[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
                         U.S.-BRAZIL TRADE AND


                        INVESTMENT RELATIONSHIP:


                      OPPORTUNITIES AND CHALLENGES

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 12, 2013

                               __________

                            Serial 113-TR03

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]          
 
 
 
         
         
         
                    U.S. GOVERNMENT PUBLISHING OFFICE
                  
 89-475                    WASHINGTON : 2016       
____________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
  Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001                        
         
         







                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON TRADE

                   DEVIN NUNES, California, Chairman

KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois               RON KIND, Wisconsin
LYNN JENKINS, Kansas
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois











                            C O N T E N T S

                               __________
                                                                   Page

Advisory of June 12, 2013 announcing the hearing.................     2

                               WITNESSES

Mr. Thomas F. McLarty III, Chairman, McLarty Associates, 
  Testimony......................................................     6
Dr. Andres R. Gluski, Chief Executive Officer, AES Corporation, 
  Testimony......................................................    12
Mr. Doug Hundt, President of Underground Solutions, Vermeer 
  Corporation, Testimony.........................................    23
Mr. Roberto Marques, Company Group Chairman, Johnson & Johnson 
  Consumer Companies of North America, Testimony.................    31

                   MEMBER SUBMISSIONS FOR THE RECORD

The Honorable Dave Reichert......................................    50
The Honorable Peter Roskam.......................................    57

                   PUBLIC SUBMISSIONS FOR THE RECORD

Cargill..........................................................    66
Braskem..........................................................    68
Amcham Brasil....................................................    75
Comprehensive Study of Brazilian Wine Market.....................    84
BIC..............................................................   134
CNI..............................................................   140
Brazil Institute.................................................   145
Phrma............................................................   148
ITIC.............................................................   150
BSA..............................................................   154
International Paper..............................................   158





                         U.S.-BRAZIL TRADE AND



                        INVESTMENT RELATIONSHIP:



                      OPPORTUNITIES AND CHALLENGES

                              ----------                              


                        WEDNESDAY, JUNE 12, 2013

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Devin 
Nunes [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

[[Page 2]]

HEARING ADVISORY

                  Chairman Nunes Announces Hearing on

             U.S.-Brazil Trade and Investment Relationship:

                      Opportunities and Challenges

Washington, June 5, 2013

    House Ways and Means Trade Subcommittee Chairman Devin Nunes (R-CA) 
today announced that the Subcommittee will hold a hearing on U.S.-
Brazil trade relations. The hearing will focus on the growing trade and 
investment relationship between the two countries, the challenges 
facing U.S. job creators in this vibrant and dynamic market, and how to 
maximize constructive bilateral engagement--including adequate 
parliamentary involvement and oversight--regarding these opportunities 
and challenges. The hearing will take place on Wednesday, June 12, 
2013, in 1100 Longworth House Office Building, beginning at 10:00 A.M.
      
    In view of the limited time available to hear the witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    The U.S.-Brazil trade is among our most important and promising 
trade relationships. Brazil has been the United States' eighth largest 
trading partner on average over the last five years, exceeding $59 
billion in two-way trade in 2012 and generating a U.S. trade surplus of 
over $5.5 billion. Yet, U.S.-Brazil trade has substantial room to grow. 
Brazil's trade-to-GDP ratio is rising rapidly, from 16 percent a decade 
ago to 24 percent in 2011--but its ratio remains one of the lowest in 
the world. Brazil's economy is large and has strong growth potential. 
At over $2.4 trillion, Brazil's gross domestic product (GDP) is roughly 
equal to that of the United Kingdom (the world's sixth-largest 
economy), double that of Canada, a third larger than those of India and 
Russia, and one-third that of China. Brazil's economy has grown rapidly 
during most of the last two decades, reaching its fastest pace of 
growth in 2010, with annual growth exceeding 7.5 percent. GDP growth 
since 2011 has been slow, however.
      
    U.S.-Brazil investment flows are also promising. U.S. foreign 
direct investment (FDI) flows into Brazil grew from over $5 billion in 
2000 to over $12 billion in 2012, while Brazilian FDI flows into the 
United States grew from over $100 million in 2000 to over $1.8 billion 
in 2012.
      
    Historically, the Brazilian government has not pursued bilateral 
trade and investment engagement, including with the United States, 
outside of the MERCOSUR arrangement with Argentina, Uruguay, Paraguay 
(temporarily suspended), and Venezuela. The current U.S. and Brazilian 
administrations have substantially increased bilateral dialogue, 
including repeated presidential-level engagement and a proliferation of 
lower-level bilateral dialogues involving numerous U.S. departments and 
Brazilian ministries. The only state visit to Washington in 2013 will 
be by Brazilian President Dilma Rousseff, who will visit the White 
House on October 23.
      
    The U.S.-Brazil trade and investment relationship presents both 
opportunities and challenges. Brazil's industrial policy makes use of 
industrial tariff rate increases made possible by Brazil's high bound 
rates in the WTO, subsidized finance, and forced localization rules, 
including local content requirements. But there are also many 
encouraging commercial developments, as well as an increased 
willingness in Brazil to engage bilaterally on an expanded constructive 
trade and investment agenda.
      

[[Page 3]]

    In announcing the hearing, Trade Subcommittee Chairman Nunes said, 
``Our trade and investment relationship with Brazil should be 
recognized as one of the United States' most important. Viewing Brazil 
simply as one of the BRICS underestimates its emerging leadership role 
in the developed world and the growing desire among its elected 
officials and Brazilian business for deeper integration into the global 
supply chain for goods and services. I look forward to exploring ways 
to improve the various U.S.-Brazil dialogues in order to advance our 
mutually beneficial relationship at this promising moment.''
      

FOCUS OF THE HEARING:

      
    The hearing will explore current U.S.-Brazil trade and investment 
issues and analyze whether they prove ripe for inclusion in an expanded 
and constructive bilateral trade and investment agenda. Among the 
issues to be discussed are (1) deepening and expanding the long-term 
trade and investment relationship with Brazil; (2) the strengths and 
weaknesses of existing bilateral forums for engagement on trade and 
investment policy; (3) evaluating Brazil's industrial policy, including 
its high industrial tariffs, local content rules, and forced 
localization practices; (4) concerns regarding barriers to bilateral 
agricultural and ethanol trade; (5) mutually beneficial opportunities 
to lower barriers to U.S. services trade, especially in Brazil's large 
energy and infrastructure sector; (6) potential collaboration on 
innovation and intellectual property rights, to facilitate more high-
tech trade; (7) simplification of Brazil's cumbersome border and 
behind-the-border regulatory measures; (8) Brazil's use of the U.S. 
Generalized System of Preferences, of which Brazil is the third-largest 
beneficiary; (9) engagement within multilateral forums such as the 
World Trade Organization; and (10) collaboration on third-country 
policies that present opportunities and challenges for both the United 
States and Brazil.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, June 26, 2013. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.

[[Page 4]]

      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman NUNES. Welcome, everyone, to our hearing on the 
U.S.-Brazil Trade and Investment relationship.
    I would first like to recognize the Deputy Chief of Mission 
at the Brazilian Embassy, Mr. Araujo. Thank you for coming, Mr. 
Araujo.
    Last week Mr. Rangel and I met with the Brazilian 
Government folks from the Embassy to try to air out some of the 
issues on the Brazilian side as it relates to trade, and we had 
a very good meeting. So I would like to thank the Brazilian 
Embassy for being here.
    The U.S. trade and investment relationship with Brazil 
deserves to be recognized as one of our most important. Brazil 
has been our eighth largest trading partner in recent years, 
accounting for nearly $60 billion in trade and a U.S. surplus 
of over $5 billion.
    Since 2000, Brazilian investment in the United States and 
U.S. investment in Brazil have more than doubled. Brazil's 
economy is now the sixth largest in the world, roughly a third 
larger than India and Russia's, And yet the relationship still 
has a lot of room to grow. Brazil's trade-to-GDP ratio, for 
example, is among the world's lowest.
    However, the ratio is increasing fast. As Brazil's middle 
class rapidly grows, it consumes more and helps drive increased 
trade flows. The drive by Brazilian businesses for global 
competitiveness will have the same effect.
    Viewing Brazil simply through the lens of the BRICs sells 
the country short. It is a strong democracy and a rapidly 
developing regional power that is unaffected by the chronic 
mis-government and social pathologies that plague some of our 
other BRIC nations.
    Our relationship also faces some challenges. For example, 
Brazil has ratcheted up its local content requirements, 
limiting the access of Brazilian businesses to U.S. goods and 
services that could otherwise help boost Brazil's global 
competitiveness. But overall, we have arrived at a promising 
moment to seize opportunities and resolve trade irritants by 
pursuing a constructive, mutually beneficial bilateral trade 
agenda.
    Currently there are around 30 U.S.-Brazil bilateral 
dialogues. About half focus on trade and economics with the 
White House, USTR, Commerce, State, Treasury, and USDA all 
leading different dialogues with numerous Brazilian agencies. 
One of the dialogues, the CEO Forum, on which one of our 
witnesses, Mr. Gluski, has served, helpfully allows policy 
makers to tap the expertise of senior business leaders from 
both countries.
    But the dialogues lack common branding and a common 
schedule, which undermines visibility. I am exploring how we 
can successfully elevate the U.S. Brazil relationship on the 
Hill by slotting these dialogues into a new, and overarching 
strategic economic dia

