, July 19, 2022, https://www.reuters.com/world/americas/us-again-defends-brazils-voting-system-questioned-by-bolsonaro-2022-07-20/.

The post Democratic institutional strength before and beyond elections: The case of Brazil appeared first on Atlantic Council.

State of the Order: Assessing June 2022

daniellemiller — Fri, 15 Jul 2022 14:15:16 +0000

Reshaping the order

This month’s topline events

NATO Moves to Expand. NATO leaders, meeting at a summit in Madrid, formally agreed to invite Finland and Sweden to join the Alliance, paving the way for the admission of NATO’s newest members since 2020. The move came after Turkish president Recep Tayyip Erdogan dropped his objections to the accession process when the two Nordic nations agreed to take certain actions to restrict terrorist groups, including PKK, a Kurdish pro-independence group against which the Turkish government has sought to clamp down.

Shaping the order. Sweden and Finland’s momentous decision to seek NATO membership, after decades of official neutrality, reinforces NATO’s critical role as an alliance of democracies aimed at defending its members against aggression. The move also represents a strategic setback for Russian president Vladimir Putin, who has been seeking to weaken and divide NATO and had warned against admitting the two nations, but now faces an Alliance that is perhaps more unified and determined than ever.
Hitting home. The addition of Sweden and Finland to NATO will bring in two new highly capable partners to help the United States defend against threats to American security, including those posed by Russia.
What to do. The Biden administration and other NATO governments should work with lawmakers in their countries to ensure swift ratification of the accession protocols required to admit the two new Alliance members.

EU Aligns on Ukraine. On a historic visit to Kyiv, the leaders of France, Germany, and Italy stood together with Ukrainian president Volodymyr Zelenskyy as they pledged to bolster assistance for Ukraine and announced their support for Ukraine’s bid to become a member of the European Union. The EU followed by granting the country “candidate status,” marking the beginning of what could potentially be a years-long process for accession. The European leaders later joined President Biden and other G7 partners for a summit in Germany at which they agreed to strengthen penalties against Russia, including banning Russian gold, cracking down on the Kremlin’s efforts to evade sanctions, and considering a price cap on Russian oil.

Shaping the order. The joint visit to Kyiv by the three European leaders showcased a remarkable degree of alignment with Ukraine, after it appeared that France and Germany were resisting Ukraine’s efforts to join the EU and pushing Ukrainian territorial concessions. The move to begin accession talks on EU membership marks a significant milestone, and, if approved, could deeply undermine Putin’s efforts to bring Ukraine into Russia’s economic orbit.
Hitting home. America benefits from working closely with the EU – which has a combined economy larger than the United States – to help support frontline democracies and stand up to autocratic aggression.
What to do. The Biden administration should continue to work closely with its European and G7 allies to provide military and economic assistance to Ukraine, while supporting Ukraine’s efforts to meet the requirements to become a member of the EU.

BRICS Stand with Putin. Vladimir Putin joined the leaders of China, India, Brazil and South Africa at a virtual BRICS summit meeting organized by Chinese president Xi Jinping, giving Putin his most high-profile international engagement since Russia’s February invasion of Ukraine. Putin used the occasion to cite the “deepening cooperation” among BRICS members, as the five leaders signed a “Beijing Declaration” pledging to work together on supply chain resilience and digital trade. Iran and Argentina reportedly submitted applications to join the BRICS as well.

Shaping the order. The participation by the leaders of three rising democracies – India, Brazil, and South Africa – highlighted the failure of Western efforts to isolate Putin in the wake of his invasion of Ukraine. As India continues to increase its purchases of Russian oil, Putin suggested that Russian trade with BRICS countries jumped 38% in the first quarter of this year, providing the Kremlin with an important conduit to undercut Western sanctions.
Hitting home. Though they have led to higher gas prices for Americans, sanctions on Russian oil are serving to pressure the Kremlin to end its brutal war in Ukraine and constrain Russia’s ability to challenge US security interests.
What to do. Washington should seek new ways to incentivize India and other developing nations to join the West in penalizing Moscow for its invasion of Ukraine. Building on the global infrastructure initiative announced at the G7 summit, the administration should consider launching an ally shoring partnership that could reorchestrate supply chains to democracies willing to limit economic engagement with Russia and China.

Quote of the month

“At a time when the world is threatened by division and shocks, we, the G7, stand united. We underscore our resolve to, together with partners, jointly defend universal human rights and democratic values, the rules-based multilateral order, and the resilience of our democratic societies.”

– Statement by the leaders of the G7, June 28, 2022

State of the Order this month: Strengthened

Assessing the five core pillars of the democratic world order

Democracy ()

In a visit to Hong Kong to mark the 25th anniversary of the British transfer of the territory to China, Xi Jinping commended the city’s incoming Chief Executive John Lee, who oversaw the crackdown on political dissent that has left Hong Kong’s democracy in a state of disarray.
In Colombia’s presidential election, Gustavo Petro defeated Rodolfo Hernandez, a right-wing populist who once praised Adolf Hitler. But Petro, a former leftist guerrilla leader, is likely to pursue warmer relations with Cuba and Nicaragua and could strain the close US-Colombia security partnership.
Despite a boycott from Mexico and a few other nations, President Biden stuck to his decision to exclude the leaders of the hemisphere’s three autocratic dictatorships – Cuba, Venezuela, and Nicaragua – from a Summit of the Americas that he convened in Los Angeles to discuss regional issues.
On balance, the democracy pillar was unchanged.

Security ()

Ukrainian forces withdrew from the city of Severodonetsk in eastern Ukraine, marking a significant gain for Russia as it continues its brutal war of aggression.
NATO agreed to strengthen its military presence in eastern Europe by deploying additional forces to Poland and the Baltics, and its invitations for Sweden and Finland to join the Alliance could help defend against security threats in northeastern Europe and the Baltic Sea.
China is building a secret naval facility in Cambodia, along the Gulf of Thailand, its second such overseas outpost (the other located in Djibouti) and the first in the Indo-Pacific region, a potentially important element of China’s expanding global military presence.
Iran switched off surveillance cameras used by the IAEA to monitor activity at the country’s key nuclear facilities and began installing advanced centrifuges at an underground enrichment plant, as multilateral negotiations to revive the Iran nuclear agreement struggle to make progress.
During a visit by Venezuelan president Nicholas Maduro to Tehran, Venezuela and Iran signed a 20-year cooperation agreement, aimed at boosting strategic ties between the two anti-Western nations.
On balance, the security pillar was unchanged.

Trade (↑)

The EU granted candidate status to Ukraine and Moldova, a significant step in what is likely to be a long process as both nations prepare to meet the criteria for joining the bloc’s common economic market and political institutions.
China has proposed a free-trade bloc among the five BRICS countries in a bid to enhance economic ties, as Russia suggested that the bloc create an international reserve currency as an alternative to the dollar.
G7 leaders agreed to explore a price cap on Russian oil, a measure aimed at limiting the Kremlin’s oil revenues and potentially holding down global oil prices.
Amidst an exacerbating food crisis caused by Russia’s blockade of Ukrainian ports in the Black Sea, G7 leaders announced that they will contribute over $4.5 billion to address global food security, while calling on Russia to end its blockade.
With the prospect of EU membership for Ukraine and Moldova, the trade pillar was strengthened.

Commons ()

The CDC lifted the requirement of a negative COVID-19 test result before entering the United States, but a new more contagious Omicron variant began to spread around the world.
NATO released a report assessing the global security risks of climate change and announced a decision by allies to reduce gas emissions by at least 45% by 2030, and to net zero by 2050.
Overall, the global commons pillar was unchanged.

Alliances (↑)

In addition to inviting two new members to join the Alliance, NATO adopted a new Strategic Concept that calls Russia “the most significant and direct threat” to peace and security, and for the first time, cites China as a strategic priority.
The leaders of Australia, Japan, New Zealand, and South Korea also joined the meeting in Madrid – their first time participating in a NATO Summit – marking a significant elevation in efforts to strengthen cooperation between the transatlantic Alliance and its Indo-Pacific partners.
Demonstrating solidarity with Ukraine, the leaders of France, Germany, and Italy made a historic visit to Kyiv, before joining the United States and other allies at a G7 Summit to bolster support for Ukraine.
The leaders of India, Brazil and South Africa joined Vladimir Putin at a virtual BRICS summit meeting, undermining Western efforts to garner support from other democracies to isolate Russia for its invasion of Ukraine.
On balance, the alliance pillar was strengthened.

Strengthened (↑)________Unchanged ()________Weakened (↓)

This month’s top reads

Three must-read commentaries on the democratic order

Ivo Daalder and James Lindsay, in Foreign Affairs, call for a new G-12 to institutionalize security cooperation among the US and its democratic allies across the Atlantic and Pacific and reinvigorate the rules-based order.
Michael Kofman, in The Economist, warns that NATO should avoid underestimating the threat of Russia as a long-term strategic competitor, despite its lackluster campaign in Ukraine.
Paul Poast suggests, in World Politics Review, that analysts may one day point to the 2022 BRICS Summit as the dawn of an alternative to the Western-led liberal international order.

Action and analysis by the Atlantic Council

Our experts weigh in on this month’s events

Ash Jain and Matthew Kroenig co-authored two new Atlantic Council reports as part of a project on Shaping a New Democratic World Order. The first, A Democratic Trade Partnership: Ally Shoring to Counter Coercion and Secure Supply Chains, proposes an integrated framework for leading democracies and other partners to reduce strategic dependency on revisionist autocracies, coordinate on economic challenges, and foster free, fair, and secure trade. The second, Toward a Democratic Technology Alliance: An Innovation Edge that Favors Freedom, outlines the need for a Democratic Technology Alliance that would help the free world prevail in the race for advanced technologies by jointly investing in innovation, countering unfair practices, and developing rules and norms consistent with democratic values.
Fred Kempe, in CNBC, urges Western and Asian allies to work together through military, economic, and political means to stop Putin’s brutal war in Ukraine and ensure rule of law triumphs over rule-of-the-jungle.
Matthew Kroenig and Dan Negrea joined a panel discussion at the 2022 Copenhagen Democracy Summit and launched the Atlantic Council’s new Freedom and Prosperity Indexes.
Amanda Rothschild and Jeffrey Cimmino, in an Atlantic Council issue brief, present key recommendations for how US diplomacy can be strengthened in the twenty-first century.
Daniel Fried and Brian O’Toole, in the New Atlanticist, lay out a long-term strategy that the United States and its G7 allies can take to sustain economic pressure against Putin and his regime.
Melinda Haring, in the New Atlanticist, warns that, while Ukraine has succeeded in the first phase of the war, Russia has not abandoned its goal of crushing Ukrainian statehood.

__________________________________________________

Ash Jain – Director for Democratic Order
Dan Fried – Distinguished Fellow
Jeffrey Cimmino – Associate Director
Danielle Miller – Program Assistant
Otto Hastrup Svendsen – Georgetown Student Researcher

If you would like to be added to our email list for future publications and events, or to learn more about the Democratic Order Initiative, please email AJain@atlanticcouncil.org.

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Lichfield cited in The Washington Times on Russia’s leverage against the West in the war on Ukraine

chsu — Fri, 24 Jun 2022 15:31:07 +0000

Read the full article here.

The post Lichfield cited in The Washington Times on Russia’s leverage against the West in the war on Ukraine appeared first on Atlantic Council.

Spotlight: Latin America and the Caribbean – Ten questions for 2022

Adrienne Arsht Latin America Center — Tue, 04 Jan 2022 13:00:00 +0000

The year 2022 will be one of change across the Western Hemisphere. So, what might or might not be on the horizon?

The year 2022 will be one of change across the Western Hemisphere. From presidential elections in Brazil and Colombia to newly elected presidents taking office in Chile and Honduras, regional leaders will be looking at new ways to rebuild economies from the COVID-19 pandemic while balancing mounting social pressures. So, what might or might not be on the horizon in 2022?

How might key presidential elections shake out? Will regional economies recover to pre-pandemic growth rates? What might be the outcome of the US-hosted Summit of the Americas, and will Caribbean voices play a larger role than in previous gatherings? Will the region expand its ties with China?

Take our ten-question poll in less than five minutes!

Question #1: Caribbean – Will Vice President Kamala Harris make her first trip to the Caribbean in 2022?

Yes

Question #2: Central America – Will the United States have confirmed ambassadors in all three northern Central American countries (currently only Guatemala) by year-end 2022?

Yes

Question #3: Chile – Will the new Chilean constitution be approved when put to a referendum?

Yes

Question #4: China and Latin America – Considering Nicaragua’s newly established China ties, will the three other Central American countries that currently recognize Taiwan—Belize, Guatemala, and Honduras—also switch recognition to China?

Yes

Question #5: Colombia – Will Colombia’s presidential election go to a second round?

Yes

Question 6: Economy – Can the region recover pre-pandemic growth rates in 2022?

Yes

Question #7: Mexico – Will Mexico remain the United States’ top trading partner throughout the next year?

Yes

Question #8: Bitcoin – Following in El Salvador’s footsteps, will support for Bitcoin tender grow in the region?

Yes

Question #9: Venezuela – Will Nicolas Maduro return to the negotiating table in Mexico City?

Yes

Question #10: Brazil – Will President Jair Bolsonaro win another term this year?

Yes

Bonus Question: Will Latin America and the Caribbean be represented in the final of the World Cup?

Yes

Our answer to question #1: YES

In 2022, the Biden-Harris administration will look for big wins and opportunities to expand its leadership in the Americas. This is achievable in the Caribbean with a high-profile visit, which would optimally be accompanied by a major policy announcement from Vice President Harris. President Joe Biden was the last vice president to visit the region, where he focused his time discussing the Caribbean Energy Security Initiative.

The stage is set for a similar visit to occur with Vice President Harris. Economic recovery is slow, vaccine hesitancy is increasing, and other actors, such as China, are playing a more active role in the Caribbean. Regional leaders often note that US attention is inconsistent, and that few high-profile US officials travel to the Caribbean. A visit and subsequent policy announcement that aids the Caribbean in its time of need would build on recent conversations between the Vice President and Prime Minister of Trinidad and Tobago Keith Rowley (virtual) and Prime Minister of Barbados Mia Mottley (in person).

Back to questions

Our answer to question #2: NO

Given President Nayib Bukele’s recent personal attacks against President Biden and other US government officials, including Ambassador Jean Manes and current Charge d’Affaires Brendan O’Brien, it is unlikely that the United States will confirm all ambassadors to the Northern Triangle countries. President Bukele’s attacks were a response to the Biden administration’s decision to add Osiris Luna Meza, the chief of the Salvadoran penal system and vice minister of justice and public security, and Carlos Marroquin, chairman of the Social Fabric Reconstruction Unit, to the Specially Designated Citizens and Blocked Persons List. Both Salvadoran officials are accused of having a direct relationship with gangs, including MS-13. In Honduras, however, a new administration under President-elect Xiomara Castro provides a renewed sense of cooperation between the United States and the Central American country.

Back to questions

Our answer to question #3: YES

Once the constitutional draft is finalized by summer 2022, the Constitutional Convention will vote to approve or reject the new legal charter. If the body rejects the new constitution, Chile will keep its current one. However, if it is approved, the group will present the document to the newly elected head of state, who, in turn, will issue a call for a national referendum in which Chileans will vote to approve or reject the new constitution. Voting will be mandatory, and the new constitution will move forward only if an absolute majority is achieved.

While 78.3 percent of voters cast their ballot in favor of a new constitution in 2020, rising polarization and inefficiencies within the Constitutional Convention have left thousands of Chileans disenchanted with the reform process. However, the desire for fundamental changes remains high. If the new legal charter is approved by Chilean voters, it will be put into effect shortly after the vote through a formal ceremony. However, if Chile votes to reject, the 1980 Constitution written under Augusto Pinochet will remain in place. With just one opportunity to get the new constitution approved, the convention will attempt to generate a moderate bill that will stimulate consensus among the political left and right.

Back to questions

Our answer to question #4: NO

It is unlikely that all three of Taiwan’s Central American allies will switch recognition to China in 2022. But, considerations of international benefits, domestic political agency, or both may prompt a change in at least one of the countries. Internationally, US COVID-19 vaccine donations far outstripped those of China, sending a reassuring message to Taiwanese allies in the region.

But, Chinese vaccine diplomacy—including early, well-publicized vaccine sales and shipments—and broader medical, humanitarian, and economic assistance could still prove alluring for countries in need. Despite running with a pro-China message, Honduran President-elect Xiomara Castro recently declined to switch diplomatic recognition from Taiwan to China. Absent any external shocks, Belize, Guatemala, and Honduras will likely attempt to maintain the status quo for as long as possible, favoring Taiwan while leaving the door open for closer ties with China. This delicate balancing act has served to remind larger countries not to take their allegiances for granted and will continue to do so. But, it will be increasingly tested, as seen with Nicaragua, in the critical and uncertain year ahead.

Back to questions

Our answer to question #5: YES

There has yet to be an election in Colombia’s history in which a president is elected in the first round. Senator Gustavo Petro, who served as mayor of Bogotá (2012–2014), leads the left-wing political party Colombia Humana, and was the runner-up in the 2018 presidential election against incumbent President Ivan Duque. With nearly 42 percent of the vote, Petro has positioned himself as the candidate with the greatest support from Colombian voters.

However, Petro currently polls at 25.4 percent, which is not enough for an absolute majority that will grant him the presidency in the first round. Petro will most likely go to a second-round vote against a center-right or center-left candidate, potentially former Mayor of Bucaramanga Rodolfo Hernández or former Governor of Antioquia Sergio Fajardo. To date, Hernández polls at 11 percent and Fajardo at 7 percent. As recommended by the Atlantic Council’s US-Colombia Task Force, co-chaired by Senators Roy Blunt and Ben Cardin, strengthening the alliance between Colombia and the United States ahead of 2022 presidential elections is paramount to safeguard Colombia’s gains in terms of development, rule of law, and democracy. Regardless of election results, the United States should continue to position itself as Colombia’s strongest ally, advancing stability and prosperity at home and abroad.

Back to questions

Our answer to question #6: YES

Led by its five major economies, regional gross domestic product (GDP) is on track to return to pre-pandemic levels in 2022, though per-capita income will likely not recover until 2023. Key uncertainties may alter this outlook: the extent of success in vaccination and pandemic management, stimulus trade-off between continued support and fiscal discipline, labor markets (currently experiencing slower recovery than GDP), inflation, electoral outcomes, and external conditions including evolving investor appetite and commodity prices.

The region as a whole is not expected to return to pre-pandemic growth trajectories in the coming years, signaling permanent output losses due to COVID-19. In a divergent recovery, smaller and vulnerable states, such as those in the tourism-dependent Caribbean, are experiencing an even slower return to normal. Lastly, Latin America and the Caribbean (LAC) should set an ambitious agenda beyond “recovery”—given unimpressive pre-pandemic growth rates and patterns—and, rather, seek ways to accelerate development and build forward in a more inclusive, productive, and sustainable way.

Back to questions

Our answer to question #7: YES

It is likely that Mexico will remain the United States’ top trading partner throughout 2022. Mexico currently holds the top position—overtaking China in February 2021—with Canada in the second spot, lagging behind by $2.9 billion in total trade. COVID-19 significantly hindered US-Mexico trade—which largely relies on land trade via trucks and railcars—due to the pandemic-induced land-border closures to “non-essential” traffic. As of November 8, 2021, however, the United States reopened its borders to non-essential traffic and booming commerce is expected along the border. Moreover, US-Mexico trade topped $545 billion through October 2021 (the most recent data available), an increase of over 24 percent from one year earlier. Given the highly integrated nature of US-Mexico trade in the automotive and energy sectors, coupled with the efforts in border cities and ports to increase capacity and efficiency, trade is likely to continue to grow between the United States and Mexico.

Back to questions

Our answer to question #8: YES

Bitcoin presents an attractive option for countries in Latin America and the Caribbean, yet those countries will not replicate El Salvador’s approach. The government of El Salvador claimed that adopting Bitcoin would reduce financial exclusion and high remittance fees. These issues also affect the entire region. The World Bank predicted that remittances to Latin America and the Caribbean rose 21.6 percent in 2021, costing roughly $6.9 billion in remittance fees. According to the International Monetary Fund (IMF), financial inclusion in the region falls below global averages, and is exacerbated in the Caribbean due to the de-risking of correspondent banks. The worsening effects of climate change will also likely generate support for a decentralized virtual currency, as remittances typically increase following natural disasters, alongside decreased access to financial institutions.

Despite Bitcoin’s allure, its implementation in El Salvador has been marred by technological unreliability, weak financial regulations, and high price volatility. Politicians in Paraguay, Mexico, and Panama have already introduced legislation to regulate Bitcoin’s use as legal tender, and more will follow in 2022. As support for Bitcoin rises, so will debates on its social and environmental risks. Countries across the region will chart their own paths instead of following El Salvador’s playbook.

Back to questions

Our answer to question #9: YES

Although, the latest round of negotiations in Mexico has been suspended since October 2021, a combination of long-term incentives will likely propel Maduro to negotiate with the Venezuelan Unitary Platform—the umbrella organization encompassing the main political opposition parties in the country. Maduro seeks access to capital, legitimacy, guarantees against prosecution, and division within factions of domestic opponents—all of which he can accomplish through negotiations.

However, these factors are not the only ones at play in determining Maduro’s negotiation participation. After the highly visible diverging strategies within the opposition during the recent regional elections—and Julio Borges’ recent resignation and call for the interim government’s dissolution—Maduro might decide to simply wait out further erosion of opposition unity, instead of engaging with it directly. The success of such a strategy, if taken, would enhance the regime’s monopoly on power.

Back to questions

Our answer to question #10: Too early to call.

The odds are not in his favor, but it’s too early to say. Recent polls suggest that President Bolsonaro and former President Luiz Inacio Lula da Silva will face each other in a second round of elections, repeating the 2018 Bolsonaro versus Workers’ Party (PT) duel. However, this time around, former President Lula, as the PT candidate, is leading the way in early polling. Both candidates have a strong support base, but former President Lula’s history with corruption and President Bolsonaro’s mismanagement of the pandemic and current economic hurdles also give them significantly high rejection rates.

Third-way candidates, such as President Bolsonaro’s former minister of justice, Sergio Moro—famous for leading the Car Wash Operation that put President Lula in jail—is running on an anticorruption, center-right platform. Those Brazilians who in 2018 voted for President Bolsonaro as a “vote against corruption” might be more inclined to seek other alternatives. Current high inflation and unemployment rates might also play against President Bolsonaro’s reelection. Having said that, it will likely be a close race, and there is still a long way to go until elections in October 2022.

Back to questions

BONUS QUESTION ANSWER: YES

Brazil and Argentina are the only Latin American counties that have already qualified for the 2022 World Cup. In the Caribbean, Jamaica seems to be the only country with a chance of qualifying. While it is impossible to know who will be in the final (RIP Paul the Octopus), Brazil and Argentina are always strong contenders.

Back to questions

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Kroenig and Ashford discuss the brewing refugee crisis in Eastern Europe and the new Taliban government

Atlantic Council — Fri, 10 Sep 2021 13:52:24 +0000

original source

On September 10, Foreign Policy published a biweekly column featuring Scowcroft Center deputy director Matthew Kroenig and New American Engagement Initiative senior fellow Emma Ashford discussing the latest news in international affairs.

In this column, they discuss Belarus’ attempt to inundate Eastern Europe with migrants, threats to democracy in Brazil, and the newly announced Taliban government in Afghanistan.

The regime in Minsk, determined to push back on the European Union for supporting pro-democracy activists and imposing sanctions on his regime, is encouraging migrants from countries like Iraq to come visit the country. Once there, Belarus helps them to cross the border into EU member states such as Lithuania and Poland.

Emma Ashford

Belarus’s Aleksandr Lukashenko understood that refugee flows, such as those that resulted from the Syrian civil war, destabilized Europe, so what better way to retaliate against the EU than to purposely unleash a flood of migrants into EU countries?

Matthew Kroenig

Staff

Matthew Kroenig

Vice President and Senior Director, Scowcroft Center for Strategy and Security

Scowcroft Center for Strategy and Security

China Defense Policy

Former staff

Emma Ashford

Former Resident Senior Fellow, New American Engagement Initiative

New American Engagement Initiative Scowcroft Center for Strategy and Security

Conflict Economic Sanctions

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Transatlantic tariffs, national security, and geopolitical priorities

Barbara C. Matthews — Tue, 01 Jun 2021 20:06:58 +0000

The United States and the European Union announced this week the initiation of a negotiation process aimed at eliminating US tariffs on steel and aluminum imports from Europe by the end of the year. The move reflects the promised rapprochement between the Biden/Harris administration and European allies, assuaging European irritation at having the metal industry – and thus, by implication the EU itself – been formally designated a national security threat by the United States. Additionally, smoothing over the disputes represents a continued effort to increase geopolitical pressure on China.

Successfully concluding these talks will require both parties to navigate some difficult issues over the next six-seven months. This post recaps the situation at hand and the key issues that require resolution.

National security tariffs on steel and aluminum

Section 232 of the Trade Expansion Act of 1962 authorizes the president of the United States (and, thus, the US Trade Representative) to impose tariffs on imports if it is found that the imported items in question constitute a threat to US national security. Section 232 tariffs therefore assume a highly globalized economy generates vulnerability for the domestic economy based on factors other than the terms of trade. The factors all seek to ensure that the US Government can acquire necessary materials from domestic sources in the event of a national emergency. When the Trump administration in 2018 imposed tariffs on steel and aluminum imports under Section 232 of the Trade Expansion Act, it triggered widespread fears of a global trade war. The controversy arose over (i) the foundation for the tariffs on national security grounds and (ii) the global scope of the tariffs, which included traditional transatlantic allies in Europe while exempting the United States’ bordering neighbors in Canada and Mexico pursuant to tariff-free commitments under the United States-Canada-Mexico Agreement.¹ Global trade war fears escalated further when the European Union threatened retaliatory action. Fortunately, trade tensions simmered down in 2019 with no further action. The May 17, 2021 joint statement by the US Trade Representative and the EU Commission acknowledged these concerns by highlighting that “as the United States and EU Member States are allies and partners, sharing similar national security interests as democratic, market economies, they can partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account.” Even as the announcement of negotiations focused on eliminating tariffs between the US and the EU, the joint statement also indicated that both the United States and the European Union face damage from steel dumping and overcapacity in the global steel market. However, they may find it difficult to eliminate the tariffs despite best intentions.

Metals trade: Key data points

Policymakers on both sides of the Atlantic frequently assert that Chinese steel and aluminum production generate the majority of adverse competitive effects on the global steel market. The actual import data in the United States tells a slightly different story. Department of Commerce data shows that the top 10 sources of steel imports into the United States do not come from China. Steel imports dropped significantly following the imposition of Section 232 tariffs, including even from Canada that had been exempted from the tariffs.

The data also indicate that the dispersion of importers is far from even. The top three steel importers (Canada, Brazil, and Mexico) account for 50 percent of steel imports. Germany only accounts for 4 percent; Italy for even less.

The import structure for aluminum is more concentrated. Canada accounts for over two-thirds of US aluminum imports. The next three largest importers are the United Arab Emirates, Argentina, and Russia. Aluminum imports from China to the United States are limited to a small set of products (such as rods, wire, and bars). European imports to the United States are minimal.

Finally, the imposition of an import tariff does not mean the tariffs remain in place without the possibility of change. The United States permits US firms to request exclusions from the tariffs, and the Congressional Research Service indicates that the Department of Commerce to date has granted roughly 60 percent of all exclusion requests regarding aluminum. At the end of 2020, the Department of Commerce further announced that 105 steel and fifteen aluminum products would become eligible for a “general exemption.”

European exports of steel and aluminum also are similarly muted. Italy’s exports to the United States are dominated by pharmaceuticals products (17 percent), machinery (12 percent) and aircraft (7 percent). Germany’s exports to the United States follow a similar structure.

In other words: the economic significance of the aluminum and steel tariffs for transatlantic trade is not as large as media headlines might suggest. Similarly, claims that Chinese steel and aluminum distorts import markets are less impactful than asserted. Rather, the symbolic and geopolitical significance of aluminum and steel tariffs is much higher, particularly in the context of global market dynamics.

