U.S. DEPARTMENT OF STATE
INTER-AMERICAN BUREAU
NOVEMBER 22, 1994

Good afternoon, ladies and gentlemen. I have just arrived from Brazil this morning; therefore, I am particularly pleased to be here to discuss the future of US-Brazilian relations. It is always a pleasure to talk about Brazil because of the richness and variety of the country and the warmth of the Brazilian people. I have a personal fondness for Brazil since I spent six years of my life there -- I served in Bahia and Brasilia -- and my daughter-in-law is Brazilian.

I am particularly fond of a characterization of Brazil from the last century which remains valid today. In his 1869 Explorations of the Highlands of Brazil, Richard Burton commented that "Hospitality is the greatest delay in Brazilian travel. It is the old style of Colonial greeting; you may do what you like; you may stay for a month, but not for a day." And that's how I feel every time I visit Brazil.

Before we turn specifically to Brazil and the US, however, I believe it is important to consider the global and hemispheric context which frames US- Brazilian relations.

In today's world, with its sophisticated and far-reaching communications, no individual country or bilateral relationship is immune from world developments. And world affairs today, more than ever before, are characterized by rapid change. In the multi-polar, interconnected world, new ideas and influences penetrate countries and decisionmakers and influence relationships instantly, sometimes dramatically and sometimes almost imperceptibly.

The challenge for democratic leaders is to channel change in ways which maintain and reinforce our national ideals. This effort to steer change in a positive direction is reflected in our own policies and how we manage our international relationships. High level activism in support of our foreign policy objectives is the norm. President Clinton, recently returned from the Middle East and the APEC Summit in Jakarta, will soon visit Hungary and will host the Miami Summit of the Americas in December.

To celebrate the ascendance of democracy and economic reform in the Americas, President Clinton has invited the elected leaders of the Hemisphere to a Summit meeting in Miami Dec. 9-11. The Summit of the Americas will be the largest gathering of Western Hemisphere leaders in history and the first such meeting in almost three decades. It will be a testimony to the democratic revolution which has taken place in Latin America and the Caribbean. But the Summit will not be just a celebration of past events; it will also look to the future.

The Summit will represent our future commitment to strengthening democracy, respect for human rights, economic integration led by free trade, sustainable development, stewardship of the environment and good governance. It will also deal with the struggles against corruption and narcotics and measures aimed at eradicating poverty, such as ensuring equitable access to basic health services and universal access to quality primary education. And a broad range of other issues will be treated, ranging from capital markets liberalization to developing a Hemispheric information infrastructure. Emerging from these discussions will be agreement on a set of principles and a future plan of action for the Hemisphere.

In essence, the Summit will represent a pledge to work with the countries of the region to create a better future. As President Clinton has said, the Summit will be an "unique opportunity to build a community of free nations, diverse in culture and history, but bound together by a commitment to responsive and free government, vibrant civil societies, open economies and rising standards of living for all our people."

The US approach to the Hemisphere is consistent with developments in Latin America and the Caribbean. While events in the former Soviet Union and Eastern Europe caught the world's attention and imagination in recent years, another part of the world -- Latin America and the Caribbean -- was already well on the road to democracy and economic reform. Although seemingly less dramatic than throwing off Communism, these developments were equally compelling.

The people of Latin America were ahead of the times; they understood that only democratic government is sufficiently flexible, strong and supple to accommodate rapid change in policies without destroying institutions and basic freedoms. And they recognized that only open economies can produce growth and better opportunities for citizens.

The importance of democracy to the region cannot be overemphasized. It is generally recognized throughout our Hemisphere that democracy is the indispensable condition for peoples and countries to realize their personal and national potential. Democracy brings the freedoms and fundamental human rights which undergird economic, social and further political development. Only one nation in the Hemisphere -- Cuba -- continues to reject democracy. And we see the results vividly in political repression, economic deprivation and human suffering.

Not surprisingly, the strengthening of democracy in Latin America and the Caribbean has been accompanied by correspondingly dramatic economic liberalization. Brazil is a case in point which I will treat later in my presentation. But there are other examples. In Argentina, the "convertibility plan" renewed economic policy credibility through a fixed exchange rate regime that has drastically cut inflation to the current yearly rate of 3.4 percent. The plan has fostered a stable investment climate and a return to sustained growth.

El Salvador's economic reform program includes elimination of price controls, breaking up government monopolies in coffee and sugar exports, reducing tariff and non-tariff barriers and adopting a free-market exchange rate system. The government of Trinidad and Tobago has moved decisively to transform its state-controlled economy to a market-driven one. Jamaica is similarly opening its economy by proceeding with plans to reduce public sector operations by privatizing public entities.

The region as a whole has matched its democratic transformation with a dramatic shift from trade restricting import substitution to a free trade, export-driven model. This shift toward more open markets has energized the growth of trade within the region, including with the US. US exports to Latin America and the Caribbean have grown at an average annual rate of 12 percent from 1989-93 and hit $78 billion in 1993. That is more than the US exported to Japan and almost as much as our exports to all the developing countries of Asia combined.