[[Page 5]]

logue. Congress could then more effectively provide oversight, 
incorporate parliamentary level engagement, and ensure 
accountability for results.
    I plan to introduce a bill to advance that goal, and I 
welcome input from our witnesses.
    I would like to welcome amd introduce my Ranking Member, 
Mr. Rangel. This is our third hearing in a row--all the 
witnesses were agreed to on a bipartisan basis. So we have now 
set a record, I think, for this Committee for the most 
bipartisan cooperation.
    With that, Mr. Rangel.
    Mr. RANGEL. Thank you, Mr. Chairman, and thank you for 
holding these hearings.
    As most of you know, we have been dealing with Russia, 
India, China, and certainly we cannot ignore the terrific rise 
in international power of the great nation of Brazil and the 
fact that one of you has been chosen to lead the World Trade 
Organization, it means that we do expect that Brazil would be 
that closing connection between the United States and other 
countries in Central and South America so that, indeed, the 
hemisphere would be in a much better economical and political 
position to improve the quality of life for all of our people.
    I do hope, not at this hearing, that we will be able to see 
how the African Brazilian population that has been able to 
enjoy this sharp increase in the improving economy of Brazil 
and what is being done educationally, as well as politically, 
to make certain that as in the United States we are able to 
incorporate all of the talents that all of our citizens have. 
Discrimination and poverty is a very costly commodity, and the 
quicker that we can overcome that in the United States and in 
other countries, the better it is, I think, for the entire 
world. And I know our witnesses agree.
    So at the appropriate time I hope you can direct me to the 
areas that you are proudest of in the assimilation of all 
Brazilians into this ever shining and ever growing economic 
success.
    And I thank you for this opportunity, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Rangel.
    Our first witness is Ambassador Mack McLarty, Chairman of 
McLarty Associates. Mr. McLarty was White House Chief of Staff 
and then Ambassador-at-Large to Latin America under President 
Clinton.
    Our second witness is Mr. Andres Gluski, who is CEO of AES 
Corporation and has a Ph.D. in economics. He has been serving 
on the Commerce Department's Bilateral CEO Forum, and is a 
member of the Brazil-U.S. Business Council.
    Our third witness is Mr. Doug Hundt, President of Vermeer, 
Underground Solutions.
    And we will finish with our fourth witness, Mr. Roberto 
Marques, Chairman of Johnson & Johnson's North American 
Consumer Products Business. He will testify on behalf of both 
J&J and the Brazil-U.S. Business Council where he serves on the 
board.
    We welcome all of you, and we look forward to your 
testimony. Our time this morning is limited. So please limit 
your statement to five minutes, and we will limit questioning 
to five minutes per member in the hope of giving as many 
members as possible the opportunity to be recognized.

[[Page 6]]

    With that I now recognize Mr. McLarty for five minutes.

    STATEMENT OF THOMAS F. McLARTY, III, CHAIRMAN, McLARTY 
                           ASSOCIATES

    Mr. McLARTY. Chairman Nunes, distinguished Members of the 
Committee, thank you for hosting this very timely and important 
hearing on Brazil and the growing bilateral relationship 
between our two countries.
    I have already submitted my written testimony for the 
record. So today I will be very brief in my comments.
    As you know, Brazilian President Dilma Rousseff will be 
traveling to Washington in October. This will be the first 
state visit by a Brazilian president since President Clinton 
hosted President Cardoso in 1995. And after 18 years, both our 
countries and, indeed, the world have changed considerably.
    Brazil's rise, as you appropriately noted, Mr. Chairman, 
together with other emerging countries and markets, such as 
China and India, have shifted and have altered the global 
dynamics. I strongly and sincerely believe the United States 
has much to gain from a more intensive, more focused engagement 
with Brazil.
    With that in mind, I would like to very briefly outline 
four areas of strategic cooperation that I believe have real 
potential for mutual benefit: energy; democracy, peacekeeping 
and defense; China; and trade and investment.
    First,energy. As you know, Brazil has discovered enormous 
pre-salt oil deposits off its coast, but deep water drilling is 
risky, to state the obvious. Then United States' technology and 
operational safety expertise could clearly be coupled with 
Brazilian know-how to produce meaningful results, a natural 
area of collaboration.
    In addition, Brazil, like the United States, is rich in 
shale gas reserves. Mr. Chairman, as you know, a Brazilian 
delegation, both congressional and business delegation, 
recently visited the United States to learn more about our 
experience in this are, again, highlighting the potential for 
bilateral cooperation.
    And lastly, thanks to this Committee's leadership in 
lifting the ethanol tariff, our two countries are more 
aggressively able to pursue business opportunities in ethanol 
production, as well as jointly create development opportunities 
in third markets.
    The second area is cooperation in democracy, peacekeeping 
and defense in our hemisphere and beyond. Though Brazil's 
cultural tendency towards nonintervention can limit the depth 
of its cooperation on certain issues like nonproliferation, 
Brazil has been a steadfast partner in peacekeeping, in Haiti, 
in Democratic Republic of Congo, and is seeking greater 
influence in the world.
    More broadly, Brazil is taking a strategic approach to 
defense cooperation and force modernization. The Defense 
Cooperation Agreement our Nation signed in 2010 is already 
helping Brazil enhance its military capabilities and helping us 
cement a strategic relationship with a potential global 
security partner.
    Third, China. Both our countries have much to gain from 
China's rise as millions of new consumers join into the 
marketplace. At the same time, we are mindful of and 
understandably concerned about China's potential impact on 
domestic competitiveness. Our countries can benefit from 
jointly encouraging China's emergence not

[[Page 7]]

only as a global leader and participant, but also as a global 
stakeholder certainly in the area of more balanced and stable 
international monetary system.
    Finally, trade and investment. Since 2006, goods and 
services exports from the United States to Brazil have more 
than doubled, approaching $63 billion in 2011, and in addition, 
the United States has long been one of the largest investors in 
Brazil. We have got a broad range of investment from 
agriculture in the plans to Embraer in Florida. This creates 
good jobs here in the United States, an area for further 
development here.
    So, Mr. Chairman, for many years and for many reasons 
Brazil has been a secondary focus in many ways of U.S. foreign 
policy. Today, however, our neighbor's rising role creates an 
opportunity for our two nations to work together in shaping a 
more peaceful and prosperous future, reflecting our democratic 
values.
    Sustained, purposeful, high level U.S. engagement and 
commitment will be essential to realizing the promising 
opportunities I have outlined here. I am encouraged by the 
leadership that you have shown with this hearing, and I 
certainly look forward to responding to and answering any 
questions you or your committee members may have.
    Thank you.
    [The prepared statement of Mr. McLarty follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    




                                 

    Chairman NUNES. Thank you, Mr. McLarty.
    Mr. Gluski, you are now recognized for five minutes.

