The U.S.-Brazil Energy Partnership

BolsteringSecurity, Growth, and

Job Creation

Bolstering Security, Growth, and Job Creation | 1

An Energy PartnershipOn March 19, 2011, President Barack Obama and Brazilian President Dilma Rousseff launched a U.S.-Brazil Strategic Energy Dialogue (SED), one of four presidential-level mechanisms between both countries to deepen their political and economic relations. The SED is the only dialogue labeled “strategic,” reflecting U.S. and Brazilian policymakers’ vision of a bold bilateral partnership with positive implications for energy security, economic growth, and job creation.

The SED, co-chaired by the U.S. Department of Energy (DOE) and the Brazilian Ministry of Mines and Energy (MME), includes other government agencies in both countries. Its first meeting took place on August 17, 2011, in Brasília, Brazil, at the deputy secretary level.

The SED is a result of a decade-old effort to institutionalize the energy partnership between the United States and Brazil. In fact, it incorporates a two-track approach to bilateral cooperation. In 2003, the DOE and the MME established an all-encompassing mechanism, including oil and gas, coal, nuclear, renewables, efficiency, and R&D. In 2007, a second, separate biofuels-only track was established under the leadership of the U.S. Department of State and the Brazilian Ministry of External Relations (MRE). The SED allows for more synergies between both tracks and greater priority for energy-related issues by both governments.

Major U.S.-Brazil Energy-Related Agreements1995 U.S.-Brazil Common Agenda on Environment

1997 Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy

1997 Implementing Agreement for Cooperation in the Area of Energy Technology

2003 MOU for the Establishment of a Mechanism for Consultations on Energy Cooperation

2007 MOU to Advance Cooperation on Biofuels

2010 MOU on Cooperation Regarding Climate Change

2010 U.S.-Brazil Binational Energy Working Group Joint Action Plan

2011 Partnership for the Development of Aviation Biofuels

2012 U.S.-Brazil Commercial Dialogue Energy Work Plan

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Energy Partnership ScopeCooperation between the United States and Brazil on energy and energy-related issues has traditionally focused on information exchange, technical assistance, and capacity building. Much of this activity has been through regular workshops between both countries’ government officials and private sector representatives. However, as the energy sector moves to the forefront of public policy in both countries because of its powerful growth and job-creating potential, additional dimensions have been incorporated into the bilateral energy agenda.

These new dimensions include trilateral cooperation in Central America, the Caribbean, and Africa; multilateral cooperation on standards development and clean energy promotion; joint research and development; diplomatic coordination in multilateral fora; regulatory cooperation; and trade and investment promotion. Public policy reform and harmonization, as well as business development, are additional areas in which to further this partnership.

U.S.-Brazil Workshops on Energy-Related AreasAugust 2011 Industrial Energy Efficiency

August 2011 Civil Nuclear Energy

October 2011 Deepwater Oil and Gas Development

November 2011 Building Energy Efficiency

December 2011 Commercial Aviation Alternative Fuels

February 2012 Dispersant and Disaster Response

April 2012 Subsea Well Containment and Contingency Planning

May 2012 Unconventional Gas

August 2012 Distributed Wind Energy Market Opportunity

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Bilateral Energy TradeU.S. energy production is largely focused on nonrenewable sources, with coal, natural gas, oil, and nuclear energy representing more than 90% of the total energy produced in the United States. In Brazil, oil represents the largest share of energy production in the country, followed closely by biomass and hydropower. In addition, Brazilian power generation is dominated by hydropower, representing more than 80% of all electricity in Brazil. These complementarities, as well as both governments’ goals toward a clean energy economy, are reflected in bilateral energy trade.

In 2001, bilateral energy trade between the United States and Brazil was $1.4 billion. In 2011, it reached more than $13 billion. While total trade between both countries increased during this period and has already surpassed the pre-2008 and 2009 crisis level, trade in energy products increased at a greater rate than bilateral trade as a whole.

In 2001, energy products represented only 7% of Brazilian exports to the United States and less than 4% of U.S. exports to Brazil. In 2011, 25% of all Brazilian exports to the United States and 21% of all U.S. exports to Brazil were energy products.

Brazil’s top energy products exports to the United States in 2011 included oil ($5.8 billion) and ethanol ($567 million). The United States’ top energy products exports to Brazil in 2011 included oil and oil products, diesel in particular ($4.5 billion); coal ($1.9 billion); and ethanol ($791 million).

While these are impressive amounts, they reflect trade in energy products, not in all energy-related goods, such as machinery and equipment. In addition, there is untapped potential in trade of other energy products, such as liquefied natural gas (LNG) and uranium.

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Council Policy Achievements

Council ActivitiesThe Brazil-U.S. Business Council (BUSBC) has been actively engaged in energy and energy-related activities to deepen the commercial pillar of the U.S.-Brazil partnership, with an emphasis on trade and investment promotion. Below are some of these activities:

• ImplementationoftheExportGreentradeandpolicypromotionprogram.

• Organizationofahigh-levelenergypanelattheU.S.-BrazilBusinessSummitonthe occasion of President Barack Obama’s official visit to Brazil in March 2011.

• SupportoftheSEDlaunchinginAugust2011withenergy-relatedprivatesectorevents in São Paulo, Brazil, and a private sector roundtable briefing with the DOE in Washington, D.C.

• Launchofapolicy-orientedOil&GasWorkingGroupinOctober2011.

• Organizationofahigh-levelenergypanelattheBrazil-U.S.:Partnershipforthe21st Century conference on the occasion of President Dilma Rousseff ’s official visit to the United States in April 2012.

