The Obama administration is setting out to help exporters get in on Brazil’s building boom even as it spars with the region’s biggest economy over high tariffs, rules favoring local companies and monetary policies.
Brazil will be the focus of a U.S. trade mission for 20 companies including Morgan Stanley, CNH Global (CNH:US) NV, Textron Inc. (TXT:US)’s Cessna Aircraft Co. and OSI Systems Inc. (OSIS:US)’s Rapiscan, which makes airport screening devices. The delegation also will visit Colombia and Panama, where commercial investment is on the rise.
“They’re going to be spending big bucks on their infrastructure improvement,” Deputy Commerce Secretary Rebecca Blank, who has led the agency for 11 months, said in a phone interview. The May 12-18 mission is her first as agency head.
The U.S. last year exported $43.7 billion in goods to Brazil, a 68 percent increase since 2009, when President Barack Obama took office and the global economic crisis depressed global exports. U.S. merchandise sent to Colombia increased 73 percent, to $16.4 billion, and to Panama jumped 131 percent, to $9.9 billion, during the same period.
The administration of President Barack Obama in September threatened to retaliate against Brazil for what it called protectionist tariff increases on goods including steel, plastics and machinery. The Latin American nation has accused industrialized nations of waging a currency war to weaken its exchange rates and thus boost exports. U.S. support for cotton farmers and Brazilian policies to favor local manufacturers also have heightened trade tensions between the nations.
“There are things here to work on in the U.S.-Brazil trade relationship,” Blank said. Those disputes are not a reason to halt trade between the nations, she said.
“The U.S. is still a very important source of inspiration for our manufacturers and we’re confident that with this trade mission we will try to increase our knowledge,” Tovar Nunes, spokesman at Brazil’s Foreign Ministry, said yesterday by telephone from Brasilia. “We take it as sort of a healthy injection of enthusiasm for our own business community to do better and also work with the government to improve the business environment in Brazil.”
Governments that complain about protectionism should check their own policies, Nunes said. “They will be surprised to see who is actually protectionist,” he said.
Brazil, the eighth-largest U.S. trading partner, plans to invest 959 billion reals ($477 billion) on transportation, telecommunications and energy as it prepares for soccer’s World Cup in 2014 and the 2016 Olympic Games in Rio de Janeiro, according to the Commerce Department.
Rapiscan Systems Inc. of Torrance, California, has already won contracts to install scanners at stadiums in two Brazilian cities for the Confederations Cup soccer tournament this year. It hopes those deals will lead to additional contracts for the World Cup and Olympics, said Peter Kant, executive vice president.
“The immediate focus in Brazil is the security business,” he said in a phone interview. The company has established an office in Rio to help ease what Kant said are “some very frustrating trade and tax rules,” including those that favor local companies. He said he hopes the trip will help make it easier to do business in Brazil.
The U.S. should be satisfied with the bilateral relationship because the U.S. has a trade surplus with Brazil, according to Nunes. Steps Brazil took to deal with the global economic crisis complied with global trade rules, he said.
The two nations in March 2011 also reached a cooperation agreement to improve trade.
While the U.S. has trade pacts with Panama, Colombia and nine other Latin American nations, Brazil -- which accounts for about 45 percent of the region’s output -- isn’t among them. The nation was part of a bloc in 2005 that was at odds with the U.S. over a Free Trade Area of the Americas, leading to a collapse of the talks.
“Whether or not we have a trade agreement, you can’t ignore” Brazil because of its size, Eric Farnsworth, vice president of the New York-based Council of the Americas and head of its Washington office, said in a phone interview. While policies favoring local producers have slowed investment in some industries, such as oil and gas, the focus on infrastructure may ease some of the bottlenecks hindering trade, he said.
The trade mission supports Obama’s recent focus on Latin America, even as the U.S. pursues agreements with 11 Pacific-region countries and the 27-nation European Union. Obama visited Mexico and Costa Rica last week. The 159 members of the World Trade Organization this week chose a Brazilian, Roberto Azevedo, as the trade arbiter’s director-general, further raising the region’s profile.
Latin America is “a very high priority area for the United States” in terms of trade, Blank said.
Vice President Joe Biden will visit the region the week of May 26, according to a White House announcement on May 8. The trip to Brazil, Colombia, Trinidad and Tobago “will be an important chance to discuss our collective efforts to promote economic growth and development, access to energy and our ongoing collaboration on citizen security,” according to the statement.
Blank is taking contractors, engineering firms, software providers, construction companies, providers of energy services and infrastructure financiers on her week-long trade mission. Most of the businesses are closely held, including security provider Condortech Services Inc. of Springfield, Virginia, and Ghafari Associates, an engineering and construction consulting firm based in Dearborn, Michigan.
Spokesmen for New York-based banker Morgan Stanley (MS:US) and Case New Holland Inc., a U.S. unit of CNH Global of Amsterdam, declined to comment.
Global sporting events that will showcase Brazil through 2016 are hastening infrastructure investment.
“We see significant opportunity there between the World Cup and the Olympics,” Rich Humphrey, senior director of industry strategy for Autodesk Inc. (ADSK:US), said in a phone interview. The San Rafael, California-based company, which provides engineering and design software, is participating in trade mission in part to promote a product that is being used in the expansion of the Panama Canal.
Tollgrade Communications Inc. of Cranberry Township, Pennsylvania, will join the delegation to show products that help utilities identify threats to their power line networks.
“There’s been a heightened sense of importance” of providing reliable energy to businesses, particularly as they add renewable energy to their systems, said Erik Christian, vice president of smart grid technologies at the company. “There’s definitely been an uptick over the last 18 months, especially in Brazil.”
Jim Jobes, operations manager Ghafari’s Brazil unit, said the company is looking to add local partners, particularly as more airports are taken over by private operators and upgraded. The trip will provide “the ability to open some doors that might not be opened otherwise,” he said.
During the three-nation visit, the delegation will meet with ministers for trade, airlines and commerce. Blank will talk with Panama President Ricardo Martinelli and the administrator for the Panama Canal, which is undergoing a $5.25 billion expansion. The mission coincides with the first anniversary of the implementation of the U.S.-Colombia free-trade agreement.
“Colombia is launching a very ambitious infrastructure effort” worth about $26 billion over the next four years, Carlos Urrutia, the nation’s ambassador to Washington, said in a phone interview. “There should be a lot of opportunities for U.S. companies.”
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