American experts rule out integrating Brazil into value chains

One of the themes of the meeting between the president-elect, Luiz Inácio Lula da Silva, and the US National Security adviser, Jake Sullivan, on Monday in Brasilia, was the displacement of part of China’s industrial value chains to Brazil, to supply the American market. American experts see no chance of that happening.

The business environment in Brazil is seen by American sources heard by CNN Brasil as very unfavorable, and in addition the country is further away from the United States than other options for so-called friend-shoring and near-shoring — the installation of plants manufacturing plants in friendly or nearby countries, respectively.

An American lawyer whose office, based in Washington, has large clients that do business with Brazil, gave an example. An American company she serves sent a product, which was held up at Customs at Guarulhos Airport, because it was not perfectly identical to the description in the “manifesto”, the import document.

The retention itself would not have happened in other countries, she said, because the discrepancies were irrelevant. The company appealed and the Federal Revenue began to charge a fine, which increased over the course of the retention. Even when the company agreed to pay the fine, it could no longer withdraw the document, as it had filed an appeal. The drama lasted for two years and the fine gained a significant amount, generating losses for the company, says the lawyer.

“Companies will say: ‘Why would I want to take value chains to a complicated and distant country like Brazil, if I can do it in more inviting business environments and closer to the United States?’”, predicts the expert.

An American diplomat, who worked at the State Department in the Republican governments of George W. Bush and Donald Trump, believes that these trips should be made primarily to Latin American countries that already have free trade agreements with the United States, such as the Mexico and Colombia, for example. “There is no political environment in the United States for new free trade agreements and not even Lula’s government seems inclined to do so”, analyzes the diplomat.

She participated in the Trump administration’s decision to support Brazil’s entry into the Organization for Economic Cooperation and Development (OECD), in October 2019. According to the diplomat, it was Trump’s personal decision to comply with President Jair Bolsonaro’s request. But the measure faced strong resistance from senior officials in the trade area, who considered that Brazil is a long way from following OECD standards. Lula’s and the PT’s resistance to reforms, said the diplomat, makes this distance even greater.

In the view of these sources, the area with the most potential for cooperation between the two governments is climate change, President Joe Biden’s priority. In this field, Americans recognize that there is a way to go. At least as long as the Democrats are in power in the US.