[[Page 12]]

STATEMENT OF MR. ANDRES R. GLUSKI, CHIEF EXECUTIVE OFFICER, AES 
                          CORPORATION

    Mr. GLUSKI. Thank you very much, Chairman Nunes, 
Congressman Rangel, and Members of the Committee.
    It is an honor to be here today to assist in any way I can 
to better U.S.-Brazilian relations and understanding.
    I am the CEO and President of the AES Corporation, a 
Fortune 200 company headquartered in Arlington, Virginia. We 
own and operate electric generation plants and electric 
distribution companies in 25 countries, including Brazil, where 
we serve about 6.5 million customers in the City of Sao Paulo, 
and another 1.2 million customers in Rio Grande do Sul. In 
addition, we operate 3.3 gigawatts of hydro and thermal 
generation capacity in the country.
    As Brazil is one of our most important businesses, I am a 
member of the U.S.-Brazil CEO Forum. I am also a member of the 
Business Roundtable and one of the Directors of the Council of 
the Americas.
    When speaking of U.S.-Brazil trade relations, there is much 
we can do to increase trade and investment between the two 
largest economies in the Americas. Brazil's economic policy 
differs from the U.S. in having a more prominent role for the 
central government. It is for this reason that the National 
Development Bank, BNDES, has played an instrumental role in the 
execution of Brazil's industrial policy.
    In this regard, they have actively financed various sectors 
of the economy, lending more money last year than the World 
Bank and Inter-American Development Bank combined.
    However, the private sector still plays the key role in 
domestic capital markets. Sao Paulo's stock exchange, the 
Bovespa, is one of the largest stock exchanges in the world by 
capitalization.
    Brazil is not only a destination for U.S. investments. It 
is also a source of capital for partnerships and even a source 
of direct foreign investment in the U.S.
    AES' two largest companies in Brazil, AES Tiete and AES 
Electropaulo, are listed on the Bovespa, and we are controlling 
partners together with BNDES in both. It is important that the 
U.S. tax policy recognizes the new realities of the growth of 
emerging capital markets and does not discriminate against 
investment in controlled companies that are locally listed 
versus private partnerships.
    A bilateral taxation treaty between the two countries would 
further incentivize investments in both countries.
    Today there are tremendous complementarities between the 
two economies. Brazil is in the midst of an offshore oil boom 
which will require U.S. technology services and investment. The 
country is also fortunate to have substantial shale gas 
deposits, an area where U.S. companies possess a clear 
competitive advantage.
    While certain property ownership issues must be resolved in 
Brazil, U.S. companies should be prepared to participate.
    Another area for collaboration is the use of Brazil's 
strength as a bioethanol producer, both to increase the 
availability of ethanol products in the U.S. and to establish a 
dependable base for U.S. bioengineering technologies.

[[Page 13]]

    There are many good examples of successful binational 
cooperation. Embraer is a world leader in the production of 
regional jets and relies on U.S.-made avionics and turbines. 
AES has also become one of the leaders in the Brazilian 
electricity sector and recently spun off a $1 billion 
telecommunications company that it built from the ground up in 
Rio de Janeiro and Sao Paulo.
    GE currently produces electric components in Brazil, 
including wind turbines, to comply with high domestic content 
requirements. High domestic content requirements admittedly 
increase the cost of doing business in Brazil, but it is a 
national policy aimed at increasing domestic value-add.
    Brazil and the U.S. share many common values which 
facilitate strong ties. In Brazil AES helped normalize 
electricity service and brought the benefits of electricity to 
two and a half million people in the shanty towns or favelas of 
Sao Paulo and the rural areas of Rio Grande do Sul. Together 
with USAID, another two million people will benefit from 
improved electrical service in Sao Paulo.
    Public-private partnerships can work. As the first private 
company to partner with the Millennium Challenge Corporation 
established by Congress in 2004, AES brought electricity to 
more than 180,000 people in El Salvador in only three years.
    We thank you for your support in helping us make a 
difference.
    [The prepared statement of Mr. Gluski follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]       
    



    Chairman NUNES. Thank you, Dr. Gluski.
    Mr. Hundt, you are recognized for five minutes.

  STATEMENT OF DOUG HUNDT, PRESIDENT, UNDERGROUND SOLUTIONS, 
                      VERMEER CORPORATION

    Mr. HUNDT. Chairman Nunes, Ranking Member Rangel, and 
members of the Trade Subcommittee, thank you for the 
opportunity to testify today.
    My name is Doug Hundt, and I serve at Vermeer Corporation 
located in Pella, Iowa, and I am President of our Underground 
Solutions and our global operations for Vermeer.

[[Page 24]]

    For more than 65 years, Vermeer Corporation has been a 
leader in providing agricultural and industrial equipment that 
is built tough, that is reliable, and that has value, and we 
also back that by a tremendous customer service. Vermeer is a 
privately held company. We have 2,400 people located in Pella, 
Iowa and an additional 600 people throughout the world, and we 
reach our customers in more than 60 countries. Our footprint 
extends around the world, including Brazil.
    Vermeer has had a presence in Brazil for over 30 years 
through its dedicated in-country dealers. Most recently, three 
years ago, we invested in a facility to enhance our 
distribution and also localize and support our subsidiaries in 
the region, and we are extremely bullish on Brazil. It is a 
market with a great need for the products we manufacture across 
all of our segments.
    We serve the infrastructure, energy, renewables, and mining 
markets, and our business is growing rapidly. Brazil, as I 
said, has tremendous growth, and we have that as one of our top 
focuses for our company.
    While there is great potential in Brazil and we are very 
bullish on Brazil, there is also great challenges. Beyond the 
normal challenges of doing business internationally, in Brazil 
we do engage in complexity in trying, for example, to get our 
business licenses, to get our export licenses, that has taken 
us between six months and 12 months, and in other countries we 
often see that process in a shorter time period. So although 
those are challenges, those are also things that we continue to 
work through in country.
    Perhaps our most pressing challenge facing our country and 
Brazil is the cost of importing equipment. After factoring in 
freight, insurance, import duties, three cascading taxes, and 
13 additional fees, the purchase price for a customer in Brazil 
purchasing our equipment is oftentimes 60 percent higher than a 
customer who had purchased the equipment in the United States. 
So often for our customers that certainly becomes a big 
challenge, and again, that is our most pressing issue to date 
for our company.
    So lowering the costs, what that does is obviously 
increases the accessibility for our products and creates jobs 
in the United States.
    We strongly support constructive and positive ways in which 
the United States can build a closer economic and trading 
relationship with Brazil. Our CEO, Mary Andringa, feels also 
strongly about this relationship, and she, too, serves on the 
U.S.-Brazil CEO Forum, a unique venture where both the private 
sector and government of both countries engage issues and seek 
results in a positive way.
    Both the United States and Brazil face political and 
structural realities that affect the discussion. Yet we believe 
the timing for increased conversation with Brazil is right. We 
believe in more visible, transparent, and higher profile U.S.-
Brazil dialogue ought to occur regularly. It should establish 
clear milestones to measure progress, building off early 
dialogues and efforts.
    We believe as well that Brazil and the United States can 
and should be working closely together in the World Trade 
Organization and other forums to advance more open and 
competitive international economy to achieve common interests.

[[Page 25]]

    Working to grow Brazilian and U.S. economies and working 
together in common international goals will help grow 
manufacturing, jobs and opportunities.
    Thank you, and again, I appreciate the opportunity to 
testify today.
    [The prepared statement of Mr. Hundt follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]       



    Chairman NUNES. Thank you, Mr. Hundt.
    Mr. Marques.

[[Page 31]]

STATEMENT OF ROBERTO MARQUES, COMPANY GROUP CHAIRMAN, JOHNSON & 
          JOHNSON CONSUMER COMPANIES OF NORTH AMERICA

    Mr. MARQUES. Thank you, Chairman Nunes, Ranking Member 
Rangel, and distinguished members of the House Ways and Means 
Subcommittee on Trade for allowing me the opportunity to 
testify today.
    My name is Roberto Marques, and I am the Company Group 
Chairman for Johnson & Johnson Consumer Companies of North 
America. I am really honored to testify today on behalf of the 
U.S. Section of the Brazil-U.S. Business Council.
    The council is a leading organization dedicated to 
strengthening the economic and commercial relationship between 
the United States and Brazil. The council was established in 
1976 and represents more than 100 major U.S. companies with 
investment and business in Brazil. It is the oldest and largest 
bilateral private sector group focusing on the U.S.-Brazil 
commercial relationship.
    Johnson & Johnson is proud to serve on the board of the 
directors of the U.S. Section of the council.
    As you might have guessed from my accent, I am actually a 
Brazilian citizen, born and raised in Sao Paulo. So for my 
colleagues here from Brazil (speaking in foreign language).
    I joined Johnson & Johnson in Brazil in 1987, before moving 
to the United States. In my more than 20 years with the 
company, I had the good opportunity and fortune to work across 
Johnson & Johnson's three business sectors: the pharmaceutical 
sector, the medical device and diagnostic and consumer 
business. And I have served around the world in three different 
continents.
    So it is really very exciting personally and professionally 
to be here on behalf of the U.S. Section of the Brazil-U.S. 
Business Council. My first observation is that there is a great 
opportunity for the combining of strengths to benefit both 
Brazil and the United States. Brazil currently needs a great 
deal of infrastructure to be developed as it grows and takes on 
several challenges on the world stage in the next few years, 
such as holding the World Cup and the Olympics--The World Cup 
next year, and the Olympics in 2016 in Rio de Janeiro.
    At the same time, Brazil needs to signal that it is 
welcoming investment and the involvement of world class 
businesses to develop its economy further. As the world's sixth 
largest economy, Brazil has become a vital market for U.S. 
companies.
    Growing trade; significant oil discovery; financial 
stability; inflation under control; rising investment; a 
booming 50 million middle class who over the last ten years 
moved from poverty to now actually be growing and consuming 
products, traveling, and really, you know, enjoying the 
benefits of the middle class; political stability are some of 
the factors that have contributed to Brazil's rise as a 
prospering and influential country on the world stage.
    I do remember on a personal note for many, many years 
Brazil was called the ``Country of the Future'' and the future 
never arrived. I would say now they are really glad to see that 
the future has finally arrived, and we are experiencing that in 
growing opportunity in Brazil.

