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Brazzil
Official Word
May 2003

Brazil on Track, Says Snow

"It will take patience. Good policies don't produce instantaneous
results. But I have nothing but praise for for President Lula
and Minister Palocci and Central Bank President Meirelles. I think
they are all to be commended for the straightforward and intelligent
approach they are taking to the big economic policy issues."

The administration of Brazilian President Luiz Inácio Lula da Silva has adopted "sound economic policies" that in due course "will pay very significant dividends for the country," says U.S. Secretary of the Treasury John Snow.

Addressing reporters at a press conference in Brasília on April 23 after discussions with Brazil's President and other senior officials, Snow hailed "the straightforward and intelligent approach" that the Brazilian government is pursuing on "the big economic policy issues." Although he cautioned that patience is required because "good policies don't produce instantaneous results," Snow reiterated his belief that the Lula Administration "is right on track" with a careful agenda for spurring economic growth in Brazil.

"You know, the best evidence that the [Lula] Administration is on the right course is the reaction" by financial markets to Brazil's policies, he said. "It is really remarkable: the fall in the interest rates on foreign debt, external debt, country debt. The reduction in the country risk premium is a commentary on these policies, a commentary on the markets' view that these policies are the right policies and are making sense."

Snow indicated that his meetings with Brazil's leaders covered a wide range of trade issues, including the ongoing negotiations toward establishing a Free Trade Area of the Americas (FTAA). Brazil and the United States are currently co-chairing those negotiations, and Snow said that U.S. trade experts will negotiate "with a seriousness of purpose and with a deep commitment to finding ways to create win-win situations for Brazil and the United States."

He observed that the Brazilian president, as a former union leader, "is an authority on the process of negotiations" who understands that at the end of that process, both sides should benefit because "good negotiations lead to mutual gain." The treasury secretary told reporters that he is "confident" that Brazil and the United States are entering FTAA negotiations "in the same spirit," and that the result will be "a major win-win situation" for the economies and the peoples of both countries.

Fielding a question about Brazil's potential role in the reconstruction of post-war Iraq, Snow said that he had spoken with President Lula and Brazil's Minister of Finance Antonio Palocci about preliminary assessments of post-war needs now being conducted by the World Bank and the International Monetary Fund.

"I was pleased to note ... that several Brazilians apparently have been recruited by President [James] Wolfensohn of the World Bank to serve on the task force that is going over to Baghdad, or may be in Baghdad now," the secretary said. Rebuilding Iraq will require "the efforts of many from around the world," he added, "and as the assessments are done and with better identification of what the needs are, there will be a process to reach out to get the best suppliers in the world to fill those needs. And it wouldn't surprise me at all if Brazil doesn't in some instances offer the very best response."

Returning to the theme of FTAA negotiations, Snow recalled that President Lula had stressed the necessity of each country recognizing the interests of the other. "Good negotiators realize you don't come away with everything you seek, but good negotiators also recognize what is important to the other party and seek to reach agreements that advance their [own] interest while accommodating the interest of the other party," Snow said. "I had the clear sense that the [Brazilian] president was approaching this with a real commitment to understand the U.S. position, just as we are going to try and understand the Brazilian position."

Snow concluded his remarks by confirming that U.S. negotiators hope that the FTAA can be launched "as soon as possible," but certainly "by the deadline of January 2005."

SECRETARY SNOW: Good afternoon. The Ambassador and I have just left a good meeting with the President, where we reviewed a number of issues and talked about trade, the importance of trade, the free-trade round of the Americas that is underway now, WTO trade issues, the desirability of opening up agricultural markets generally, and the potential for more trade between the United States and Brazil, and between the hemisphere, and North America and Latin America.

We were joined by Minister Palocci, someone I have gotten to know well and [for whom I] have a great deal of respect. In the course of our conversation, I was able to commend the President and the Minister for the sound economic policies that are being put in place. I commended the President and the Minister for the approaches they are taking to a number of important economic policy issues—the debt issue, the question of the pensions, and so on—and offered my thoughts that staying on this course will pay very significant dividends for the country, and for the citizens of the country, in the years ahead.

Madam Ambassador, anything I missed that we should cover? Okay, good. Well, with that, we will look forward to responding to your questions.

QUESTION (Leonardo Souza—Folha de S. Paulo): I would like to ask a question about the FTAA negotiations, more specifically about the possibility of reviewing the trade barriers to agricultural product by the United States. When you talked about this issue yesterday, did you mean that the U.S. Government is willing to negotiate agricultural trade barriers within FTAA? For instance, renegotiate subsidies to domestic farm products?

SECRETARY SNOW: The issue of the subsidies is really more appropriately a matter before the WTO. The Free Trade Agreement of the Americas is focused primarily on tariff barriers, and what I said is that we are prepared to put everything on the table in the Free Trade Agreement of the Americas.

We will approach those negotiations with a seriousness of purpose and with a deep commitment to finding ways to create win-win situations for Brazil and the United States. Brazil has good, strong, effective negotiators and we think the United States does as well. Good negotiators find ways to reach agreements that are mutually advantageous, and the President was very clear on that subject in our discussions: that Brazil would be well represented, that Brazil had serious interests, and that the negotiators—the Brazilian negotiators—would be pursuing those interests. And [he] acknowledged the same for the United States: that we would have intelligent and effective negotiators [who] would understand our interests and would negotiate those interests.