Two key issues for 2021

The Joint US-EU Statement this week makes clear that policymakers on both sides of the Atlantic seek to join forces to combat a larger, persistent problem in the global market for steel: Chinese over-production. Powered by state subsidies, Chinese steel production alone has increased 418 percent since 2000, making it responsible for nearly 50 percent of all global production by 2019. The success of the Chinese steel market seems to have also inspired many large emerging steel markets (India, South Korea, Russia, Taiwan, Brazil, and Mexico) to scale up rapidly, supported by state subsidies and market intervention.

Transatlantic policymakers must now grapple with two very difficult issues if they are going to successfully eliminate the Section 232 tariffs applied to European producers.

State subsidies: On the surface, a joint US-EU effort to address Chinese overcapacity could take the form of challenging state subsidies provided by Beijing to local firms. The challenges could include bilateral initiatives as well as more formal complaints within the World Trade Organization (WTO).

This will not be an easy transatlantic conversation. Certain EU member states currently provide significant subsidies to their domestic steel and aluminum manufacturers. Market intervention also is not uncommon. Pandemic-era industrial policy spending priorities focused on preserving and creating jobs by funding the transition to a green economy mean that traditional manufacturing companies are likely to receive even larger shares of government funding to facilitate changes in their production processes that decrease their carbon emissions.

European efforts to pressure China to decrease state subsidies for steel and aluminum may not be as effective as policymakers might like. If the elimination of Section 232 tariffs for European steel and aluminum becomes contingent on Chinese action, the prospects for a deal by year end dramatically decrease.

National security: US policymakers could certainly decide that no national security issues arise from European steel and aluminum imports based solely on the nearly minimal amount of such imports relative to other trading partners. European policymakers certainly will seek to promote the perspective that they should at least be treated on a par with the largest importer of both products (Canada), which already receives a large exemption due to the USMCA’s tariff terms.

Eliminating the Section 232 tariffs would certainly go a long way towards assuaging the diplomatic insult of being deemed a national security threat to the United States. But making this decision based on geopolitical grounds potentially undermines the ability to make progress regarding state subsidies that distort global markets.

Transatlantic policymakers have thus created a potentially problematic framework for discussion. If US officials lift the Section 232 tariffs on EU steel and aluminum imports, they effectively determine that European state subsidies and market intervention in this sector is not as important as geopolitical priorities. In other words, they suggest that the problem with the tariffs were not state subsidies themselves – but who was giving them.

Prioritizing preferential treatment for allied nations makes it far more difficult to persuade China by making arguments about substantive market distortion. Any such move instead could backfire, incentivizing China to call out the various government subsidies being distributed as part of the pandemic-era recovery process. Pursuing all these initiatives outside the WTO umbrella potentially further weakens the global trade body. How Europe and the United States resolve the steel and aluminum tariffs issue will thus tell us a great deal about the shape of global trade policy over the near- to medium-term.

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1 The USMCA requires that at least 70 percent of aluminum imports from Canada and Mexico for the automobile sector must enter the United States free of tariffs.

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Raising ambitions: How Latin America and the Caribbean is tackling the climate crisis

Valentina Sader — Fri, 30 Apr 2021 19:38:57 +0000

The ripple effects of last week’s Leaders Summit on Climate, led by US President Joe Biden, will be felt for years, as the international community embraced renewed momentum toward mitigating the impacts of climate change ahead of November’s UN Climate Change Conference of the Parties (COP26) in Glasgow, Scotland. With climate change impacts being felt across the Americas, urgency is rising in this pivotal part of the world.

The Leaders Summit brought together forty world leaders, including seven from Latin America and the Caribbean, representing Antigua and Barbuda, Argentina, Brazil, Chile, Colombia, Jamaica, and Mexico. The Americas are a crucial player in coordinated efforts to tackle global climate change, so we asked experts from the Atlantic Council and elsewhere to lay out what’s next.

What were some of the most ambitious commitments made by Latin America and the Caribbean in mitigating climate change? Are they aligned with the expectation put out by the Biden administration and COP26? How will the international community contribute to these regional efforts?

Jorge Gastelumendi is the global policy director at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center. He is also a COP26 high level climate champions co-lead for the Race to Resilience.

Putting nature-based solutions at the core of the efforts to fight climate change was the most outstanding, though not surprising, feature of commitments advanced by Latin American and Caribbean representatives—from Brazil’s president, Jair Bolsonaro, indicating the country’s commitment to end illegal deforestation in the Amazon by 2030, to Mexico’s president, Andrés Manuel López Obrador, committing to implement one of the largest reforestation programs in the world. Peru went even farther by committing that 50 out of the 150 actions in its climate plan will be nature-based solutions in sectors such as water management, land use, and forests. The main obstacles to materialize these commitments is the lack of implementation capacity in the region and the lack of financial resources from both public and private actors, particularly the financial sector. The international community, with the leadership of the United States, is critical in helping overcome these two obstacles. Colombia, for example, highlighted exploring innovative financial mechanisms, such as debt-for-adaptation swaps, which could avoid deforestation in the Amazon (a priority of Brazil, Colombia, and Peru) and protect the oceans (a priority for Chile).

President Bolsonaro, in his speech, raised the need for the right to development of current and future generations, also mentioning the Amazonian Paradox. What is the Amazonian Paradox and in what ways can a collaborative approach with the international community, the private sector, civil society, and indigenous communities help address it?

Rodrigo Lima is a lawyer with expertise in international trade, non-tariff barriers and sustainable development. He is the director of Agroicone, a Brazilian sustainable agribusiness organization.

The Amazonian Paradox emerges from the immense contradiction between the assets and potentials from a mega-biodiverse forest that covers almost five million square kilometers over nine countries, and the social realities and inequalities among its more than twenty-three million inhabitants. The possibility to provide effective value to the forest, generate profits from its services, promote its sustainable use, and allow its population to thrive from the economic benefits and environmental services reflects the challenge of the Amazonian Paradox.

It is reasonable to compare the Amazon to a puzzle that needs time and effort to be assembled. The Amazon is home to 329 indigenous lands, covering almost one million square kilometers—local communities, family farmers, medium and large farmers. About 640,000 square kilometers are non-designated public lands, which should be designated as national parks, private areas, indigenous land, or for other uses.

To organize the territory and create policies to enable a low carbon economy, while considering different actors and interests, depends on federal and state governments. But it also relies on cooperation from multiple sources. In this regard, climate finance can play a critical role not just in promoting Reducing Emissions from Deforestation and forest Degradation (REDD+) projects, but more broadly in creating and sustaining a flourishing nature-based economy.

The completed puzzle relies on fostering a thriving economy based on natural resources, tourism, sustainable agriculture, forest management, and conservation activities. Bioeconomy opens a huge possibility to build upon this challenge, connecting extractivist producers to processing facilities and the market, generating social co-benefits from REDD+ projects, harnessing sustainable agriculture production based on innovation and good practices, and generating cosmetics and medicines, among other activities that could transform the Amazonian Paradox into the Thriving Amazonia.

International cooperation, as discussed at the Leaders Summit on Climate and other forums, has a fundamental role to play to support assembling this puzzle. The Amazon cannot be seen as a pure protection area; it must enable and promote social, economic, and environmental benefits for its population while it generates environmental goods to all society.

President López Obrador, in mentioning Mexico’s reforestation program, suggested its expansion to the South of Mexico and into Central America, generating jobs. He also suggested temporary work-permits and residency in the United States for those committed to this program, as a mechanism to address the migration crisis. How could the climate crisis be a greater challenge to the current border crisis? In what ways could addressing climate issues also be an opportunity to solve migration?

Maria Fernanda Bozmoski is the deputy director for programs at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Mexico and Central America.

Hurricane season in Central America is right around the corner, and back-to-back natural disasters may bring the region to the breaking point. The number of migrants will likely increase in anticipation of hurricane season, as well as in the aftermath. While migration from the dry corridor—which stretches from Guatemala to Costa Rica—is likely, hurricanes also greatly affect the Caribbean coast. The Central American Integration System (SICA) estimates that up to eight hurricanes may form in the region this year. Four of the eight may be intense, according to the organization.

Climate change is both a long-term push factor for migration and an accelerant. The United Nations estimates more than 7.3 million people were directly impacted by hurricanes in 2020, and there are more than 8 million starving people in Honduras, Guatemala, and El Salvador—up from 2.2 million in 2018. While the nearly four-fold increase in starvation is not all a result of the climate crisis, the destruction of crops and villages is a factor in this increase. In fact, experts find that climate change is a major factor explaining in the current surge in hunger.

The consequences of climate change are being felt now by current generations and the Caribbean nations are particularly impacted. Like other heads of state, the leaders of Antigua and Barbuda, and Jamaica reinforced the need for support and collaboration on addressing climate change. How could the international community support Caribbean nations in adapting to the existing and upcoming consequences of the rise in global temperatures?

Vicki Assevero is a former senior fellow for the Adrienne Arsht Latin America Center’s Caribbean Initiative.

The international community can support Caribbean nations and other small island developing states (SIDS) by acknowledging the World Meteorological Association’s 2020 Report that sea level rise has doubled, and hurricanes have intensified, so the imperative to finance climate adaptation is urgent. Prime ministers Gaston Browne of Antigua and Barbuda, and Andrew Holness of Jamaica urged acceleration of the pace of implementation of existing accords. This would mean not only funding the financing mechanisms foreseen in the original Paris Climate Accord but also those outlined in the Warsaw Mechanism and the Samoa Pathway. More importantly, multilateral institutions must continue to mobilize capital for greater investments in renewable energy and green technologies. The Caribbean SIDS are also urging new metrics in the form of a multi-dimensional vulnerability index that would facilitate access to concessional financing.

Commitments on energy transition and renewable energy were popular among leaders at the summit. In terms of transitioning to cleaner energy, how close is Latin America and the Caribbean to reaching that goal and significantly reducing its greenhouse gas emissions? What key steps could be taken to accelerate an energy transition in the Americas?

Randolph Bell is the director of the Atlantic Council’s Global Energy Center, and Reed Blakemore is the deputy director of the Atlantic Council’s Global Energy Center.

Though the reaffirmation and raised ambitions for climate action last week from across Latin America and the Caribbean were encouraging, regional progress to meeting climate goals has thus far been inconsistent. That said, growing electricity demand and the cloudy forecast for hydropower (long the prevailing baseload electricity source in the region) presents an important opportunity for countries to take significant steps to transform their energy mix and kickstart their climate goals. Accelerating the introduction of a mix of variable renewables, low-carbon natural gas resources, and in some cases nuclear energy, will offer alternatives to bioenergy, diesel, and coal in order to fulfill new electricity demand while also replacing potential declines in hydropower output. Additional efforts to decarbonize the transportation sector will also further electrify the region and support reduced emissions. Taken together, this makes investment into accompanying grid infrastructure as well as digitalization and energy efficiency important next steps in maximizing the emissions-reducing potential of regional electrification and energy transition.

Valentina Sader, is assistant director and Brazil lead at the Adrienne Arsht Latin America Center.

AfricaSource Apr 23, 2021

Climate change will not be fixed without Africa

By Rama Yade

When Congolese President Félix Tshisekedi spoke at the virtual Leaders Summit on Climate this week, he had the force of the continent behind him. And his message was that developed countries must do more. As the summit comes to a close, the world still has so much to learn from Africa about how to tackle the climate crisis—if the world would only listen.

Africa Climate Change & Climate Action

Fast Thinking Apr 13, 2021

FAST THINKING: Why economic development is key to addressing the migration crisis at the US border

By Atlantic Council

On this episode of Fast Thinking, Atlantic Council experts Rebecca Scheurer and Jason Marczak dive into the root causes of mass emigration from Guatemala, Honduras, and El Salvador, and offer recommendations for long-term solutions to the underlying push factors that drive people from their homes—including crime, gang violence, corruption, and climate change.

Migration Northern Triangle

New Atlanticist Apr 25, 2021

Climate diplomacy can help turn action into results: UAE minister

By Larry Luxner

Al Jaber, the United Arab Emirates’ minister of industry and advanced technology, reflected on the connection between climate partnerships and economic results.

Climate Change & Climate Action Energy & Environment

The post Raising ambitions: How Latin America and the Caribbean is tackling the climate crisis appeared first on Atlantic Council.

Spotlight: 10 Questions for Latin America and the Caribbean

Adrienne Arsht Latin America Center — Thu, 11 Feb 2021 14:00:00 +0000

As we approach one year since the first COVID-19 case in Latin America and the Caribbean, we look ahead at what might or might not be on the horizon for the region over the next year.

Join us as we look at some of the key questions that may shape the region, then take our informal poll and see how your opinions shape up against our analysis.

Will the region see mass vaccinations? How will regional economies fare? What might be on the agenda for the US relationship with Brazil and Mexico? US President Joe Biden’s administration has entered office with a full inbox: how will developing trends in the region affect the new administration’s agenda?

Here are the eleven questions that the Adrienne Arsht Latin America Center is answering to map the rest of the year.

Question #1: COVID – Will Latin America and the Caribbean achieve widespread vaccination in 2021?

Yes

Question #2: Economy – Will regional economies outpace growth forecasts in 2021?

Yes

Question #3: Central America – Given the extent of damage from the 2020 hurricanes in Central America, will the region see more climate migrants?

Yes

Question #4: Mexico – Will joint security challenges top the list of priorities in the US-Mexico relationship under Biden?

Yes

Question #5: Stability – Latin America has faced sporadic, but massive, waves of protests and national strikes prior to and during the pandemic. Will 2021 be a year of even greater social unrest?

Yes

Question #6: Venezuela-EU – Will the European Union (EU) resume conversations with Nicolás Maduro’s regime to monitor Venezuela’s regional elections in 2021?

Yes

Chapter #7: Brazil – Will the Biden administration and that of Brazilian President Jair Bolsonaro find ways to cooperate on a climate agenda?

Yes

Question #8: Colombia – Will the United States and Colombia reform the underlying premises of their anti-narcotics policies?

Yes

Question #9: China and the Caribbean – Will the five Caribbean nations and two Central American countries that still recognize Taiwan shift to recognizing the People’s Republic of China (PRC)?

Yes

Question #10: Caribbean – Will the Caribbean Community and Common Market (CARICOM) achieve its goal of a Caribbean Single Market and Economy (CSME) in 2021?

Yes

BONUS QUESTION: In the 2016 Summer Olympics in Rio de Janeiro, Brazil (#13), Jamaica (#22), and Cuba (#23) were the only Latin American and Caribbean countries to finish in the top twenty-five in the medal count. Assuming the Olympics are held, will more countries from the region finish in the top twenty-five this summer?

Yes

OUR ANSWER TO QUESTION #1: NO

The first case of COVID-19 in Latin America and the Caribbean was reported in Brazil on February 26, 2020. Since then, the region has reported nearly 17.5 million cases and more than 550,000 COVID-19-related deaths, accounting for one third of global deaths. Countries have actively worked to secure vaccines through bilateral and multilateral arrangements, including agreements with Pfizer, Moderna, AstraZeneca, Russia’s Sputnik V, and China’s CoronaVac. Nevertheless, widespread vaccination requires not only adequate planning for vaccine acquisition, but efficient and equitable distribution. Recent incidents in Germany and the United States show that even more resourceful countries are experiencing hiccups in massive vaccine rollouts, such as logistical challenges (especially the required temperature-controlled supply chain), personnel shortages, and vaccine hesitancy. Latin American and Caribbean nations may face these hurdles at a greater scale, due to resource and capacity constraints.

As of January 19, 2021, eleven Latin American and Caribbean countries have authorized emergency use of COVID-19 vaccines: Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Panama, and Venezuela. On December 24, 2020, Mexico, Chile, and Costa Rica became the first countries in Latin America to begin mass vaccination. Despite moving quicker than most others in the region, Mexico aims to inoculate only 75 percent of its population by March 2022. For most countries in Latin America and the Caribbean, definitive delivery and mass vaccination timeframes remain unclear, and could be delayed over time.

Some low-income countries in the region may be able to vaccinate, at most, 20 percent of their populations in 2021, a figure considerably lower than the 65-percent theoretical threshold for herd immunity. Of added concern, the COVAX initiative—a key global initiative launched to secure vaccine doses for poor countries—currently faces a $4.9-billion funding gap. This could potentially complicate the initiative’s goal of helping inoculate 20 percent of each low-income country’s population against COVID-19 by the end of 2021. With stark disparities in vaccine access across and within countries, widespread vaccination is a distant prospect for Latin America and the Caribbean in 2021.

Back to questions

OUR ANSWER TO QUESTION #2: YES

In July 2020, a month after Latin America and the Caribbean became the global epicenter of the coronavirus pandemic, Alicia Bárcena, head of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), cautioned that the region should brace for a “lost decade.” By the end of 2020, the economic contraction in Latin America reached 7.7 percent—its steepest contraction ever, albeit 1.4 percent less than ECLAC’s earlier forecast. Can the region rebound in 2021 and exceed current growth forecasts?

After experiencing its worst economic crisis ever in 2020, the regional economy is expected to grow 3.7 percent in 2021. But, it’s also possible that the region can outpace this forecast, if it can manage a strategic balancing of expanded fiscal support for social-protection programs and small businesses, investment in job-generating productive sectors, and structural reforms to tackle long-standing challenges in the rule of law, equality, productivity, and climate. To accelerate economic reactivation, the region must leverage international investment and cooperation from global institutions such as the World Bank and the International Monetary Fund (IMF), as well as from regional organizations such as the Inter-American Development Bank. The private sector, at the national and international levels, must also play a central role in revamping growth, but will require strong incentives from local governments and risk-mitigated business climates.

Eyes will be on Brazil, Mexico, and Argentina (the region’s three largest economies) as well as Peru, which has had one of the best developing-world growth rates in the past decade, to recover from their 2020 economic downturns. In comparison to these four countries, Chile and Colombia suffered less devastating declines and could be positioned for stable growth over the year, but the migration crisis in Venezuela will continue to pose a heavy burden on neighboring countries’ already-strained public resources.

Back to questions

OUR ANSWER TO QUESTION #3: YES

This year will almost certainly see a surge in Central American migrants and refugees trekking north to the US southern border, due to a unique confluence of the devastation caused by Hurricanes Eta and Iota, as well as the myriad effects of the coronavirus pandemic and other long-standing migration pressures. Days before Biden’s inauguration, a caravan of more than nine thousand Hondurans created international headlines. The caravan was fueled, in part, by the promise of a revamped immigration policy in the United States.

The back-to-back hurricanes—which made landfall in Central America less than two weeks apart—wreaked havoc across Nicaragua and the Northern Triangle (Guatemala, Honduras, and El Salvador), affecting more than five million people and forcing at least 350,000 Hondurans and Guatemalans into emergency shelters. With hundreds of thousands of Central Americans internally displaced, shelters lacking basic services and sanitation quickly became new ground for rapid coronavirus infection. The destruction to essential infrastructure—such as bridges, roads, buildings—and entire communities was a heavy blow to a region that saw a 6.5-percent economic decline in 2020.

Food insecurity in Nicaragua, Guatemala, and Honduras is expected to rise significantly, due to the destruction of large swaths of agricultural lands, livestock, and infrastructure. In a region with long-standing pre-pandemic challenges around rule of law, insecurity, and economic opportunity, the most likely outcome from these push forces is a novel wave of “new” climate refugees seeking better livelihoods in the United States.

In 1998, Hurricane Mitch, the second-deadliest Atlantic hurricane, caused a massive surge in Central American migration to the United States. If history is any indication of the future, Hurricanes Eta and Iota—Category 4 and 5, respectively—can trigger a similar scenario in 2021.

Back to questions

OUR ANSWER TO QUESTION #4: NO

Security cooperation will be an important, though complicated, part of the US-Mexico relationship. In the days leading up to Biden’s inauguration, Mexican President Andrés Manuel López Obrador’s (AMLO) administration decided to stop investigations into former Mexican Secretary of National Defense General Salvador Cienfuegos—who was arrested in Los Angeles at the end of last year, and then sent for prosecution to Mexico. AMLO then released more than seven hundred pages of confidential evidence and intelligence, prompting an unusual rebuke by the US Department of Justice. The General Cienfuegos saga is just the latest example of a strained US-Mexico security relationship.

The Mexican Congress passed a new law in December 2020 that limits and deters the work of foreign enforcement agents in Mexico. Under the law, all communications—at all levels—with foreign enforcement agents will need to be reported, meetings with foreign agents must be approved in advance, and senior federal officials will need to be present at said meetings. Failure to do any of the above may result in expulsion of foreign agents. The law has prompted serious concerns that international cooperation with Mexico on the security front will be henceforth paralyzed. Most of the intelligence on criminal groups and illicit activities comes the United States.

AMLO has sought to double down on addressing the root socioeconomic causes of crime, and has moved away from the drug-kingpin strategy of past administrations. These actions also reflect a desire to move away from a “war” with cartels and other powerful criminal organizations in Mexico. But, security cooperation goes beyond reduction of homicides and combating drug trafficking—a stable security climate is a requisite for business and commerce to thrive. The Biden administration will have to navigate this complex scenario in Mexico.

Back to questions

OUR ANSWER TO QUESTION #5: YES

Protests in Bolivia, Chile, Colombia, Ecuador, Peru, and Haiti that began in 2019 were expected to continue into 2020, but extended lockdowns to control the spread of the pandemic led to the suspension of protests in the first half of 2020. Despite the lockdowns and the inherent risk of public gatherings, citizens gathered in large numbers last fall in Argentina, Chile, Colombia, Costa Rica, Guatemala, and Peru for reasons ranging from a rejection of government austerity plans to calls for racial equality, better social and economic protections, increased transparency, and free elections.

As vaccines become available and social activities resume, protests will most likely resume in 2021 as citizens will air new grievances. The pandemic has increased inequality in the region, pushing an additional forty-five million people below the poverty line. As governments struggle to fund social-protection programs, discontent with ruling governments will rise. Costa Rica will likely see protests as President Carlos Alvarado Quesada’s administration resumes negotiations with the IMF to secure a much-needed loan. In 2020, the Costa Rican government quickly retracted proposed tax measures after protestors blocked major roads. Colombia may also continue to see protests as long as marginalized groups, including Colombia’s indigenous and Afro-Caribbean groups, feel the government has failed to address their demands.

Finally, as Nicaragua heads toward an election in November in which the opposition will be unable to run, protestors against Nicaraguan President Daniel Ortega’s regime should be expected to return to the streets. Protests may also gain momentum in Chile, Ecuador, Honduras, and Peru, as they also head toward elections.

Back to questions

OUR ANSWER TO QUESTION #6: YES

The EU will continue to promote a democratic transition in Venezuela. In September 2020, a European mission was sent to Venezuela in a failed attempt to promote minimum democratic conditions ahead of legislative elections. High Representative of the EU for Foreign Affairs and Security Policy Josep Borrell, who announced the EU’s rejection of Venezuelan election results, asked Maduro to “chart a path towards national reconciliation.” Borrell also reiterated the EU’s commitment to supporting Venezuela’s transition to democracy.

In 2021, municipal and regional elections are set to occur according to the Venezuelan Constitution. This will open a new opportunity for the EU and a multilateral coalition to continue engaging in close dialogue with the Maduro regime, the opposition, academia, non-governmental organizations, and other civil organizations to seek to promote conditions that allow for the participation of all political parties in a competitive electoral process. However, conversations aside, the Maduro regime is unlikely to see any upside in allowing elections that are transparent or fair.

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OUR ANSWER TO QUESTION #7: MAYBE

In past years, the synergy between the United States and Brazil has led to the signing of the Alcântara Technological Safeguards Agreement, advancing scientific and technological cooperation; support from the United States for Brazil to join the Organisation for Economic Co-operation and Development (OECD); and, at the end of 2020, the signing of a protocol to facilitate trade and investment between the two largest economies in the Western Hemisphere. Despite some diverging views at the presidential level, stronger bilateral relations between Brazil and the United States are mutually beneficial, and opportunities could still exist for advancing on a common agenda.

Brazil has been criticized for recurrent fires in the Amazon rainforest and Pantanal wetlands, environmental disasters such as the Brumadinho dam collapse, and high levels of deforestation, heightening pressures on the Brazilian government to take action to protect its environment.

For Bolsonaro, the economy and structural reforms are top priorities. The government has pursued trade agreements with the EU, South Korea, and Canada, as well as the United States. However, with increasing pressure from the EU, and now the United States, failing to advocate for strong democratic principles and a concrete plan for sustainable development can isolate Brazil in the global arena, undermining possibilities for cooperation with the United States and other countries. To advance on the trade and investment fronts, which are priorities for the Bolsonaro administration, Brazil will need to double down on its efforts to reconstruct its image and role abroad, particularly regarding the climate agenda.

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OUR ANSWER TO QUESTION #8: YES

In December 2020, the Congressional Western Hemisphere Drug Policy Commission (WHDPC) unveiled a bipartisan report recommending that the United States rethink many of its historical anti-narcotics policies. The report found that while Colombia has made remarkable progress in strengthening state authority in marginalized areas, the United States’ $11.6-billion Plan Colombia was unsuccessful in meaningfully curbing coca cultivation. Despite having significantly increased manual eradication efforts in Colombia, coca cultivation and cocaine production remain high; it is unlikely the current strategy will allow the United States and Colombia to reach their joint objective of decreasing coca cultivation and cocaine production to half of 2017 levels. As discussed in the report “The Untapped Potential of the US-Colombia Partnership,’’ the United States and Colombia must take measures to reduce coca cultivation and also target other stages of the drug market, including cocaine production, trafficking, and consumption.

Entering office with a profound understanding of the Americas and a track record of advancing policies fundamental to the region’s prosperity, Biden will prioritize strengthening the United States’ ties to the region—particularly the US-Colombia partnership, which he has referred to as the keystone of US foreign policy in the region. In light of the WHDPC report, the new administration has new thinking on how to reorient the US counter-narcotics policy in Colombia away from mass eradication and toward a more holistic approach, placing renewed emphasis on providing physical and economic security to rural Colombians and demobilized rebels. There is also new momentum for the United States to develop a whole-of-government strategy to counter transnational criminal organizations (TCOs) and the international drug trade, per the report’s recommendations.

Back to questions

OUR ANSWER TO QUESTION #9: NO

It is unlikely that all five Caribbean countries that currently recognize Taiwan—Belize, Haiti, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines—will instead recognize the PRC in 2021. However, the Dominican Republic’s switch to establish diplomatic ties with the PRC in 2018 puts significant pressure on Haiti, with whom it shares the island of Hispaniola. In its overtures to Haiti, the PRC recognizes the country’s extreme poverty and holds out a promise of building the kind of capacity that allowed China to lift 850 million of its citizens out of extreme poverty, but only if Haiti recognizes the “One-China” policy. The other Caribbean countries have long, and sometimes ethno-cultural, histories with Taiwan, which has been a loyal and generous partner. Nevertheless, the geopolitics playing out between Washington and Beijing will put pressure on these small island nations to choose—not necessarily in their own developmental interests, but in the interest of alignment with one great power.

For Guatemala, Honduras, and Nicaragua—the three Central American countries that still recognize Taiwan—pressing domestic issues around the pandemic, natural disasters, citizen and food insecurity, and the economic downturn will prevail over the diplomatic issue of recognition. In addition, the new administration in the United States will move away from a bilateral and mostly stick approach to the isthmus, and toward a more regional and balanced carrot-and-stick approach, in which the question of China can be a powerful bargaining chip. A ramping up of conditionality on foreign aid and support to the region from the United States can be highly persuasive, and can discourage Central American leaders from switching sides.

Caribbean and Central American recognition of China versus Taiwan also hinges on the intensity of Chinese outreach efforts. This, in turn, is often dictated by the state of play in cross-strait relations between China and Taiwan. Since 2016, Taiwan under Tsai Ing-wen’s leadership—in alignment with former US President Donald Trump’s administration—has shifted to a more explicitly competitive stance vis-à-vis Beijing. As cross-strait relations soured, both sides became more aggressive in maintaining or courting new diplomatic allies (e.g., the Dominican Republic, El Salvador, and Panama). In this context, China will likely continue its soft-power diplomacy in the region. The PRC’s staunch verbal support for multilateralism also has the potential to tilt more Caribbean countries toward its orbit. However, much of this could change in the next four years, contingent upon new dynamics in the US-China-Taiwan triangle, as well as Biden’s promised return to global, non-transactional cooperation and a renewed focus on the Americas.