[[Page 32]]

    U.S.-Brazil trade has seen significant progress in recent 
years. U.S. merchandise exports to Brazil reached $44 billion 
last year. Brazil's growing middle class made it an attractive 
market for U.S. exporters and for U.S. investors, many of which 
are in sectors such as service that can only tap the local 
market by means of a local presence.
    In my industry, for example, health care benefits this 
growing middle class that demands, among other things, higher 
levels of health care. Johnson & Johnson is very proud of our 
company presence in Brazil. We have operated there for over 80 
years. Our sales are almost $2 billion and growing 20 percent.
    Our exports from the U.S. to Brazil last year were over 
$165 million, and we are committed to doing business in Brazil 
and have made substantial investments that support 6,000 direct 
and 25,000 indirect jobs.
    However, it is clear that U.S. and Brazilian firms have 
barely tapped the possibilities of this relationship. Brazil 
markets are far more open to imports than they were 15 years 
ago, but tariffs and other barriers are on average 
significantly higher than those of most of other middle income 
economies.
    The Brazil-U.S. Business Council has labored for years to 
facilitate companies' access to the Brazil market via its 
strategic policy deliverable of the many issues that the 
council works on. I would like to mention three of our top 
priorities.
    First, the council has been actively promoting the idea of 
a bilateral trade agreement known informally as ``bilateral 
economic partnership agreement.''
    The council's second priority is the launching of 
negotiations for a bilateral tax treat. Brazil is the largest 
market in the world with which the U.S. has not negotiated such 
an agreement, and doing so would support growth and job 
creation in both countries.
    Thirdly, the council advocates for facilitated entry and 
ultimately visa free travel between the United States and 
Brazil. Visa free travel is a win-win for both countries. 
Brazilians are almost the highest spending visitors to the 
United States in terms of outlays for travel. Believe me, I 
know that for a fact.
    This means U.S. jobs. To that end, the council supports the 
inclusion of Brazil in the U.S. visa waiver program and the 
U.S. global entry program. In both cases we support reciprocal 
actions by Brazil.
    We greatly appreciate the efforts of this Subcommittee in 
organizing this hearing and providing congressional leadership 
of U.S.-Brazil trade issues. The Brazil-U.S. Business Council 
is at the disposal of this Subcommittee to work on issues 
relating to trade and investment between the United States and 
Brazil.
    Thank you for this opportunity.
    [The prepared statement of Mr. Marques follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        
    



    Chairman NUNES. Thank you, Mr. Marques.
    In my opening statement I mentioned a plan of trying to 
streamline all of these dialogues. A few of us were down in 
Brazil and then working here. In talking to the Brazilians, 
there are many

[[Page 40]]

dialogues, and I know, Mr. Gluski, you serve on one of these 
dialogues.
    So I would ask you for your advice on how we could 
structure the overall strategic, you know, framework, and then 
of course, any of you can comment if you have any opinions on 
it.
    Mr. GLUSKI. Sure. I think in terms of the strategic 
framework, what we have seen at the U.S.-Brazil CEO Forum, we 
have made progress in specific areas. So, for example, one of 
the issues was the professional skilled technicians being able 
to enter Brazil. So they have made changes to be able to grant 
90-day visas.
    There was the bilateral trade treaty, which has been in 
discussions for 20 years, has suddenly started to move. So we 
had the Tax Information Exchange Agreement in terms of the tax 
information advancement.
    So I think that my advice here would be to look at specific 
areas and, as you are doing, involve the private sector in 
helping make these executable on the ground.
    Chairman NUNES. Mr. McLarty?
    Mr. McLARTY. Well, certainly I think all the efforts I 
applaud and endorse them, but I think you are on the right 
track in terms of trying to streamline them, better focus them. 
I think the upcoming state visit gives a real time line to help 
do that.
    We certainly face some of the same dynamics when I had the 
privilege to serve in government where you had good intent, but 
I think you have to establish a clear track. I think we have 
done a pretty good job over the years in both Republican and 
Democratic White Houses in terms of China, how that has been 
organized, and I think that is kind of the model, so to speak, 
or direction that you are moving.
    I think accountability is absolutely key in these efforts 
and can really enhance what can be done. I would agree the 
private sector certainly needs to be fully engaged in part of 
that.
    Chairman NUNES. Thank you, Mr. McLarty.
    Anyone else? Mr. Marques.
    Mr. MARQUES. I would agree with their points. I think we 
are progressing well in a lot of those conversations and 
dialogues. We should keep the private sector very much 
involved. We are seeing a lot of progress and inroads in that. 
So getting that kind of sponsorship from the Congress and 
government, but keeping the private sector well involved I 
think will make a difference.
    Chairman NUNES. Thank you.
    Mr. Hundt, do you have any thoughts?
    Mr. HUNDT. I would just echo my colleagues. I think 
elevation at the highest level is important and also putting 
real clear goals and tangible goals in place so we know how to 
support those goals, but also to really make progress on some 
of the issues outlined today.
    Chairman NUNES. Thank you.
    I recognize Mr. Rangel for five minutes.
    Mr. RANGEL. Thank you, Mr. Chairman. And thank all of you. 
I can only see a win-win for both countries to work more 
closely together, and I do hope at the conclusion of this 
hearing we may get some ideas how we can start to iron out 
those differences we

[[Page 41]]

do have, whether it's currency manipulation or high tariffs or 
the complex taxes in your country as well as ours.
    And I hope it goes without saying that we hope that your 
leadership and international community could concentrate on 
Central and South America to bring our continents closer 
together because this hemisphere has not had a history of 
mutual respect and mutual cooperation, and we have so many 
people that have not been pulled into the general society not 
only to receive the benefits, but more importantly, to make the 
contributions that they can make to the countries.
    And so, Mr. Chairman, I look forward to see what we can do 
since there is nothing on the table right now that we can be 
discussing. So we will be depending on the private sector and 
our State Department to see what we can do to take advantage of 
this spirit of goodwill and cooperation which we are enjoying 
now.
    Also I was very, very active in working with the Colombian 
Government on the free trade agreement we have there, and I was 
so pleasantly surprised to see how the African Colombian 
community had been brought into their political and economic 
life so that they were actually coming here to the United 
States to lobby African Americans in showing that it was a 
civil rights issue, and how the more people who can get into 
their middle class, the more they would be able to buy from 
Americans.
    Of course, that is what America is all about, regardless of 
what the color is, is the middle class, and while we have a 
great disparity in our country, your country, Brazil, really 
has the same thing, and without bringing that into trade 
agreements, you are going to have to help me to get a better 
understanding about what the government of Brazil is doing to 
break down these historic barriers that separated the majority 
of people of color from the minority of those of wealth.
    Because a part of trade is freedom, democracy, and that is 
really more than any one thing what makes Brazil our friend. It 
is what you think of human life and the principles that you and 
I enjoy.
    So this has been a good beginning, and I am very anxious to 
take the next step, Mr. Chairman. Thank you.
    Chairman NUNES. Thank you, Mr. Rangel.
    Mr. Buchanan is recognized for five minutes.
    Mr. BUCHANAN. Yes. I want to thank the Chairman for holding 
this important hearing and thank all of our witnesses.
    Just looking at the numbers, $30 billion exported, 32, 34 
billion, ten billion of that comes out of Florida. So when I 
look at what is happening and part of our recovery in Florida, 
we talk about tourism. We talk about construction picking up a 
little bit. There is no question about that. Ag. has been 
pretty good, our ports and stuff, but there is no question in 
my mind Central and South America play a huge role for our 
recovery, and it is a big opportunity, not just to the country, 
but as I focus a little bit more narrowly on Florida.
    Then as you mentioned earlier about one company somewhat 
I've followed for the last seven, eight years, Embraer, they 
had facilities in Broward County. Now, they are opening up a 
lot more facilities in Melbourne, which is further north. So 
that gateway to Central and South America and also in terms of 
these free trade agree

