FEBRUARY 6, 2009, 10:04 P.M. ET
Economy Fuels Brazil's Ambitions Beyond South America
By JOHN LYONS
SÃO PAULO, Brazil -- In the years since terrorist attacks refocused U.S. foreign policy on the Middle East, Brazil and Venezuela vied to replace the U.S. as chief broker of Latin American affairs. Today's plunging oil prices may determine a winner: Brazil.
Venezuela relies on its oil wealth to push an anti-U.S. agenda in the region through foreign-aid programs that include selling cut-rate oil to several nations and lending to Argentina and others at below-market rates. The programs are being cut back this year as oil revenue plummets and economic growth grinds to a near halt.
While Brazil's commodity-rich economy -- the world's 10th largest -- will be hit by the downturn, it is expected to fare better than most, growing slightly even as the U.S., Europe and Japan contract, economists forecast.
President da Silva, left, with Venezuela's Chávez, in January.
Unlike the checkbook diplomacy practiced by Venezuelan President Hugo Chávez, the sources of Brazil's influence are more diversified and less vulnerable to economic woes.
Brazil's diplomatic edge is a welcome development for U.S. policymakers. During the Bush years, Washington viewed Brazil as an important counterweight to Venezuelan influence, and encouraged the South American giant's increased assertiveness.
Under President Barack Obama, that bilateral relationship may develop as the U.S. seeks diplomatic alliances to tackle hemispheric issues such as energy and drug trafficking. Latin America provides the U.S. with a third of its oil -- and is the source of most of its illegal immigrants.
"Cooperation with Brazil is going to be crucial for any progress on the Hemispheric agenda," says Michael Shifter, vice president of the Inter-American Dialogue, a think tank in Washington.
Brazil, the world's biggest exporter of iron ore, beef, chicken, sugar and coffee, wants better access to the U.S. market for its goods. In return, Brazil and its charismatic President Luiz Inácio Lula da Silva could help the U.S. repair its image in the region, which declined sharply under the Bush administration.
Brazil, which recently discovered major offshore oil fields, could also become an energy ally as oil output drops in Mexico and Venezuela. Brazilian output has jumped 46% to 1.9 million barrels per day this year -- and could surge again as new discoveries are brought online.
Mismanagement and declining investment have cut Venezuelan output by 700,000 barrels a day to an estimated 2.35 million over the past decade.
President Obama has asked a proponent of U.S.-Brazil ties during the Bush years, Assistant Secretary of State for the Western Hemisphere Thomas Shannon, to remain in his post. In January, Mr. Obama telephoned Mr. da Silva, and pledged to advance trade talks. The two leaders plan to meet in Washington in March.
To be sure, Brazil is no unconditional ally. Mr. da Silva regularly visits Caracas and Brazilian firms, such as construction giant Odebrecht, do business in Venezuela. The two leaders share the belief that the U.S. shouldn't set the tone for regional affairs.
As Brazil's economic interests expand beyond its borders, the country looks to be shifting toward U.S.-friendly positions, such as promoting access to markets and regional stability. At a recent regional summit, Brazil succeeded in getting harsh anti-U.S. rhetoric stripped from the final resolution -- a clear win over Venezuela.
As recently as the 1990s, Brazil's foreign policy amounted to begging for financial assistance as it wobbled from one crisis to another. Hard-won economic stability and an export-driven expansion changed that.
Brazil's prominence in Latin America grew as the U.S. waged its war on terror. Brazilians long have held that their country's sprawling size and 180 million population warrant it international prominence. Brazil wants a United Nations Security Council seat, for example, and building regional preeminence is one way to lobby for it.
—Peter Millard in Mexico City contributed to this article.