September 2, 2009
How far can $21 million go?
In terms of Brazil’s real GDP, it is a drop in the bucket. In terms of its impact on regional relations, it is far more significant. On August 23 , Brazilian President Luiz Inácio Lula da Silva announced that Brazil would open up its market to $21 million worth of tariff-free Bolivian textiles. The amount accounts for .001 percent of Brazilian GDP according to the IMF. Not surprisingly, it was not the amount that made the announcement newsworthy. While addressing thousands of Bolivians on an official state visit there during the week of August 21, Lula declared that the sum is equal to the amount that Bolivian textile manufacturers would lose because of Washington’s refusal to renew the terms of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) that used to guarantee certain Bolivian exports, including the textiles in question, tariff-free entry to the U.S. market.
The new agreement is made for PR. Bolivian-U.S. relations have deteriorated rapidly within the past year, and the rift has led Bolivian President Evo Morales to search for allies and strategic partners to fill the gap. All throughout the region, U.S. influence is waning, and Brazil is emerging as the regional leader championing a dramatic shift in hemispheric relations. Rather than having significant economic value, importing Bolivian textiles that previously were destined for the United States is a perfect opportunity for Brazil to emphasize how the tide is changing, and perhaps more importantly, how Brazil cares about supporting industry amongst its immediate neighbors. As Brazil has increased its presence on the continent, the expansion has not always been so smooth.
It is not the first time Brazil has done something like this. This July, Brazil announced a plan to triple the current amount paid to Paraguay for energy generated at the Itaipu Hydroelectric Dam. Once again, the money was not as significant as the notion that Lula is willing to negotiate with his Paraguayan counterpart. Given the strategic relevance of the Brazil-Paraguay relationship on regional security, this is an important gesture.