[[Page 42]]

ments with Panama and Colombia, but we always think about doing 
business, and I am very pro doing business. That is what I did 
for 30 years.
    We think about going east and west, and as I think about 
Florida, we need to be going more south. We are, but we need to 
be doing a lot more in terms of that opportunity, not just with 
Florida, but with the country.
    So I guess I would add I heard your opening statement, but 
distilling down, what are a couple of things that we could do 
to continue? We have got a good relationship, but to take that 
relationship to another level on a win-win basis?
    Because there are parts of the world that we trade with and 
we have huge negative surpluses, and Brazil is one of those 
countries that I think has been more than a win-win for the 
U.S., especially Florida, and we would like to find a way to do 
more business because at the end of the day we are looking to 
create more jobs, positive jobs, and a lot of the people that 
are doing business I know in Florida, they have created a lot 
of jobs that have benefitted a lot of our people in terms of 
recovering out of this recession.
    Mr. McLarty, do you want to mention your thoughts? What are 
two or three things that we could do more of to take this 
relationship to the next level?
    Mr. McLARTY. Yes, I will be pleased to. Well, first of all, 
I think you and Congressman Rangel really encapsulated the 
right theme, and that is we have a win-win situation here. I 
think that is really the thrust of this hearing.
    I take your point that sometimes we do look east and west, 
and those are large, emerging markets for sure, but the natural 
market for the United States in terms of exports and to grow 
our economy and to grow jobs and to replace the jobs we lost, 
we are going to have to have top line growth of revenues, and 
that is going to have to come partly from exports.
    So Latin America is a natural market, but one we cannot and 
should not take for granted, and I think it is the same for 
Brazil. I think it is a two-way street, and I think we have got 
to be mindful of that in the United States.
    I think to simplify the ability to invest and to trade, 
whether that goes as far as the free trade agreement, that may 
be one step too far, but I think enhancing of customs, 
procedures, reducing tariffs, and other barriers to trade, we 
must work on diligently on both sides to make the flow easier.
    And we are already seeing in our country investment from 
Brazil. You mentioned Embraer. JBS has made a large investment 
in the agricultural sector as you know in the heartland. So I 
think that in itself creates jobs. So those are two or three 
items that I would emphasize and build on going forward.
    Mr. BUCHANAN. Yes, it is amazing to me because we are in 
pretty much the same time zone, and I just feel like I see the 
huge impact it has had on Florida and continues to have. I want 
to make sure we can do more across the country.
    Mr. Gluski.
    Mr. GLUSKI. Well, I very much agree with what Mr. McLarty 
said. I think that the key is to expand a little bit of our 
understanding of Latin America-Brazil in particular--in terms, 
of the

[[Page 43]]

size of their domestic capital markets, the sophistication of 
the deals that we are doing. For example, it has a lot of 
imbedded U.S. value add and cases such as ourselves where we 
are able to raise money and make investments in the countries 
themselves.
    So when I see a lot of the discussion, it is very much just 
thinking of, let us say, direct trade in goods and not 
realizing that today how much more intertwined things are, how 
production has changed. Today, for example, NAFTA has created a 
production chain from Mexico all the way north. So I think that 
is going to be expanded in the case of Brazil.
    So how to make this a reality, I think, is to continue the 
discussion that you are having at a high level; try to simplify 
a lot of the barriers that make this more difficult; and then I 
think the business sector can, follow once those doors are 
open.
    Mr. BUCHANAN. Mr. Hundt.
    Mr. HUNDT. Yes, maybe speaking from a small and medium 
perspective, the size company, I would agree completely, but if 
you look at the competencies in the United States and of U.S. 
manufacturing energy and transportation and agriculture those 
are our core competencies that we have expertise that we can 
assist Brazil in moving their economy along.
    What I referred to earlier as far as the complexity for 
small and medium size business because sometimes it can be very 
difficult to maneuver through and also, again, the landed cost 
with the tariffs, and it does go both ways, but oftentimes, for 
example, there is a city in northeast Brazil that is going to 
be putting sewer in for the first time. It is a city of a 
million people, and we have a technology that can put the sewer 
infrastructure in without really open-cutting any of their 
streets. So it is an advanced technology. We are very 
interested in introducing it to the country, but that system in 
the United States would cost a contractor a million dollars. 
Well, it is going to cost the contractor in Brazil 1.6 million 
because of the tariffs and the duties that I spoke to earlier.
    So it is a significant issue. In our case, we are exporting 
to Brazil, and we have 2,400 people in Pella, Iowa, and 700 of 
those jobs are attributed directly to exports. So the more we 
can an export friendly environment, bilateral trade, it is only 
going to create more jobs in the United States.
    Mr. BUCHANAN. Mr. Marques.
    Mr. MARQUES. Thank you.
    Not to repeat what my other colleagues mentioned here, 
which I do agree with in terms of bilateral trade agreements 
and how can we facilitate the inflow and outflow, I would 
mention your point on Florida, which I think is a very good 
example of how the Brazilians really love coming to the United 
States. So I will go back to the point in terms of action to 
facilitate the entry.
    Miami is a very important port of Latin American, in 
general, for coming to the United States, as is New York. So 
facilitating that inflow of people coming to the United States 
to spend money, buying a second home or spending money in malls 
and shopping and tourism is such a huge opportunity for the 
United States.
    And there is a very strong bond between the Latin Americans 
and Brazilians in the United States, they are very similar. 
Brazil is a well-established democracy was a very strong middle 
class, an

[[Page 44]]

emerging middle class, a very strong internal market and very 
strong private sector. There are so many similarities that 
establishing that close relationship I think, again, is a win-
win for both economies and both countries.
    Mr. BUCHANAN. I want to thank all of our witnesses, and I 
yield back.
    Chairman NUNES. Thank you, Mr. Buchanan.
    Mr. Smith is recognized for five minutes.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you to our 
witnesses for sharing your perspective here today.
    Obviously Brazil and the United States have tremendous 
trading potential, and representing a good bit of agriculture 
in Nebraska, I know that agriculture is a major part of the 
Brazilian economy as well.
    I do have some concerns though. Take, for example, Brazil 
being the second largest producer and consumer of ethanol. It 
is obviously an appealing market, and while the main U.S. 
ethanol tariff expired at the end of 2011, Brazil has only 
suspended its ethanol tariff, meaning it could be reinstated 
without notice.
    And also I have concerns about beef trade in Brazil, 
keeping U.S. beef out of their country even though the experts 
say that BSE is of negligible risk. And so I have those 
concerns.
    But, Mr. McLarty, could you reflect on those a bit and 
maybe give me some hope that we can iron some of these things 
out?
    Mr. McLARTY. Well, being from an agricultural State as 
well, I certainly understand and identify with the points and 
the concerns that you raise. I think the real heart of your 
points is that it has to be the proverbial two-way street if we 
are going to really raise this relationship to a more robust 
level and achieve the potential, the natural collaboration. We 
are going to have to reduce barriers on both sides, and we are 
going to have to make it easier for trade to flow between both 
countries, as well as investment.
    I certainly think in terms of some of the non-tariff 
barriers, we need to depend on sound science and not have those 
get in the way, for example, of beef and other matters that you 
raise.
    The agricultural issues are going to be the toughest, as 
they usually are, and you know that so well, but I am hopeful 
that because Brazil has become so much more of an outward 
looking country in terms of their ability in terms of exports, 
that they will see the reciprocal nature of the essential, 
essential move toward liberalizing their trade and opening 
their markets as well.
    The real issue here is not only creation of jobs, but you 
have got to increase productivity in Brazil to really raise 
their standards of living and to continue to build their middle 
class, as Congressman Rangel noted. So that is the key.
    So I think there is some hope. It will have to be pressed, 
and some of it is getting to understand each other's 
perspectives better as you well know in reaching common ground, 
easier said than done, but essential, essential for both 
countries.
    Mr. SMITH. Thank you.
    Anyone else wishing to comment on that?
    [No response.]
    Mr. SMITH. Again, I appreciate a little reflection on this 
issue and the need to base our trading standards and our 
policies on