Back to questions

OUR ANSWER TO QUESTION #10: NO

Although the CARICOM has operationalized the single market, the prospect of a single economy remains unlikely. A little history will help. CARIFTA was formed in 1965, shortly after anglophone Caribbean countries achieved independence. CARIFTA removed tariffs and other non-tariff barriers to regional trade. CARICOM was formed in 1973 to implement the Treaty of Chaguaramas, which replaced the free-trade area with a single market. The intended free movement of people, goods, and capital is still not a reality because there is not a “regional body with powers and accountability that can help transform community decisions to binding laws in individual jurisdictions is a key impediment,” according to a 2020 report from the IMF.

In 1989, the CARICOM heads decided that further economic integration was required in an era of globalization. The Treaty of Chaguaramas was revised in 2001 to accelerate the implementation of the CSME, which started in 2006. The 2008 global financial crisis further delayed what former Managing Director of the London-based Caribbean Council David Jessop called “a process plagued by rhetoric and inaction.”

COVID-19, however, may have done what neither of the two best-known analyses of the Caribbean’s challenges, the Golding Report and the Ramphal Commission, could: show the fragmented Caribbean nations the real benefits of integrated, unified coordination when faced with externalities. As she relinquished the CARICOM chair In June 2020, Barbadian Prime Minister Mia Mottley praised the regional architecture for its sterling performance in organizing and supporting the region during the pandemic.

Current Chairman of CARICOM and Prime Minister of Trinidad and Tobago Keith Rowley called for 2021 to be “the year of CARICOM,” and challenged the region to live up to its promise: “Let this be the year that we make CARICOM work for us and construct the resilient society that will provide a safe, prosperous and viable community for all of us.” He boldly called for the CSME to become the principal framework for recovery. Despite the real obstacle of establishing a single currency and its attendant institutions, CSME got a shot of energy from the COVID-19 crisis.

Back to questions

BONUS QUESTION ANSWER

Assume the Olympics occur this summer. Several factors contribute to a country’s medal-count prospects—population size, the promotion of women in sports, national investment in sports, etc. While no single factor explains a country’s success or failure, decisions and investments made by Latin American nations over the past four years could be an indication of a strong Olympic showing.

Brazil has made the strategic decision not to prioritize one sport, and has instead sought to be in the competition for as many Olympic slots as possible, securing one hundred and eighty so far. Cuba, in comparison, has focused on boxing and baseball to achieve its Olympic medal goals. Mexico’s Olympic team is also looking promising, with a fairly gender-balanced team (forty-nine men and thirty-seven women). AMLO also announced a financial stimulus for athletes who participated in the 2019 Pan American Games and are now preparing for Tokyo 2020+1 amid the COVID-19 pandemic. Jamaica is also investing in its Olympic athletes, despite the economic constraints of the pandemic, providing $40 million in funding for its athletes’ preparation and qualification.

With all eyes hopefully on the Summer Olympics, the authors predict that countries that provided the most comprehensive support to their athletes during the pandemic will come out on top in the upcoming games.

The post Spotlight: 10 Questions for Latin America and the Caribbean appeared first on Atlantic Council.

#DFRLabCoffeeBreak with InternetLab Head of Research Heloisa Massaro

ebaker — Thu, 13 Aug 2020 12:00:14 +0000

On this week’s #DFRLabCoffeeBreak, Assignment Editor and Research Associate, Luiza Bandeira sits down with Heloisa Massaro, Head of Research at InternetLab. InternetLab is a Brazilian think tank focused on law, technology, and internet policy. The two explore COVID-19 disinformation inside the country and the resulting outbreak that has made it a global hot spot. Massaro explains the disinformation’s resulting effect on Brazil in the wake of COVID-19 and the country’s hastily put together bill meant to combat “fake news.”

The DFRLab Coffee Break is a video series meant to discuss how disinformation and digital change affect industries, policy making, and society with a community of experts, academics, and leaders from around the world.

The Atlantic Council’s Digital Forensic Research Lab (DFRLab) has operationalized the study of disinformation by exposing falsehoods and fake news, documenting human rights abuses, and building digital resilience worldwide.

learn more

The post #DFRLabCoffeeBreak with InternetLab Head of Research Heloisa Massaro appeared first on Atlantic Council.

Where the US-Brazil relationship is going next

Larry Luxner — Mon, 08 Jun 2020 14:03:00 +0000

As Brazil and the United States grapple with the devastating effects of the coronavirus pandemic, both countries are trying to chart paths to economic recovery. And according to officials from both countries, the road to renewed growth could include deepening their trade and investment relationship.

In a June 4 webinar titled “The Next Phase of the US-Brazil Relationship,” US Ambassador to Brazil Todd Chapman and Nestor Forster, chargé d’affaires at the Brazilian Embassy in Washington, described how their respective jobs have evolved as the pandemic worsens.

The virtual event was hosted by the Atlantic Council’s Adrienne Arsht Latin America Center, moderated by the center’s associate director, Roberta Braga, in partnership with the Brazilian Trade & Investment Promotion Agency (Apex-Brasil) and in collaboration with AmCham Brasil.

As of June 8, Brazil has confirmed 691,758 coronavirus cases, up 31 percent since June 1 and now second in the world after the United States. Brazil, with 212 million people, has now also passed Italy, France, and Spain to rank third in total COVID-19 deaths (36,455) after the United States and Britain.

“When anticipating my arrival in Brazil, we had a very expansive dialogue and agenda to pursue, from economics to education to health,” said Chapman, who began his post March 30 in Brasília. “But with the advent of COVID-19, the health situation is now my first, second, and third priority—and also to attend to the 1,500 staffers at the US mission and the 275,000 resident Americans in Brazil—as we focus on how to address the pandemic and loss of life.”

Forster defended the approach toward the pandemic taken by President Jair Bolsonaro. “There’s a clear division between the role played by the federal government and the guidelines enforced by state and local governments,” said Forster. “From the onset, our president has said that in a country as large and regionally diverse as Brazil, it’s very hard to have a one-size-fits-all solution.”

Forster added: “This is a public health emergency, but it’s not only a health issue. It has tremendous repercussions for society and the economy, and the view of our president has been that we should tackle all these fronts at the same time.”

Braga, noting that both Bolsonaro and US President Donald J. Trump have compared COVID-19 to the flu, explained that on May 27 the Trump administration began banning the entry of non-US citizens who had recently traveled to Brazil. Forster said the restrictions are a measure to address the spread of the pandemic.

“Brazil had taken the same measure on March 27, when we established restrictions on all foreigners coming by plane,” he said, noting exceptions to this rule. “Those measures are temporary. They should go away as soon as the numbers start to improve.”

Chapman, a career diplomat and former US ambassador to Ecuador, said he’s set a target of doubling the value of US-Brazil trade from the current $105 billion to $210 billion over the next five years. By comparison, annual trade between the United States and Mexico—which has only 60 percent of Brazil’s population—exceeds $600 billion.

“At 15 percent growth a year, it’s possible,” Chapman said. “You get there by improving the overall business climate here in Brazil to make it more attractive, and by reducing every barrier possible. Our economic teams are meeting constantly to look at very specific issues—and the more specific the dialogue, the more progress we’ll make. That’s the objective that’s been set for us.”

Even though Brazil’s travel and tourism industry has been devastated by COVID-19, Forster believes the crisis will pass.

“Brazil just had its largest agriculture harvest ever,” he said. “Even during the pandemic, Brazil has been the country least affected by foreign trade among the [Group of Twenty]. We’re showing resilience in our trade performance.”

In 2019, Brazil received $78 billion in foreign direct investment (FDI), making it the world’s fourth-largest recipient. It seeks to join the Paris-based Organization for European Co-operation and Development (OECD)—an effort the United States formally supported this year—and would also like to enact a free-trade agreement with the United States.

Colorful fishing boats wait for tourists at the docks in Paratí, a resort town. (Photo by Larry Luxner)

“It’s the ultimate goal that both our countries think is worth pursuing, though how soon it can happen is not clear, because there are questions and legal requirements,” Forster said in addressing when a US-Brazil free trade agreement might come about.

“Instead of thinking when we can have an FTA, we should work on the goal of doubling trade between Brazil and the US. There’s a tremendous potential here, and I think we should add to that the goal of doubling bilateral investment both ways,” he said, estimating that Brazilian investment in the US economy has grown by 350 percent over the past decade.

“Our minister of economy, Paulo Guedes, said the pandemic should not be an excuse to do less or procrastinate,” Forster said. “By year’s end, we can tackle tax reform and put Brazil in a better shape to face the dire economic situation. We’re not sitting idly by. On the contrary, we’ve been extremely busy.”

To that end, Forster said, “we’ve made lots of progress regarding trade facilitation—getting rid of red tape and inefficiencies, and streamlining the process of imports and exports—and we’ve had ongoing talks on e-commerce and regulatory practices. We have just begun talks on an anti-corruption package and a dialogue on intellectual property issues.”

In response to concerns raised by members of the US House of Representatives’ Ways and Means Committee regarding environmental protections and labor rights in Brazil, Forster added: “This administration is as committed to environmental protection in Brazil as any other. What’s different is that President Bolsonaro has expressed a big concern about the 25 million Brazilians who live in the region. We need to bring sustainable development to these people, and economic opportunities for those who need it badly.”

Larry Luxner is a Tel Aviv-based freelance journalist and photographer who covers the Middle East, Eurasia, Africa and Latin America. Follow him on Twitter @LLuxner.

Guatemalan president criticizes US over lack of COVID-19 assistance

By Larry Luxner

“Guatemala is an ally of the United States, but I don’t believe the US is an ally to Guatemala, because they don’t treat us like one,” he said. “We’ve seen how they’ve assisted other countries with ventilators, and we haven’t even gotten a dime from them—not even one single mask from the United States. We don’t feel appreciated.”

Coronavirus Migration

New Atlanticist Jun 2, 2020

Costa Rica legalized same-sex marriage. Where does the rest of Latin America stand on marriage equality?

By Isabel Kennon

As Costa Rica becomes the first in Central America to take this step toward equality, it remains to be seen who will be next to turn the Inter-American Court on Human Rights’ opinion into action.

Civil Society Human Rights

New Atlanticist May 20, 2020

The day after COVID-19 and saving emerging markets

By Mohammed Soliman and Francisco Campos

While developed markets have responded with historical levels of fiscal stimulus, globally there is immediate fiscal need in the emerging markets to tackle the health and economic fallout.

Africa Coronavirus

The post Where the US-Brazil relationship is going next appeared first on Atlantic Council.

China-Brazil relations under COVID-19

Isabel Kennon — Wed, 20 May 2020 21:36:49 +0000

On May 12, 2020, the Atlantic Council’s Adrienne Arsht Latin America Center hosted a timely conversation on the implications of the coronavirus on Sino-Brazilian relations. The event also marked the launch of the new China-Latin America Policy and Business Consultation Group, which will discuss some of the most pressing issues around China’s relationship with countries across the region.

The conversation featured Julie Chung, principal deputy assistant secretary (PDAS) in the US Department of State’s Bureau of Western Hemisphere Affairs; Thiago de Aragão, a partner and director of intelligence at Arko Advice; Ambassador Marcos Caramuru de Paiva, currently a partner and manager of KEMU Shanghai and former Brazilian ambassador to China; and José Roberto Martins, partner at Trench Rossi Watanabe Advogados. Jason Marczak, director of the Adrienne Arsht Latin America Center, gave opening remarks, and Pepe Zhang, associate director and lead on Latin America-China affairs for the Adrienne Arsht Latin America Center, moderated the conversation.

PDAS Chung opened the dialogue by calling for increased bilateral, regional, and global cooperation to combat the economic and public health crises. “The more we can pool our resources, the better we can overcome and fight this current situation,” she said. She also encouraged long-term capacity building and bilateral coordination efforts through capital investments, regulation coordination, and trade collaboration.

Ambassador Caramuru de Paiva noted that Brazil’s response to COVID-19 has been distributed between federal and local governments. In his view, states and municipalities have played a larger role against the pandemic, partly because of the size and diversity of the country, but also because the federal administration has followed a more lenient public health strategy. According to Ambassador Caramuru de Paiva, “the local governments took the right steps to protect people [and the] federal government was efficient in approving measures to protect businesses.”

Transitioning to external affairs, Caramuru de Paiva shared that trade with China has flourished despite the pandemic. Martins spoke on the mutual respect between the Brazilian and Chinese business communities. Both countries, he explained, have developed a “business infrastructure”—China has been Brazil’s major trading partner for at least ten years, and there is a strong bilateral business community. Caramuru de Paiva and Martins agreed that the active trade and infrastructure investment that characterize Brazil’s relationship with China are both beneficial and necessary.

Offering the political perspective on the Brazil-China relationship, de Aragão explained that there have been aggressive comments against China coming from individuals in government and Congress. However, these narratives have not transformed into concrete actions. De Aragão stated that while the Sino-Brazilian political relationship has suffered from these comments, the commercial relationship has thrived. This contrast between political and trade relations can be managed, he said, but political narratives can eventually materialize and contaminate the commercial relationship.

Therefore, according to de Aragão, China has several concerns regarding its relations with Brazil. First, the perceptions that Brazilian decision-makers have about China; second, US influence in Brazil—for example, a suspicion toward Huawei and 5G investments; and third, non-trade opportunities that could pose a problem for operations due to regulations of mergers and acquisitions. Therefore, de Aragão stated, China’s short-term goals are to understand the presidential decision-making process; to increase strategic partnerships in infrastructure; and to counteract the negative portrayals of China within the Brazilian government.

When asked if there is political pressure to impose tariffs on Chinese products, de Aragão asserted that Brazilian imports from China reflect the nature of free trade and supply chains. He stated that due to its complex tax system and labor laws, Brazil has been unable to boost local production at competitive prices.

The panelists compared the Chinese and US approach to Latin America. PDAS Chung encouraged Brazil and Latin American countries to be careful of China’s intentions, given their lack of transparency, predatory lending tactics, and strict government control over the Chinese business sector. Caramuru de Paiva responded that Brazil is not facing a dilemma between China and the United States, even if both powers have different economic models. “We have to have a decent dialogue with both,” he stated.

Chung explained that Brazil does not face “a choice between the United States and China,” but a choice about what Brazilians want and what values they want to import and integrate into their nation. Caramuru de Paiva mentioned that many Brazilians favor democracy, multilateralism, free trade, and international health cooperation; however, he expressed confusion over the values that are leading current US foreign policy.

To close the conversation, Martins observed that “Brazil doesn’t have the luxury to choose investors,” and noted that “any restriction to investors, whatever country, would be unconstitutional and unsustainable.” He lauded Brazil’s recent regulatory efforts and acknowledged that Brazil should continue to build upon this platform.

Observing that Brazil received more foreign direct investment in the first four months of 2020 than in the entirety of 2019, Martins shared that Brazil has a privatization plan to open the market further after the pandemic. He looked toward the future with optimism, declaring, that despite challenges, Brazil has institutions that will continue to attract foreign investments. “I would love to see investors from everywhere, to challenge, participate, and contribute in [the Brazilian] market,” Martins concluded.

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The coronavirus infodemic in Latin America will cost lives

Roberta Braga and Diego Area — Fri, 03 Apr 2020 17:15:54 +0000

Since February, when the first case of COVID-19 was confirmed in Latin America, leaders have begun directing citizens on the best course of action to reduce the spread and loss of life. But whether to assuage fears or to assert their own political interests in a time of crisis, some heads of state have also been the culprits of spreading disinformation and misinformation. In Brazil and in Venezuela—two very different countries but both with oversaturated, highly polarized online information environments—thousands could end up paying for the spread of disinformation and misinformation with their lives.

At this moment of uncertainty and too many “expert voices,” societies are desperately seeking reliable, trustworthy sources of information. The COVID-19 pandemic is the first global health crisis in the age of social media—in countries where conversations on social media are hyperpolarized, governments must work even harder to create an atmosphere of confidence and reliability.

The number of COVID-19 cases in Latin America had surpassed 12,000 as March turned to April. As the situation worsens, it is imperative that governments be able to effectively implement national public health measures with which societies will comply. Yet the more governments send clouded, confusing, or outright inaccurate messages, the less likely it will be that their populations will heed mandates or warnings. In Brazil’s case, for example, the president himself is urging citizens to go back to work for the sake of the economy, contradicting health experts advocating for social distancing around the world and prompting the legal system to legally prohibit Jair Bolsonaro from amplifying directives against social isolation.

Disinformation and misinformation, especially circulating within the biggest economy in Latin America (Brazil) and the country with the worst man-made humanitarian crisis in the hemisphere (Venezuela), can foment national catastrophes that will be felt well beyond the realms of the online information space and national borders.

Two of the region’s most polarized countries, whose leaders espouse nearly opposite ideologies, provide stark glimpses into the very real effects of disinformation and offer a warning for how we should proceed.

Brazil

In Brazil, President Jair Bolsonaro has failed outright to recognize the sheer potential of the virus—he has on various occasions called the coronavirus a “gripezinha,” (a small cold), as well as a fantasy amplified by the media. On March 29, he took to walking the streets of a market outside Brasilia, the capital, in an attempt to encourage Brazilians to keep the economy going rather than heed lockdown directives coming from health experts. Just days before, in a YouTube announcement streamed live on March 24, he affirmed that he will not sacrifice Brazil’s economy, and again referred to the virus as a small cold—going so far as to say it would not affect him as he is healthy and athletic, prompting enraged responses from scientists and some local government officials.

And, thanks in part to some encouragement from the president himself, mass gatherings like the pro-government protests that took place on March 15 brought together thousands of people at a time when social distancing was the recommended course of action by the World Health Organization. On the streets of São Paulo, some protestors called the virus a “hoax to discourage protesting.”

Confusing directions from the top, combined with the rising tide of disinformation spreading through Brazilian social media and messaging platforms, means millions of Brazilians are taking inappropriate, or outright ineffective, measures to contain the virus’s spread.

Brazilians, and most visibly the country’s most vulnerable populations, cannot afford to be put at risk by disinformation, misinformation, or the minimization of the seriousness of the virus. The first cases of coronavirus were confirmed on March 21 in the City of God favela. With low levels of access to health care services and high exposure to poor sanitary conditions, these are the populations that will suffer the most from this pandemic.

Venezuela

Nowhere is the information environment more conducive to the spread of disinformation than in Venezuela—the regime of Nicolas Maduro controls all of the major channels of communication, and independent media and civil society organizations struggle to make their voices heard within an environment replete with censorship, persecution, torture, and extrajudicial killings. Additionally, no epidemiological information has been publicly reported since Maduro took office in 2014, with one exception. In December 2016, then Minister of Health Antonieta Corporale published an epidemiological report, and the following day, the regime fired her.

In the middle of the COVID-19 crisis, on March 26, the US Department of Justice charged Nicolás Maduro and fourteen other former and current officials with drug trafficking, corruption, money laundering, and narco-terrorism. Hours later, Juan Guaidó, interim president of Venezuela recognized by more than fifty countries including the United States, called for the creation of a national emergency government to face the pandemic, excluding Maduro.

More than any other country in the region, the coronavirus pandemic could hit Venezuela at its very core. Just after Maduro ordered mandatory social quarantine in Venezuela, social media videos emerged from the streets of Petare, the country’s largest slum, showing hundreds heading to street markets to access basic goods. In a country where “59 percent of households have insufficient income to buy food” according to the Food Security Assessment published on February 2020, its unlikely that people could follow social distancing regulations.

The political stalemate in Venezuela and the US “maximum pressure” campaign is opening the door for the Maduro-controlled military to reinforce regulations exposing the population to larger violations of human rights, as well as political violence, persecution, and chaos.

As the online information environment in Venezuela continues to evolve, monitoring the digital engagement space with an approach to countering false narratives is increasingly necessary. #AlertaVenezuela, an Adrienne Arsht Latin America Center and Digital Forensic Research Lab effort, is paving the way for a deeper understanding of the complexities of the information environment in and around Venezuela. On March 27, we hosted a virtual discussion with key partners in Venezuela to look at the impact of COVID-19 disinformation in the country. By exposing and explaining disinformation in this context, the Atlantic Council has and will continue to shed light on the path ahead for combatting disinformation during this crisis.

A call to action

From the highest echelons of government to those sitting at home interacting with these developments from their phones or computers, there is a joint responsibility to stick to the facts, to verify everything, and to think twice before sharing.

Fact-checkers, media, and civil society have quickly mobilized to counter the rapid spread of disinformation. Technology companies launched control centers to help counter the spread of false news. And media outlets across the world opened bureaus focused on coronavirus reporting.

But, these efforts alone are not enough if leaders are contributing to the infodemic. Disinformation, misinformation, or misleading information coming from the top will not do the region any favors—at this time of uncertainty, the countries’ leaders must stick to the facts and avoid minimizing the dangers of this pandemic.

Roberta Braga is an associate director at the Adrienne Arsht Latin America Center of the Atlantic Council, where she focuses on Brazil and disinformation, and co-leads the organization’s #AlertaVenezuela work focused on countering disinformation in Venezuela with the Digital Forensic Research Lab.

Diego Area is an associate director at the Adrienne Arsht Latin America Center of the Atlantic Council, where he leads the Center’s work on Venezuela that covers themes including illicit activities, democracy and governance, crisis management, depolarization, and countering disinformation.

What Mexico’s response to H1N1 can teach us about coronavirus and future pandemics

By Pablo Reynoso Brito

While the A(H1N1) and novel coronavirus (COVID-19) crises are different in magnitude and were caused by viruses with different levels of lethality, Mexico’s experience with the A(H1N1) can offer valuable lessons for current disruptions.

Coronavirus Mexico

New Atlanticist Mar 23, 2020

What Latin American countries are doing to confront coronavirus

By David A. Wemer

As governments in North America, Europe, Asia, and around the world continue to combat the spread of the novel coronavirus (COVID-19), Latin American leaders are stepping up their efforts as cases are beginning to be documented in their countries. Although the number of cases across the region remains mostly lower than the epicenters in Europe and the United States, “we are not letting our guard down,” El Salvador’s Minister of Foreign Affairs Alexandra Hill Tinoco said on March 23. “No one can guarantee us that it is not going to hit us,” she explained, so every Latin American government is taking the threat seriously.

Colombia Coronavirus

New Atlanticist Mar 16, 2020

Addressing the coronavirus “infodemic”

By David A. Wemer

“Information, including disinformation and misinformation about the novel coronavirus is spreading faster than the pandemic itself,” Atlantic Council President and CEO Frederick Kempe explained. The sheer amount of information on the outbreak means that government and business leaders need to take specific actions to ensure that their citizens and employees receive important credible information.

Disinformation Economy & Business

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Ahead of Brazil’s municipal elections, novel legal requirements can elevate women’s participation in politics

Valentina Sader — Tue, 10 Mar 2020 21:15:57 +0000

In October 2020, Brazilians will head to the polls to elect new mayors and city counselors in thousands of municipalities across the country. For the first time in history, Brazil’s thirty-five individual political parties will be required by law to allocate at least 30 percent of their campaign funding toward the election of women candidates. As the deadline for candidates to register with their respective parties approaches, the moment is ripe to elevate women’s participation in politics in a country where the playing field for women remains severely unequal.

Brazil has one of Latin America’s largest gender gaps. It ranks twenty-second out of twenty-five countries in the region. The main drag on the country’s overall performance is political empowerment—ranking 104^th in the world, behind other Latin American countries, such as Nicaragua (third), Costa Rica (sixth), Argentina (twenty-second), Bolivia (twenty-seventh), Colombia (thirty-third), and even Venezuela (seventy-sixth).

Diversity, Equity, and Inclusion

Mar 10, 2020

Venezuela’s democratization: Leading with women to achieve peace

By Cristina Guevara

In order for Venezuela to transition to a more democratic, inclusive, and peaceful society, the interim government must strengthen women’s political participation and decision-making power.

Democratic Transitions Venezuela

With regards to local governments, only one of the twenty-six states and the federal district is governed by women. In 2016, when the last municipal elections took place in Brazil, 11.6 percent of Brazil’s 5,568 municipalities elected women mayors, while 1,286 municipalities did not even elect a woman as city councilor. Only twenty-four cities had majority women on their city council.

Women represent nearly 52 percent of Brazil’s voting population. However, as of June 2019, two positions in Brazil’s twenty-two-member cabinet were held by women (Teresa Cristina, Minister of Agriculture, Livestock and Supply, and Damares Alves, Minister of Human Rights, Family and Women). In addition, only 15 percent of federal deputies and senators are women.

Though Latin America has made strides for women’s advancement over the last decades, women in the region still face significant hurdles to inclusion and prosperity. Leadership is an area where we can observe not only women’s modest yet visible progress but also the clear need for mechanisms to sustain and expand female representation. Today, only Barbados and Trinidad and Tobago have elected women heads of states, and Bolivia has a woman interim president.

As Brazil prepares to hold municipal elections in October 2020, the country should aim to increase women’s political participation and learn from its fellow Latin American countries.

Why should Brazil aim to increase women’s political participation?

The UN Sustainable Development Goals, to which Brazil is a signatory, highlight key urgent global challenges that must be addressed for a better and more sustainable future. Goal 5 highlights the importance of gender equality.

According to the United Nations, “equal access to education, health care, decent work, and representation in political and economic decision-making processes will fuel sustainable economies and benefit societies and humanity at large.” Having women in political positions facilitates the representation of women’s interests in politics, helping implement “new legal frameworks regarding female equality in the workplace and the eradication of harmful practices targeted at women,” for example, gender-based violence, such as femicide.

Research proved that in India, the number of drinking water projects in areas with women-led councils was 62 percent higher than in those with men-led councils; and in Norway, the presence of women in municipal councils had a direct causal relationship with regard to childcare coverage.

Women, like men, have “proven abilities as leaders and agents of change, and the right to participate equally in democratic governance.”

What can Brazil learn from other Latin American countries?

Argentina was the first country in the world to introduce a gender quota into law, in 1991. Since then, other countries in Latin America have adopted similar legal requirements.

Nicaragua ranks third in the world for political empowerment. Unlike Brazil, Nicaragua has a unicameral political system, but the country’s gender quotas apply for both the lower house and the subnational level. Implemented in 2012, the legislation enforces a 50 percent rate for women candidates in legislative elections, and gender balance of elected officials. Today, forty-three out of ninety-one seats (47 percent) in the National Assembly are held by women.

Colombia ranks thirty-third in the world for political empowerment. Even though there is space for improvement, under President Iván Duque, Colombia has a woman vice president and its first ministerial cabinet with gender parity. The country’s gender laws are more aligned with those of Brazil, also requiring a minimum 30 percent of women candidates, but these regulations apply not only to the Lower House and subnational level, but also to the Senate.

Diversity, Equity, and Inclusion

Mar 10, 2020

Colombia ¿Cómo vamos?: Women’s political and economic empowerment

By Camila Hernandez

Closing gender gaps in economic and political empowerment will move Colombia forward in its path toward sustainable development. Greater female participation in the economy and in politics will not only boost the country’s economy (by increasing productivity, diversifying the economy, reducing income inequality, increasing organizational effectiveness, among others), but will also contribute to more inclusive, democratic, and sustainable policies.

Colombia Women

Brazil instituted “gender quotas” in 1995, establishing a 20 percent minimum quota for women candidates in local elections. In 1997, a new electoral law determined that each party or coalition had to put forward a minimum 30 percent women candidates. These quotas, however, only apply to positions elected through a proportional representation system—therefore, the quota does not apply to presidents, governors, and senators.

For the 2020 elections, slight changes apply regarding gender quotas. The end of party coalitions will now require individual political parties to meet the 30 percent minimum requirement for women candidates. In addition, to guarantee greater participation, political parties are now required to allocate at least 30 percent of their campaign funding towards women candidates. In the case the number of women candidates exceeds the minimum requirement, the funding allocated should be proportionate.

These changes in regulations can make a difference in electing more women to political positions at the local level. But to shrink the gender gap in Brazil, clear mechanisms must be in place to enforce and punish those not compliant with these regulations, avoiding additional cases of misappropriation of campaign funding.

Beyond 2020, gender quotas for the Senate could also be helpful in guaranteeing greater women participation throughout the political system.

Valentina Sader is an assistant director at the Adrienne Arsht Latin America Center. Follow her on Twitter @valentinasader.

Diversity, Equity, and Inclusion Mar 10, 2020

Colombia ¿Cómo vamos?: Women’s political and economic empowerment

By Camila Hernandez

Colombia Women

Diversity, Equity, and Inclusion Mar 5, 2020

Venezuelan women: The unseen victims of the humanitarian crisis

By Angela Chavez

Although gender inequality is not a novel issue in Latin America and especially not in Venezuela, the current humanitarian crisis has made women more vulnerable financially, politically, and socially, and made sexual violence and discrimination commonplace. According to a recent report by Venezuelan non-profit organization Center for Peace and Justice (CEPAZ), the crisis has increased women’s vulnerability through the lack of governance and weakened institutions, impoverishment, lack of access to food and medicine, and the rising forced migration, among other factors.

