How to contain Brazil

    As American presidential candidates and pundits alike yammer about the threat posed by a rising China, the rise of another potentially unfriendly superpower closer to home has been ignored. This nation is Brazil, the seventh richest country in the world1, ahead of Britain, and the third highest GDP growth rate2 from 2000 to 2010. Although Brazil is not nearly strong enough to challenge American hegemony, it is powerful enough to frustrate U.S. policies and actions in ways that harm U.S. interests. Therefore, the United States should not only take actions to convince Brazil to support the U.S., but it should also work to break up Brazil’s power.

Brazil’s rising power status is questioned by nobody. Brazil’s rise is a true success story; a fight against both an unforgiving geography and relentless inflation3 that kept the country in endless poverty despite high growth. Brazil’s rainforest geography, lack of easily accessible arable land (most arable land is deep in the interior rainforest) have provided significant obstacles to growth. The natural barrier provided by the Amazon ensures that all trade and thus all major cities are confined to the Atlantic Ocean, which further frustrates growth because the Great Escapade, a high wall of mountains, runs along the coast except for in a few small pockets, confining Brazil’s cities to these small pockets and thereby preventing transportation links between Brazilian cities and the development of economies of scale.3 Brazil shot up to prominence once the forests were cleared and roads built, creating farmland and  enabling the rise of a middle class of small farmers.3 Further, the implementation of the Real Plan (named for the Real, the new Brazilian currency created by the plan) in 1994 brought inflation down from 45 percent in 1994 to one percent in 1996 by tightening monetary policy, floating the currency, and tying the Real to the dollar.5 While this destruction of inflation hampered growth by tightening credit and cutting deficit spending, the Real Plan vastly increased the purchasing power of most Brazilians, decreasing the poverty rate by 10 percent in two years5 and creating a consumer economy in Brazil from scratch. It is the largest country in South America, both in terms of population and wealth. Despite having growth decreased by the Real Plan, Brazil’s growth rate remains high, as mentioned before. Further, this growth appears to be here to stay: Brazil’s economy is largely based on agriculture, and its products, particularly soybeans (needed for tofu, food additives and animal feed) and sugar cane (used as biofuel and food sweetener) are in high demand and will likely remain so in the future.6 The Brazilian people’s high purchasing power, and the fact that the Brazilian poverty rate is plummeting, ensures the long-term health of the domestic consumption economy as a main driver of growth. Brazil has also discovered enormous oil fields: Brazil sits on 50 billion barrels of oil, enough to propel it into the top five oil producers by 2020,7 and some estimate that 70-100 billion barrels more are located offshore.8 Although Brazil slumped in 2011, this slump was largely the result of faltering consumer spending, a problem that can be easily overcome. Likewise, Brazil's inflation crisis, which is largely the result of excessive foreign investment from China, can be solved through tighter currency regulations. 14, 3

This wealth has translated to regional dominance. The Brazilian state-owned firm Petrobras controls the Bolivian natural-gas industry, the largest sector in the Bolivian economy, and almost all Bolivian agricultural products are shipped to Brazil. Large numbers of Brazilians have migrated to Paraguay, and Brazil is the largest investor in the Paraguayan economy, particularly in its energy sector. Brazilian cash drives Uruguay’s financial industry, the main driver of Uruguay’s economy, and Brazilians now own a majority of Uruguay’s farmland.3 All told, Brazil is the largest direct investor in Latin American nations and the most powerful country in the region, giving it the status of regional hegemon.

In the past, Brazil’s power has been checked by that of its neighbors, particularly Argentina. Argentina benefits from many large navigable rivers (which facilitate trade) and the fact that most of its territory is large arable plains, which facilitate not only large-scale agriculture but economies of scale and giant cities. Historically, these geographic advantages have played out in the way one would expect: Argentina wore the pants in the Argentina-Brazil relationship. Argentina dominated the Southern Cone region (Uruguay, Paraguay, Argentina and Southern Brazil) that formed the heartland of South America after Argentina’s victory against Brazil in the 1825 Cisplatine War. By dominating this crucial, resource rich region, Argentina rose to global prominence and was even able to challenge European powers, seen most recently in the Falklands War. Although modern Argentina is but a shadow of its former self, it remains the second most powerful country in South America and the only potential threat to Brazil.

Recognizing the threat posed by Argentina, Brazil has undertaken a number of successful measures to ally itself with Argentina. The two countries consider each other to be in a “strategic alliance,” and their militaries collaborate extensively.9 Brazil and Argentina have collaborated on designing military aircraft, and their militaries frequently drill together. Most importantly, the two countries have shared details on their top-secret uranium enrichment plants with each other. Further, Brazil supports Argentina in Argentina’s claim over the Falklands Islands, Argentina’s biggest foreign policy issue.10 However, the main way in which Brazil has formed a cohesive power block in South America is economically, through the Mercosur trade agreement that involves Brazil, Argentina, Paraguay and Uruguay i.e. Brazil and the Southern Cone nations. Mercosur is a free-trade organization with a standardized external trade policy, similar to NAFTA or ASEAN. Mercosur has led to great amounts of trade and migration between Brazil and Argentina, deepening their ties. Mercosur is also the main means by which Brazil controls the Southern Cone: while individual deals brought local nations into Brazilian suzerainty, Brazil sets the common foreign policies of the region through Mercosur.10