The BUSBC has advocated for increased energy and energy-related trade and investment between both countries, including through removing tariffs, nontariff measures, and regulatory barriers. The Council has advocated for the following recent policy accomplishments:

• EliminationoftheU.S.$0.45per-gallon“blender’staxcredit”subsidyandthe$0.54 per-gallon import tariff on foreign ethanol.

• Suspensionofthe20%Brazilianimporttariffonforeignethanolupto December 2015.

• CreationofanEnergyWorkPlanintheU.S.-BrazilCommercialDialoguetoenable private sector participation in the SED.

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Council RecommendationsTo deepen the commercial pillar of the energy partnership between the United States and Brazil, the BUSBC offers these recommendations:

• SupportanSED“whole-of-government”approachtoenergycooperationinvolving all key agencies of both countries.

• EnsureformalandactiveparticipationoftheU.S.andBrazilianprivatesectorsintheSED, including through the U.S.-Brazil Commercial Dialogue Energy Work Plan.

• Increaseenergyandenergy-relatedtradeandinvestmentpromotionactivities.

• SigntheU.S.-BrazilJointDeclarationConcerningIndustrialandCommercialCooperation in the Nuclear Energy Sector.

• EstablishaU.S.-Brazilworkplantocreateaglobalbiofuelsmarketdetailingjoint efforts at the bilateral, trilateral, regional, and multilateral levels, including joint action at the G-20, the United Nations Food and Agriculture Organization (FAO), and the World Trade Organization (WTO).

• JointlypursuetheeliminationofbarrierstoEnvironmentalGoodsandServices(EGS)trade, including through a potential Sustainable Energy Trade Agreement (SETA).

• AllowflexibilityinBrazilianlocalcontentrequirementrulesrelatedto pre- and post-salt oil and gas fields’ development.

• AllowU.S.companiestoincludeeducationandtraining-relatedinvestmentinBrazil in their local content requirement compliance accounting.

• AllowflexibilityinPetrobras’soleoperatorshiprulerelatedtopre-saltoiland gas fields’ development to foster greater international participation.

• Organizeatleastonebiddingroundofpost-saltblocksperyearinBrazil.

• Establishandimplementalong-termtrainingprogramforoilandgasworkersinBrazil and adapt labor laws in the oil and gas sector to its unique business cycle.

• Revise“HireBrazilian”quotarequirementsconnectedtothehiringofcrewandofficers in the Brazilian oil and gas market.

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• EstablishafasttrackprocedureforissuingvisastohighlyskilledprofessionalsinBrazil, specifically in the oil and gas sector.

• Accelerateandbroadenthescopeofbilateralcooperationonoffshore security and safety.

• Establishoilandgassuppliers’certificationbycompanyratherthanbyproject.

• EnforceBrazilianintellectualpropertylawsandrulesintheoilandgassector,particularly through Petrobras’ purchasing policy.

• Establishclear,nonduplicativeenvironmentallicensingcriteriafor energy-related projects.

• ReduceenergypricesinBrazil,especiallyforBrazilianandU.S.energy-intensivemanufacturers operating in that country.

• ImproveenergysecurityinBrazil,includingbyexploringfurtheropportunitiestodevelop Brazil’s natural gas and nuclear power markets.

• RollbackBrazilianrestrictionsonforeignreinsuranceprovidersthatlimitintragroup risk ceding operations and negatively impact energy projects.

• Securecongressionalapprovalandfundingforpublicinvestmentinnuclearpowergeneration in Brazil.

• Opposethere-creationoftheU.S.$0.45per-gallon“blender’staxcredit”subsidyand the $0.54 per-gallon import tariff on foreign ethanol.

• OpposeunilateralU.S.tradesanctionsrelatedtoenergythatcouldaffectBraziland U.S.-Brazil trade and investment relations.

• OpposeincreasedandburdensomerequirementsfortheU.S.Congresstoapproveagreements for peaceful nuclear cooperation with foreign countries.

Council Recommendations continued

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About UsThe Brazil-U.S. Business Council (BUSBC) is the premier business advocacy organization dedicated to strengthening the economic and commercial relationship between Brazil and the United States. Established in 1976, the Council is composed of two sections. The U.S. Section of the Council represents major U.S. companies that invest in or have business in Brazil. It operates under the administrative aegis of the U.S. Chamber of Commerce and maintains independent policy formulation and membership. The Brazil Section of the Council is managed by the Brazilian National Confederation of Industry (CNI), composed of the 27 Brazilian state-level Federations of Industries. BUSBC also works in conjunction with the American Chambers of Commerce for Brazil (AmCham Brazil), the U.S.-Brazil CEO Forum, and sectoral associations in both countries. Together, this powerful structure enables the Council to forge consensus between the two private sectors and communicate to both governments with a unique bilateral voice.

VisionA barrier-free bilateral trade and investment relationship between Brazil and the United States that contributes to a lasting partnership with decisive influence in world politics and global governance.

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Mission

Objectives

Foster understanding among the private and public sectors in Brazil and the United States to maintain and advance trade and investment between both countries through free trade, free markets, and free enterprise.

• Advocateformembers’interestsinBrazilandintheUnitedStates.

• PromotesubstantiveinteractionbetweenmembersandleadingpolicymakersinBrazil and the United States.

• Delivertimelyinformationtomembersandfacilitatememberinputintopolicyformulation and program development.

• Advancemembers’policyprioritiesthroughtaskforces,workinggroups,coalitions,and joint programs with government and private sector stakeholders.

The U.S.-Brazil Energy Partnership

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