Starting Over: Brazil Since 1985

5. Foreign Policy in a Changing World

140 5 Foreign Policy in a Changing World Brazilian foreign policy took on increasing importance as the country returned to civil leadership. Globalization had an impact economically and, subsequently, politically. During these years, four issues merit detailed discussion. The first is closer convergence of Argentina and Brazil. Never before had these neighbors pursued joint policies as actively. This tale of Mercosul (known as Mercosur in Spanish) incorporates the boldness of the initiative but also stresses its limits: trade among the Mercosul countries, adjusted for inflation, has exceeded its 1997 level only recently. Differences in domestic macroeconomic policy in these two countries help explain why. Second is regional policy. Response to U.S. efforts in behalf of a hemispheric free trade agreement occupied the Ministry of External Relations (hereafter referred to as Itamaraty) for more than a decade. A South American grouping took precedence and has continued to be favored. It is an arena in which an implicit contest with Venezuela’s Chávez has evolved. Brazil has also tried to use Mercosul to reach out to the European Union (EU), earlier as a counter to the U.S. Free Trade Agreement of the Americas and now as a competitive alternative to China’s rising dominance. A third subject is Brazil’s emergence as an important global player. Both Presidents Cardoso and Lula achieved international prominence and traveled widely. Foreign policy within the Lula years has extended to the India-Brazil-South Africa Dialogue 05-2143-7 chap5.indd 140 6/1/11 3:20 PM Foreign Policy in a Changing World   141 Forum, the BRICS grouping (Brazil, Russia, India, China, and South Africa), and even a presence in the Middle East. This extension, in turn, has created tensions in bilateral U.S.-Brazilian relations. The last issue is Brazil’s increased multilateral commitment. The country played a large role in the successful culmination of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and has been central in the subsequent, but still incomplete, Doha Round of the World Trade Organization (WTO). Brazil hosted the 1992 Earth Summit in Rio, which focused on global warming, and has had to address global scrutiny regarding its subsequent environmental policies. Permanent membership in the UN Security Council has been a longtime goal, and those efforts accelerated during the Lula period. Argentina and Brazil: The Beginning of Rapprochement The return of democracy, first in Argentina in 1983 and then in Brazil in 1985, explains the origins of a more intense bilateral relationship.1 With the end of military rule, the civil leaders, Alfonsín and Sarney, could reveal each country’s experimental efforts to utilize nuclear power. Both presidents met in November 1985 and agreed to a Joint Declaration about Nuclear Policy. Full concordance, leading to eventual acceptance of UN nuclear control, was to take five years. In the interim, both countries proceeded toward economic cooperation. Each country emerged from military rule in parallel fashion. Each experienced a run-up in external indebtedness and difficulty in paying interest due. Each suffered from limited access to foreign credit. Inflation in both had reached intolerable levels and had to be countered, not by orthodox IMF measures but by more heterodox means. That was the basis of the Austral Plan implemented in Argentina in June 1985 and the Brazilian Cruzado Plan in February 1986. That close timing was no accident. Leading economists of the countries were in close touch. Many were intrigued by the possibility of a unified response to creditors. Debtor countries might enhance their negotiating power by acting jointly. The Cartagena Consensus in 1986, out of which the Rio Group developed, was a Latin American meeting calling for debt relief. Argentina and Brazil were active and equally frustrated participants searching for a solution. In March 1986 came the Programa de Integração e Cooperação Econômica (PICE). Earlier there had been movement toward greater trade 05-2143-7 chap5.indd 141 6/1/11 3:20 PM 142   Foreign Policy in a Changing World by means of the Association of Latin American Integration (ALADI), the regional trade association affording tariff preferences for specified products . Wheat and oil had come from Argentina, and some manufactured products had entered from lower-cost Brazil. But such exchange was limited , representing small percentages of each country’s exports. The PICE spoke of a “common economic space” rather than free exchange and began with a...