But the end result of that process—and, of course, the President is an authority on the process of negotiations, having spent years in the negotiating world—[he] understood that in the end of any good negotiations, both sides benefit: that good negotiations lead to mutual gain, lead to a win-win situation. I responded that I am confident that we are entering these negotiations in that same spirit and that the result will be a major win-win situation for the economies and the peoples of Brazil and economies and the peoples of the United States.

QUESTION (Lu Aiko—O Estado de S, Paulo): I would like to know about the political issues discussed during the meeting. The way reforms are evolving in Brazil, is that a matter of concern to you? Did you talk about them? What were your impressions about them?

SECRETARY SNOW: It seems to me that these reforms—the pension reforms, the tax reforms—are awfully important to the future of Brazil. The President, Minister Palocci, the Social Security Minister, and others have made these priorities. And, as I discussed these reforms with the President, I was encouraged by his view that the administration would be successful in getting them ultimately adopted. I was also encouraged by discussions I had yesterday with a number of members of the House of Deputies and the Senate, arranged by the Ambassador, where we had a good round-table discussion on the political outlook for those reforms. And, without betraying any confidences from those discussions, I can say I left very encouraged that those reforms were receiving a broad-based support in the legislative body.

So, I guess my reaction is very positive: that the President and the administration have put on the table critically important reforms. Reforms that will help deal with the issue of the fiscal deficit, reforms that will help lower interest rates over time, that will help strengthen the economy and the private sector and capital formation. And, as all those things happen, the Brazilian economy will grow faster, there will be more jobs and there will be more prosperity. So, I commended the President and the administration for taking on those difficult political issues. It takes real courage and foresight to take on big far-reaching political issues like the pension question and the tax question, and the other ones—the labor laws, the bankruptcy issues, and so on—that are part of the administration's program.

QUESTION (Hugo Studart—Dinheiro): Mr. Snow, you have been talking since yesterday about how positively impressed you were by the way the Brazilian Government is conducting its policies. I would like to know, first, what have you seen that you've disliked? That is, did you detect any weak or wrong spot? And, second, I wish to ask if you talked about the Iraq's reconstruction with President Lula or will talk about it with Minister Amorim in Quito? What is the U.S. proposal to Brazil with reference to that?

SECRETARY SNOW: In terms of the first question, my counsel is to stay the course. I think the Administration has identified well the economic policies that will help the economy grow and prosper. I offered the view that it will take patience; that good policies don't produce instantaneous results. But I have nothing but praise for the Administration, for President Lula and Minister Palocci and Central Bank President Meirelles. I think they are all to be commended for the straightforward and intelligent approach they are taking to the big economic policy issues.

A Central Bank that operates as an independent body, responding to inflation targets outside of political pressure—that is a real advance. A government that is focusing on the fiscal drag of pensions—that is an important political advance: a recognition of the need to deal with a very important structural factor in the country's fiscal deficit. The need to focus on lower interest rates and more capital formation, a tax system that is simpler and creates fewer burdens on the citizenry and businesses: in all of those areas, it seems to me the Administration is right on track with what needs to be done and I have nothing but praise for them.

You know, the best evidence that the Administration is on the right course is the reaction that the financial markets have given to the policies. It is really remarkable: the fall in the interest rates on foreign debt, external debt, country debt. The reduction in the country risk premium is a commentary on these policies, a commentary on the markets' view that these policies are the right policies and are making sense.

Turning to the issue of Iraq: that came up in the course of our discussions and what we said on that subject—and we initiated it—was that clearly Brazil had a different view on that conflict, we acknowledged that, but also said that we have now moved on. The conflict phase of involvement with Iraq is over. The building and rebuilding—reconstruction phase—is where we are today. So, we have turned the page, we have moved on to the new issues.

There I was pleased to engage the President, in the discussion with Minister Palocci, on the role of the international institutions—the World Bank and the IMF—that are now doing their preliminary assessments. I was pleased to note, as well, that several Brazilians apparently have been recruited by President Wolfenson of the World Bank to serve on the task force that is going over to Baghdad, or may be in Baghdad now.

I made clear that our focus now is on rebuilding, and that rebuilding will take the efforts of many from around the world, and as the assessments are done and with better identification of what the needs are, there will be a process to reach out to get the best suppliers in the world to fill those needs. And it wouldn't surprise me at all if Brazil doesn't in some instances offer the very best response.

QUESTION (Glenn Somerville—Reuters): Just wanted one quick question: going back briefly to your discussions on FTAA, you apparently put great emphasis on U.S. willingness to be open for negotiation on all points. I was wondering if you could describe what was the reaction you heard on the other side and also could you say whether your timetable for completing that remains on track?

SECRETARY SNOW: Well, yes, I think—and I don't recall who initiated the discussion at this point, but my comments were met by the President—actually, I think the President initiated the discussion about recognizing each other's interest, and good negotiators realize you don't come away with everything you seek, but good negotiators also recognize what is important to the other party and seek to reach agreements that advance their interest while accommodating the interest of the other party.

I had the clear sense that the President was approaching this with a real commitment to find common ground, with a real commitment to understand the U.S. position, just as we are going to try and understand the Brazilian position, and a commitment to find those win-win outcomes that we talked about. Timetable: certainly we want to get this done as soon as possible, but by the deadline of January 2005.

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