One path leads to a prompt US investigation that satisfies Brasilía and paves the way for a rescheduled presidential summit and subsequently boosted trade ties. But the other path leads to a steady deterioration in relations that could derail pending business deals here for US companies including Boeing and Chevron.
The uncertainty has some wondering if Brazil will now go the way of some of its neighbors, taking on a cooler tone with the US, long accused of treating Latin America like its backyard. The defense ministers of Brazil and Argentina have already met and pledged to increase their cyber security capabilities against such “forms of attack” from the US.
“Before this happened, the whole idea was that Rousseff’s trip would launch bilateral relationships to a new level,” says Joao Augusto de Castro Neves, a Latin America analyst at Eurasia Group in Washington. “Now, the question is whether we see a further deterioration of relations. The goals and expectations have changed.”
The row erupted in June when Brazil’s Globo TV began publishing a series of reports based on leaked information from former US National Security Agency contractor Edward Snowden, who has been granted temporary asylum in Russia. Globo’s reports continued this month with evidence of NSA slides that appeared to show direct spying on Rousseff’s communications, hacking into the computer network of state oil company Petrobras, and the interception of billions of e-mails and phone calls made by people across the country.
Rousseff’s office said yesterday that the US has not provided a full explanation of its surveillance program, nor has it promised to cease spying, which means, “conditions aren't in place” for the visit.
Points for 'snubbing the Yankees?'
In fast calculations for the expected fallout, analysts are dividing between political and economic reverberations.
Politically, Rousseff scored points at home. “You’ve never heard of a Latin American leader losing political points for snubbing the Yankees,” Fabio Zanini, the world editor for Folha de Sao Paulo, wrote in an op-ed yesterday. Matias Spektor, a professor of international relations at Fundação Getulio Vargas in Rio de Janeiro, wrote that the political opposition would have used Rousseff’s photos with Obama “like a bazooka” ahead of next year’s presidential election.
Rousseff could use the jolt, as her personal popularity ratings hit a low of 49.3 percent in July following massive nationwide demonstrations against government corruption and poor public services. Her numbers have recovered to 58 percent, although are still down from the high 70s earlier this year.
But while Rousseff’s decision is being cast as a stand against the US, she also lost a valuable chance to boost valuable trade ties with the US, says Roberto Izurieta, head of the Latin America Department at The George Washington University's Graduate School of Political Management.
“The cancellation of this visit is a lost opportunity,” he says. “The White House has many other pressing issues to resolve; unfortunately, despite the importance of Brazil and the whole of Latin America, it is not the top agenda of the US government.”
Business and trade
Some expect relations to normalize in the medium-term, without any major repercussions. “The economic interests of both sides are above the ‘crisis’ in progress,” says André César, a political analyst at Prospective Strategic Consultancy in Brasilía.
If not, Brazil’s economy may have more to lose than the US, Mr. Izurieta says, citing weak growth indicators in both Brazil and its trade partners Europe and China. “Given Brazil's waning economy, and the US's growing economy, Brazil has more to gain if this impasse is overcome as soon as possible,” Izurieta says.
Specific US-Brazil deals that could be impacted include Boeing and Chevron, according to Eurasia Group’s Mr. Castro Neves. The US oil giant is expected to bid for concessions in Brazil’s Libra prospect next month, considered one of the largest offshore oil fields ever discovered, although Chevron’s involvement there could cause now “a political firestorm,” says Castro Neves.
“How will the government respond if an American company wins the bid round?” says Castro Neves, predicting potential allegations that Chevron benefited from alleged US spying of Petrobras. “There are definitely going to be a lot of political sensitivities if an American company wins. It will call into question whether the American company had privileged information.”
Boeing also appeared, until recently, the favorite to win a $4 billion contract to sell 36 F-18 fighter jets to the Brazilian Air Force, although Brazilian officials have now said the country cannot buy such strategic aircraft from a country it cannot trust. “Even if Brazil had made a decision to buy from Boeing, they weren’t going to announce it now,” says Castro Neves. “The best scenario is that they postpone this.”
Brazilian business may also be hurt, according to Marques Moses, a professor of international relations at the School of Sociology and Politics in São Paulo. He told local newspaper O Estado that strained relations would impact everything from soy to citrus exports to the US, which is Brazil’s largest trade partner after China.
More to come?
Rousseff’s visit to Washington is still expected to happen, eventually. The careful timing and phrasing of yesterday’s press releases – and use of the word “postponed” instead of “canceled” – are reason to believe both leaders seek to contain the fallout and will reschedule the visit in coming months, analysts agree. Rousseff’s office said in its press release that once the allegations are settled the state visit “will take place as soon as possible.” The White House said Obama still welcomed Rousseff “at a date to be mutually agreed.”
Castro Neves also sees relations mending relatively quickly – unless Globo TV has more to reveal from Snowden about the US spying program.
“In the near-term we’ll see heightened tensions but I don’t see relations derailing altogether, barring new information surfacing,” he says.