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From an Alliance for Progress to a Partnership for Prosperity

President Obama’s Latin America Trip Paves the Way for an Updated Economic Partnership with Brazil at the Center

SOURCE: AP/Pablo Martinez Monsivais

People walk by a Banco do Brasil bank in Rio de Janeiro, Friday, January 9, 2009. Brazil has a booming economy with 193 million of the world’s consumers, and a per capita income expected to grow at 6 percent a year, making Brazil a very attractive market for U.S. products and services.

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It is now 50 years since the United States forged its “Alliance for Progress” with its South American neighbors. Half a century later, these neighbors have grown in importance. They are the new engines of global economic growth and critical actors on the global political stage. President Barack Obama’s first trip to the region is the perfect opportunity to update our alliance to a “Partnership for Prosperity” in which the United States and its South American neighbors commit to forging a mutually beneficial economic relationship in this transformed global economic landscape.

Brazil, with its large and dynamic economy, is likely to play a central role in this new partnership as the contours of 21st century economy are drawn. It is now clear that the United States will need Brazil as much as Brazil will need the United States.

The United States and Brazil share many characteristics that make the two well-suited allies in international fora such as the Group of 20. The two countries are the biggest democracies in the Western Hemisphere, with robust federal systems and private-sector-led models of economic growth. Both are looking to expand their exports as a way to stem high levels of unemployment, and both will benefit from pressing China to ease excessive restrictions in its capital markets and strengthen the undervalued yuan.

Emerging markets such as Brazil are seeing a massive influx of capital as advanced economies struggle with sluggish growth and uncertainty. This fuels volatility that is coupled with high demand for Brazil’s commodities and is driving the up the value of the Brazilian real. The real has gained by 45.8 percent against the U.S. dollar over the last two years. China is a major purchaser of Brazil’s commodities, and its excessive use of controls plays a role in driving capital to other emerging countries, including Brazil.

Brazil, like the United States, is also feeling the pinch of China’s exchange rate policy. For decades, China has pegged its currency to the U.S. dollar to manage its stability and depress its international value. This makes Chinese exports cheaper and prices other countries such as Brazil out of export markets.

The common interest in pressing China to ease excessive restrictions in its markets and strengthen the undervalued yuan form the basis of a strong alliance between Brazil and the United States within the Group of 20. Any publicly issued statement reaffirming the U.S. and Brazilian commitment to rebalancing global imbalances is code for pointed private conversations about these common concerns.

But beyond these shared concerns, Brazil also has a booming economy with 193 million of the world’s consumers, and a per capita income expected to grow at 6 percent a year. All of these factors make Brazil a very attractive market for U.S. products and services—particularly at a time when the United States is looking to bolster exports and promote the creation of good jobs. Brazil is one more example of a country where rising living standards are helping fuel consumer demand to the benefit of producers in developed countries such as the United States, as well as those in Brazil itself.

Trade is already booming between the United States and Brazil. Two-way trade between the two countries doubled in the past decade. U.S. goods exports to Brazil nearly tripled, growing from $12.4 billion in 2002 to $35.4 billion in 2010. And American goods exports to Brazil were up 35 percent in 2010 from 2009. Nearly 15 percent of all goods exported to Brazil are from the United States, making it the biggest recipient of U.S. exports.

Some in Congress are hesitant to embrace greater trade and efforts to improve working conditions abroad as a driver of broad-based economic growth at home. But President Obama can use this trip to help illustrate how a new Partnership for Prosperity based on a shared agenda for the creation of just jobs with workers’ rights and economic mobility can be of benefit to all.

Sabina Dewan is Associate Director of International Economic Policy and Matt Browne is a Senior Fellow at American Progress.

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