Migration Venezuela

Diversity, Equity, and Inclusion Feb 24, 2020

Women protest for their lives: Fighting femicide in Latin America

By Isabel Kennon and Grace Valdevitt

Femicide continues to claim the lives of Latin American women on a daily basis. In Mexico, they are standing up to say something about it.

Civil Society Human Rights

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The path forward for the US-Brazil economic relationship

David A. Wemer — Thu, 05 Mar 2020 17:05:06 +0000

Growing cooperation between the United States and Brazil has created “a very unique moment in our bilateral relations,” as both sides move closer to a potential deepening of their economic relationship, Ambassador of Brazil to the United States Nestor Forster said on March 5.

Joe Semsar, acting under secretary of commerce for international trade at the US Department of Commerce, agreed, saying that it “feels like there is some momentum behind this bilateral relationship,” Semsar suggested that both the United States and Brazil are now focused on continuing to “build the foundations for a potential free trade agreement.”

Semsar and Forster spoke at the Atlantic Council on March 5 to mark the launch of a new Atlantic Council report “US-Brazil trade and FDI: Enhancing the bilateral economic relationship.” The report, authored by Brazilian and US experts, offers a new vision for strengthening US-Brazilian trade and foreign direct investment, with the ultimate goal of a free trade agreement between both countries.

Read the report:

Issue briefs and reports

Mar 5, 2020

US-Brazil trade and FDI: Enhancing the bilateral economic relationship

By Abrão Neto, Roberta Braga

The United States and Brazil would benefit from a closer and stronger trade and foreign-direct-investment-relationship that would amplify growth and prosperity, in both the short and long terms. Deepening the economic relationship would pay dividends in other areas as well, translating into greater opportunities for strategic bilateral cooperation. This paper recognizes that the moment is now and that 2020 is a pivotal year to substantively advance bilateral economic ties.

Brazil Economy & Business

According to Sergio Segovia, president of Apex-Brasil, the report does not just advocate for pursuing a free trade agreement, but “creates a strategy for a way forward.” Forster agreed, praising the report for suggesting achievable goals for the short term that both countries can utilize “as building blocks towards longer-term objectives.” Semsar argued that the report will help provide leverage as a “focusing document to move [the US-Brazilian relationship] forward.”

The time is ripe for real progress on building economic ties between both countries, as years of hard work have provided a chance for breakthroughs. The US government and their “Brazilian counterparts have worked together for many years to prevent, reduce, and remove barriers to bilateral trade,” Semsar said, adding that “through years of engagement under our bilateral mechanisms, such as the US-Brazil commercial dialogue, we have been able to have productive and meaningful discussions.” According to US Representative Darin LaHood (R-IL), who co-chairs the Brazil Caucus in the US Congress, there has been “growing recognition” in both the United States and Brazil that economic cooperation “can help both countries.”

LaHood also credited the personal relationship between US President Donald J. Trump and President of Brazil Jair Bolsonaro as having “spurred where we are at today.” He further suggested that the successful completion of the United States-Mexico-Canada Agreement (USMCA) “showed our allies around the work that we can negotiate a trade agreement” successfully that is beneficial to all sides.

But while LaHood agreed that a free trade agreement should be a long-term goal for both the United States and Brazil, he cautioned that “there are a number of things that have to be met before we get to this next step.” He stressed the need in Brazil for tax reform, pension reform, and more significant anti-corruption measures as requirements for a serious push toward a free trade agreement. Semsar agreed, stressing that “if this were easy, we would have done it a long time ago.” For the United States, he continued, “details matter. There are fundamental issues that we need to work through before an agreement is possible.”

Forster acknowledged these continued challenges and argued that these make the intermediate steps outlined in the Atlantic Council report more important as an alternative to simply “throwing obstacles on the course” before beginning the race. He also warned against either side becoming too obsessed with potential economic competition between both countries, who often export similar goods. “I think it is about time that we overcome this logic of competition for market access; trying to get a larger slice of each other’s pie,” he said. “I see so much we can do to increase the size of the pie so we all end up with a large slice.”

One intermediary step, Semsar explained, will be to boost US investment into Brazil’s growing infrastructure construction. “US companies are only involved in 2 percent of infrastructure projects in Latin America,” he reported, while Spain accounts for nearly 19 percent and China 7 percent. By working to close this gap and taking other small steps to strengthen the underlying economic relationship, Semsar argued that both sides can “continue to build the foundations for a potential free trade agreement.” LaHood agreed, stressing that both sides should focus on “meeting the goals that we have put in place,” as maintaining progress “internally in Brazil will pay the best dividends down the road.”

“We all agree that we have a tremendous opportunity before us,” Forster said. But he warned that “we cannot keep opportunity for later. This is a unique moment; we should grab the moment.”

David A. Wemer is associate director, editorial at the Atlantic Council. Follow him on Twitter @DavidAWemer.

US-Brazil trade and FDI: Enhancing the bilateral economic relationship

By Abrão Neto, Roberta Braga

Brazil Economy & Business

New Atlanticist Dec 3, 2019

Brazil and Argentina surprised by tariff announcement: What comes next?

By Jasper Gilardi

On December 2, US President Donald J. Trump announced that he would impose new tariffs on Brazilian and Argentinian steel and aluminum coming into the United States, a retaliation for alleged currency manipulation, which he claimed was hurting US farmers.

Brazil Latin America

Report Apr 11, 2019

Spotlight: Five key economic avenues for strengthening US-Brazil trade and FDI

By Daniel Marteleto Godinho, Abrão Neto

In what five key ways can the United States and Brazil work more effectively together to strengthen bilateral trade and foreign direct investment?

Brazil Economy & Business

The post The path forward for the US-Brazil economic relationship appeared first on Atlantic Council.

US-Brazil trade and FDI: Enhancing the bilateral economic relationship

Abrão Neto, Roberta Braga — Thu, 05 Mar 2020 07:36:00 +0000

DOWNLOAD REPORT

Versão em Português

Foreword

The year 2020 marks the turning of a page for the Western Hemisphere, a region that in 2019 saw uncertainty dominate headlines as new governments came in and out of office, trade tensions grew, and citizens took to the streets to voice their concerns with the status quo.

For years, the opportunities that could come with a stronger bilateral relationship between the United States and Brazil have been underestimated. Significant potential exists to produce sizeable benefits for both societies. That potential must be maximized.

While US and Brazilian governments and businesses have begun to seize the benefits of the synergies the two countries share, hurdles remain that prevent a full and successful commercial reality.

Building upon the successes and progress made over the years, this paper incorporates the input and expertise of the US and Brazilian private sectors and policymakers to offer a renewed vision and new momentum for strengthening US-Brazil trade and foreign direct investment (FDI), supporting concrete steps toward deepening the commercial relationship, and laying the foundation for a potential free trade agreement (FTA) between the United States and Brazil.

As the global balance of power shifts, as the world faces new hurdles that could slow growth, and as Latin America must contend with more uncertainty amid new external shocks, the two countries strategically and economically have countless reasons to deepen commercial relations. Stronger ties will ultimately provide additional certainty at this critical time.

Jason Marczak
Director, Adrienne Arsht Latin America Center Atlantic Council

Executive Summary

A New Chapter for US-Brazil Relations
Deepening US-Brazil Trade and Investment
Institutional Hurdles and Potential Opportunities
The US Perspective
The Brazil Perspective
Working Toward Greater Foreign Direct Investment
Domestic Reforms Paving the Way for Greater Investment
Bilateral Pathways for Deepening Investment
Key Recommendations
Conclusion
Acknowledgments
About the Authors

Executive summary

Scan the global horizon today and one can’t help but note the trends that are fundamentally reshaping the world order. New global players are taking center stage, as countries reconsider their approaches to collaboration and cooperation. Changes in technology are evolving at unprecedented speeds—changes that have brought forward a fourth industrial revolution that has generated new questions about how best to solve global challenges not confined by borders. These transformative trends are affecting the world, and the marketplace. But, change also brings immense opportunity.

In this environment, the United States and Brazil are uniquely positioned to advance momentum for a more robust bilateral economic relationship. As the United States and Brazil look at delivering on such a goal, the Atlantic Council’s Adrienne Arsht Latin America Center, alongside intellectual partners in both countries, lays out the benefits that a closer economic relationship may offer. The goal: provide new ideas and reinforce momentum for deepening the bilateral relationship at a time of great synergy between the countries’ leadership.

An open, transparent, inclusive, and international rules-based bilateral trading system is key to sustainable growth and prosperity for the United States and Brazil.

This paper, authored by two US and two Brazilian experts, showcases the scope for the United States and Brazil of deepening trade and FDI ties. In particular, it highlights the institutional hurdles and opportunities for lowering trade barriers and enhancing convergence in the near term, while articulating the benefits of a comprehensive free trade agreement in the long term, as well as what the two countries can do to achieve even stronger investment ties. To highlight the potential benefits of a stronger US-Brazil partnership and increased investment in different sectors of the economy, this paper, from a bilateral and non-partisan perspective, proposes short-term and long-term approaches to seizing on opportunities for greater engagement. It also highlights, through call-out boxes, the authors’ perspectives on key themes and opportunities for particular industries.

Throughout 2020, the United States and Brazil have the chance to focus on key, practical, short-term wins that could pave the way for next steps toward a comprehensive long-term free trade agreement.

In the areas of trade, recommendations include a multi-chapter trade enhancement agreement that could encompass bilateral rules on customs administration and trade facilitation, good regulatory practices, technical barriers to trade, and digital trade, among other areas. Working closely with the private sectors of the two countries, the United States and Brazil should continue to identify specific bottlenecks to reduce trade uncertainty, and work to finalize a mutual recognition agreement between national trusted traders or Authorized Economic Operator (AEO) programs. Key to short-term success will be expanding digital documentation in bilateral trade and expanding upon sharing good regulatory practices, including conducting impact analyses and public consultations, and implementing a whole-of-government approach.

The two countries should work to move beyond the pilot program to establish a full-fledged Global Entry Program for pre-approved Brazilian travelers entering the United States, start negotiations to avoid double taxation, and consider the implementation of a high-level mechanism at the vice presidential level to oversee the bilateral relationship (in coordination with existing dialogues and groups). The United States and Brazil can also increase policy cooperation in third countries and international fora in areas of investment and trade policy coherence.

The United States should continue to support Brazil’s process of accession to the Organisation for Economic Co-operation and Development (OECD), which would energize and consolidate important economic domestic reforms in Brazil.

Beyond 2020, and using momentum of short-term progress, the United States and Brazil should work toward launching and concluding negotiations for a comprehensive free trade agreement (FTA) and bilateral investment treaty (BIT).

An open, transparent, inclusive, and international rules-based bilateral trading system is key to sustainable growth and prosperity for the United States and Brazil. By articulating the spillover effects of stronger ties from a bilateral approach, this paper provides a new perspective on the benefits of closer trade and investment linkages between the two countries. The moment to catapult the joint relationship to the next level is now.

A new chapter for US-Brazil relations

As the two largest economies in the Western Hemisphere, the United States and Brazil have a long and prosperous relationship, one dating back to 1824, when the United States became one of the first countries to recognize Brazil’s independence.¹

More recently, and over the course of decades, Brazil and the United States have taken steps to foster deeper engagement within sectors of strategic mutual importance. These have included the aerospace, energy, tourism, defense and security, healthcare, infrastructure, and automotive industries, among many others.

The partnership is one characterized by a shared vision of growth and prosperity, while each country’s viewpoint regarding the role of the public and private sectors in leading growth has varied. Recent numbers give a glimpse of the mutual benefits behind the bilateral relationship. In 2018, two-way trade in goods and services amounted to more than $100 billion, which is also likely to be the case in 2019.*

A $30.6 billion trade surplus

As Latin America’s largest democracy and economy, Brazil ranks fourteenth as a US trading partner, and it is the United States’ number-two destination for goods in the region.

For Brazil, the United States is a crucial economic and commercial partner. As of 2019, the United States ranked as Brazil’s second-largest trading partner— having only recently been overtaken by China—when considering goods and services together. The United States is the most important destination for Brazilian exports in services and in manufactured products. In terms of FDI, while flows from China have accelerated in recent years (especially in the energy and infrastructure industries), the United States remains the largest investor of FDI in Brazil—five times greater than China, reflecting the breadth and depth of the longstanding relationship between the United States and Brazil.²

The United States also benefits from its relationship with Brazil. As Latin America’s largest democracy and economy, Brazil ranks fourteenth as a US trading partner, and it is the United States’ number-two destination for goods in the region. According to the US Trade Representative (USTR), in 2018, the United States had an overall trade surplus of $30.6 billion for goods and services, including an $8.5 billion trade surplus for goods alone.³ Brazil’s main imports from the United States are aircraft, machinery, petroleum products, electronics, and optical and medical instruments.

One can look at the number of student exchanges between the United States and Brazil as another example of the importance of the bilateral relationship—Brazil is the ninth-leading country sending students to the United States.⁴ Between 2017 and 2018, per US Immigration and Customs’ SEVIS (Student and Exchange Visitor Information System) by the Numbers Report, the number of Brazilian students studying in the United States increased by 13.1 percent.⁵ From 2018 to 2019, that number increased by 9.8 percent, the second-largest percentage increase in international students from any country worldwide in that timespan.⁶

There is no denying that the United States and Brazil are key partners and allies. But the two largest economies in the Americas have yet to remove the barriers necessary to maximize the full potential of actual and possible trade and investment ties.

The positive state of bilateral relations offers a unique opportunity to build momentum to deepen economic ties in this longstanding and enduring partnership. The key reforms being advanced in Brazil to strengthen the economy, and the role of the private sector in it, make this an opportune moment to advance and achieve key short-term outcomes that would position both countries to deepen and expand trade and investment in the longer term.

Over the past year, the administrations of US President Donald Trump and Brazilian President Jair Bolsonaro have made commitments to further bring the two economies closer together in increasing prosperity, enhancing security, and promoting democracy and national sovereignty.

In his first bilateral visit abroad after assuming office, President Bolsonaro met in Washington, DC, with President Trump in March 2019, joined by seven of his twenty-two ministers, including Economy Minister Paulo Guedes, Justice Minister Sérgio Moro, and Foreign Affairs Minister Ernesto Araújo. The visit defined an agenda that prioritized expanding cooperation in trade and FDI, defense and security, and innovation.

As the United States and Brazil look at further delivering on a stronger bilateral agenda, this publication sheds light on the possibilities to advance short-to-long-term commercial opportunities in numerous sectors.

On more than one occasion, leaders of both countries have expressed their willingness to negotiate a trade agreement—notwithstanding the complicated and ongoing challenges that have held back such negotiations in the past.⁷ The two presidents have thus far made several specific trade-related commitments. They agreed to build a Prosperity Partnership to increase jobs and reduce barriers to trade and investment, putting emphasis on exploring new initiatives to facilitate trade, investment, and good regulatory practices. They also pressed for the conclusion of a mutual recognition agreement regarding their trusted trader or AEO programs.

To show their mutual intent to tackle some long-standing bilateral trade disputes, President Bolsonaro announced the intention to expand US access to the Brazilian wheat and pork markets, while President Trump indicated the United States would take steps to resume Brazil’s beef exports. Brazil has also implemented the commitment to extend the annual duty-free tariff rate quota (TRQ) of 750,000 metric tons (MT) of wheat imports.⁸

As written in the joint statement between the two countries, President Trump offered his support for Brazil’s accession to the OECD—a process that started in 2017 with Brazil formally expressing its interest in joining the organization—and President Bolsonaro announced that Brazil will begin to forgo special and differential treatment in World Trade Organization (WTO) negotiations.

Brazil affirmed it would waive the tourist visa requirement for US citizens to enter the country, which became effective in June 2019, and both presidents agreed they would work to enable Brazil to participate in the US Global Entry Program.⁹ They also decided to resume the activities of the Brazil-US CEO Forum.

On the defense-and-security front, both countries signed a Technology Safeguards Agreement that enables US spacecraft to be launched from Brazil’s Alcântara Launch Center. The agreement was approved by Brazil’s Congress in November 2019 and launches are expected to begin in 2021.¹⁰ This agreement is part of a broader effort to continue expanding bilateral cooperation beyond trade. The United States also designated Brazil as a “major non-NATO ally,” facilitating Brazil’s ability to purchase US weapons and defense equipment.¹¹

The Brazil-US CEO Forum, which met in Washington, DC in November 2019 after a four-year lapse, also laid the groundwork for deeper collaboration. The chief executive officers’ (CEOs’) joint recommendations included “proposals to increase bilateral trade, infrastructure cooperation, collaboration in the technology sector, and improvements in health, education, and workforce development.”¹² They recommended “several measures to advance discussions toward the long-term goal of a free trade agreement, focusing on issues such as Brazil’s entry into the OECD, tax reforms, trade facilitation and a Double Taxation Agreement (DTA).”¹³

Brazil’s own economic-reform agenda is also helping to lay the groundwork for a deepening of the relationship. The Brazilian Pension Reform, passed in the fourth quarter of 2019, bolsters Brazilian public finances, particularly in the longer term, by easing pressure on the budget over the coming years.¹⁴ More importantly, it is the first of various planned reforms to Brazil’s fiscal challenges—a much-needed tax reform is one of the next long-awaited reforms on the horizon.

As the United States and Brazil look at further delivering on a stronger bilateral agenda, this publication sheds light on the possibilities to advance short-to-long-term commercial opportunities in goods-and-services trade through a multi-chapter trade enhancement agreement, coordinated efforts to ensure Brazil’s accession to the OECD, the conclusion of a mutual recognition agreement between national trusted traders, continuing to enhance good regulatory practices and sector-specific regulatory cooperation, enhancing commercial policy cooperation in third countries, the implementation of a full-fledged Global Entry Program, and eventually, the conclusion of a US-Brazil Free Trade Agreement, a Double Taxation Agreement, and a Bilateral Investment Agreement.

* From a statistics standpoint, imports reported by one country do not necessarily coincide with exports reported by its trading counterpart. Various factors, including valuation and timing, explain such differences. Discrepancies may also occur in FDI data generated by each country. The Central Bank of Brazil and the Bureau of Economic Analysis may be using different methodologies for measuring FDI.

President Trump offered his support for Brazil’s accession to the OECD—a process that started in 2017 with Brazil formally expressing its interest in joining the organization—and President Bolsonaro announced that Brazil will begin to forgo special and differential treatment in World Trade Organization (WTO) negotiations.

Deepening US-Brazil trade and investment

Building toward a comprehensive free trade agreement

Brazil and the United States have long made strides toward the potential negotiation of an FTA. This would be the most ambitious and wide-ranging economic and trade measure toward which both countries could aim. Estimates predict that a US-Brazil FTA would have a net positive impact not only on both countries’ gross domestic product (GDP) and national income, but also on exports, imports, wages, and employment.¹⁵ An FTA would also create a long-standing legal framework that would further integrate both economies, and would shape the trade and investment patterns between them in the future.

However potentially positive an FTA may be, it is a long-term goal. The production of mutually beneficial results will demand time, resources, and political capital. There are several stages in the process of negotiating an FTA. In the US case, there is the need to notify Congress prior to the start of trade talks. Special pre-initiation assessments and congressional consultations are required, including an assessment of existing tariff disparities on agricultural products and an assessment by the International Trade Commission of import-sensitive agricultural products.

On the Brazilian side, it is necessary to decide whether the agreement would be a joint enterprise alongside the Southern Common Market (Mercosur), or whether it would be a bilateral undertaking—which would entail changes to the current legal structure of Mercosur.

Once talks formally start, multiple rounds and strenuous hours of negotiations are needed to reach agreements on a vast array of technical issues, involving numerous negotiating teams, private-sector consultations, and political instructions. If a deal is reached, the United States and Brazil would run the “last mile” of legal revisions, signing, congressional approvals, and, finally, ratification.

In a nutshell, the road to an FTA is a long one. As such, various steps can be taken to ripen the path to an eventual agreement.

Institutional hurdles and potential opportunities

As a member of Mercosur, Brazil is bound by its rules to negotiate tariff agreements as part of the trading bloc.¹⁶

Until recently, the administration of President Bolsonaro had firmly maintained its commitment to pursuing FTAs together with Mercosur, especially after successfully concluding negotiations in 2019 with the European Union and the European Free Trade Area (EFTA)—blocs that represent a combined gross domestic product (GDP) of $20 trillion.

But, the change in administration in Argentina, with Alberto Fernández assuming the presidency in December 2019, may impact next steps. Despite Brazil and Argentina’s long relationship as partners and allies, the two administrations may not see eye to eye on all issues of global integration. Such a position could eventually lead to new Mercosur legislation granting members full autonomy to negotiate treaties. It could also lead to a downgrade in Mercosur’s status from an “incomplete common market” to a “free trade area”—which would allow its members to unilaterally change their import tariffs. On the other hand, a pragmatic approach by the Argentine administration would open the door for continued cooperation through the existing Mercosur mechanism.

Any changes to the Mercosur normative framework require consensus from all Mercosur members, including Argentina. This is also valid for somewhat simpler modifications, as is the case of Decision CMC 32/00, which states that tariff preferences given to third parties must be jointly negotiated. A return to a free trade area involves even more complex and time-consuming legal and political arrangements.

Conversely, a withdrawal from Mercosur would be a last resort, with significant consequences. A withdrawal would impact Mercosur’s ongoing trade negotiations with third parties, as well as the recently concluded European Union-Mercosur trade agreement (as the agreement has not yet been signed and the European Union mandate was to negotiate with Mercosur as a bloc, and not with individual countries). It would also lead to time-consuming discussions regarding what tariffs would be in place in trade between Brazil and the other Mercosur countries.

All alternatives seem to come with a substantial cost to the political balance in the region, and would demand considerable time and energy.

Against this backdrop, from Brazil’s perspective, the case for an FTA negotiation with the United States is an incredible opportunity but not a simple task: FTA negotiations would have to take place within and alongside Mercosur (which demands Argentina’s new government be onboard and the United States be keen to negotiate with the four Mercosur countries as a trading bloc), or Brazil would come up against the need to adjust Mercosur’s rules to allow a bilateral negotiation.

Nevertheless, 2020 provides an opening to glance at alternative opportunities that could pave the way for an eventual FTA.

Brazilian President Jair Bolsonaro, Uruguayan Vice President Lucia Topolansky, Paraguayan President Mario Abdo Benitez, and Chilean Foreign Minister Teodoro Ribera attend a Mercosur summit, in Bento Gonçalves, Rio Grande do Sul, Brazil, December 5, 2019.

The US perspective

During President Bolsonaro’s visit to Washington in March 2019, Presidents Trump and Bolsonaro committed to “enhancing the work of the United States-Brazil Commission on Economic and Trade Relations, created under the Agreement on Trade and Economic Cooperation (ATEC) to explore new initiatives to facilitate trade investment and good regulatory practices.”¹⁷

In a historic move, President Trump also welcomed Brazil’s ongoing efforts to institute much-needed domestic economic reforms, as well as a regulatory framework in line with the standards of the OECD.

From the US perspective, the moment is ripe for both countries to engage in productive conversations that will yield positive outcomes for both parties and the private sector. The personal relationship between both presidents and their directives to reevaluate their respective countries’ trade relations presents a unique opportunity for dialogue and concrete results.

While an FTA should continue to be the goal toward which the United States and Brazil strive, given administrative and legislative priorities, results in the short term are key to laying the groundwork for an eventual agreement. The building blocks for a potential FTA between Brazil and the United States will be the short-term opportunities, which—if successfully implemented over the current year—can pave the way for a potential FTA and for the various long-term recommendations laid out in this paper.

As the United States and Brazil work to deepen trade of goods, the United States will look to seize on opportunities to increase regulatory cooperation, identify and eliminate technical barriers, and identify new openings for harmonizing standards and assessment procedures.

A focus on goods

Though the United States and Brazil have made progress on trade and investment over the years, Brazil remains one of the countries with the highest tariff barriers. As the United States and Brazil work to deepen trade of goods, the United States will look to seize on opportunities to increase regulatory cooperation, identify and eliminate technical barriers, and identify new openings for harmonizing standards and assessment procedures.

Brazil’s Most Favored Nation (MFN) applied tariff averaged 10.2 percent for agricultural products and 13.9 percent for non-agricultural products in 2017. Brazil’s WTO maximum bound-tariff rates are 55 percent for agricultural products and 35 percent for non-agricultural products.

US exporters face significant uncertainty as result of frequent increases and decreases in tariffs. According to the World Bank, Brazil’s average (trade-weighted) tariff rate was 8.3 percent in 2015, the highest rate among emerging and advanced economies.

Though the United States and Brazil have made progress on trade and investment over the years, Brazil remains one of the countries with the highest tariff barriers.

According to the USTR, Brazil imposes relatively high tariffs on a variety of sectors, including automobiles, automotive parts, chemicals, plastics, information and communications technologies (ICT), industrial machinery, steel, textiles, and apparel.¹⁸

Beyond tariffs, US industrial goods are subject to non-tariff barriers to trade. These barriers include import licensing, product standards, conformity assessment procedures, and technical regulations. As an example, the United States and Brazil take different approaches to the recognition of international standards. Conformity-assessment procedures for toys and medical devices are examples of areas for discussion and improvement.¹⁹ The complexity of meeting unique country requirements is particularly burdensome on small and medium-sized enterprises (SMEs). Such non-tariff measures create additional costs and loss of time for businesses and consumers. According to estimates using data from the United Nations Conference on Trade and Development Trade Analysis Information System (UNCTAD TRAINS) and UN Comtrade data, the ad-valorem equivalent of non-tariff measures is almost 12 percent.²⁰

Although some of these non-tariff measures serve legitimate health-and-safety policy objectives, a higher percentage of products are subject to such measures in Brazil than world averages. The percentage of imports subject to sanitary and phytosanitary measures and technical barriers, for example, is 66 percent and 89 percent, respectively, as compared to 26 percent and 61 percent, respectively, per the World Bank.²¹

There are also opportunities to improve trade logistics and trade facilitation between the United States and Brazil. Brazil ratified the WTO Trade Facilitation Agreement in 2016 and continues to work toward implementation of the agreement.

US companies continue to express concerns regarding burdensome and inconsistent documentation requirements for imports of certain goods, (e.g., heavy equipment). While great progress has been made in certain sectors (e.g., medical devices), unpredictability and delays in customs clearance remain problematic in other sectors (e.g., pharmaceuticals).

Brazil has improved its trade-facilitation environment by implementing ATA Carnet, an international customs process permitting the duty-free and tax-free temporary export and import of goods for up to one year, per the International Chamber of Commerce.²²

The country has also done so by working toward a mutual recognition agreement with the United States for its Authorized Economic Operator program. The AEO is a partnership program that many customs administrations are pursuing to facilitate global trade by providing incentives to customs and traders that have decided to work in partnership to improve supply-chain security, per the World Customs Organization.²³ The mutual agreement refers to two countries closing an agreement or arrangement to mutually recognize AEO authorizations.

A focus on services

Brazil has more restrictions on trade in services than the average country in Latin America, according to the World Bank Services Trade Restrictiveness Index (STRI), with the most restrictive scores in financial and professional services, essential for productivity growth and competitiveness.²⁴

US companies experience barriers to trade across a wide variety of services sectors. For example, services barriers in audiovisual services include: higher taxes on foreign film; requirements of percentages of programming by Brazilian on “open-broadcast” channels; express delivery (e.g., 60-percent duty on goods imported through Simplified Customs Clearance, lack of a de minimums exemption, partially funded automatic express-delivery clearance system, per-shipment value limits of $10,000 per exports, and $3,000 for imports); financial services (requirement that Brazilians be directly responsible for administration of a foreign bank subsidiary); and local content requirements (LCRs) in telecommunications.²⁵

Relevant gains for the United States

Given the size of Brazil’s economy and the successful implementations of US FTAs with other key countries in the region, it is clear that a US-Brazil FTA would bring tangible economic benefits to the United States.