[[Page 45]]

sound science, I think, allows us a great opportunity to 
establish an objective viewpoint so that producers themselves, 
consumers as well, kind of know what to expect.
    So thank you for your time, and I yield back.
    Chairman NUNES. Mr. Boustany is recognized for five 
minutes.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    I come from the State of Louisiana, and the energy sector 
is a very important part of our Louisiana economy, and as I 
traveled through Brazil back in April, I was struck by the 
tremendous opportunity for a win-win in the energy sector as we 
are seeing this revolution in energy markets today.
    We have seen the advantage of integrating the U.S. and 
Canadian energy markets, and I see amazing potential to further 
integrate energy markets between the U.S. and Brazil, and I 
know Brazil is carrying out a series of auctions for both 
conventional and unconventional oil and gas. U.S. companies are 
certainly well positioned to participate in this, but Brazil 
has a number of local content requirements and other issues 
that create barriers.
    I have heard from companies back in Louisiana who are 
trying to do business in Brazil, and so whether it's the pre-
salt finds dealing with technology, which we are well equipped 
to do here in the U.S. or looking at shale plays where we have 
had tremendous success, trying to get through local content 
requirements with regard to services and equipment is a big 
issue, and, Mr. Gluski, if you could comment on this.
    Mr. GLUSKI. Yes. I think recently, as you know, Petrobras 
has tried to lower some of the domestic content rules to lower 
its cost and increase productivity. I think there are companies 
that have adapted to this. For example, General Electric 
actually has the highest domestic content in its wind turbines 
that it produces in Brazil.
    So I think here the point is that U.S. technology is the 
leading technology, and we need ways for the U.S. companies to 
participate in the Brazilian economy. Some of it may be, quite 
frankly, establishing, some manufacturing in Brazil so they can 
bring in components from the U.S. and then comply with these 
requirements.
    But I certainly agree with you this is a great opportunity 
for U.S. businesses and those U.S. businesses in your district. 
It is natural this progresses. It may take some time to 
develop, but I certainly see the great potential.
    Mr. BOUSTANY. Others want to comment on the energy sector?
    Mr. McLARTY. Well, having spent a decade in the natural gas 
business and having the privilege to serve Lake Charles, 
Louisiana through Entex, which was part of our company, I 
certainly identify with the opportunities that are present in 
Brazil with Petrobras, with the oil find and more broadly.
    I think Petrobras, as Mr. Gluski noted, has recognized the 
need to show some flexibility in terms of local content. It is 
an enormous opportunity for Brazil, not only in development of 
their reserves and from an energy standpoint, but again, to 
support and lift their economy and the middle class.
    But I would certainly underscore that from a Petrobras and 
broader standpoint of Brazil, they can enormously gain from 
U.S.

[[Page 46]]

expertise. So they need to be encouraging that, not impeding 
it, in the right way.
    And secondly, I think they need to minimize or at least 
mitigate some of the risk that is associated with deep water 
drilling and not have all their eggs in one basket. I think the 
senior management of Petrobras recognizes that.
    So I think it is a natural opportunity. I think we are 
already on the right path. It may take a little more time than 
some of us would like, but natural areas of collaboration in 
energy and agriculture, both countries are blessed, fortunate 
to have tremendous resources in those areas.
    Mr. BOUSTANY. Thank you.
    And I also believe that Brazil would benefit tremendously 
from joining the ongoing negotiations involving the Trade and 
Services Agreement at The WTO. They have been reluctant to do 
so. There are some 50 countries that are now representing two-
thirds of global services involved in this, which also includes 
energy services trade, and so I am still trying to understand 
the reticence on the part of Brazil to participate in TISA, or 
the Trade and Services Agreement, and I would like for each of 
you to comment if you would on this.
    Mr. GLUSKI. I really do not have any particular insight 
into that, only that in Brazil there are domestic content 
requirements, if you will, and services as well, and all the 
arguments that we have made in the other case apply as well.
    Mr. BOUSTANY. Thank you.
    Anybody else care to comment on this? Mr. Marques.
    Mr. MARQUES. No, I would agree with that. I think Brazil 
can benefit from participating and being more engaged in some 
of those trade agreements more broadly. I think there has been 
a lot of progress in reducing the cost of doing business in 
Brazil, and I think that is a major component.
    You know, the private sector continues to work with the 
government in making sure that Brazil will increase its 
productivity and efficiency in doing business, and this will 
allow, I think, Brazil to be more externally driven and 
participate more broadly in those kinds of trade agreements, 
but I think we are seeing a lot of progress in many fronts.
    Mr. BOUSTANY. Thank you.
    I see my time has expired. Thank you, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Boustany.
    Mr. Kind is recognized for five minutes.
    Mr. KIND. Thank you, Mr. Chairman, and I want to thank our 
witnesses for the testimony today. I think it is pretty self-
evident that it is going to be important for the U.S. and 
Brazil to maintain a constructive, active working relationship 
if there is hope for continued economic growth and progress 
throughout the Western Hemisphere.
    I know there has been a lot of focus so far in this hearing 
of some of the trade irritants that we have seen pop up in 
Brazil from higher tariffs to forced location. Some of my 
colleagues talked about agriculture, but Brazil has a few asks 
of us as well, when it comes to ethanol, when it comes to 
cotton subsidies, in particular.

[[Page 47]]

    I have introduced legislation here that would reform our 
domestic cotton subsidy program to get us out of the WTO box 
that we find ourselves in with Brazil. I think the average 
taxpayer back home would be astounded if they knew that because 
of our unwillingness or inability to reform our own cotton 
subsidy program within our farm bill, we are now subsidizing 
Brazil cotton producers to the tune of $150 million a year. 
This is crazy. This is nuts.
    And we have a farm bill coming up. I will be offering an 
amendment that would change our domestic cotton program so we 
do come into compliance with WTO so we can end $150 million of 
basically blackmail payments to Brazil so they do not level 
sanctions against us because of that WTO case.
    How much of an irritant--Mr. McLarty, let me start with 
you--is that cotton case between us and Brazil right now? And 
what practical steps do you think we can take right now in 
order to deal with it and get it off our plate?
    Mr. McLARTY. Well, your feelings are understandable, and 
they came through loud and clear, and I certainly again 
identify with them from my own State perspective.
    It is a matter of tension, and you are going to have some 
issues and tensions in trade, as you well know. But I think on 
the broader picture we have to comply with WTO, with our trade 
agreements and move forward here.
    The key is I think leaving the agreement in place for the 
moment, but as you suggest and as you're earnestly trying to 
do, is to move forward with a comprehensive farm bill that puts 
this issue and others in a much better place, absolutely 
essential for us to do.
    Mr. KIND. Mr. McLarty, let me ask you. Given what you have 
seen coming out of the Senate right now with the farm bill that 
they just reported out and what the House is working on, would 
that fix the cotton problem for us in its current form?
    Mr. McLARTY. Well, I am not an expert on farm legislation, 
but I think it is essential to move forward, and I would hope 
it would, Congressman. I would hope it would. You are obviously 
working very, very diligently and earnestly to do that, and I 
commend you for it.
    Mr. KIND. Let me ask you and the others on the panel here 
if you have an opinion, but obviously Brazil has not been from 
my perspective an honest broker in the lead they have taken in 
trying to represent the developing world in WTO discussions. 
Ambassador Azevedo now has taken over the directorship of WTO. 
That means he has got a different constituency, a much wider 
constituency that he has to answer to.
    Does this provide some hope or an opportunity as far as 
what Brazil has historically done to the talks in WTO now that 
Ambassador Azevedo is the Director of it?
    Mr. McLARTY. I will start and then defer to my other 
colleagues. I think it definitely does. I think that was in 
2008 on the DOHA round that you're referring to. A lot has 
changed in both our countries and, indeed, the world economic 
landscape as I noted in my testimony. So I would very much hope 
that we would again move forward with agreements, and I think 
that Brazil actually can play