Brazil

Now, I would like to examine briefly our relationship with Brazil in this promising global and hemispheric context.

Brazil is by key measures -- GDP, population, territory and its activism in the international arena -- the dominant country in South America. It is the world's fifth largest state with a territory larger than the continental U.S. and a population over 150 million, and the tenth largest economy with a GDP of $467 billion in 1993. To get a sense of the scale of the Brazilian economy, it is worth noting that the state of Sao Paulo's GDP is greater than Argentina's and the state of Rio de Janeiro's GDP exceeds that of Chile.

Our exports to Brazil grew at an average annual rate of 6 percent from 1989 to 1993. In the first seven months of 1994 our exports grew at an even faster pace with an increase of 22 percent over the same period in 1993. Brazil is the host to over $16 billion in US foreign investment, more than any other country in Latin American and the Caribbean.

The US and Brazil share many attributes. We are countries of immigrants from many different lands yet we are at peace with our neighbors. We have diverse cultures and history but are bound together by a commitment to freedom and improving the lives of our citizens. We share the desire to invigorate our societies and increase opportunity for all. We are proud of our sovereignty and national identity but are open to the world.

The US and Brazil: A Strong Working Relationship

One often hears about the disagreements which characterize US relations with Brazil rather than our extensive cooperation. This perspective may stem from the propensity of analysts to focus on the negative. I have spent a good portion of my career working in US-Brazil relations. Although there is an ebb and flow, relations have always been good and now we are in an especially constructive period.

I think it is crucial to keep in mind that the US and Brazil share a basic approach to the world and world problems. In the first instance, we have a common political system -- democracy -- and both nations subscribe to the fundamental structures of the international system. We are both members of the UN, the GATT, the OAS, the IMF and the other fundamental international institutions. We both believe in security and stability for nations and that governments should foster prosperity for their peoples. To those ends we work together in multilateral forums to resolve disputes peacefully and to build confidence among states.

When our two nations disagree, it is usually over emphasis rather than the fundamental approach to an issue; it is a tactical difference rather than strategic disagreement. The debates reflect competition within the broad system to which we both subscribe and are about means rather than ends. They are not disputes which threaten the relationship.

Because we increasingly recognize the commonality of our objectives, US- Brazilian relations are characterized by a strong working relationship.

Let me here pay a special tribute to President Itamar Franco. As Vice President Gore told him during our March visit to Brasilia, the US greatly appreciates President Franco's steadfast and successful effort to strengthen Brazilian democracy during a particularly difficult period. In addition, he has maintained the conditions for economic reform and injected a new sense of national confidence and pride in Brazil. Under President Franco's leadership, Brazil has pursued a policy of active international cooperation, including with the US. President Franco's success has been amply demonstrated by the victory in the Oct. 3 presidential election of one of his ministers, Fernando Henrique Cardoso.

Our shared commitment to democracy and free market economics has enabled the US and Brazil to work together constructively on a broad range of issues. At the UN we have both sought the best path for the restoration of democracy in Haiti and solutions to the problems in Mozambique and Angola. In the Uruguay Round GATT negotiations, we negotiated together to create a more open trading system.

Through multilateral institutions like the World Bank, the US and Brazil are cooperating on implementation of key environmental projects like the Program to Conserve the Brazilian Rain Forest. Other areas of cooperation include climate research, development of satellite imagery to monitor deforestation, projects on forest fire prevention and management, training courses on hazardous wastes, pesticides and toxic substances and workshops on carbon emissions.

We have also worked closely with the Franco government on nuclear non- proliferation issues, including in connection with Brazil's adoption of International Atomic Energy Agency (IAEA) full scope nuclear safeguards and Brazil's quadripartite agreement with the IAEA and Argentina on inspection and control of nuclear facilities. We were very pleased that Brazil waived into force the Treaty of Tlatelolco, which bans nuclear weapons in the Western Hemisphere -- a major accomplishment.

In another significant contribution to global security, Brazil has expressed interest in joining the Missile Technology Control Regime (MTCR) and has agreed to abide by MTCR guidelines. We continue to cooperate with Brazil in this important effort.

Economic and Trade Cooperation

Our two countries have also cooperated closely on a broad range of economic and trade issues.

Since 1990, Brazil has opened its markets substantially by sharply lowering its tariffs and eliminating quotas on imports. These measures have spurred substantial growth in our bilateral trade -- in the first half of 1994 our exports to Brazil rose 22 percent and Brazilian exports to the US jumped 20 percent.

The US government has actively and consistently supported Brazil's efforts to normalize its relations with the international financial community. Most recently, to ensure the viability of Brazil's April, 1994 "Brady-like" debt deal with foreign commercial banks, the US took the unusual step of filing an amicus brief in New York District Court, noting that the arrangement was consistent with US interests in stabilizing international financial markets.