First, an FTA would strengthen hemispheric commercial cooperation, enhancing the overall bilateral relationship between the United States and Brazil. As Brazil is by far South America’s largest economy, reducing barriers to trade would open this important market to US businesses. A 2016 study estimated an FTA would add $24 billion to US GDP and $30 billion to real national income, and expand employment by nearly one hundred thousand jobs.²⁶ Employment growth was projected in every US state.

The removal of tariffs would reduce the cost of imports from the United States to the Brazilian consumer, and would make US exports more competitive with US competitors in Brazil (e.g., China, the European Union, and other Mercosur countries). An FTA could also increase the predictability of US-Brazilian trade for US exporters. Per a 2018 National Trade Estimate Report on Foreign Trade Barriers by the Office of the United States Trade Representative, given the large disparities between bound and applied rates, US exporters face uncertainty in the Brazilian market. The unpredictability makes it difficult for exporters to forecast the costs of doing business. An FTA that would include the elimination or reduction of tariffs and non-tariff barriers would remove this fluctuation.

An agreement on good regulatory practices would support the development of compatible regulatory approaches in the United States and Brazil, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent requirements. An agreement on good regulatory practices would also better enable effective regulatory cooperation. It would increase transparency in the regulatory process, providing a clear rationale for new regulatory actions, as well as encouraging cooperation on minimizing divergence in regulatory outcomes.

Furthermore, an FTA could streamline import licensing for US companies, removing entry barriers for US firms. Opportunities to streamline import-licensing processes via a potential FTA would help US businesses enter Brazilian markets faster and more inexpensively.

Finally, the strengthening of the US-Brazilian economic relationship through an FTA would likely have positive ramifications for the broader US-Brazilian relationships outside of the economy.

An agreement on good regulatory practices would support the development of compatible regulatory approaches in the United States and Brazil, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent requirements.

The Brazil perspective

In recent years, Brazil has been walking more resolutely down the path of greater global trade integration. Negotiations between Mercosur and the European Union have changed gears with the exchange of market offers in May 2016, and gained real traction in 2017. In 2017, Mercosur formally engaged in negotiations with EFTA, and in 2018 launched FTA trade talks with Canada, Singapore, and South Korea.

Argentina under then-President Mauricio Macri and Brazil under then-President Michel Temer and President Bolsonaro initiated a phase of greater political and technical convergence when it came to trade negotiations, which allowed Mercosur to advance on the aforementioned initiatives. The modernization of Mercosur itself also got under way with the adoption of an investment agreement (2017), a public procurement agreement (2018), and revised rules for common technical regulations (2018).

On the bilateral level, Brazil signed its first-ever public procurement agreement in 2016 (Peru), ratified its first investment agreements with several countries in Latin America and Africa, and in 2018 signed a comprehensive FTA with Chile. The bilateral trade treaty with Chile, for the first time in Brazilian history, includes chapters on digital trade, trade and gender, trade facilitation, micro, small, and medium enterprises, the environment, and many others.

In 2017, Brazil formally expressed interest in becoming a member of the OECD, and became an observer to the WTO Government Procurement Agreement (GPA). At the multilateral level, Brazil has been one of the most active sponsors of discussions on investment facilitation and digital trade.

Under President Bolsonaro, the Brazilian transition toward a more ambitious trade policy gained extra momentum. The current Brazilian administration has defined trade integration as a top priority, having successfully concluded negotiations for the milestone trade deals with the European Union and EFTA (2019), and continued progress on formal talks with Canada, Singapore, and South Korea. The country has also begun dialogues with partners such as Japan, Lebanon, Indonesia, and Vietnam. Additionally, in 2020, Brazil expressed its intention to join, as a full member, the WTO GPA.

Soybeans are loaded into a truck in Cuiabá, Mato Grosso, Brazil, March 27, 2012. Agriculture will be a key focus of a potential FTA negotiation. (REUTERS / PAULO WHITAKER)

From the Brazilian perspective, the moment is ripe for laying the groundwork for an FTA discussion with the United States. It is seemingly a top priority for the Brazilian government, fitting perfectly into its current trade-negotiating directives. Taking into consideration the political convergence that exists between the heads of state from both countries, this is the ideal moment to begin paving the road to an FTA.

In his first year in office, President Bolsonaro tweeted at least five times his desire to initiate trade negotiations or address the relevance of stronger trade relations with the United States.²⁷ As 2020 elections in the United States approach, exploring more gradual and agile approaches, such as a multi-chapter trade enhancement agreement could produce relevant results and, at the same time, constitute an incremental step toward a future FTA.

In general, the Brazilian private sector also appears to support the idea that an FTA would generate gains for both sides, being perceived as a win-win initiative. Leading business entities in Brazil—such as the American Chamber of Commerce for Brazil (Amcham Brasil), the National Confederation of Industries (CNI), and the Federation of Industries of the State of São Paulo (FIESP)—have publicly supported an FTA with the United States.

A Focus on Goods

The United States has a low average tariff rate, particularly for industrial goods. According to the USTR, the average trade-weighted import tariff rate for non-agricultural goods is currently 2 percent, and half of those products are imported into the US market duty free.²⁸

From an export perspective, one could say Brazil would not gain much when it comes to reducing tariff barriers on industrial products as a result of an FTA. However, this would be too narrow an analysis.

Several exceptions exist. Apparel and clothing accessories are one good example: average tariffs for knitted or crocheted clothing are 18.7 percent, and for non-knitted or crocheted items are 15.8 percent. Natural wool, yarn, and woven fabrics carry a 13.1-percent duty. Footwear is taxed at 11.8 percent. Import duties for jewelry, gemstones, and precious metals are 5.9 percent, and for furniture and bedding, 5.7 percent.²⁹

The United States is also utilizing measures under Section 232 of the Trade Expansion Act of 1962, based on national security arguments, which lead to unilateral increase in duties or to quantitative restrictions on exports from Brazil.

In 2018, the United States imposed an additional 10-percent duty for Brazilian exports of aluminum, and slapped hard quotas on Brazilian exports of steel, limiting volumes using the average of years 2015–2017 as a reference. Under this same mechanism, there is an investigation under way regarding automobiles and automobile parts, which could affect Brazilian exports.

Tariffs aside, Brazilian industrial goods are subject to technical requirements for being marketed in the United States, which usually entails compliance costs associated with product and process adjustments, testing, and conformity assessment. Intensification of sectorial initiatives of regulatory cooperation and negotiation of rules for avoiding unnecessary technical barriers to trade (TBT) may, therefore, have substantial positive impacts for driving down costs and time in bilateral trade.

Market access for Brazilian agricultural goods in the United States also faces considerable constraints in the form of tariffs and quantitative restrictions. Although they represent only approximately 5 percent of Brazilian exports to the United States (2018), there is considerable potential for their expansion.³⁰

The United States and Brazil are world leaders in producing and exporting agricultural products. They are fierce competitors in the global market, but may complement each other in certain areas, as is the case for ethanol, sugar, and meat. The two countries may also work together to access new international markets and develop common standards for agricultural goods.

Barriers to free trade in the agricultural sector are quite high in both countries. Trade restrictions exist for Brazilian exports of sugar, cotton, soy complex, tobacco, orange juice, and dairy—all which face tariff quotas or high tariffs to enter the United States. In many cases, tariffs imposed outside the quotas are de facto prohibitive. In other instances, Brazilian exports are de jure forbidden from the US market, usually due to certification or sanitary and phytosanitary (SPS) restrictions, as is the case for fresh beef, poultry, avocado, persimmon, fig, and starfruit, among others.³¹

Negotiations on agricultural products tend to be highly sensitive, as they involve deep-rooted political arrangements and special interests. One should expect nothing different if the United States and Brazil decide to engage on these topics as a part of FTA talks, incorporating discussions on building bilateral SPS rules, revisiting SPS restrictions, and eliminating or reducing import-tariff barriers.

Government procurement: A new horizon for Brazil

When it comes to public procurement, Brazil is a new player on the global scene. Brazil signed its first international agreement on public procurement only in 2016, with Peru. Since then, Brazil’s position has grown stronger—Brazil signed a deal within Mercosur in 2017 and with Chile in 2018. In 2019, Mercosur concluded negotiations on agreements with the European Union and the European Free Trade Association, both of which have chapters on public procurement, and the bloc is currently negotiating with Canada, Singapore, and South Korea. Although still not a member, Brazil became an observer to the WTO GPA in 2017, and in 2020 announced its intention to become a full member.

There is a predominantly positive view in Brazil about the aforementioned agreements, as they are seen as mechanisms to add more transparency in public procurement in the country and, above all, to enhance the quality of public spending, considering the Brazilian government faces growing and challenging budgetary restraints. It is unlikely, therefore, that public procurement would be an issue of much contention, at least from the Brazilian government side, if and when it gets to the negotiating table with the United States. This does not mean, however, there will be full endorsement from business sectors directly affected by such an agreement, as they may look to preserve the Brazilian market and for reciprocity within the US market.

On the other hand, some measures comprising the Buy American Act may be subject to special attention from the Brazilian negotiators, as they curtail the possibility of participation of Brazilian companies or demand high thresholds of local content in government procurement in the United States, including, for instance, in infrastructure, defense, and energy projects. The Brazilian government assesses that Brazilian business is potentially affected by US restricting measures in US purchases in the sectors of food, textile, and steel products.³²

A focus on services

The United States is Brazil’s main destination for the export of services. In 2017, the United States represented more than 50 percent of Brazilian foreign sales of services, totaling nearly $16 billion, according to Brazil’s trade statistics. In 2018, exports to the United States dropped to $8.7 billion. The most relevant services exported included technical services, water transportation, app designing, and financial services, among others.

In 2018, the United States was second only to the Netherlands as the country of origin for Brazilian imports of services. The total amount of services purchased from the United States by Brazil was $12.5 billion. Relevant sectors included licensing for producing rights, leasing of machinery and equipment, advertisement services, and licensing for the use of computer software.

It is important to note that, both in export and import flows, US official statistics differ significantly from Brazilian ones. As a reference, 2018 US data indicate US services exports to Brazil totaled $28.2 billion (more than twice the Brazilian data), and US services imports from Brazil reached $6.1 billion.³³ As a consequence, the United States had a services trade surplus of an estimated $22 billion. Explanations to justify such substantial disparities and ensure common understanding regarding bilateral trade statistics must be further explored by both governments.

Irrespective of the differences in figures, the relevance of bilateral trade in services suggests that negotiating a services agreement between Brazil and the United States could generate substantial benefits for both countries. On the Brazilian side, sectors that would benefit from such an agreement could include financial services, legal and accounting services, managerial services, information-technology services, and marketing and recreational services, among others.³⁴

FTA Benefits

According to a done study by Amcham Brasil and Fundação Getulio Vargas, a free trade agreement would increase Brazil’s GDP by up to 1.3 percent (more than $38 billion) by 2030.

Relevant gains for Brazil

An FTA would not only generate potential benefits for exports deriving from the elimination or reduction of tariffs and non-tariff barriers, but also from the market creation and reduction of trade costs that may arise from agreeing on bilateral rules on trade facilitation, TBT, SPS, digital trade, and other areas.

Should the two countries conclude an FTA, one could expect an increase in Brazilian exports of machinery, apparel and clothing, footwear, steel products, granites and ornamental stones, wood flooring and furniture, aircrafts, auto parts, and transport equipment, to name a few examples. Obviously, agricultural goods mentioned in the previous section could also gain a greater share of the US market.

In addition to export gains, an FTA would bring gains in the areas of imports, investments, and overall improvements for the Brazilian economy. On the import side, an FTA would allow Brazil more competitive access to inputs (e.g., plastics and chemicals), capital goods, and technology and consumer products (e.g., pharmaceutical, automobiles, and food products).

An FTA could make production in Brazil—and, subsequently, exporting from Brazil to other countries in Latin America and the world—more competitive, corroborating the “import-to-export” motto and the global trend of higher import content in exports. Such competitiveness gains would be greater if accompanied by crucial domestic reforms to raise productivity and to reduce local production costs, by investment in infrastructure and by investment in workforce training. An FTA would also increase the general welfare of the Brazilian population, who would have cheaper access to consumer durable and non-durable goods.

Likewise, two-way flows of services would largely benefit from a trade agreement that enhances mutual market-access conditions and enables more predictability and legal certainty. For Brazil, considering the prominence of the United Stated as a destination for its exports of services, a more favorable environment created by an FTA would be a welcome development. An ambitious trade agreement could also work as a major driver of more US direct investment to Brazil (not only to cater to the domestic market, but also to gradually use the country as an exporting platform), and could encourage more Brazilian companies to expand or invest in the United States.

Finally, an FTA would generate income and jobs in Brazil. According to a done study by Amcham Brasil and Fundação Getulio Vargas, a free trade agreement would increase Brazil’s GDP by up to 1.3 percent (more than $38 billion) by 2030, generating additional exports of up to $25.7 billion and additional imports of up to $28.1 billion in that period.³⁵

Working toward greater foreign direct investment

The benefits and importance of strengthening bilateral foreign direct investment between Brazil and the United States—specifically in and for the areas of exports, technology, research development, and job creation—are clear, as outlined in the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) Brazil Bilateral Investment Map Brazil/USA.³⁶

But, while the US-Brazil or Brazil-US FDI relationship is one of the mutual benefits, it remains uneven. In 2018, the stock of US direct investment abroad was $5.95 trillion, according to the US Bureau of Economic Analysis (BEA). Brazil accounted for $71 billion, or 1 percent, of this total.³⁷

Per one of the author’s calculations using BEA data, advanced economies accounted for the lion’s share of the stock of US FDI abroad (60 percent in Europe, 15 percent in Asia with the highest focus in Australia, Japan, and Singapore, and 7 percent in Canada, with China at a lower 1.9 percent). Latin America and other Western Hemisphere countries accounted for 16 percent of US investments, mostly concentrated in Caribbean financial centers, including Bermuda, rather than in the two largest economies in the region—with just 1.9 percent in Mexico (the same as China) and 1.1 percent in Brazil).

Brazil is a leading destination for US investment into Latin America, both in terms of FDI and portfolio investment. This is not only because Brazil is the largest economy in the region, but also because of the breadth of its debt and equity markets.

According to the Brazilian Central Bank data, the stock of FDI in Brazil was $738 billion in 2018 (almost 70 percent of which is equity and the remainder debt-funded). According to the ultimate-investment country calculation method—which looks through the use of intermediary countries, often for tax purposes, to the ultimate controlling investor—the United States is the largest investor in Brazil, accounting for $118 billion in equity-funded FDI. This accounts for 24 percent of total equity-funded (reinvested profits or flows rather than intercompany loans, or debt) FDI in Brazil. The United States also accounts for another $16 billion in debt-related FDI (according to the immediate investor metric). The majority of this significant US FDI in Brazil is in the manufacturing and financial services sectors.³⁸

Brazil is a leading destination for US investment into Latin America, both in terms of FDI and portfolio investment. This is not only because Brazil is the largest economy in the region, but also because of the breadth of its debt and equity markets. Nevertheless, Brazil continues to be a small share of overall US investment. Here, there is room for closer investment ties between the United States and Brazil.

The moment is ripe to lay the groundwork for greater FDI. The US and Brazilian administrations share a similar philosophy of strengthening private-sector participation in the economy. The Bolsonaro administration has expanded the Investment Partnership Program (PPI) started under the Temer administration, with key roles for public-private partnerships (PPP) and concessions. The Brazilian government estimates this will apply to more than one hundred new projects totaling about 1.3 trillion Brazilian reais. Projects span highways, railroads, ports, airports, energy, oil and gas, and telecommunications. This offers an array of possibilities for US companies. Indeed, while the large global infrastructure players don’t tend to be US companies, opportunities for small to medium-sized companies could follow.

To generate a faster pace of growth led by investment and broad-based productivity gains, FDI from the United States could enhance Brazilian investment and growth prospects and vice versa. But to open doors for greater investments, be it over the next years or over the next decade, redressing aspects of hindrances to doing business will be key for companies.

Brazil’s domestic reforms to tax and foreign-exchange systems, and steps taken to reduce the cost of doing business in the country, will all pave the way for a more effective investment environment. From a bilateral perspective, starting conversations on an agreement to avoid double taxation and, in the longer term, negotiating a potential bilateral investment agreement would present the United States and Brazil with new and important opportunities for higher rates of FDI.

Domestic reforms paving the way for greater investment

Brazil’s tax reform

To pave the way for more investments from US businesses and other countries, US investors will look to Brazil to advance reform of its tax system. At present, the complexity of Brazil’s tax system at times slows investment; federal, state, and local taxes that overlap contribute to competition across state lines, with a convoluted system of tax credits.

According to the World Bank’s Doing Business 2020 report, paying taxes took more than 1,500 hours per year in Brazil, as opposed to about one hundred and forty and two hundred and forty, respectively, in China and Mexico.³⁹ Efforts to make the system simpler with a unified tax declaration system, the use of electronic invoices, and an electronic payment platform system for social security and payroll taxes have begun to simplify the process.

That said, from the US perspective, further reform would alleviate some of the difficulties of investing in Brazil. A broad tax reform is one such opportunity for cooperation and enhancement of economic ties between the two countries.

Brazil’s administration and Congress are discussing various versions of a tax reform, which could move Brazil closer to easing the cost of doing business in the country by simplifying the tax system and reducing incomes tax rates. This is potentially a monumental step for a country that has long talked about the need for tax reform but lacked the political will to move it forward.

From a bilateral perspective, starting conversations on an agreement to avoid double taxation and, in the longer term, negotiating a potential bilateral investment agreement would present the United States and Brazil with new and important opportunities for higher rates of FDI.

The likely tax reform may include simplification of federal taxes by merging three to five taxes (the Program of Social Integration or PIS, the Contribution for the Financing of Social Security or COFINS, the Brazilian Tax on Industrial Products (IPI), the Social Contribution on Net Income tax (CSLL), and the Tax on Financial Operations or (IOF)) into one federal value-added tax (VAT), which would ease the burden on long production chains, and reduction of the corporate income tax rate and introduction of a tax dividend.

The administration is weighing its ideal reform against revenue needs and political practicality. Multiple tax reform proposals have been laid out, and in February 2020, Davi Alcolumbre, president of Brazil’s Senate, announced that a Joint Tax Reform Committee comprising twenty deputies and twenty senators should be created.⁴⁰

Meanwhile, Brazil’s Congress is already discussing potentially more ambitious tax reform proposals that require a constitutional amendment. These entail simplification and merging of the state’s VATs (ICMS) with a federal VAT. This includes PEC 45, a tax on goods, which creates one VAT for all goods and services in Brazil.⁴¹

The government and Rodrigo Maia, head of Brazil’s Chamber of Deputies, foresee that a tax reform will be approved in 2020. However, any potential reform still faces obstacles, including a lack of definition of priority points, competing bills in the Chamber and the Senate, and 2020 municipal elections that are likely to reduce the Brazilian legislature’s working time.

Meaningful progress on the complex tax and distortionary tax fronts, which would simplify Brazil’s tax system, would help foster a more productive investment climate in Brazil by reducing tax hurdles to investment and lowering the costs of paying taxes. The various proposals have the potential to ease litigation costs and free up valuable resources within firms for more productive and efficient investment. Such developments would make the investment climate in Brazil more attractive to US businesses.

Additionally, the risk of tax increases is very low, as all the tax reform proposals presented so far seek to keep the tax burden unchanged.

Reforms to Increase Ease of Doing Business in Brazil

Administrative hurdles in Brazil, such as the costs of starting a business, dealing with construction permits, and registering property also affect US FDI (besides investment in general), particularly for smaller and medium-sized firms.

A high number of days, number of procedures, and monetary costs for starting a business, registering property, and getting construction permits are challenges to investment.

But Brazil made improvements in these areas in 2018 and 2019; the process for registering a new business became faster, the costs of digital certificates were lowered, and electronic property-registration systems improved with online payments and certificates.

That said, regulations still vary across Brazil’s twenty-seven states and more than five thousand municipalities. Previous Brazilian governments put in place a federal system for simplifying and unifying business registration requirements (REDESIM), motivated by streamlining efforts at local-government levels.

But, costs remain high. For US investors, the creation of a “one-stop” shop for opening a business, initiating electronic processes, and a less time-consuming process for obtaining environmental licenses and bidding on government contracts could greatly improve the investment environment. If a one-stop shop is created and the government is able to digitize the process, this would simplify the process of investing in Brazil.

In increasing the ease of doing business in Brazil, it is important to note that the country has made strides in addressing corruption, following recent investigations under operation Lava Jato. Though Brazil is party to a variety of OECD anti-corruption measures—including the Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption, the Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions, the Recommendation of the Council on Tax Measures for Further Combating Bribery of Foreign Public Officials in International Business Transactions, among others—continued progress in the area of anti-corruption would likely contribute to greater investments from the United States into Brazil.

Looking to the Brazilian Real. Brazil is paving the way for greater investment by implementing key domestic reforms, including to its foreign exchange (FX) legislation.

Brazil’s FX Legislation Reform

Modernizing Brazil’s foreign exchange (FX) legislation is a key element of the Central Bank’s BC# agenda under the current Brazilian administration. Fewer restrictions and complexities related to Brazil’s FX regulation could enhance Brazil’s participation in global supply chains and deeper integration in the global economy. This would be attractive to both US financial and non-financial firms.

Current Brazilian FX legislation dates back to the 1920s, and includes more than four hundred rules (some contradictory) contained in some forty-odd pieces of legislation. This reduces efficiency and increases legal uncertainty for foreign investment in and out of Brazil, in addition to trade flows and participation in global supply chains.

In October 2019, the government sent legislation (Bill 5387/2019) to Congress that would simplify, modernize, and increase legal certainty for the FX system and capital flows (both Brazilian flows abroad and foreign-capital inflows). The proposed legislation aims to reduce bureaucracy and align Brazil’s FX regulation with global best practices, consistent with OECD standards, including for money laundering, counterterrorism, and data dissemination.

The legislation would cede authority and flexibility to the National Monetary Council and to the Central Bank to write and change infra-legal rules, which would, in turn, facilitate quicker adaptation to changing global financial markets while preserving commitment to sound risk practices.

The project supports incorporation of new business models such as fintechs, increased convertibility of the real, and more. It could simplify access and improve attractiveness for US and foreign investors in Brazil—for portfolio and foreign direct investment—including for long-term infrastructure projects and concessions.

Proposed legislation, for example, would likely eliminate the asymmetrical burden on clients, more commensurate with the risk profile of a business’s size and industry segment. This would lower costs for US businesses.

Another example of cumbersome FX rules for US companies is the fact that, per existing legislation, every single foreign investment must be registered with the Central Bank, regardless of the size of the transaction. This is generally a costly process for smaller firms in particular. In addition, foreign exchange for every individual trade (import or export) transaction must be documented with and for the relevant financial institution as having occurred, with often-costly fees. Reforms to FX legislation aim to shift to a risk-based approach for these transactions, permitting the financial institution/foreign exchange operator to decide what documentation or registration is needed according to their risk assessments and hence lower costs for firms.

The proposed legislation could also reduce asymmetries associated with international correspondent banking denominated in reais and trade-related finance with easier establishment of custody accounts denominated in reais in Brazil and abroad. The legislation could, over time, lead to development of the real as a fully convertible currency on global capital markets.

US financial—banks and fintech—and non-financial FDI would likely benefit from passage of this legislation and find investment in Brazil more attractive.

The US tax reform

In 2017, the Trump administration passed the Tax Cuts and Jobs Act (TCJA) legislation, one of the more robust changes to the country’s federal tax system since the mid-1980s. In terms of FDI, the US corporate tax reform affected effective tax rates for both domestic investments in the United States and international investments where investors or investees resided in the United States. Per the Tax Foundation, the TCJA reduced the federal corporate income tax rate from 35 percent to 21 percent—it dropped the country’s rate from nearly 40 percent to around 25 percent, putting the United States slightly above the OECD average of 24 percent.⁴²

Though the reforms had a generally positive effect, global FDI fell 19 percent in 2018 to an estimated $1.2 trillion, caused in part by US firms repatriating $300 billion in accumulated earnings to take advantage of the tax break.⁴³

According to Global Trade magazine, “changes to the US corporate tax regime also prompted a 78 percent increase at the end of 2017 in companies reinvesting overseas earnings in the United States.”

Nevertheless, the United States still leads in inbound FDI; foreign investors and businesses have historically designated the United States as one of the safest places in the world to invest.

Investors attribute this designation to several factors, including the size of the US consumer market, its established legal system, defined business regulations, the country’s labor force, its infrastructure, and overall economic stability.⁴⁴

Though the United States is among the simplest and least bureaucratic countries for setting up a business, uncertainties—particularly around immigration and trade—continue to deter investment.

Bilateral pathways for deepening investment

Brazil’s domestic reforms to tax, administrative, and foreign-exchange systems will no doubt improve the country’s investment environment. That said, in addition to the domestic reforms under way, to foster greater FDI, the United States and Brazil can work toward the achievement of two consequential bilateral agreements.

A double taxation agreement

When it comes to attracting FDI, an agreement to avoid double taxation (DTA or tax treaty) is of paramount importance—a point that was reinforced by the US-Brazil CEO Forum recommendations outlined in November 2019, which reflected the priorities and perspectives of both countries’ private sectors.

Tax treaties enhance legal certainty on cross-border investment between countries, with clauses on legal enforcement, exchange of information, and dispute settlement. They also deal with a tangible element of investments, the establishment of rules on the distribution of income tax between residence and source countries, which have practical consequences for companies investing on both sides. In short, double taxation agreements reduce the aggregate tax burden on five crucial operations for cross-border business: profits, dividends, interests, royalties, and services.

According to CNI, and without further examining the exceptions, withholding taxes imposed to foreign persons are: 30 percent in the United States and 0 percent in Brazil on the payments of dividends; 30 percent in the United States and 15 percent in Brazil on interests; 30 percent in the United States and 15 percent in Brazil on royalties; 30 percent in the United States and 15 percent in Brazil on services.⁴⁵ In all these operations, double taxation agreements lead to lower taxation for foreign investors.

Both Brazil and the United States have several agreements to avoid double taxation in force.⁴⁶

However, they have some important differences. The first bilateral negotiations date back to 1949, with no result achieved so far. An agreement was reached in the 1960s, but was later rejected by the US Congress. Currently, the gap between both models is shrinking, due to the fact the Brazil has changed some important clauses, such as the tax-sparing and matching credit.

Tax treaties enhance legal certainty on cross-border investment between countries, with clauses on legal enforcement, exchange of information, and dispute settlement.

Although Brazil’s tax-treaties structure is very similar to the OECD, the model diverges from OECD guidelines in some clauses, as opposed to the US practice. Against the recent background of the Brazilian decision and efforts to join the OECD, one can imagine an easier path to the negotiations. This is particularly important for transfer-pricing practices, a hot topic in past discussions. Brazil will have to modify its legislation and move in the direction of the OECD’s rules in order to join the organization. Efforts in this direction have already begun, and may prove decisive in any formal discussions with the United States.

One of the most controversial clauses that sets negotiation positions apart is the tax-sparing and matching credit. Stimulated by the OECD in the past but later rejected, the tax-sparing clause provides for relief from residence taxation on taxes that have not actually been paid, or have been “spared.”⁴⁷ Its rationale is to avoid fiscal incentives aimed precisely at attracting foreign investments becoming ineffective. Its claimed goal is to keep space in developing countries for public policies created to attract investments, even in the face of double taxation agreements signed with developed countries. Without analyzing the disputable results of this type of provision, the fact is that Brazil used to include tax-sparing provisions in many of its agreements, whereas the United States does not adopt them in its treaties.

Nonetheless, recent developments show that this specific clause might no longer be a problem. Brazil signed agreements with Switzerland, Singapore, and the United Arab Emirates that do not contain tax-sparing provisions. Yet to be confirmed as a new policy orientation, this at least shows unprecedented flexibility from the Brazilian authorities on this matter. In addition, Brazil has reduced the level of taxation on interest and services, from 15 percent in most of the previous treaties to 10 percent in those last treaties.

A big opportunity remains in terms of services—their growing importance to value-added products and exports is undisputable.

Brazilian domestic legislation classifies most services as technical services, leading to the taxation of nearly all. In the opposite direction, the OECD model prescribes taxation of services only in the residence country, a practice that is followed by the United States.

A big opportunity remains in terms of services—their growing importance to value-added products and exports is undisputable.

In general, the United States only taxes services in the source country in the case of permanent establishment, which is basically understood as physical presence. Brazilian double taxation agreements adopt the concept of permanent establishment, but a narrow interpretation given by domestic legislation makes the application of this rule uncommon.