[[Page 48]]

a singular role in future discussions on the world trade front, 
and I had hoped that would be the case.
    I think Brazil has changed, Congressman Kind. I think they 
have stepped on the world stage, and I think they recognize the 
responsibility there.
    Mr. KIND. I hope you are right.
    Anyone? Mr. Marques?
    Mr. MARQUES. Yes, I would agree with Mr. McLarty. I think 
the appointment of Roberto Azevedo to be the new Director-
General of WTO is a very important signal of, again, continuous 
progress of Brazil as a country in the direction of really 
being more open in terms of trade agreements and progressing in 
that sense.
    So I do agree that it is absolutely in the right direction.
    Mr. KIND. Okay. Thank you. Thank you all for your testimony 
today.
    Thank you, Mr. Chairman. I yield back.
    Chairman NUNES. Thank you, Mr. Kind.
    Mr. Reichert is recognized for five minutes.
    Mr. REICHERT. Thank you, Mr. Chairman, and thank all the 
witnesses for taking time from their busy schedules to be here 
today with us.
    And I would like to follow up on the line of questioning 
that Mr. Kind just concluded with just to be a little bit more 
specific.
    So it is great that we have Brazil's long time ambassador 
now as the Director-General of the World Trade Organization, 
and I heard the positive comments that you think that this 
appointment will be beneficial for Brazil moving toward WTO 
agreements, but just more specifically directed to the 
Government Procurement Act, what do you think our new direction 
will be and what do you propose that Brazil might do to push 
that along a little bit?
    That is a stumbling block between the United States and 
Brazil as well. Anyone on the panel wish to address that?
    So far Brazil has not signed onto the GPA agreement.
    Mr. McLARTY. Well, I think in a general manner, it is very 
hopeful that Brazil will show more flexibility. That is what 
you are suggesting, and again, I think it is so essential that 
the private sector have a voice and an engagement with both the 
U.S. Government and with Brazil, and I think that can at least 
put these issues in a much more realistic perspective.
    I would not make any predictions on these issues. I am not 
an expert on them, but I understand very much your concern. I 
do think that this is a new time and place from a global 
trading standpoint for both our countries, for both the U.S. 
and for Brazil, and that is what leads me to the hopeful nature 
that I noted.
    But flexibility is required on a number of these issues.
    Mr. REICHERT. Anyone else wish to comment? Mr. Marques, do 
you have a thought?
    Mr. MARQUES. Yes, I would say that again, on behalf of the 
Council we see that improving supply chain integration is 
really crucial to our members as well. So we agree with that 
and would like to continue to push, you know, the agenda on 
that.
    We have seen some progress with some of our members. The 
private sector continues to work together to be more efficient 
on that

[[Page 49]]

count, but we also need the government to demonstrate the 
action and commitment on that front.
    We have seen some good wins from the Brazilian Government 
which we applaud. Brazil expressed delivery at the Istanbul 
convention, and so there are some examples that, again, I think 
the government and Brazil is actually showing more support and 
better integrating supply chain. So, again, I think the signs 
are very positive, but we need to continue to work diligently 
with the private sector and government continue to make inroads 
there.
    Mr. REICHERT. Thank you.
    Mr. Chairman, I would like to enter into the record a 
document that has been prepared by Donna Hrinak, who is the 
former U.S. Ambassador to Brazil and now the President of 
Boeing-Brazil, who stresses the importance of joint R&D 
currently being done in the aerospace sector.
    Chairman NUNES. Without objection.
    [The information follows: The Honorable Dave Reichert]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        
    



    Mr. REICHERT. I would also like to point out that there is 
another great partnership from Pacific Northwest, Washington 
State, specifically Pacifically Car and Foundry that has a 
great friendship and partnership with Brazil and also engaged 
in research and development opportunities there.
    So, Mr. Marques, there is, I think you would agree and the 
panelists might agree and most everyone in here would probably 
agree,

[[Page 54]]

that research and development is an important aspect of trade, 
and there is great opportunities for both the United States and 
Brazil.
    In this arena what opportunities specifically do you see 
rising between the United States and Brazil in the area of 
research and development?
    Mr. MARQUES. Again, I think this is a very important point 
on the agenda. I think the regulatory agency in Brazil, ANVISA, 
still a young agency, but they're a global reference in terms 
of some of the technical capabilities, but we do believe that, 
again, especially in terms of IP, there is an opportunity to 
improve, to protect innovation and discovery and development, 
and that I think will serve both countries well.
    It is a topic that it is priority also within the counsel 
to continue to work with the government and the regulated 
agencies in Brazil to progress with that and to make sure that 
the inventions are protected with the appropriate rights of IP 
protection.
    Mr. REICHERT. My time has expired, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Reichert.
    Mr. Roskam is recognized for five minutes.
    Mr. ROSKAM. Thank you, Mr. Chairman, and witnesses, thanks 
for your time and your expertise today.
    I want to shift gears a little bit and focus in on the 
relationship between Brazil and China. China is Brazil's number 
one trading partner, and there are some interesting statistics. 
Let me look down and cite them, but then come back, and I am 
interested in your reflection not so much on the numbers, but 
on the nature of the trade and how the nature of that trade 
brings questions forth.
    So here it is in a nutshell. Brazil exported $41 billion in 
exports to China in 2012; imported 34 billion, whereas it 
exported 27 billion to the U.S. and imported over 32 billion.
    More interesting though is this relationship between raw 
materials going out of Brazil, finished goods coming into 
Brazil, whereas my understanding of the relationship between 
Brazil and the U.S. is far more balanced, balanced in the 
totality.
    What is the significance of that? Where are the 
opportunities for Brazil and the U.S. to work together vis-a-
vis international standards, third party questions, just kind 
of open field running?
    What is the significance of that for us as a committee, as 
we need to make decisions in U.S. policy going forward?
    Mr. GLUSKI. I'm going to take it.
    Basically not only Brazil, but all Latin America is much 
more, let us say, engaged with the U.S. economy and products 
for a long historical period. So when their economies grow, 
they are much more likely to draw in U.S. exports and also to 
make joint ventures with U.S. companies.
    The relationship with China is much newer and much more 
focused, as you say, on exporting raw materials, whether it be 
soybeans or iron ore, for example, to China. So numerically 
that will predominate, but I think that given the greater 
similarities between the two economies' longstanding 
relationships, it is a different type of trade that they are 
having with the United States, and you also have longstanding 
relationships like Johnson & Johnson 80 years in Brazil, and 
lot of other U.S. companies as well. That makes a significant 
difference.

[[Page 55]]

    I think there is an opportunity also for the U.S. to 
attract more Brazilian investment going forward, and that would 
also help the relationship become a relationship where you have 
more equal interests from both sides in terms of the bilateral 
treaties, investment protection, et cetera.
    Mr. ROSKAM. Thank you.
    Mr. McLarty.
    Mr. McLARTY. Well, I think you certainly raise some very 
important points, and I thought you did so in a particularly 
thoughtful and precise manner.
    First of all, it underscores how increasingly our worlds 
and our economies are connected. I think on balance if handled 
properly, that is a positive. I think it will lift living 
standards if done properly. It will strengthen the middle 
classes. It will lead to more stability in emerging countries 
and emerging economies.
    I do think it puts Brazil and the United States much more 
aligned than not in terms of encouraging China to be a 
responsible stakeholder in the multinational, multilateral 
organizations in terms of transparency, in terms of governance, 
in terms of currency.
    So I think it aligns us in the proper way, but it also 
underscores, which I noted in my testimony; it also underscores 
some of the points that we have made about some of these issues 
of tension or disagreement. Clearly both countries are focused 
on job creation and understandably and commendably so, but part 
of that goes with increasing productivity in order to be 
competitive.
    And so I think it has to go to lower barriers and 
complications of doing business where Brazil can be competitive 
and we certainly can keep our country competitive.
    Mr. ROSKAM. That alignment that you just mentioned, is that 
naturally happening? No, no, that is not my question.
    So there is the alignment that you mentioned. That is a 
natural alignment?
    Mr. McLARTY. In my judgment.
    Mr. ROSKAM. Are there things that now we need to do as 
policy makers to move forward on that, to take advantage of the 
alignment?
    It is one thing to line up, and it is another thing to act.
    Mr. McLARTY. Yes.
    Mr. ROSKAM. Are there affirmative things that we need to 
do? And my time is dwindling. So why don't you be the last 
word?
    Mr. McLARTY. All right. I will try to be brief to sum it 
up. I think you have got a strong running start at it today 
with this hearing. I mean, you have to engage in order to 
better understand where there is alignment and a natural 
mutuality of interest and what concrete steps can be taken. I 
think you will find the Brazilian Government and the private 
sector very receptive in that regard, Congressman.
    And, again, I think you have raised some very fundamental 
points.
    Mr. ROSKAM. Thank you.

[[Page 56]]

    Mr. Chairman, I would like to enter into the record a graph 
from The Economist, the results of which I have basically 
cited.
    Chairman NUNES. Without objection.
    [The information follows: The Honorable Peter Roskam]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        



    Chairman NUNES. The gentleman's time has expired.
    Mr. Larson is now recognized for five minutes.
    Mr. LARSON. Thank you, Chairman Nunes and Ranking Member 
Rangel. I want to thank all of our witnesses for your expert 
testimony.
    I would like to underscore a number of things that have 
been said by my colleagues, most notably Mr. Rangel and Mr. 
Buchanan, who underscore the incredible potential for a win-win 
situation here between the United States and Brazil. The great 
opportunity abounds.
    Hailing from the State of Connecticut and in the aerospace 
industry as was also noted by Mr. Reichert as it relates to 
Embraer, we are deeply excited about this, and also the 
Chairman's most recent trip to Brazil, along with the Vice 
President.

