Brazil’s honeymoon with the US is over too soon

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After a year of seeking a stronger rapprochement with the US, Brazil continues to be the target of President Donald Trump’s few friends’ policy, raising questions about the real advantages of this partnership.

On Monday, US President Donald Trump announced the restoration of tariffs on steel and aluminum imported from Brazil and Argentina, countries that he said would be devaluing their currencies against the dollar and thus disrupting US producers in the international market, especially in the agricultural sector.

The move announced by the White House was the latest in a series of negative actions taken by Washington against Brazil in recent months that countered the trend that many had envisioned for bilateral ties when current Brazilian President Jair Bolsonaro took power, promising a virtually automatic alliance with the US.

Even before being elected, Bolsonaro always showed great admiration for Trump. And the alleged friendship initiated by him this year had been presented as a source of assurance of numerous benefits to be obtained by Brazil in this relationship with the United States, which, so far, has not occurred.

In addition to taxing Brazilian products, the US government has recently frustrated Brazilian expectations by not effectively fulfilling its promise to support Brazil’s entry into the Organization for Economic Co-operation and Development (OECD) and by maintaining its veto on its entry.

According to economist Livio Ribeiro, a researcher at the Brazilian Institute of Economics of the Getúlio Vargas Foundation (IBRE / FGV), Trump’s decision regarding Brazil and Argentina is based on a wrong assumption about the depreciation of the currencies of these two countries, that it occurred artificially, intentionally, which does not reflect reality.

In Argentina, he explains, the devaluation of the peso took place in a pre-election context of concern over a possible shift in the country’s economic policy with the return of the left to power.

“Certainly, depreciation in the Argentine case is associated with a prospect of economic policy change, which is quite different from saying that the Argentine government induced the weakening of the currency,” the expert said in an interview.

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In the Brazilian case, the devaluation of the real would be mainly linked to global factors, such as the strengthening of the dollar in the world and the movement of US long interest rates.

“So, in fact, in both countries, and even more clearly in the Brazilian case, the depreciation that has occurred cannot be qualified as a competitive depreciation. And so President Trump’s claim is fundamentally mistaken.”

According to Ribeiro, the announcement made by the American head of state on Monday took the Brazilian market by surprise, mainly because of the justification presented for this taxation, which brings even “some discomfort.”

“To the extent that President Trump suggests fact-based tariffs… or at least an unreasonable reading of the facts, how does that open the possibility for new, unjustifiable or unfounded events ahead?” questions the researcher.

For Juliana Inhasz, economist and professor at the Institute for Education and Research (Insper), the decision announced today by Donald Trump did not come as a big surprise to him because the American leader was already giving contradictory signals regarding Latin America and Brazil. to Brazil. The weirdness, she says, is that this “honeymoon” ended “too early.”

“I think we somehow knew that this honeymoon, in quotes, that Brazil lived with the American economy, would eventually end,” she said, also ruling out the possibility that Brazilian government tried to influence the devaluation of the real.

The Insper expert believes that given the current US political moment, where, in the midst of an impeachment process, Trump prepares for a new election dispute, his announcement this morning could very well set up a signal to the public. to its constituents.

“This has a clear bias, a clear sign, that he means to his constituents and eventually to those he is still trying to bring to his side that there is a policy of protecting the local economy, producers, try to make the United States continue to play the leading role in the world economy it has always had,” explains Inhasz.

from https://www.fort-russ.com/2019/12/brazils-honeymoon-with-the-us-is-over-too-soon/

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