However, it seems there may be room for convergence here since some of the United States’ treaties bring flexible definitions for “permanent establishment,” as well as differential treatment for “technical services.”

Altogether, a bilateral treaty to avoid double taxation would allow Brazilian companies in the United States to have the same treatment as competitors from other countries that already have agreements with the United States, carrying a lower tax burden in their investments.

In addition to leveling the playing field for Brazilian investors abroad, a bilateral double taxation agreement would also benefit home companies that would be able to import services crucial to their technology and competitiveness.

A bilateral investment agreement

When addressing the opportunities for enhancing bilateral investments between Brazil and the United States, special attention should also be paid to the negotiation of a potential bilateral investment agreement.

According to the United Nations Conference on Trade and Development (UNCTAD), in 2017 there were 3,322 bilateral investment treaties (BITs) and other treaties with investment provisions signed around the world.⁴⁸ While the United States had signed thirty-eight BITs by 2015, most in force, Brazil remained one of very few countries that did not have a single international agreement on investments in force.⁴⁹

Though Brazil had earlier followed the flood of BITs in the 1990s—signing fourteen, mostly with European countries—these agreements were later rejected by the Brazilian Congress, which argued that some provisions were unconstitutional.

Criticism was directed toward investor-state dispute settlement clauses (ISDS), as well as to indirect expropriation. As a consequence, BITs became taboo in Brazil—the country avoided the discussion for years, while the number of international agreements on investments in the world ticked upward.

Brazilian economic growth in the 2000s propelled Brazilian companies to increase their investments abroad. Brazil started to be seen—and also to look at itself—as not only a recipient of FDI, but also as an investor in other countries, especially in Latin America and Africa.⁵⁰ Against this background of being a late comer in exporting capital, the Brazilian government finally started to revisit investment agreements.

The perspective at that time was that Brazil had always been among the top recipients of FDI in the world without having agreements in force, so investment agreements were not needed to attract FDI but rather to foster Brazilian investment abroad. This is fundamental to understanding what would become the innovative Brazilian Agreements on Cooperation and Facilitation of Investments (CFIA). These agreements, signed since 2015 with many countries in Africa, Asia and Latin America, are strongly focused on investment facilitation clauses, institutional governance, prevention of disputes and risk mitigation, as opposed to traditional BITs which are focused on investment protection clauses.

One main feature of the Brazilian model is the establishment of focal points or ombudsmen in each party to act as one-stop-shop facilitators of the relationship between investors and the government. Investment-related issues and problems can be treated directly with the ombudsman, who is responsible for providing appropriate assistance, government support as well as connecting with other relevant authorities if necessary. Besides that, a Joint Committee, composed of government representatives of both parties, also work for dispute prevention and amicable settlement of any issues involving bilateral investments. If a dispute cannot be solved by this prevention framework, it can then be brought to State-State arbitration procedures. ISDS clauses are not included in the Brazilian CFIAs.

In terms of investment facilitation, which is dominant in the CFIAs, there are clauses focused on promotion of investment flows, tackling issues such as visas, licenses and certifications, capacity building, among others. The CFIAs also provide for the negotiation of supplementary issues that are important for investments, bringing a framework than can more easily evolve and adapt according to investors’ needs. The visa case, for instance, is an interesting innovation. The issue is not usually covered by agreements on investments, but as investors are very aware, difficulties in obtaining and renewing business visas can significantly hinder the evolution of projects. CFIAs provide for special conditions for business visas, such as reduced deadlines, multiple entries and extended validity.

Finally, as expected in any agreement on investments, there are also typical protection rules, such as non-discrimination (national treatment and most favored nation), direct expropriation, compensation, international transfers and transparency clauses.

The aforementioned typical protection rules represent the basis of BITs signed by the United States over the years. But the US model is much more comprehensive. US and Brazilian perspectives are indeed quite different, as Brazil does not include ISDS, indirect expropriation, and fair-and-equitable-treatment clauses.

Though differences have made negotiation of a BIT hard to imagine in the past, recent developments today indicate the opposite. A concrete window for bilateral negotiations exists now.

A ship and containers at the Port of Santos, São Paulo, Brazil, September 23, 2019. Addressing the core, collective challenges posed by trade irritants and other barriers to trade and investment will open new doors for US and Brazilian companies.

For one, the United States has started to adopt a different perspective on the most controversial clause that used to set apart the negotiation positions of the United States and Brazil. The recently signed agreement between the United States, Mexico, and Canada (USMCA) no longer provides for ISDS between Canada and the United States, including a sunset clause of only three years.

ISDS can still be used between Mexico and the United States, but only in certain cases. For instance, investors can bring claims about expropriation and non-discrimination, but issues such as fair and equitable treatment cannot be claimed under ISDS in most cases. Above all, even in these situations, investors need to first resort to local remedies and domestic courts. Only if they do not reach a solution does arbitration become an option. There are exceptions for a few sectors with special provisions, such as oil and gas.

Despite not being a determinant per se for FDI attraction, a bilateral investment agreement deals with important issues for investors. When tackling investment facilitation, agreements can lower transaction costs that, if summed together, are indeed burdensome. Altogether, a bilateral investment agreement will undoubtedly help offer a better environment for businesses across the two countries.

All in all, there is a window of opportunity for exploring both a double taxation agreement and a bilateral investment agreement. Against the backdrop of Brazil’s movement toward accession to the OECD, Brazil will have to modify its legislation and move in the direction of OECD’s rules to join the organization. Efforts in this direction have already begun, and may prove decisive in any formal discussions with the United States.

Key recommendations

To lay the groundwork for increased economic integration between the United States and Brazil, this paper proposes the following recommendations for consideration by the US and Brazilian governments. These suggestions aim at addressing the core, collective challenges posed by trade irritants and other barriers to trade and investment, and at creating a mutually beneficial framework to foster the bilateral flow of goods, services, and capital.

Shorter term – 2020

The United States and Brazil should:

1) Conclude a multi-chapter trade enhancement agreement

Brazil and the United States should conclude a trade enhancement agreement on a specific number of areas of interest. Possible chapters include customs administration and trade facilitation, good regulatory practices, technical barriers to trade, digital trade, and anti-corruption. Under a more ambitious approach, the agreement could also encompass the areas of services, investment and public procurement.

A multi-chapter trade enhancement agreement is more likely to produce results in the short term and would narrow the number of issues for any potential free trade agreement negotiation. On the Brazilian side, as long as there are no preferential tariff discussions, this approach could be taken up bilaterally, without the involvement of other Mercosur member countries and without changes to current Mercosur rules.

A trade enhancement agreement would have relevant economic value for both parties: it would create a set of rules and commitments that would facilitate and foster bilateral commerce; it would provide predictability and legal security that would boost two-way investments; and it would serve as a building-block for a potential FTA in the longer term.

2) Start negotiations for an agreement to avoid double taxation

A bilateral Double Taxation Agreement (DTA) would propel foreign direct investment. Along with adding to the business environment, the establishment of rules on income-tax distribution between residence and source countries has practical benefits for companies investing on both sides.

The scenario looks promising, as both the United States and Brazil have been reviewing their DTA models. In particular, Brazil’s decision to accede to the OECD requires that the country modify its transfer-pricing practices. A DTA negotiation would represent an additional political and practical opportunity for Brazil to move in the direction of adhering to the OECD’s rules.

Against this backdrop, the United States and Brazil should launch formal negotiations for an agreement to avoid double taxation as soon as possible, which would send a strong signal about the importance of the issue.

3) Create a high-level mechanism to oversee and strengthen the bilateral relationship

The United States and Brazil should consider the creation of a high-level and comprehensive mechanism to oversee and strengthen bilateral trade and investment, led, ideally, by the vice presidents of each country. Such a mechanism would build a strategic framework to guide the bilateral relationship, enhance the bilateral dialogue and keep both administrations continuously engaged.

Through this mechanism, both governments would meet regularly and track progress on jointly defined goals. Additionally, this body could provide political guidance for further technical work.

This would require: the participation of government representatives at both political and technical levels, and from multiple agencies; the maintenance of a periodic schedule of meetings; a strategic working agenda; systematic monitoring of its scope; and the establishment of a formal channel for the participation of the private sector (including interaction with the reactivated CEO Forum).

The mechanism should work in coordination with the existing dialogues and groups to assure greater coherence and smoother interagency work among them. Such groups include the US-Brazil Commission on Economic and Trade Relations (under the Agreement on Trade and Economic Cooperation), the US-Brazil Commercial Dialogue, the Defense Cooperation Dialogue, and the Infrastructure Development Working Group.

4) Enhance good regulatory practices and sector-specific regulatory cooperation, working closely with the private sector

The United States and Brazil should continue sharing good regulatory practices, with an eye on regulatory impact analysis and public consultation, transparency in regulatory development and implementation, and with a heightened focus on a whole-of-government approach (i.e., a central regulatory coordinating body).

Because the United States and Brazil take different approaches to technical regulations and standards development, as well as to conformity assessment procedures—which can raise costs for businesses looking to trade bilaterally—both countries should identify one or two sectors for enhanced regulatory cooperation. Potential sectors include oil and gas, healthcare, life sciences, crop protection products, chemicals, genome editing, artificial intelligence (AI) and the internet of things (IOT). In choosing any sector, engagement with and the commitment of the private sector of each country is key.

Good regulatory cooperation should include a deeper understanding of each country’s regulatory systems, and the role of regulators in them, exploring the possibility to mutually accept conformity assessment results in order to facilitate reciprocal market access.

In both the good regulatory practices exchange and the enhanced regulatory cooperation, Brazil and the US should encourage and create opportunities for the participation of the private sector. Though the enhancement of good regulatory practice should be prioritized in the short run, technical efforts and engagement with the private sector have to continue over time.

The existing Memorandum of Understanding Regarding Joint Cooperation on Good Regulatory Practices between the Executive Secretariat of the Foreign Trade Council (CAMEX) and the Casa Civil of Brazil and the US International Trade Administration (ITA) and Office of Information and Regulatory Affairs (OIRA), which dates from 2018, should be used as a framework for this effort.

5) Initiate efforts to increase communication and cooperation on standards-development in emerging sectors, working closely with the private sectors of both countries

The two countries should initiate an effort to enhance communication and cooperation on standards development in the areas of AI, IOT, and/or genome editing. These transformational technologies are redefining manufacturing and business, and enabling new consumer products and services. International standards development ensures that customers are able to use technology products and services around the world, regardless of country of origin or market.

Considering that the United States and Brazil traditionally pursue different approaches to standards development, there is risk that “country-unique” standards will serve as a barrier to future innovation, investment, and trade in these critical sectors of the 21^st century.

To fully realize the benefits of these technologies—and address associated challenges— collaboration among the private and public sectors is critical. To that end, this paper urges the United States and Brazil to launch an effort in which both countries participate in consensus-based, industry-led, and global standards development bodies for the benefit of both developers and users of these technologies.

Such an initiative would result in increased and appropriate adoption and use of these cutting-edge technologies, resulting in enhanced competitiveness and enhanced opportunities for trade and investment.

6) Coordinate efforts to ensure the effective initiation of Brazil’s accession to the OECD

Building on the recent announcement by the US government that it would back Brazil as the next country to accede to the OECD, both countries should coordinate efforts before the organization and its membership to have Brazil’s process formally started yet this year.

This would effectively trigger the accession framework, kicking off a review of Brazil’s legislation and public policies. Meanwhile, Brazil should continue its journey to incorporate the OECD “acquis,” expanding its position as the non-member country with the largest number of accepted instruments.

At the same time, Brazil and the United States could cooperate, on a technical basis, on specific issues—such as tax, movement of capital, investments, and good regulatory practices—that will have to be addressed by Brazil along the way to becoming a member.

7) Conclude a Mutual Recognition Agreement between national trusted traders programs

In line with the joint statement issued by Presidents Donald Trump and Jair Bolsonaro in March 2019, the United States and Brazil should prioritize completion of the steps required to mutually approve their national trusted traders or AEO programs. Doing so would ease customs bureaucracy and reduce time and costs in the bilateral exchange of goods.

National AEO programs provide advantages for companies of all sizes and sectors. Exporters benefit from reduced inspections on goods and quicker clearance at the borders. AEO programs also increase efficiency within customs administrations, allowing for better resource allocation, particularly toward inspections of unknown high-risk cargo. As a consequence, it also contributes to increasing trade flows.

Brazil and the United States first committed to mutually recognizing their AEO or trusted traders programs in 2015. Such a measure requires involvement of the Ministry of Economy in Brazil, Receita Federal and of the US Customs Border and Protection to establish a standard set of security requirements that allows each program to recognize the validation findings of the other program.

This agreement would allow that low-risk companies enrolled in the national program from one country be automatically accepted in the other program, extending more agile and less bureaucratic customs procedures to those companies.

8) Adopt electronic phytosanitary certificates in bilateral trade

The United States and Brazil should conclude the adoption of electronic phytosanitary certificates (ePhyto) in lieu of paper documents. The ePhyto is the electronic version of a phytosanitary certificate, comprising all the data contained in a paper phytosanitary certificate.

The adoption of such a standard document in bilateral trade would expedite administrative procedures and reduce red tape and costs in exports of goods subject to phytosanitary certification, ultimately facilitating the exchange of agricultural products. It would also reduce the risk of fraudulent certificates and the number of shipments detained at customs, making the process more secure and reliable.

The exchange of electronic certificates could be done through the ePhyto Hub, developed by the International Plant Protection Convention (IPPC). In line with the 17th Edition of the US-Brazil Commercial Dialogue, which took place in 2019, Brazil is working to fully operationalize its participation in the ePhyto Hub by early 2020.

9) Implement a full-fledged Global Entry Program for Brazilian travelers coming into the United States

In 2019, Presidents Trump and Bolsonaro committed to taking the steps necessary to enable Brazil’s participation in the US Trusted Traveler Global Entry Program. Both countries signed a joint statement in November 2019 listing general criteria for the eligibility of Brazilian citizens and launching a pilot for a group of up to twenty participants of the Brazil-US CEO Forum.

As a next step, both countries should work to enable Brazil to fully participate in the US Global Entry Program by expanding its outreach to all eligible Brazilian citizens. This would make it quicker for pre-approved low-risk Brazilian travelers to enter the US territory, contributing to increased bilateral business and investments.

This recommendation requires further action from the Brazilian executive, specifically, the Policia Federal and Receita Federal, including the development of a simple electronic system to process such requests. This should be done in close cooperation and alignment with US Customs and Border Protection.

10) Increase US-Brazil policy cooperation in third countries and international fora in areas of investment and trade policy coherence

The United States and Brazil have the capacity to influence other governments on a variety of trade, investment, and other policy issues. The two countries should identify and develop an agenda for working together to shape trade and investment rules where they share common interests. By coordinating policy advocacy efforts, the two countries have the opportunity to enhance their influence on critical trade and investment issues.

Possible areas for such cooperation include food security and agriculture trade, trade and investment facilitation, biotechnology, AI, IOT, and/or genome editing.

Medium to long term – 2021 and beyond

The United States and Brazil should:

1) Conclude a comprehensive free trade agreement

An FTA would be the most ambitious bilateral economic achievement, considering its potential to create a comprehensive supporting legal framework to further economic integration between the United States and Brazil. Such an agreement could prove to be a powerful instrument to increase current—and stimulate new—flows of mutual trade and investment.

Although a multi-chapter trade enhancement agreement in the short term could generate important results and make the negotiation process for an FTA less complex, dealing with the remaining topics would be a challenging endeavor, especially with respect to market access.

To reach a successful outcome, both governments will need to engage at the executive-branch and congressional levels. Another fundamental aspect is broad transparency and dialogue with the private sectors of each country. Given the concrete private interests at stake, an open and participatory process will prove decisive for a positive outcome.

2) Conclude an agreement to avoid double taxation

As formal negotiations are launched, Brazil’s Receita Federal and the US Treasury should be prepared for a time-consuming and human-resources-intensive process. Even as current chances for a successful outcome are considerably higher than in the past, challenges cannot be underestimated. Besides transfer pricing, services taxation in Brazil may prove to be one of the most critical issues, given Brazilian fiscal constraints.

In addition to the technical work necessary to resolve differences and find solutions, political support at the highest levels of government will be critical.

3) Coordinate technical and political efforts to conclude Brazil’s accession to the OECD

Brazil’s process of accession to the OECD will not be easy. The country has a long journey as it strives to comply with the proposed accession roadmap and to fully adopt the OECD’s set of decisions and recommendations, going through a series of meetings in OECD committees and negotiation rounds with individual members. Throughout this process, coordination with the United States in terms of technical and political efforts will be key for the accession to be successfully completed.

As of October 2019, Brazil had met more than eighty of the two hundred and fifty-three instruments that form the OECD “acquis.” Brazil continues to advance on adhering to various regulatory best practices in agriculture/food, tax cooperation, BEPS, tax-information sharing for serious crimes, protection of e-commerce, and more. Nearly seventy points are actively being discussed between the Brazilian government and the OECD, and the Bolsonaro administration has already identified the next set of nearly sixty.

This year, the United States formally backed Brazil for OECD membership. In this inherently political process, long-term and continuous US support for Brazil’s accession will be key.

4) Conclude a bilateral investment agreement

Both Brazil and the United States already have a number of investment agreements in force with different countries. A balanced combination of an approach aimed at investment facilitation and traditional protection is desirable and feasible.

More recent international trends in this field highlight the relevance of facilitation provisions.

The conclusion of a bilateral investment agreement could lower transaction costs and add more certainty in the business environment. Interagency technical work will be necessary in order to meet this goal. Congressional approval would be necessary in Brazil and the United States.

Conclusion

As the two largest economies in the Western Hemisphere, the United States and Brazil have a unique opportunity to explore new ways to deepen their bilateral trade and investment relationship. To lay the groundwork for increased economic integration, this paper proposes key opportunities the United States and Brazil can harness in the short term to pave the way for longer-term goals, including that of concluding a free trade agreement—a goal both countries have long discussed.

To create a set of commitments that would facilitate and foster bilateral commerce, Brazil and the United States should explore a trade enhancement agreement on chapters including trade facilitation, good regulatory practices, and digital trade. A multi-chapter trade enhancement agreement concluded over this year would provide predictability and legal security that would boost two-way trade and investment in the short term and serve as a building-block for a potential FTA in the long term.

To propel foreign direct investment, the two countries should engage in conversations on an agreement to avoid double taxation. A DTA would add to the business environment and establish rules on income-tax distribution between residence and source countries, with benefits for investors on both sides.

The United States and Brazil should also consider the creation of a high-level and comprehensive mechanism to oversee and strengthen bilateral trade and investment, ideally led by the vice presidents of each country. Such a mechanism would build a strategic framework to enhance the bilateral dialogue and keep both administrations continuously engaged.

Enhancement of good regulatory practices and sector-specific regulatory cooperation in such sectors as oil and gas, healthcare, life sciences, chemicals, AI and IOT will open a host of doors for both countries. International standards development in emerging technologies also ensures that customers are able to use technology products and services around the world, regardless of country of origin or market.

In 2020, the US government formally affirmed its support for Brazil as the next country to accede to the OECD. As a next step, both countries should coordinate efforts before the organization and its membership to have Brazil’s process formally started yet this year.

Likewise, in line with the Joint Statement issued by Presidents Donald Trump and Jair Bolsonaro in 2019, the United States and Brazil should Conclude a Mutual Recognition Agreement between national trusted traders programs to increase efficiency within customs administrations, allowing for better resource allocation. The two countries also have an opportunity to adopt electronic phytosanitary certificates (ePhyto) to expedite administrative procedures and reduce red tape and costs.

Commerce is facilitated by the ease of movement of people. Presidents Trump and Bolsonaro committed to taking the steps necessary to enable Brazil’s participation in the US Trusted Traveler Global Entry Program in 2019. Following the pilot project, both countries should work to enable Brazil to fully participate in the US Global Entry Program.

And, beyond their own borders, by coordinating policy advocacy efforts with third countries, the United States and Brazil have the opportunity to enhance their influence on critical trade and investment issues.

The aforementioned short-term opportunities pave the way for the conclusion of a more comprehensive FTA, a DTA, and a bilateral investment agreement, which combined would foster far greater trade and foreign direct investment, improving the economic realities of both the United States and Brazil.

The road to a deeper economic relationship between the United States and Brazil has not been and will not be easy. But, with the political will and the support of the private sectors of both countries, the Western Hemisphere’s largest nations have the potential to maximize their commercial benefits.

The United States and Brazil are already important commercial partners. In areas of trade and foreign direct investment, further collaboration among the two countries is a natural next step to prosperity and economic growth.

Acknowledgments

Just as deepening trade and FDI is a bilateral effort by the United States and Brazil, so too were the efforts put forth in this paper. This publication included a host of actors from government and the private sectors of the United States and Brazil.

For their partnership and support, the Atlantic Council’s Adrienne Arsht Latin America Center would like to acknowledge the contributions of its authors, Abrão Neto, Ken Hyatt, Daniel Godinho, Lisa Schineller, and Roberta Braga, and the stakeholders and in-country partners that helped make this publication a reality. A special thank you to Renata Vargas Amaral for lending the paper her legal expertise.

Thank you to those who took part in the consultative roundtables in Washington, DC, and on the sidelines of the Brazil Investment Forum in São Paulo, Brazil. Special recognition goes to Ambassadors Sérgio Amaral and Benoni Belli, who helped cultivate the initial idea for this partnership, as well as to Ambassador Nestor Forster and the Embassy of Brazil in the United States for their partnership and insight.

Thank you also to the many stakeholders who provided their insight and feedback through consultations, including leaders from the energy, defense, agricultural, pharmaceutical, biochemical, and steel industries, industry federation leaders, and others.

Thank you to Adrienne Arsht Latin America Center Director Jason Marczak for his guidance, and to the other Adrienne Arsht Latin America Center Senior Brazil Fellows Ricardo Sennes and André Soares for their valuable insight throughout this process.

Thank you also to Valentina Sader, assistant director at the Adrienne Arsht Latin America Center, and to Sarah Hennessey and Frederico Fróes, who supported research for this publication. As well, thank you to Susan Cavan and the report editor. Thank you also to Donald Partyka and Nikita Kataev for their beautiful report design.

Finally, the Atlantic Council extends a heartfelt thank you to Apex-Brasil, whose partnership and generous support made possible this comprehensive effort to lay out the practical next steps for strengthening US-Brazil bilateral trade and FDI. In particular, the Atlantic Council would like to thank Apex-Brasil President Sergio Segovia, as well as Augusto Souto Pestana, Igor Isquierdo Celeste, Gustavo Ferreira Ribeiro, Karen Kiyomi Hayashi, and Cintia Marques Faleiro.

About the authors

Abrão Árabe Neto

Abrão Árabe Neto is the executive vice president for Amcham Brasil, a not-for-profit organization that represents more than five thousand companies of various economic sectors, responsible for approximately 33 percent of Brazil’s GDP.

Prior to that position, he served as secretary of foreign trade of Brazil between 2016 and 2018, involved in several trade-and-investment negotiations, trade-and-investment facilitation initiatives, and leading areas in regional integration, trade remedies, and trade statistics, among other areas.

A career foreign trade public servant since 2013, Neto also acted as deputy secretary of foreign trade and director of international negotiations in the Ministry of Industry, Foreign Trade and Services of Brazil. Before serving the government, Neto worked as an international trade lawyer and as coordinator in the foreign trade and international affairs department of the Federation of Industries of the State of São Paulo (FIESP).

In 2008, he joined the Permanent Mission of Brazil to the WTO as part of a capacity-building program for lawyers in WTO issues. In 2017, he was distinguished by the Brazilian government as Commander of the Order of Rio Branco.

He holds a PhD in international law from the University of São Paulo, and a master’s degree in international economics law from the Catholic University of São Paulo. He was also a visiting PhD researcher at Georgetown University.

Ken Hyatt

Ken Hyatt is senior advisor at Albright Stonebridge Group, and a co-founder and partner at CMPartners, where he advises clients of the firm on complex negotiations, trade, and investment matters in international markets.

Prior to joining ASG, Hyatt served in the US Department of Commerce as the acting undersecretary and deputy undersecretary for international trade. He oversaw the strategy and operations of the International Trade Administration (ITA) with an annual budget of approximately $500 million and more than 2,200 employees worldwide. He led ITA, which: contributes to the development of US trade policy; identifies and resolves market-access and compliance issues; promotes US competitiveness and the strength of US companies in the global economy; administers US trade laws; and undertakes a range of trade and investment promotion and trade-advocacy efforts. In this role, he worked with a wide range of US companies, helping them achieve their international objectives, and with foreign governments on the development and implementation of trade and investment policies. He also co-led the creation of SelectUSA, the US government’s investment-attraction agency, led the US government’s support for BrandUSA, the US national tourism-promotion organization, and co-led the development of the US National Travel and Tourism Strategy. In 2017, he was distinguished by the Brazilian government as Commander of the Order of Rio Branco.

Earlier in his career, Hyatt was a principal at Conflict Management Inc. and a management consultant with Bain & Company in its Boston, London, and Munich offices. At Bain, he led teams of consultants analyzing and implementing a variety of strategic and organizational projects at leading US and European multinational corporations, focusing on strategy development, mergers and acquisitions, sales and marketing strategy, and training.

Hyatt holds a juris doctor from Harvard Law School and a bachelor of arts from Yale. He also has been an associate at the Harvard Negotiation Project.

Daniel Marteleto Godinho

Daniel Marteleto Godinho, a nonresident senior fellow at the Adrienne Arsht Latin America Center, currently serves as corporate strategy director at WEG, a global solutions provider of industrial electrical technologies headquartered in Brazil. Prior to that, Godinho built his career in the public service as a foreign trade analyst since 2003, serving in many positions. From 2013 to 2016, Godinho served as the secretary of foreign trade of Brazil. Between 2016 and 2017, he worked as a senior consultant for the Inter-American Development Bank (IDB).

Godinho holds a law degree from the Federal University of Minas Gerais and a bachelor’s degree in international relations from the Catholic University of Minas Gerais. He also holds a post-graduate degree in international business from the Catholic University of Brasília and a master’s degree in international law and economics from the World Trade Institute, an institution connected to the universities of Bern, Fribourg, and Neuchâtel in Switzerland.

Lisa Schineller

Lisa Schineller is managing director for S&P Global Ratings. Schineller is a lead analyst in Sovereign and International Public Finance Ratings for the Americas, and responsible for sovereign analysis covering key credits such as Argentina, Brazil, and Mexico. She also covers a number of multilateral institutions, such as the International Bank for Reconstruction and Development and the International Development Association. She coordinates with analysts, regionally and globally, on government-related entities across the region. Schineller also served as S&P Global Ratings’ chief economist for Latin America, part-time for five years through 2013.

Schineller was an adjunct associate professor at Columbia University’s School of International and Public Affairs from 2006 to 2009. She co-developed and co-taught a course entitled “Problems of Economic Growth in Latin America” for master’s-degree students. She continues to give guest lectures in a number of courses at the School of International and Public Affairs and the Business School.

Before joining S&P Global Ratings in August 1999, Schineller worked in the International Finance Division at the Federal Reserve Board of Governors in Washington, DC, for more than three years as the French desk economist and world oil economist. She was also an economist at Exxon Company International, Corporate Affairs. At Exxon, she analyzed and projected economic and energy developments in Latin America (mainly Brazil) and Europe.

Schineller holds a PhD in economics from Yale University and a BA in economics and Spanish from Wellesley College. Upon completion of her PhD, she was an assistant professor at McGill University, Faculty of Management from 1992–1994.

Roberta Braga

Roberta Braga is an associate director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads projects on Brazil’s economic and political developments, and disinformation and misinformation in Latin America. Over the past four years, Braga has also led work on trade integration, energy, and anti-corruption in the region. During her time at the council, Braga helped launch the center’s #AlertaVenezuela and #ElectionWatch Latin America projects, which focused on exposing disinformation in and about Venezuela and around elections in Brazil, Mexico, and Colombia, respectively; executed projects on USMCA’s impact on energy and Venezuela’s oil crisis; and managed the center’s work on anti-corruption ahead of the 2018 Summit of the Americas. Braga also manages the center’s media and communications strategy and outreach.

Braga previously worked as a strategic communications analyst at the US Department of Homeland Security, and supported corporate affairs and public relations efforts at Promega Corporation, an international biotechnology firm headquartered in Madison, Wisconsin.