We have worked with Brazil on trade issues such as lowering tariffs, eliminating import quotas and ending the market reserve in informatics. Together we negotiated and resolved our differences on intellectual property protection and look forward to the approval of implementing legislation by the Brazilian congress. These accomplishments show how we can work together to achieve our common goals.

As the US pursued economic integration through NAFTA, Brazil worked with its Southern Cone neighbors to form the Southern Common Market (Mercosul). Even though NAFTA and Mercosul are different in many respects, both are dedicated to expanding free trade. We look forward to working with Brazil to bring our respective trade initiatives closer together.

Cooperation in Other Areas

In addition to our cooperation on political and economic issues, we have made significant progress in other fields.

We are energetically implementing our bilateral science and technology agreement and are cooperating in a number of areas, including environmental protection, medical research and space cooperation.

We are working closely with Brazil on environmental cooperation. Some examples include USAID's Global Climate Change Program which works with Brazil to reduce global emission of greenhouse gases by reducing deforestation in Brazil's Amazonian states. The US Forest Service has initiated cooperative programs with key Brazilian institutions to monitor deforestation and biodiversity, including one with the Brazilian Institute for the Environment and Renewable Natural Resources on fire prevention and management.

The US and Brazil have a long history of cooperation on medical research as well. A US Army Medical Research Unit works with Brazilian counterparts to minimize global medical threats through basic and applied research on diseases endemic to South America. Special emphasis is directed to malaria, hepatitis, leishmaniasis and dengue and other arboviral diseases.

On Space cooperation, NASA recently completed a sounding rocket campaign from Brazil's Alcantara launch facilities as part of an international scientific experiment to measure the earth's magnetic equator. The US looks forward to future cooperation with Brazil in the exciting field of space science.

On the anti-narcotics front, President Franco declared 1993 as the "year to fight narcotics." Brazilian authorities have created a new anti-drug secretariat, a new permanent congressional committee on narcotics and approved construction of the Amazon Surveillance radar system (SIVAM) -- all of which contribute to our bilateral cooperation on this crucial issue. Incidentally, we are pleased that the Raytheon Corporation -- from my home state of Massachusetts -- won the contract to construct SIVAM -- the largest commercial contract for a US firm in Brazil in many years.

In sum, the US and Brazil have strengthened cooperation across the board by successfully addressing issues in many areas of mutual interest.

Continued Close Cooperation

We have very good reason, then, to be optimistic about our future relations with Brazil. In this regard, we believe it is useful to look at our bilateral relations today as part of a historical continuum and by the broad positive trends at work in the Western Hemisphere and the world.

We will build on the progress we have achieved over the past few years. The Summit of the Americas will give a major boost to our work.

So, we anticipate a healthy, dynamic relationship in which we maximize our areas of agreement.

President-elect Cardoso has already made clear that the first few months of his presidency will focus on securing Brazil's economic future. If Dr. Cardoso can keep inflation low and his program on track, Brazil should enjoy continued growth and should attract long term investment.

On the trade side, Brazil has pledged to strengthen patent, trade secret and trademark protection. Legislation now before Brazil's Congress will represent an important step forward in this regard. These measures and adequate enforcement of international conventions and Brazil's copyright law will provide new momentum in our trade relationship.

I cannot end my remarks without talking about some areas in which we are seeking further cooperation. For instance, we would like to see Brazil continue its market opening strategy by reducing investment restrictions in communications, mining, petroleum, health care services, construction, and financial services. Brazil could also reduce limits on the entry of new foreign banks and cut restrictions on established foreign-owned banks, such as prohibitions on increasing capital and adding branches.

A concern for the US is new "Buy Brazil" legislation stipulating very stringent price, technical, and local content requirements. This would deny huge sales opportunities to US telecommunications equipment, computer, and digital electronics firms that do not produce in Brazil. Although Brazil claims its restrictions "mirror" Buy America provisions, they cover a far larger share of Brazil's telecom market and create far more distortions. This is one area which will require our careful attention.

Conclusion

I hope it is clear from these remarks that the US and Brazil have -- and will continue to have in the future -- a full, rich relationship marked by cooperation and mutual respect.

And we are fundamentally optimistic about the direction of that relationship.

I can say this with confidence because Brazil and the US share similar views of where the world and the Hemisphere are headed. Those common perceptions will lead to converging objectives.

It is, in my view, particularly important that we achieve this result in international trade. Our joint interest -- as the two largest economies in the region -- in fostering a freer, more open international trading system, will result in greater prosperity for both nations. The Summit of the Americas offers us a truly historic opportunity to launch this process vigorously. We must not miss it.

Together the US and Brazil can contribute dynamic leadership to help secure a more democratic, prosperous and secure world for our citizens.

Thank you very much.

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