Brazil Suspends Trade Sanctions Against The US Until 2012

The Brazilian Foreign Board (CAMEX) – the agency that encompasses the ministers entitled to tailor the foreign trade policy – gathered late today and approved an agreement with the United States, which suspended until 2012 the applicability of commercial sanctions against the US subsidies to cotton producers.

Both governments will sign a Memorandum of Understanding to establish a new set of negotiations, consultations and reforms until the US government finalize the elaboration of a new agricultural law by 2012.

The MOU further establishes the American government’s commitment to create a fund of US$ 147 million to support Brazilian cotton producers. Moreover, the discussions with the Americans up to 2012 will involve the determination of a maximum cap for government’s expenditures and subsidies to the US cotton producers. This cap has not been settled yet, since it will require the prior approval of the American government, but it is expected that it will not surpass the amount spent between 1999 and 2005.

In case the Americans do not fulfil the terms and conditions of the MOU, Brazil may re-initiate the process of trade retaliation. The main objective of the MOU is to seek a mutual and satisfactory understanding between the countries without refraining Brazil from using its trade weapons, if needed.

It is believed that the suspension of the retaliations aims to greatly reduce the existing friction between the Brazilian diplomacy and the Americans, which has recently deteriorated due to the Brazilian opposition of sanctions against the Iranian government.

More information will be passed soon.