Braga frequently provides English-, Portuguese-, and Spanish-language commentary on political and economic issues in Latin America. She has been published in Newsweek and The Hill, and been quoted in The New York Times, The Wall Street Journal, The Financial Times, Axios, Brazil’s O Globo, and Estado de S.Paulo, among others. Originally from Brazil, Braga is a native Portuguese and English speaker, and fluent in Spanish.

She has a master’s degree in global communication and public diplomacy from the George Washington University’s Elliott School of International Affairs, and a bachelor’s degree in journalism and global security from the University of Wisconsin-Madison.

1 Randig, Rodrigo. Argentina: O Primeiro Pais a Reconhecer a Independencia do Brasil. Fundação Alexandre de Gusmão. 2017. Accessed at: http://www.itamaraty. gov.br/images/ficha_pais/artigo-argentina.pdf

2 The United States holds 15 percent of foreign direct investment (FDI) in Brazil, equivalent to $119 billion in 2017 (against a lower $95 billion, with a methodology that includes immediate investment highlighting the use of intermediaries for US corporations). This US position takes the form (over 80 percent) mostly of equity, reinvested profits, or flows, rather than debt or intercompany loans. While China has risen in to hold 2.7 percent to the stock of FDI in 2017 to $21 billion, up nearly threefold from $7.9 billion in 2010, the United States remains more significant. According to the Policy Center for the New South, while the Central Bank of Brazil has indicated that between 2014 and the first semester of 2018, the flows of Chinese investment in Brazil accumulated $20.7 billion, the Secretariat of International Affairs of the Ministry of Planning, Development, and Management (SEAIN-MPDG) estimates an amount of $28.6 billion. Banco Central do Brasil Direct Investment Report 2018.

3 Brazil. Office of the US Trade Representative. Accessed at: https://ustr.gov/sites/default/files/2013%20NTE%20Brazil%20Final.pdf

4 Brazil is now the ninth-leading country worldwide sending students to the United States. US Embassy and Consulates in Brazil. US Mission Brazil. November 18, 2019. Accessed at: https://br.usembassy.gov/brazil-is-now-the-9th-leading-country-worldwide-sending-students-to-the-united-states/

5 SEVIS by the Numbers. US Immigration and Customs Department. US Department of Homeland Security. May 3, 2018. Accessed at: https://studyinthestates.dhs.gov/2018/05/sevis-by-the-numbers-more-south-american-students-in-the-us

6 ibid

7 Trump says he will seek U.S. trade accord with Brazil. Reuters. Accessed at: https://www.reuters.com/article/ us-usa-trade-brazil/trump-says-he-will-seek-u-s-trade-accord-with-brazil-idUSKCN1UP1KA; and Brazil and US strengthen ties, free trade in the pipeline, DW. Accessed at: https://www.dw.com/en/brazil-and-us-strengthen-ties-free-trade-in-the-pipeline/a-50428682

8 Brazil’s Implementation of Tariff Rate Quota for Wheat a Win for American Farmers. Office of the United States Trade Representative. November 14, 2019. Accessed at: https:// ustr.gov/about-us/policy-offices/press-office/press-releases/2019/november/brazil%E2%80%99s-implementation-tariff

9 Diario Oficial da União. Decreto No 9.731. March 16, 2019. Accessed at: http://www.in.gov.br/materia/-/as-set_publisher/Kujrw0TZC2Mb/content/id/67423098

10 Brazil Senate Approves Technology Safeguard Agreement with U.S.. US News and World Report. November 12, 2019. Accessed at: https://www.usnews.com/ news/technology/articles/2019-11-12/brazil-senate-approves-technology-safeguard-agreement-with-us

11 Trump officially designates Brazil a non-NATO ally. The Hill. July 31, 2019. Accessed at: https://thehill.com/homenews/administration/455642-trump-officially-designates-brazil-non-nato-ally

12 Joint Communique from the U.S.-Brazil CEO Forum. US Department of Commerce. November 25, 2019. Accessed at: https://www.commerce.gov/news/press-releases/2019/11/joint-communique-us-brazil-ceo-forum

13 Joint Communique from the U.S.-Brazil CEO Forum. US Department of Commerce. November 25, 2019. Accessed at: https://www.commerce.gov/news/press-releases/2019/11/joint-communique-us-brazil-ceo-forum

14 Brazil pensions: Victory for Jair Bolsonaro as reform passes. BBC News. October 24, 2019. Accessed at: https:// www.bbc.com/news/world-latin-america-50151327

15 Impact of a US-Brazil Trade Agreement. Brazil-US Business Council. Accessed at: https://www.us-chamber.com/sites/default/files/documents/files/ busbc_trade_agreement_initiative_report.pdf

16 Decision CMC 32/00, from the Common Market Council of Mercosur, states that tariff preferences to third parties from extra zone must be jointly negotiated.

17 Joint Statement from President Donald J. Trump and President Jair Bolsonaro. The White House. March 19, 2019. Accessed at: https://www.whitehouse.gov/briefings-statements/joint-statement-president-donald-j-trump-president-jair-bolsonaro/

18 Brazil. Office of the US Trade Representative. Accessed at: https://ustr.gov/sites/default/files/2013%20NTE%20Brazil%20Final.pdf

19 Ibid.

20 Reis, et al. Trade Liberalization and Integration of Domestic Output Markets in Brazil. Policy Research Working Paper 8600. World Bank. Page 6. Accessed at: http://documents.worldbank.org/curated/en/848981538569408470/pdf/WPS8600.pdf

21 Ibid.

22 ATA Carnet. International Chamber of Commerce. Accessed at: https://iccwbo.org/resources-for-business/ata-carnet/

23 Mutual Recognition Arrangement/Agreement Strategy Guide. World Customs Organization. June 2018. Accessed at: http://www.wcoomd.org/-/media/wco/public/global/pdf/ topics/facilitation/instruments-and-tools/tools/safe-package/strategy-guide-for-aeo-mutual-recognition.pdf?la=en

24 Reis, et al. Trade Liberalization and Integration of Domestic Output Markets in Brazil. Policy Research Working Paper 8600. World Bank. Page 7. Accessed at: http://documents.worldbank. org/curated/en/848981538569408470/pdf/WPS8600.pdf

25 Office of the US Trade Representative. Page 62-64.

26 National Confederation of Industry, American Chamber of Commerce for Brazil, and U.S. Chamber of Commerce. 2016. Accessed at: https://www.brazilcouncil.org/wp-content/uploads/2017/05/CNI_CEBEU_Roadmap_EUA-to-print.pdf

27 Tweets de Bolso. Aos Fatos. On trade negotiations (23 Aug 2019, 28 June 2019.). On trade relations (31 Aug 2019, 31 July 2019, 26 March 2019). Accessed at: https://aosfatos.org/tweets-de-bolso/

28 Industrial Tariffs. Office of the US Trade Representative. Accessed at: https://ustr.gov/issue-eas/industry-manufacturing/industrial-tariffs

29 Desilver, D. US tariffs vary a lot, but the highest duties tend to be on imported clothing. Pew Research Center. Accessed at: https://www.pewresearch.org/ fact-tank/2018/03/28/u-s-tariffs-vary-a-lot-but-the-highest-duties-tend-to-be-on-imported-clothing/

30 ComexVis: Paises Parceiros. Estados Unidos. Ministerio de Economia do Brasil. Accessed at: http://www. mdic.gov.br/comercio-exterior/estatisticas-de-comecio-exterior/comex-vis/frame-pais?pais=usa

31 Desafios e Oportunidades a Exportacao de Produtos Brasileiros aos Estados Unidos. Brazilian Embassy in Washington. August 2018. Accessed at: https://sistemas.mre.gov.br/kitweb/datafiles/Washington/en-us/file/Desafios%20e%20Oportunidades%20à%20Exportação%20de%20Produtos%20Brasileiros%20aos%20EUA.pdf

32 Ibid.

33 US Trade in Services by Selected Countries and Areas. US Census Bureau. Accessed at: https://www.census.gov/foreign-trade/Press-Release/current_press_release/exh20b.pdf

34 Plano Nacional de Exportações 2015-2018. Accessed at: http://www.mdic.gov.br/images/REPOSITORIO/ascom/PNCE/PNE_-_2015-2018.pdf

35 Brazil’s alternatives, EU and/or USA: do these partnerships complement or exclude each other? FGV EESP and Amcham Brasil.

36 Bilateral Investment Map Brazil/USA. APEX Brasil. Amcham Brasil, Brazil US Business Council. 2019.

37 BEA Source: Bureau of Economic Analysis, Direct Investment by Country and Industry, 2018.

38 Banco Central do Brasil – Direct Investment Report 2019. Accessed at: https://www.bcb.gov.br/estatisticas/tabelasespeciais.

39 Doing Business 2020. The World Bank. October 24, 2019. Accessed at: https://www.doingbusiness.org/ en/reports/global-reports/doing-business-2020.

40 Alcolumbre promete comissão da reforma tributária até próxima semana. Exame. February 5, 2020. Accessed at: https://exame.abril.com.br/economia/alcolumbre-promete-comissao-da-reforma-tributaria-ate-proxima-semana/.

41 Brazilian Tax Reform—Framework and What to Expect. Bloomberg Tax. January 22, 2020. Accessed at: https:// news.bloombergtax.com/daily-tax-report-international/ brazilian-tax-reform-framework-and-what-to-expect.

42 York, Erica. The Benefits of Cutting the Corporate Income Tax Rate. The Tax Foundation. August 14, 2018. Accessed at: https://taxfoundation.org/benefits-of-a-corporate-tax-cut/.

43 Miles, Tom. Global FDI skids 19 percent on Trump tax reform, may rebound in 2019 – U.N. Reuters. January 21, 2019. Accessed at: https://www.reuters.com/article/us-global-economy-fdi/global-fdi-skids-19-percent-on-trump-tax-reform-may-rebound-in-2019-u-n-idUSKCN1PF13J.

44 Will the Tax Cuts and Jobs Act Increase Inbound FDI? Area Development. 2018. Accessed at: https://www.areadevelopment.com/business-climate/Q2-2018/will-the-tax-credit-jobs-act-increase-inbound-FDI.shtml.

45 A Roadmap for a US-Brazil Tax Treaty. Brazil-US Business Council. US Chamber of Commerce. March 2019. Accessed at: https://www.brazilcouncil.org/wp-content/ uploads/2019/03/Roadmap-U.S.-Brazil-Tax-Treaty_1.pdf.

46 United States Income Tax Treaties – A to Z. US Income Revenue Service. Accessed at: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z And http://receita.economia.gov.br/acesso-rapido/legislacao/acordos-internacionais/acordos-para-evitar-a-dup-la-tributacao/acordos-para-evitar-a-dupla-tributacao

47 Tax Sparing: A Reconsideration (OECD Publishing, 1998). Accessed at: https://doi.org/10.1787/9789264162433-en

48 World Investment Report 2018: Investment and New Industrial Policies. United Nations Conference on Trade and Development (UNCTAD). Accessed at: https:// unctad.org/en/PublicationsLibrary/wir2018_en.pdf

49 World Investment Report 2018: Investment and New Industrial Policies. United Nations Conference on Trade and Development (UNCTAD). Accessed at: https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf

50 Textos CINDES 39 – Os investimentos brasileiros na África: características, tendências e agenda de política. Pedro da Motta Veiga e Sandra Polónia Rios. December 2014. Accessed at: http://www.cindesbrasil.org/site/index.php?option=com_jdownloads&Itemid=7&view=viewcategory&catid=7

The post US-Brazil trade and FDI: Enhancing the bilateral economic relationship appeared first on Atlantic Council.

US will use energy revolution to transform its foreign policy, energy secretary says

David A. Wemer — Fri, 07 Feb 2020 17:15:49 +0000

The United States’ transformation into a net exporter of energy “has revolutionized our foreign policy, and it frees us to pursue options that we have not had at least in my lifetime,” US Secretary of Energy Dan Brouillette said on February 7.

Speaking at the Atlantic Council, Brouillette argued that “with US energy production now at record levels, the world is no longer subject to the will of countries who seek to do us harm,” such as Russia and Iran, and allows the United States to use energy cooperation and investment as a key tool to advance its foreign policy aims. “Energy remains a critical aspect and a critical component of our national security,” Atlantic Council Executive Chairman Emeritus General James L. Jones Jr. said while introducing Brouillette, adding that “the United States’ role as an energy and energy technology exporter has provided a deeper toolbox of policy options to meet our foreign policy goals.”

Brouillette argued that the boom of US energy production followed “a long struggle between innovation and regulation,” but now “innovation is winning the day,” as the Trump administration has “made innovation the cornerstone of our energy policy.” Brouillette credited new technology and looser regulations with helping the United States become not only “the world’s largest producer of both oil and natural gas,” but also “the world’s second largest generator of wind and solar power.”

The energy secretary added that the United States is also focused on “reviving two of the world’s most reliable, 24/7 generators of electricity—nuclear [energy] and coal.” Brouillette announced that the Trump administration would be releasing $64 million of research and development funds into the Coal FIRST initiative, which will “help us produce more coal-based power more efficiently, and transform it into a near-zero-emissions energy source for not only our country, but the rest of the world.”

Brouillette noted the concern of continuing to rely on carbon-intensive coal for electricity generation amidst global efforts to cut carbon emissions but argued that this effort is intended to find ways to make coal electric power generation cleaner and more efficient. He stressed that developing countries continue to rely on coal and “if we are going to see that product used to generate electricity, we want it to be used as cleanly as possible.” He explained that research would focus on making coal plants smaller and more efficient, as well as integrating more carbon capture and storage technology. Brouillette added the Trump administration also announced $125.5 million on February 5 for solar technology research.

Coal is just one example of how increased US energy production opens up new opportunities for the United States to meet its foreign policy goals abroad. He explained that the Coal FIRST initiative will also help explore ways to export cleaner coal technologies to markets such as Asia and Africa in order to help them limit their carbon emissions and diversify their energy sectors. Boosting all of the United States’ energy sectors “strengthens our energy security [and] improves our economic security,” Brouillette argued. “Costs have fallen, jobs have risen, and opportunity flourishes. It bolsters our national security, by freeing us and our partners from unstable and often unfriendly foreign suppliers.”

The impact of the United States’ new energy resources is already being felt in Europe. Brouillette cited EU figures that “many European countries remain dependent on Russian gas to meet more than 75 percent of their annual gas imports.” This dependence is dangerous, he argued “given Russia’s use of energy to bend other nations to its will,” as Moscow has attempted several times with its neighbor Ukraine. “Those nations must diversify,” Brouillette said, “[and] thankfully, I think the United States is offering a compelling answer.” He reported that US exports of liquified natural gas (LNG) have “risen by nearly 600 percent,” but maintained that more needs to be done. He stressed that “roughly 40 percent of the EU’s LNG regasification capacity cannot be accessed by their neighboring member states.”

The United States supports efforts to help Europe rectify these shortfalls through both the Partnership on Transatlantic Energy Cooperation (PTEC) to help grow infrastructure for US LNG exports to Europe, as well as the Three Seas Initiative to help strengthen intra-European gas transport infrastructure. “Through PTEC and the Three Seas Initiative, the United States will mobilize technical expertise…and help Europe create a better environment to attract what we feel is the investment they need to build new infrastructure,” Brouillette said. “America’s incredible energy success story means the transformation of both sides of the Atlantic—and indeed the world—in truly wonderful ways.”

The energy secretary also highlighted the effect of the energy transformation on US relations with Latin America. Brouillette reported that the Trump administration has “accepted the challenge of developing a Western Hemisphere Energy Strategy, which was launched right here with the Atlantic Council, to give us a modern blueprint for supporting energy projects all across the Americas.” The strategy is already bearing fruit, he explained, as he chaired the first meeting of the US-Brazil Energy Forum in Rio de Janeiro on February 3. Launched by US President Donald J. Trump and Brazilian President Jair Bolsonaro in March 2019, the Forum “exemplifies the bold new frontier for our own hemisphere’s integration, its independence, and ultimately its prosperity,” according to Brouillette. “From oil and gas to civil nuclear energy to power and energy efficiency, the dialogue we had was both extensive and illuminating.”

Brouillette said the United States remains committed to engaging with the entire Western Hemisphere on energy cooperation to help further prosperity. “From the pre-salt drilling in Brazil to unconventional gas projects in Argentina, to the potential deployment of renewables in Colombia and Chile, the Americas present incredible opportunities for nations to work together and to develop energy resources,” he said. “We can work together to achieve energy security and work together to foster economic growth.”

For the United States, energy can provide another critical tool to help further the United States’ vision of a free and peaceful world. “We believe that in order to have a more secure and a more prosperous world, we must encourage more free, transparent, rules-based markets within countries, and to replicate these fundamental values around the globe to enhance commerce among these countries,” Brouillette said. As the United States enters a new age of energy abundance, these new resources can drive US action to bring about that new world.

David A. Wemer is associate director, editorial at the Atlantic Council. Follow him on Twitter @DavidAWemer.

What will Brexit mean for energy markets?

By Global Energy Center

“Initial indications are that post-Brexit Britain will pay less attention to issues concerning climate change despite the fact that it is to hold COP 26 in Glasgow in November,” John Roberts says.

Climate Change & Climate Action Energy Markets & Governance

Global Energy Forum Jan 12, 2020

Energy markets underestimate Middle East supply vulnerability

By Adal Mirza

Buoyed by ample supply, global energy markets continue to underestimate risks to output from the Middle East, despite the recent escalation in tensions between the United States and Iran.

Energy Markets & Governance Geopolitics & Energy Security

Global Energy Forum Jan 9, 2020

European energy diversification: How alternative sources, routes, and clean technologies can bolster energy security and decarbonization

By Richard L. Morningstar, András Simonyi, Olga Khakova, Irina Markina

The European Union’s efforts to achieve a carbon-neutral economy present a unique and timely opportunity to strengthen European energy security. What is the EU currently doing to meet its decarbonization goals, address the role of natural gas in Europe’s low-carbon future, and explain the potential for new gas sources, alternative gas routes, and clean energy technologies to reduce carbon emissions? And how can this be done while simultaneously increasing European energy security and opportunities for transatlantic cooperation?

Energy Markets & Governance Energy Transitions

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Rapid reaction call: Steel and aluminum tariffs on Brazil and Argentina

Frederico Fróes — Thu, 05 Dec 2019 19:57:37 +0000

On Monday, December 2, President Donald Trump announced on Twitter that the United States would reinstate steel and aluminum tariffs on Argentina and Brazil. In response to the surprising news, the Atlantic Council’s Adrienne Arsht Latin America Center held a rapid reaction call the following day to discuss what these tariffs could mean for the Brazilian and Argentine economies, as well as their bilateral relations with the United States.

To kick off the conversation, Jason Marczak, director of the Adrienne Arsht Latin America Center, andRenata Vargas Amaral, founder of Women Inside Trade, senior adviser for BMJ Consultores Associados, and director of American University’s summer program on US and international trade law and policy, contextualized these tariffs by the numbers. In 2018, trade between the United States and Brazil amounted to $130 billion in goods and services. And Brazil is, in fact, the largest and second-largest supplier of semi-finished steel and unfinished steel to the United States, respectively. “When you actually dig a little bit deeper behind these numbers, you see the importance of the Brazil steel industry to the United States and also the importance of the United States to the Brazil steel industry,” summarized Marczak.

Touching on United States-Argentina trade, Shunko Rojas, former undersecretary of trade of Argentina and partner at Quipu,pointed out that Argentina exported $700 million in steel and aluminum to the United States in 2018. Although the tariffs will directly impact the country’s metallurgical industry, these exports only make up 1 percent of Argentina’s total, meaning the country’s trade balance will be mostly unaffected.

Listen to the call

As surprising as this announcement may have been, Thiago de Aragão, director for strategy at Arko Advice and editor of Sinológico podcast, added that “the investors that I speak with in New York… understand the modus operandi of President Trump,” and were perhaps better prepared for the turbulence than those in Latin America.

But, for de Aragão the real question is whether the personal relationships between Latin American leaders and Trump will protect their countries from US trade policies. “Bolsonaro has demonstrated that he really gets involved [in] personal relationships with the leaders that he deals with,” he added.

Observers have been skeptical of the Trump-Bolsonaro relationship of late given Trump’s tactics —first by not opening US markets to Brazilian beef, and later declining to recommend it for accession to the Organization for Economic Cooperation and Development. It seems as though Bolsonaro may have miscalculated the depth of his relationship with Trump.

Despite Bolsonaro’s initial reservation towards China during his presidential campaign, the Chinese have taken a strategic stance towards Brazil, supporting the country during the Amazon fires and participating in Brazil’s oil auction. And after a visiting President Xi Jinping, the Bolsonaro administration shifted its approach to China, which may give Beijing room to strengthen its relationship with Brazil.

Atlantic Council experts weigh in on Trump's tariff announcement

The December 2 announcement came as a surprise to both the Brazilian and Argentine governments, especially for President of Brazil Jair Bolsonaro, who has enjoyed a close relationship with Trump since coming into office in January of this year. The announcement also came at an inopportune time for Argentina as President-Elect Alberto Fernández is set to assume office on December 10.

For Trump “it’s not about steel and aluminum, [and] it’s not about currency manipulation in Argentina and Brazil; it’s a message for the farmers,” added Rojas, also warning that the Argentine government should first wait for a formal resolution from the US government, as the Trump administration will have difficulty justifying the tariffs on the grounds of national security as they did a year ago.

Looking toward possible responses, Amaral believes Brazil should not, and will not, impose their own counter-tariffs because “there is no interest in retaliating against the United States, and there are no mechanisms like [those that] Canada and Mexico have in the USMCA (United States-Mexico-Canada Agreement).” Rojas noted that the tariffs could be challenged at the World Trade Organization, but suggested that the United States and Argentina engage in bilateral discussions.

Though the economic consequences of the tariffs will likely be muted in Brazil and Argentina, Trump’s announcement might damage the US’ relationship with, and influence in, the region.

Frederico Fróes is an intern with the Atlantic Council’s Adrienne Arsht Latin America Center.

See more on Brazil

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Brazil and Argentina surprised by tariff announcement: What comes next?

Jasper Gilardi — Tue, 03 Dec 2019 22:27:16 +0000

Brazil and Argentina have seen their economies stagnate over the past year against the backdrop of a strong US economy and dollar, yet there is no evidence to suggest either country engaged in currency manipulation.

Trump first announced broad tariffs on steel and aluminum in March 2018, yet until this month, Brazil and Argentina had been exempt from the tariffs with self-imposed export caps to the United States.

Jasper Gilardi from the Adrienne Arsht Latin America Center asked Atlantic Council experts how the imposition of new tariffs could affect bilateral relations and the political and economic climates in Brazil and Argentina.

Gilardi: The imposition of the tariffs comes just a week before the inauguration of President-Elect of Argentina Alberto Fernández and amid protests in Buenos Aires over the economic condition of Argentina. How will President Trump’s announcement affect the new Argentine administration’s priorities?

Jason Marczak, director of the Atlantic Council’s Adrienne Arsht Latin America Center

“President Trump’s decision to impose steel and aluminum tariffs on Brazil and Argentina could not have come at a worse time for both countries, particularly Argentina. President-Elect Alberto Fernández assumes office on December 10 at a time of great concern about the state of the Argentine economy, and as Argentines reel from increased unemployment and increased poverty. President Trump’s decision unfortunately does not send the message of partnership that is so needed as a new president assumes office. This is an unexpected blow to the bilateral relationship at a critical time for Argentina, and a critical time for the United States to show its solidarity with Argentina, an important ally of the United States.

“Furthermore, in 2017, Argentine exports of raw soy to China totaled 2.4 billion dollars. Those exports have since tripled, and in September of this year the two countries finalized an agreement to begin allowing the import of Argentine soymeal—a processed form of soy—to China, an agreement that Argentina has sought for decades. The growing trade and the recent soymeal import agreement were likely factors in President Trump’s announcement since Argentina’s increased soy exports to China have come as US soy farmers continue to suffer due to the ongoing trade war with China.

“It is my hope that we find a quick resolution to the decision to impose tariffs so that it does not affect the bilateral relationship or the policy priorities and direction of the incoming Fernández administration.”

Gilardi: Prior to President Trump’s announcement, what was the status of the trade relationship between Brazil and the United States? And what harm will these tariffs cause to both countries’ economies?

Roberta Braga, associate director and Brazil lead, Adrienne Arsht Latin America Center:

“The United States and Brazil have a longstanding trade and commercial relationship, and one that has benefited both countries over the years. Though this is not the first time President Trump has accused a major partner of manipulating its currency, a tit-for-tat move like this one detracts from the progress the United States and Brazil have made on the trade and investment front. If imposed, these tariffs could do major damage to Brazil’s economy at a time when its growth remains precarious.

“It is important to note that only a few weeks ago, on November 25, CEOs of major Brazil and US companies came together to discuss ways for deepening bilateral business ties at the relaunch of the US-Brazil CEO Forum. There was no hint of a re-imposition of tariffs on Brazil at that time. In fact, the Forum, co-chaired by US Commerce Secretary Wilbur Ross and Brazilian Minister of Economy Paulo Guedes, among others, recommended measures to advance discussions toward the long-term goal of a free trade agreement and Brazil’s entry into the Organization for Economic Cooperation and Development (OECD).

“Going forward, the United States and Brazil must continue productive conversations toward strengthening the bilateral trade relationship. This announcement is an escalation by Trump that will amplify a global trade war that will not benefit the United States in the long run.”

Gilardi:The economies of Brazil and Argentina are projected to face declining growth in the coming months, meanwhile the US economy, and thus the US dollar, continues to strengthen against them. Is the US president right to attribute the currency devaluation to manipulation or is likely a product of wider economic declines in Brazil and Argentina?

Bart Oosterveld, Atlantic Council C. Boyden Gray fellow on global finance and growth and director of the Global Business & Economics Program:

“There is no evidence whatsoever that there is deliberate currency manipulation from either country. The president may be attempting to distract from other news, or address concerns related to rising agriculture exports from especially Brazil to China in this way. The economic impact is likely relatively muted in either case.”

Jasper Gilardi is a program assistant for the Adrienne Arsht Latin America Center at the Atlantic Council. Follow him on Twitter @gilardi_jasper.

Rapid Reaction Call

On December 3, one day after President Trump’s announcement, the Adrienne Arsht Latin America Center hosted a conference call with leading experts in this space. Listen to the recording of the call and read the summary.

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Chile Against Corruption: What Can the Region Learn?

Guillermo Garcia Montenegro — Tue, 30 Jul 2019 04:00:00 +0000

To launch the last of a series of spotlights on anti-corruption, the Adrienne Arsht Latin America Center hosted a conference call to discuss Chile’s successes and steps countries can take to revitalize regulatory frameworks.

Authored by Former Minister of National Women’s Affairs of Chile and Adrienne Arsht Latin America Center Non-Resident Senior Fellow Laura Albornoz Pollmann, the spotlight “Chile Against Corruption: What Can the Region Learn?” analyses the country’s experience with corruption and the lessons it can offer Latin America.

Maria Fernanda Perez Arguello, associate director at the Adrienne Arsht Latin America Center, opened the conversation stating that “anti-corruption efforts have been vague in the region in the last five years, ever since the Lava Jato investigation became known to the public.” Perez Arguello emphasized that though there have been successes to be celebrated, much remains to be done. Countries like Chile can offer valuable lessons and best practices.

Albornoz Pollmann highlighted that over the past twenty years, Chile has reformed public institutions, with the goal of increasing transparency and accountability. One of these developments, Albornoz Pollmann added, are the antitrust laws that have been introduced in Chile, which “have enabled the penal code to impede certain actors from limiting the actions of financial regulators” aimed at guaranteeing free and fair competition in the marketplace. She made the case each country should be cautious of the reforms they push for, given that “everything is highly dependent on the political context of each country.”

Rodrigo Janot Monteiro de Barros, former prosecutor general of Brazil from 2013 to 2017, when the bulk of Car Wash investigations took place, added that combatting corruption is a holistic process that involves not only the judiciary, but also civil society, a free press, and political parties. Janot believes the region could learn from Brazil on how to tackle corruption in a transnational way and how to cooperate with other countries. He emphasized the duty to combat corruption internationally, stating that “if we only tackle corruption domestically, instead of eradicating it, we only end up exporting it to other countries that do not have the institutional capabilities to properly combat corruption.”