With its one major enemy removed, and its status as regional hegemon fully secured, Brazil stepped on to the world stage. Brazil leads the UN mission in Haiti, has tripled its foreign aid budget since 200811 and has participated in 27 UN peacekeeping missions. However, Brazil’s stint in the international arena has been anything but beneficial to the U.S. Historically, Brazil has been unfriendly to the U.S.; Brazil worked with the Chinese and the Soviets during the Cold War and refused to oppose Fidel Castro’s Cuba. Brazil refuses to cooperate with American demands, seen in Brazil’s unwillingness to pacify its neighbors or crack down on drug lords in neighboring countries.12 Another major source of friction between the two nations is an incident in which Brazil negotiated with Iran in 2010, despite explicit U.S. instructions not to interact with Iran. Economically, Brazil has been working to exclude the U.S. from South America through economic integration unions such as Mercosur and was the main opponent of the Free Trade Area of the Americas in addition to raising tariffs on U.S. agricultural goods. Further, Brazil has worked to actively oppose U.S. actions. Brazil has opposed American anti-drug lord operations in Colombia and has even insisted that any American military actions in South America be approved by Brazil first. Brazil has also opposed most recent U.S. foreign policy, particularly the War on Terror, the invasion of Libya and the U.S. attempt to pass a UN Security Council resolution condemning Syria. Overall, Brazil’s attitude towards the U.S. is one of suspicion: Brazil regards the U.S. as an obstacle to its rise and thus is unfriendly towards the U.S.13

The United States ought to undertake a two-pronged approach to protecting its interests from Brazil. First, the U.S. needs to reach out to Brazil in order to show the Brazilian government that American interests and values are aligned with those of Brazil. Value-wise, both countries are Western-style republics that value democracy and liberty. Brazil benefits from the security provided to it by U.S. hegemony and is made wealthy by the freedom of navigation the U.S. Navy provides. The U.S. should try to convince the Brazilian leadership, through state visits and possibly through incentives such as subsidies for sugar-cane based biofuels from Brazil, that U.S. hegemony benefits Brazil. Second, the U.S. must try to peacefully frustrate Brazilian regional hegemony. This can be done in two ways: by assisting South American nations that are opposed to Brazil and by creating an alternative to Mercosur. Already, Brazil’s rise has hit opposition from several South American countries, particularly Venezuela, Colombia and Bolivia. The U.S. can reach out to Colombia by providing more assistance in attacking drug operations there and by increasing trade to Colombia, which would pull the country away from Brazil. Likewise, U.S. investment in developing Bolivian resources, particularly in the emerging and strategic lithium industry, could make the U.S. Bolivia’s main trading partner and thus bring Bolivia out of Brazil’s shadow. Although Colombia and Bolivia are the two pieces of low-hanging fruit, efforts to strengthen ties with South American nations to weaken Brazil’s grip on the region must be made with most South American countries. The centerpiece of this weakening of Brazilian hegemony should be the creation of an alternative to Mercosur. Mercosur is already faltering, as it is becoming obvious that the organization exists solely as a means to further Brazilian power and not to promote free trade.3 If the U.S. were to create a free-trade organization in South America incorporating the Mercosur countries and other South American nations, this would tie South America to the U.S. instead of Brazil, especially if this free-trade organization was more of a free-trade organization than Mercosur is. Inevitable Brazilian opposition to such an organization can be circumvented by offering membership to the other Mercosur nations first, and then letting peer pressure kick in.

Brazil’s rise cannot be halted, nor should it be. However, Brazil’s economic strength need not imply regional hegemony, a fact that can be ensured by increased U.S. involvement in South America. 

Pictured above: A Brazilian oil platform, the first to tap the massive and newly discovered "sugar loaf" deposit off of Brazil's coast. Platforms like this one will catapult Brazil into the ranks of the world's largest oil producers and ensure Brazilian economic growth for decades.

Citations

1. "Brazil." CIA World Factbook. CIA, 2 Apr. 2012. Web. 6 Feb. 2012.

2. International Monetary Fund. World Economic Outlook Database, September 2011. N.p.: n.p., 2011. IMF.org. Web. 6 Apr. 2012.

3. The Geopolitics of Brazil: An Emergent Power's Struggle with Geography. N.p.: STRATFOR, n.d. Print.

4.  Clemons, Benedict. The Real Plan, Poverty, and Income Distribution in Brazil. N.p.: IMF, 1997. Finance and Development. Web. 6 Apr. 2012. .

5. Pielow, Christian. "Brazil – A New Future." The Executive Search Blog. Blue Steps, 9 Nov. 2010. Web. 6 Apr. 2012.

6. "Filling Up the Future." The Economist 5 Nov. 2011: n. pag. The Economist. Web. 6 Apr. 2012. .

7.  "A Big Oil Discovery." The Economist 12 Feb. 2008: n. pag. The Economist. Web. 6 Apr. 2012. .

8. Shifter, Michael. "Argentina-Brazil Relations." World Politics Review. Trend Lines, 22 Dec. 2010. Web. 6 Apr. 2012.

9. "Brazil reiterates support for Argentina, denies any blockade to the Falklands." MercoPress 1 Feb. 2012: n. pag. MercoPress South Atlantic News Agency. Web. 6 Apr. 2012. .

10. Varas, Augusto. Brazil in South America: From Indifference to Hegemony. N.p.: FRIDE, 2008. FRIDE. Web. 7 Apr. 2012.

11. "Speak Softly and Carry a Blank Cheque." The Economist 15 July 2010: n. pag. The Economist. Web. 7 Apr. 2012.

12. Alberto Moniz Bandeira, Luiz. "Brazil as a Regional Power and Its Relations withthe United States." Latin American Perspectives 33.3 (2006): 12-27.JSTOR. Web. 7 Apr. 2012. .

13. Hakim, Peter. "Why the US and Brazil Can't Get Along – A Story of Turf, Ideology, and Interests." Foreign Affairs Latinoamerica (Mar. 2011): n.pag. Inter-American Dialogue. Web. 7 Apr. 2012.
14.  "Brazil News." The New York Times 7 Dec. 2010: n. pag. The New York Times. Web. 6 Apr. 2012.