Licks Attorneys' Government Affairs & International Relations Blog

Doing Business in Brazil: Political and economic landscape

Licks Attorneys' COMPLIANCE Blog

Jair Bolsonaro in Washington: Visit key points

Jair Bolsonaro, who travelled last week to the United States (US) on his first bilateral visit, demonstrated he is prioritizing the construction of a solid partnership with Donald Trump’s administration. [Link] Trump declared that “the US and Brazil have never been this close”, and rewarded Brazil through concessions for its approximation to the US. [Link]

Key Points
  • The US declared its support to Brazil’s plea to enter the Organization for Economic Co-operation and Development (OECD) brought forward in May 2017 under Temer´s Administration and a “fundamental priority” of Bolsonaro’s Administration. [Link] The US’ support is viewed as decisive since Washington, which is reluctant to let the OECD expand much, had blocked Brazil’s integration into the organization until Argentina became a member. Click here to know why is becoming a member of the OECD is important for Brazil. [Link] In return, the US argued that OECD membership entailed economic maturity, and asked Brazil to abandon its “special and differentiated” treatment at the World Trade Organization (WTO). Insofar as this status permits developing countries to retain protectionist policies and receive trade concessions, giving it up could have an impact on Brazil’s strength in global trade negotiations. [Link]
  • On March 18, the US and Brazil signed a technology safeguards agreement allowing the commercial use of the Alcântara base in Maranhão by the US to launch satellites. The geographical position of the base close to the equator is recognized as strategic, since it permits a 30% reduction of fuel cost. [Link] Thanks to the safeguards agreement, the Alcântara base will become profitable as the US represents close to 80% of the satellite market, involving about US$ 3 billion in 2017. [Link] This accord should lead to greater technological cooperation in aerospace and defense, and in turn, allow Brazil to develop its expertise through transfer of technology. [Link] It is the second of the type - the first signed in 2000 was rejected by the Brazilian Congress due to its implications for Brazil’s sovereignty. [Link] [Link]  
  • Trump said he intended to designate Brazil as “major non-NATO ally”, which is granted to countries considered as strategic military allies of the US. Though specialists warned about the implications for Brazil to retain its strategic autonomy and constraints such an alliance might imply, this status can facilitate closer military cooperation, transfer of technology and preferential access to the purchase of US military equipment. [Link] The US President even suggested it could integrate the organization as a member of the alliance. This led to criticism in Brussels and amongst member states, especially as only European states can be called to join the organization. [Link]  
  • Brazil passed a decree on March 18 to grant visa waivers, after June 2019, to US, Australian, Canadian and Japanese citizens considered to have high buying power and low migration risk. [Link] Though US citizens are the largest group of foreign visitors to Brazil (7.2% of entries and 475,000 tourists sent in 2017), the number of tourists from the US dropped by 28% over 2014-2017. [Link] To stimulate tourism and generate income, visa waivers will be granted in cases of trips to Brazil for tourism, business, transit or “exceptional circumstances of national interest” for a period of 90 days renewable. [Link] The measure could help double the number of tourists until 2022, to reach a total of 12 million, and could inject between US$ 2-3 billion into the Brazilian economy. [Link] [Link] Yet, Bolsonaro distanced itself from Brazil’s diplomatic tradition that favors reciprocity, giving bargaining power to negotiate a visa waiver for Brazilian tourists in the US. [Link] The US, which had recently adopted more restrictive rules to grant visas to Brazilians and refused 12.7% of Brazilians’ requests in 2017, suggested it would include Brazil in the “Global Entry” program of the Department of Homeland Security, which makes the entry in some US airports for trusted travelers flexible
  • On March 19, Brazil agreed to grant an import quota of 750,000 tons of wheat per year (about 10% of Brazil’s annual wheat imports) free of tariffs to the US. This created concerns inside Mercosul and more specifically in Argentina, largest exporter of wheat to Brazil. In 2018, Brazil imported 5.9 million tons of wheat from Argentina, compared to only 270,000 tons from the US. [Link] [Link]  
Extra Info

It is worth noting that Turkey and South Korea are members of the OECD and kept their differentiated status at the WTO. [Link]

Japanese are nº18 with 60.3 thousand tourists. Australians and Canadians are not even in the top 20. [Link]

Although the visa waiver for foreigners is an old request of the tourism industry, [Link]

Without reciprocity, prohibited by law until 2017 and the implementation of the new Migration Law [Link].  

Since the end of 2017, they already benefited from a special program, which enables them to obtain the visa by internet without going to the Consulate. [Link]

Brazil will stop collecting R$60.5 million per year in average with visa emissions. [Link] 181,242 visas were granted to US citizens.