Albornoz Pollmann agreed that, usually, corruption cases are cross-border crimes with regional impact. She stressed that to combat corruption more effectively, strategic alliances between governments, the private sector, and international institutions “can raise awareness about best practices to tackle the evils that reside in our democracies.”

For Albornoz Pollmann, one of the main challenges in the fight against corruption is that “corruption acts mutate over time, so what appeared to be corruption in the past, which was an explicit lobby, today is covered up in other different ways of conduct.”

She added that beyond laws, “we need a more horizontal democratic system. As democracy advances, it should enable actors to punish such acts more publicly.” Perez Arguello added that “[corruption] can move at a faster speed than legislators and laws can,” and that the fight against corruption is, in nature, never-ending.

Janot raised Chile’s successful centralization of authority within the Attorney’s General office over all treaties of a penal nature as a successful component of the fight against corruption. He noted this has not taken place in Brazil. For Albornoz Pollmann, while Chile has made strides in its fight against corruption, the power to investigate resides in a public entity dependent on political power, and this relationship has limited the investigations Chile’s Public Ministry can advance.

Beyond the need to guarantee the necessary autonomy of the judiciary and its investigative institutions, both Janot and Albornoz Pollmann drew attention to the importance of a more democratic penal justice system that would guarantee laws are enforced equally, regardless of socioeconomic status. Janot concluded that the recent arrests of former presidents across the region showcase that “justice is for all. A signal of the democratization of the penal justice system.”

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20 Years in the making: Mercosur-European Union reach trade deal

Bryan Wilensky — Tue, 02 Jul 2019 15:18:33 +0000

Days after the announcement of the Mercosur-European Union trade deal, the Atlantic Council’s Adrienne Arsht Latin America Center partnered with the Global Business and Economics Program and the Future Europe Initiative for a conference call to discuss the details and implications of the momentous agreement.

A byproduct of two decades of discussions and forty rounds of negotiations, the deal is the largest for the European Union (EU) in terms of population and the first for Mercosur since the four-nation bloc, which includes Argentina, Brazil, Paraguay, and Uruguay, was established in 1991. The agreement covers a population of nearly eight hundred million people and will result in over four billion euros in tariff savings for the European Union.

Jason Marczak, director of the Adrienne Arsht Latin America Center, started off the discussion, stating that “the word historic is sometimes overused, but not in the case of the recently announced” Mercosur-EU agreement. Marczak emphasized that this trade deal reaffirms the EU’s commitment to multilateralism and represents Mercosur’s eagerness to engage in the interdependent economy of the twenty-first century.

Marcos Troyjo, deputy minister of Foreign Trade and International Affairs for the Brazilian Ministry of Economy participated in the final rounds of discussion in Brussels. He shared that a willingness to find common ground culminated in this positive agreement that will foster Mercosur to modernize its ideological views. Troyjo noted that the agreement highlights President Jair Bolsonaro’s pursuit of trade with all corners of the globe, and Argentine President Mauricio Macri’s eagerness to change regional development patterns. For him, “all boats are lifted by this beautiful tide of trade,” endorsing the trade agreement as a “win-win” for all parties involved.

Tomas Baert, head of the Trade and Agriculture Section at the EU Delegation to the United States, and his colleague, Owen Jones, minister counselor at the same division, underscored the agreement’s importance for the EU’s commitment to open, rules-based trade along with its desire to export EU values and standards in addition to goods.

The conversation also considered how this trade agreement produces new possibilities for advancement within Mercosur. Daniel Godinho, director of Corporate Strategies at WEG Brazil and a nonresident senior fellow at the Adrienne Arsht Latin America Center, referring to the possible benefits of the trade deal to Brazil, stated that “this opportunity will be proportional to the speed and deepness of domestic reforms in Brazil.” Regionally, he hopes the agreement will foster greater integration, beyond Mercosur boundaries. On a bilateral level, Troyjo identified this deal as an opportunity for Brazil to harness momentum to better US-Brazil relations.

Shunko Rojas, former undersecretary of International Trade for President Macri and a partner at Quipu, believes the Mercosur-EU agreement will undoubtedly play a role in the run up to Argentina’s October presidential elections. However, he emphasized that the efforts of negotiators from across the political spectrum made this trade agreement an impressive accomplishment. Given the cross-administration work on negotiations, this deal will likely not be a point of contention in the elections.

Regarding the possible impacts of the deal and the ratification process on both sides of the Atlantic, Troyjo characterized the agreement as a major win for Brazilian industries, such as beef, poultry, and sugar. He also highlighted that the deal will both add value to Brazilian firms and change the nature of foreign direct investment in the country. He expects a smooth approval process in the Brazilian Congress, as legislators seek to capitalize on the agreement’s potential to benefit different economic sectors.

For Argentina, Rojas noted that political “voices of rejection” directed at the Mercosur-EU trade deal in the coming weeks will be the result of “ignorance” as most Argentinians have not witnessed a trade agreement in their lifetimes. He commented that pursuit of a similar trade agreement by earlier, left-wing administrations ensures that Argentina will ratify the agreement regardless of its election results.

On the EU front, Jones reaffirmed that EU food standards would not drop due to the agreement. He added that the EU does not recognize figures used by European agricultural sectors that predict a great negative impact of the deal. With regards to the implementation process, Baert confirmed the agreement must be signed and ratified by all EU member states and that, once submitted to the EU for ratification, it will be provisionally applied throughout the bloc. This process could take between one and two years.

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INFOGRAPHICS – Disinformation in democracies: Strengthening digital resilience in Latin America

Roberta Braga — Thu, 27 Jun 2019 21:08:44 +0000

2018 saw political tides turn in three of Latin America’s largest democracies. These elections also saw deep polarization and distrust in institutions among Brazilians, Mexicans, and Colombians in an information environment ripe with disinformation. And while disinformation and misinformation are nothing new, the spread o#f false information at alarming rates is more effective and worrisome than ever. A year-long effort to identify, expose, and explain disinformation around elections in Latin America using open source methodologies yielded the following key findings and recommendations.

Download pdf

Recommendations: Disinformation in democracies (English PDF)

Key findings: Disinformation in democracies (English PDF)

Recomendações: Desinformação em democracias (Português PDF)

Principais conclusões: Desinformação em democracias (Português PDF)

Recomendaciones: Desinformación en las democracias (Español PDF)

Resultados clave: Desinformación en las democracias (Español PDF)

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Brazilian VP in China: A turning point for Brazil-China relations?

Paulina Ornelas — Wed, 22 May 2019 16:17:29 +0000

Brazilian Vice President, Hamilton Mourão, was in China for a six-day trip ahead of President Jair Bolsonaro’s trip to the country later this year. The Atlantic Council’s Adrienne Arsht Latin America Center held a conference call just before the China–Brazil High-Level Cooperation and Commission (COSBAN) meeting to assess expectations and possible key outcomes to Brazil-China relations of the visit. The call was moderated by Pepe Zhang, associate director at the Adrienne Arsht Latin America Center.

Luiza Duarte, Asia correspondent at Globo News, who was in Beijing for the visit, kicked off the conversation by highlighting the relevance of the visit, particularly in the context of current trade wars. She stated that the visit flagged to the Chinese government and to investors that Brazil is open for business and to propositions of the Belt and Road Initiative.

On this regard, Ricardo Sennes, partner at Prospectiva Consulting and a nonresident senior fellow at the Adrienne Arsht Latin America Center, forecasted that Vice President Mourão’s visit served to cultivate the bilateral relation for future partnerships in areas such as agribusiness. For Larissa Wachholz, partner at Vallya and an expert on Brazil-China relations, Brazil must take a stance and be firm on its position to join the Belt and Road. She believes Brazil has nothing to lose from partnering with China.

Wachholz believes Brazil must take initiative and drive discussions toward Chinese investments and how they might help the country diversify its exports away from commodities and into infrastructure investment. She adds that Brazil must become more competitive to become more attractive to the Chinese market in comparison to other countries. Zhang added that “the conversation on the Belt and Road Initiative has happened on a broad, regional level. There is a need for more country-specific strategies.”

In the context of the BRICS, its development bank and the opening of its São Paulo branch, Duarte stated that things are not running as forecasted. She explains that there is still no set date for the development bank to open in São Paulo and the BRICS have not been a priority for President Bolsonaro, especially since the development bank focuses on green and blue projects – also not a priority for the federal government. Nonetheless, Sennes added that since financial crises freeze money for investment, the BRICS bank might be a good alternative, especially considering that funding from the US might not be constant, as Wachholz stated.

Having mentioned the role of the United States, Wachholz highlighted “Brazil has been one of the few developing countries that has sustained a good relationship with all major economies in the world: the US, China, and the European Union. We should continue this position in the future.” She believes that despite the change in rhetoric from President Bolsonaro’s administration toward China, there have been no substantial changes in Brazil’s relationship with either the US or China and thus no need to choose to partner with one or the other. For Sennes, “barriers in US-Brazil trade and investment relationship are largely concentrated in specific sectors. There are sensitive issues, but in general the tenor of the relationship is positive.” With regards to the trade relation with China, he considers it to be more balanced, yet believes Brazil could expand its currently limited export portfolio. Agreeing, Wachholz defended that Brazil could become a better negotiator and clearly communicate its desire of diversifying exports since China heavily relies on Brazil for food security. Duarte mentions that “there is an increasing movement of Brazilian states to conduct business with China on their own. A key emerging dynamic to watch in Brazil-China relationship.”

The conversation concluded with a brief discussion on the Chinese company Huawei. Duarte stated that Vice President Mourão was evasive when asked to address Brazil’s position towards recent allegations against the telecom company. Nonetheless, she stated that the government has hosted Huawei representatives and has always spoken favorably about the company. She believes it is too soon for the Brazilian government to choose a side. Wachholz added that Huawei’s operations in Brazil have always complied with Brazilian law, defending that the upcoming public bid for 5G in the country should welcome all companies compliant with Brazil’s requirements.

Overall, Vice President Mourão’s trip to China was a positive one. His visit re-launched COSBAN, setting the stage for greater cooperation between Brazil and China and a successful visit later this year by President Jair Bolsonaro.

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Spotlight: Five key economic avenues for strengthening US-Brazil trade and FDI

Daniel Marteleto Godinho, Abrão Neto — Thu, 11 Apr 2019 13:00:42 +0000

In this Spotlight, we ask: In what five key ways can the United States and Brazil work more effectively together to strengthen bilateral trade and foreign direct investment?

REad spotlight

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Digital resilience in Latin America: Automation, disinformation, and polarization in elections

Valentina Sader — Thu, 28 Mar 2019 21:28:02 +0000

2018 saw political tides turn in three of Latin America’s largest democracies. These elections also saw deep polarization and distrust in institutions among Brazilians, Mexicans, and Colombians in an information environment ripe with disinformation. Following a year-long effort in which the Atlantic Council’s Adrienne Arsht Latin America Center and its Digital Forensic Research Lab (DFRLab) exposed and explained disinformation around key elections in Brazil, Colombia, and Mexico, on Thursday, March 28, 2019, the teams launched a comprehensive report that outlines trends and lessons learned from the 2018 presidential elections in Latin America.

Graham Brookie, director and managing editor of the Atlantic Council’s DFRLab kicked off the event by painting a picture of the global nature of disinformation and its repercussions. “The challenges of disinformation will continue to evolve in ways we can’t fully predict. And as they do, the more people working on this issue, the better the chances for addressing the risks to democracies and fact-based discourse,” Brookie stated.

In laying the groundwork for the day’s discussions, Andrew Sollinger, publisher at Foreign Policy, pointed to the dangers of disinformation not only around elections in Latin America, but globally, emphasizing the important role media can and should play in combatting the spread of disinformation. As elections in countries such as India and Argentina approach, takeaways from the 2018 elections in Brazil, Mexico, and Colombia can assist with fact-checking and debunking of disinformation, Sollinger noted.

To dive deeper into the role of polarization, disinformation, and automation in Latin America around the 2018 elections, Roberta Braga, associate director at the Adrienne Arsht Latin America Center, moderated a conversation with leading experts from the region.

Gerardo de Icaza, director of the department of electoral cooperation and observation at the Organization of American States (OAS) explained the characteristic widespread distrust in institutions and electoral process of these elections. He noted that “from a political party perspective, it works to question the establishment, it works to have conspiracy theories, it works to say the system is rigged unless I win. And even if I win, it was rigged but I won anyway,” which hits trust at its core. He explained the phenomenon of widespread mistrust in terms of the essence, incompetence, and failure to adapt by electoral management bodies. In terms of electoral regulatory bodies, de Icaza explains essence as the ability to point out the wrongdoing without being called biased. Incompetence is the failure of electoral bodies to realize their out dated communications approach, especially in the context of social media, where political candidates have millions of followers and an exclusive communications team. Electoral bodies, thus, fail to adapt, because, in many instances, they believe to be above social media and this kind of discourse.

For Tania Montalvo, executive editor at Animal Politico and coordinator of Verificado 2018, the main challenge when combatting disinformation in Mexico is disinformation from within the government. Montalvo defended “innovative forms of investigative journalism with citizens at its core, and collaboration” as mechanisms to effectively combat disinformation.

Carlos Cortés, co-founder of Linterna Verde layed out the challenges ahead for Colombia in this realm. He emphasized that first, civil society must leverage their effort to better understand the scope of the issue and develop best tools to combat it. Secondly, the media must better assess their fact-checking efforts. Lastly, incentivizing the ongoing process of building digital literacy among users of social media platforms.

Amaro Grassi, lead coordinator of the Digital Democracy Room at the Department of Public Policy Analysis at Fundação Getulio Vargas (DAPP/FGV) agrees with other panelists that a “coalition-like approach to solve the issue of disinformation in all its complexity” is the only viable approach. He argues that the government, represented by the electoral body, and media must equip themselves to identify and combat disinformation. He adds the role of tech companies to assist with data management as support to the work of fact-checkers.

The director at InternetLab, Francisco Brito Cruz, defended the need to avoid a technocratic approach of blaming technological advancements and broader access to technology as causes of widespread disinformation. In the case of Brazil, “for the first time in 30 years, we [had] real grassroots, robust right-wing or conservative activism,” which was a major shift in the country, affecting how media functions.

Montalvo attributed the success of Verificado 2018 in setting the political agenda during the elections in Mexico to multidisciplinary collaboration, diversification of sources, prioritizing citizens’ needs, and the unification of partnerships under one single brand: Verificado 2018, in this case.

Moltalvo focused on the importance of explaining rather than accusing the source of disinformation, to which Cortés added the importance of emphasizing the need to bring awareness to the effects of amplification. As Grassi explains, not every piece of information can go through the fact-checking process. For him, during elections, civil society and electoral bodies must be in alignment to understand what types of information should be checked, based on the detriment it may bring to the democratic process itself.

The question of the day was regulation. There is no doubt that there must be an institutionalized mechanism to hold actors accountable in the digital space without threatening freedom of speech. De Icaza brought to the discussion the issue of a “black market” in campaign funding with regards to disinformation. The hiring and use of bots, for example, is not accounted for in campaign finances. Brito Cruz pushed for analysis and changes to compliance and liability regulations on social media, including third party posts.

Moderated by Graham Brookie, director and managing editor at the Atlantic Council’s Digital Forensic Research Lab (DFRLab), the second panel discussed the possibilities of fostering digital resilience in a hyperconnected world.

Katie Harbath, public policy director for global elections at Facebook, outlined the five approaches the company has taken to protecting the integrity of elections in the platform, while still protecting good civic engagement. Their efforts have included: cracking down on fake accounts; reducing false news by controlling their reach and partnering with fact-checkers; advocating for more transparency around political advertisement through improved regulations; disrupting bad actors both foreign and domestically, by differentiating between perceived truths and facts; and civic engagement through information about participating in the democratic process.

Both Harbath and Carl Woog, director and head of communications at WhatsApp, noted the importance of accounting for differences in design of each platform. Woog explained the challenges of the platform, having privacy at its core. Still, in Brazil, one of its largest markets, WhatsApp was able to ban thousands of accounts that presented abnormal activities in the election period. WhatsApp generally bans around 2 million accounts per month related to automation.

Describing the Lie Detector project by La Silla Vacia in Colombia, Woog says “the presence of a fact-checking initiative on WhatsApp, even if it doesn’t reach every single person, is contributing to a conversation about misinformation in society, raising our awareness to disinformation on WhatsApp.”

Looking ahead, the upcoming elections in various parts of the world are the next challenge for building digital resilience.

Read the REPORT

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Has progress been made in containing disinformation?

David A. Wemer — Thu, 28 Mar 2019 19:21:58 +0000

The spread of online disinformation during the 2018 election campaigns in Mexico, Colombia, and Brazil demonstrated to social media companies that they need to “make sure that we are not solving just the problems that we saw in the US in 2016, but that we are really thinking steps ahead,” according to Katie Harbath, public policy director of global elections at Facebook.

The three high-profile elections in Latin America made up “one of our very first big test cases” for new measures meant to limit the spread of false information on Facebook, Harbath said at the Atlantic Council in Washington on March 28. But while Facebook has had some success in limiting harmful activity on its platform, Harbath explained “we have to have different solutions for all of our different platforms.”

Harbath was joined at the Atlantic Council by WhatsApp Director and Head of Communications Carl Woog for an event looking back at 2018’s elections in Latin America. While Facebook is used throughout the region, WhatsApp use is far more ubiquitous and presented unique problems for counter-disinformation efforts.

“Encryption is a headline feature of what we do,” Woog explained, “which means that we can’t see the messages that people send.” The widespread use of WhatsApp during all three electoral contests last year presents an issue for “a digital version of a private space that is much more like a living room than it is a town square,” Woog said.

The event was held to mark the launch of a new report by the Atlantic Council’s Adrienne Arsht Latin America Center and Digital Forensic Research Lab outlining the polarization, automation, and disinformation online during the 2018 elections and presenting a vision for fostering digital resilience in future elections.

Harbath and Woog both reported on how their companies are making tangible changes to their platforms to prevent their misuse in the future. “Even though we can’t see the content that people are sharing,” Woog said, WhatsApp “can look at an account to see if it is acting in an abnormal fashion,” such as sending thousands of messages per minute. Once abnormal accounts are identified they can then be banned. Woog said that during the Brazilian election WhatsApp banned almost 2 million accounts per month. Woog also said that WhatsApp has limited the ability to mass forward messages in order to stop the viral spread of messages on a platform that is primarily designed for one-to-one messages and small groups. With new features, Woog said, “as soon as you get a message from someone who is not in your contacts, you get a warning that pops up.”

Harbath said that Facebook is also targeting clearly automated accounts and is focusing on giving “people additional context about who they are seeing this information from.” The company also made a conscious decision last year to change its feed algorithm to prioritize content from family and friends in user feeds. The decision has hurt the ability for business and other pages to grab attention, Harbath conceded, but she argued it was based on the actual preferences of users and the desire to limit the spread of disinformation by bad actors.

Harbath warned that Facebook’s initial attempts to mark potentially fake information had largely backfired on the platform as “it made people believe it even more” by drawing attention to it.

Graham Brookie, director and managing editor of the Digital Forensic Research Lab, explained that “disinformation is an emotional problem” and that marking disinformation as overtly fake often makes people have “a visceral reaction.” He warned that if platforms or fact-checkers get bogged down in “an extended conversation about who is right and who is wrong, then you have already lost. Those who are trying to spread disinformation have already won.”

Harbath said Facebook now is including relevant links below potentially fake content and focusing on putting the source of the information in the proper context.

Both Harbath and Woog stressed the importance of factcheckers from civil society and the media in helping social media companies identify and then counter disinformation online, an idea shared by a collection of Latin American disinformation experts who also spoke at the Atlantic Council on March 28. Francisco Brito Cruz, director of the InternetLab in Brazil, pushed back on the instinct to blame social media platforms themselves for the promotion of disinformation. “We need to stop thinking that the problem is technology,” he said, but focus instead on how this technology is interacting with “the social and political environment.”

Tania Montalvo, executive editor of Animal Politico in Mexico and coordinator of the Verificado 2018 election reporting and fact-checking initiative, argued that journalists and media companies can play a huge role in pushing back disinformation, especially if media outlets “put into the center of our work as journalists, the citizen” rather than making money or trying to affect political outcomes.

Andrew Sollinger, publisher of Foreign Policy magazine, on the other hand argued that media companies can only play a limited role in pushing back, especially on platforms such as WhatsApp where “it is very difficult for media organizations—trusted media organizations—to publish premium content on that vehicle.” As media companies double down on subscription services in an effort to stay financially solvent, Sollinger said, “information is becoming a luxury commodity… [and] folks living in favelas don’t have not just the presence of mind but also the wallet” to consume quality news.

Carlos Cortés, co-founder of Linterna Verde in Colombia agreed, saying that fact-checking initiatives by news outlets and social media companies “need to be assessed critically [to see] if they are really working, if they are really having an impact.”

What both Harbath and Woog want to avoid is becoming “arbiters of truth” on their platforms, deciding what type of content to allow or not to allow. Harbath argued that she sees content moderation as following the rule that a user “has the right to say that the sun rises in the West, but he doesn’t have the right for us to amplify it.”

Woog worried that overreaction from policy makers could threaten the very benefits that an open and free Internet provides, especially if it threatens the privacy of the user. “Once you lose privacy, it is very hard to get it back,” he said.

David A. Wemer is assistant director, editorial, at the Atlantic Council. Follow him on Twitter @DavidAWemer.

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Key takeaways from Brazilian president’s visit to Washington

Valentina Sader — Wed, 20 Mar 2019 21:06:30 +0000

Brazilian President Jair Bolsonaro’s choice of the United States for his first official international visit as president did not come as a surprise given his vocal desire to reposition Brazil closer to the United States and his admiration for US President Donald J. Trump.

Bolsonaro was joined on his March 18-19 visit by six of his twenty-two ministers, including Economy Minister Paulo Guedes, Justice Minister Sérgio Moro, and Foreign Minister Ernesto Araújo. The Brazilians had a clear agenda: expand and deepen the areas of cooperation between the two largest economies in the Western hemisphere and gain the support Brazil needs to further attract trade and foreign direct investment.

Brazil’s accession to the OECD

At a joint press conference in the White House Rose Garden on March 19, Trump offered verbal support for Brazil’s accession to the Organisation for Economic Co-Operation and Development (OECD), a move particularly important to Brazil which is undergoing significant structural reforms that are key to its economic prosperity. While OECD membership would impose strict economic rules and standards on Brazil, effectively placing it on the same playing field as other OECD members, it would also provide legal certainty that would make the country more attractive to foreign investors. However, Brazil still faces lengthy OECD procedures of accession and must fulfill the standards needed for full membership.

Agreement for US space launches from Brazil

While in Washington, Brazilian Minister of Science and Technology Marcos Pontes and Araújo signed an agreement that allows US spacecraft to be launched from Brazil. This agreement is part of an effort to expand bilateral cooperation beyond trade, in areas of mutual interest. Launches from Brazil’s Alcântara Base are more cost effective for the United States. The agreement, if passed by Brazilian Congress, will allow for US-Brazil cooperation in the development of technologies for space launches and would help fund segments of Brazil’s space program.

Removal of Brazil’s visa restrictions on US citizens

Bolsonaro announced US citizens, along with citizens from Japan, Canada, and Australia, would no longer need visas to enter Brazil. Although the effects of lifting visa requirements on tourism and business are hard to measure, the move serves as a clear signal that Brazil is open to the rest of the world.

Cooperation on Venezuela

Both Trump and Bolsonaro reiterated their support for the interim government of Venezuela and condemned the Nicolás Maduro’s regime. Trump announced that the United States could impose tougher sanctions against Venezuela and affirmed that all options are being considered. Bolsonaro stood by Brazil’s more diplomatic stance. Brazil maintains communication with the Venezuelan military in an effort to convince it to end its support for Maduro.

Conclusion

Bolsonaro’s visit to Washington represents the beginning of a closer relationship between the United States and Brazil—one of the Brazilian president’s top campaign promises. The Brazilian government was successful in beginning discussions on expanding areas of cooperation with the United States and demonstrating to US companies that Brazil is open for business. Concrete outcomes from the US-Brazil relationship remain to be seen and could be overshadowed when Bolsonaro visits China later this year.

Overall, it was a positive visit, consistent with expectations and with minimal fireworks.

Valentina Sader is a project assistant in the Atlantic Council’s Adrienne Arsht Latin America Center. Follow her on Twitter @valentinasader.

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Braga quoted in NYT on Bolsonaro’s Meeting with Trump

Roberta Braga — Tue, 19 Mar 2019 15:29:17 +0000

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Braga Quoted in AFP on Bolsonaro’s Visit With Trump

Roberta Braga — Fri, 15 Mar 2019 13:33:58 +0000

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Open for business: A new chapter for US-Brazil relations?

Santiago Herdoiza — Thu, 28 Feb 2019 15:39:55 +0000

Previewing President Bolsonaro’s first official visit to the United States, the Adrienne Arsht Latin America Center hosted the public event “Open for Business: A New Chapter for US-Brazil Relations?” on February 28. Roberta Braga, associate director at the Atlantic Council’s Adrienne Arsht Latin America Center, moderated the discussion between Murillo de Aragão, founder and CEO of Arko Advice, Renata Vargas Amaral, founder and president of Women Inside Trade Association and director of international trade at Barral M. Jorge and Associates, and Ambassador Anthony S. Harrington, former US ambassador to Brazil and chair of Albright Stonebridge Group’s Managing Board.

Brazil and the United States have long been allies, despite moments of tension. As President Jair Bolsonaro and his administration work to propose reforms to strengthen Brazil’s economy, the bilateral relationship will open new doors for growth and prosperity.

Corruption was considered an impediment to further trade and investment in Brazil. Amaral argues that Minister Sergio Moro’s anti-corruption measures “respond much more to civil society,” despite having a good reception by the market. Similarly, Amaral added that though the market received the pension reform with enthusiasm, “Congress will not approve [it at] the pace the market would like.” De Aragão added bureaucracy and taxes to the list of domestic reforms the government should pursue to guarantee a more prosperous environment for businesses.

The economic forecast seems promising. For de Aragão, Brazil is a much more open economy for business, assuring a potential $100 billion USD in foreign capital will enter Brazil in 2019 due to privatization, public-private partnerships, and investment. Amaral also noted the multiple announcements of public-private partnerships, highlighting that “Brazil has been historically a country that attracts a lot of investment worldwide, and the US has been historically a great investor in Brazil.” She believes, however, that the government’s economic agenda might face resistance at its current configuration, giving the example of the agricultural sector which, despite being supportive of Bolsonaro, has been affected by the government’s trade policies toward the dairy market.

In touching on opportunities for key sectors as the two countries strengthen the bilateral relationship, Harrington noted that Embraer is an example of what businesses can do in a value added, advanced manufacturing environment. For Amaral, the agricultural sector might face some challenges as the United States and Brazil debate closer economic ties amid an ongoing conversation with China, but the South America nation is prepared with subsidies comparable to the levels of Japan, the European Union, and the United States.

Ambassador Harrington considers that “there is more will on both sides [Brazil and the United States] than we have seen perhaps forever” to strengthening bilateral trade relations. Given the recent trade talks between China and the United States, Amaral warned for the possible effects to the Brazilian agricultural sector, as they include China importing $30 billion USD of soy beans, beef, and poultry from the United States, – products that China currently imports from Brazil. For Amaral, the question remaining is whether Brazil can play this trade game at this level.

In this context and emphasizing the expectations around Bolsonaro’s upcoming visit to the United States, Murillo de Aragão affirmed the primary goal of the visit will be to show that Brazil is a country ready for increased investments. Renata Amaral added that although chances of a free trade agreement between the two largest nations in the hemisphere are slim in the short term, the dialogue on the economic and trade front will deepen during the upcoming visit. President Bolsonaro is also expected to emphasize Brazil’s membership at the Organization for Economic Co-operation and Development (OECD) as a priority during his time in the United States.

Brazil is the OECD’s most active non-member. The country’s acceptance into the OECD’s Competitive Committee just last week signals that “Brazilian practice in regard to competitiveness is aligned to [that of the organization],” Amaral affirmed, and that the country is committed to domestic reforms with long-term implications to businesses and investment. The support of the United States for Brazil’s membership at the OECD would signify “an impetus for further reform, and in the long term, make […] Brazil’s economy and business community a more competitive factor in the world business stage,” added Amb. Harrington.

The post Open for business: A new chapter for US-Brazil relations? appeared first on Atlantic Council.

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