[[Page 58]]

    And yet in these very difficult times we continue to see 
countries reflexively act in a protectionist manner, and so 
suffice it to say that that is a concern, and some of the 
monetary concerns that were raised by Brazil, especially we 
certainly deeply understand the concern as it relates to China, 
but not as it relates to the United States, a country that does 
not partake in that kind of activity.
    So my question is, and it is kind of a follow-on to what 
Mr. Roskam was saying, Mr. McLarty. In terms of looking at this 
economic slowdown, what kind of effect do you think that that 
might have on our trade relations if Brazil is not able to 
quickly regain growth rates that it had over the past two 
decades?
    Do you foresee the Brazilian Government implementing 
additional protectionist measures?
    Mr. McLARTY. Congressman Larson, I think you have certainly 
raised the right concern. I think there is a natural tendency--
we have seen it in our country--to be a bit more defensive or 
look a bit more inward in times of economic slowdown.
    I would say that Brazil has benefitted with their 
increasingly outward looking stance and moving onto the global 
stage both in terms of exports and how they have conducted 
their affairs internally. So I would hope they would continue 
that and not raise but actually decrease any sources of tension 
and protectionism, although they will be looking for the 
proverbial two-way street in that regard.
    Again, I go back to the point I tried to make earlier. It 
is essential in my judgment for Brazil not to only look at job 
creation, but also increased productivity. I think the private 
sector in both Brazil and the United States and other countries 
to engage with government agencies, engage with the private 
sectors are absolutely essential there.
    So I would hope that would not be the case, bearing in mind 
Brazil has a history of very understandable deep concern about 
the rekindling of inflation that has led to high interest 
rates. So that will always be a part of their economic mindset, 
and I think appropriately so. And I think that has to be taken 
into account in the overall scheme of things.
    But much as it is in our country, exports are key to some 
of the Brazil continued growth and job creation, and I think 
that goes with more liberalized trade not a more insular look.
    Mr. GLUSKI. Recently Brazil has removed certain 
restrictions to capital inflows. So in terms of making the 
currency more market determined, I very much echo what has been 
said. I think if the economies are slowing down, what they 
actually need is to make sure to incentivize trade and to lower 
barriers rather than raise them at this point in time.
    Mr. HUNDT. I would just comment that what was said earlier 
is absolutely true, but to gain productivity, I think the 
access to American technology and American exports is 
essential. Therefore, IP protection and, again, lowering the 
cost of tariffs and duties into the country will only help 
Brazil become more efficient, more effective in order to grow 
their own exports.
    Mr. MARQUES. Yes, I would agree with what the panel said, 
but again, the point that I would make, which is very much in 
line to

[[Page 59]]

your concern, is what happens if the economy slows down growth 
because that can trigger more protectionism.
    I think there is a very clear sense right now in the 
private sector in Brazil of the importance of fostering 
economic growth through exports as well, that just internal 
markets are not going to be enough, even though it is a very 
robust internal market.
    So I think all of the industry is very committed to 
continue to drive an increased productivity and rely on exports 
to foster growth and create job demand. So I think, you know, 
there is a pressure coming from the private sector on this idea 
of trade and that potential to help us in that regard.
    Mr. LARSON. My time has expired.
    Chairman NUNES. Thank you Mr. Larson.
    Ms. Jenkins is recognized for five minutes.
    Ms. JENKINS. Thank you, Mr. Chairman, and I thank the 
panelists for their testimony this morning.
    Brazil is the third largest beneficiary of the United 
States generalized system of preferences, which allows certain 
goods to be imported into the United States without duties. The 
program expires at the end of July, and I strongly support its 
extension because it allows U.S. businesses and consumers the 
access they need to maximize our competitiveness.
    However, the same logic holds when it comes to Brazil's 
tariffs. High tariffs make it more difficult for Brazilian 
businesses to have access to the U.S. goods that they need to 
remain globally competitive. But Brazil seems to be taking a 
contradictory step in this regard. For example, Brazil 
increased 100 industrial tariffs last year and has plans to 
increase 100 more later this year. These increases are 
counterproductive.
    At the same time Brazil has a promising X tariff program 
that should be expanded. X tariffs are the rough equivalent of 
the U.S. miscellaneous tariff bill through which Brazil reduces 
its tariffs on a specific set of imports that its businesses 
need.
    I would be interested in anyone's thoughts on a couple of 
questions, but maybe directly primarily to Mr. Hundt.
    How do you see Brazil's attitude toward tariffs in your 
sector?
    Secondly, have you been hurt by the tariff increases or 
helped by the special tariff reductions?
    And then finally, how would reduced tariffs in your exports 
impact Brazil's competitiveness?
    Mr. Hundt, if you would maybe lead off.
    Mr. HUNDT. Sure. Thank you.
    As I said earlier, I will go back to those examples, and it 
is a very important issue for our company and certainly for a 
lot of U.S. manufacturers that the importance of the bilateral 
trade agreements, it really has to be bilateral.
    But in this case, in our instance our experience is our 
landed cost of products exported from the U.S. to Brazil is an 
average of about 60 percent higher. So clearly that is a large 
percentage. It is an inhibitor to technology acceptance in 
countries, in Brazil sometimes, but more importantly, these are 
technologies that could help them become more productive. They 
are technologies that would help them advance their own 
economy, and in this case by lowering it

[[Page 60]]

is only going to create a wider adopting to technologies to 
help Brazil become more productive.
    So we are quite optimistic. The timing is good. We feel 
that certainly the bilateral agreements are very, very 
important, and again, the net effect will be an increase in 
U.S. jobs as well.
    Ms. JENKINS. Thank you.
    Are there others that would like to respond?
    [No response.]
    Ms. JENKINS. No? All right. Thank you.
    I yield back.
    Chairman NUNES. Thank you, Ms. Jenkins.
    Mr. Marchant is recognized for five minutes.
    Mr. MARCHANT. Thank you, Mr. Chairman, and thank you for 
inviting me to go on our latest trade mission to Brazil. We had 
a whirlwind trip. We got to see the growth in Brazil. We got to 
see massive preparation for the World Cup and the Olympics and 
probably more infrastructure projects than I have seen anywhere 
except in Texas. We have a lot of infrastructure going in 
Texas.
    A couple of questions have come from that. I understand 
that there are some restrictions on reinsurance and the 
liability insurance in Brazil. There is some issue about 
allowing foreign companies to come in and write reinsurance 
insurance.
    Is there any response to that?
    Mr. GLUSKI. AES is very capital intensive. We insure about 
$42 billion of assets around the world, including Brazil. We 
have not had any issues with reinsurance. We have a captive 
insurance program that we run from Arlington here in Virginia 
and that Brazil participates. So we really have not had that 
issue directly.
    Mr. MARCHANT. Okay. Another question. We just in the news 
recently read about Brazil's abandoning its tax on foreign 
investment inflows. Apparently the worries about hot money have 
dissipated, and Brazil is now concentrating on, basically 
concerned about currency depreciation.
    And what does this mean for U.S. investors? Has it changed 
the climate of the way U.S. investors, big investors, are 
looking at Brazil?
    Mr. GLUSKI. Well, again, people like us who invest in 
infrastructure projects, we invest for 30 or 40 years. So 
basically I think I have not seen any. You know, that policy in 
and of itself is favorable in terms of people being able to 
make more investment, but really these are driven by 
fundamentals in your long-term views.
    So I do not see it will have an impact more in terms of 
financing, but I do think that especially for large 
infrastructure projects we prefer to finance them in the local 
currency to avoid having liquidity issues due to devaluations, 
et cetera.
    Mr. MARCHANT. We have a couple of companies in my area, 
Vermeer and Johnson & Johnson, that have significant operations 
in Brazil, and I would just like to solicit the comments of 
both of those companies on your experiences and your plans to 
expand there.
    Mr. MARQUES. Yes. Thank you, thank you, Congressman, for 
the question.
    Again, the thing I would like to add, I mean, our presence 
in Brazil with Johnson & Johnson is for more than 80 years. We 
al

[[Page 61]]

ways think more in terms of long term. Brazil is our second 
biggest consumer affiliated company outside of U.S. in terms of 
size. We do have one of our largest manufacturing facilities in 
Sao Jose Dos Campos that produces both pharmaceutical device 
and consumer products for the Brazilian market, and we also 
export as we also import to the Brazilian market a lot of 
products, some of those produced in the United States.
    So we continue to be very bullish on the Brazil economy 
and, you know, in terms of our future growth in the country we 
continue to invest and be very committed to the market.
    I would say that some of the short-term changes in the 
investor's market was already was said here. There is a high 
level of sensitivity on inflation, and the central bank 
continues to act pretty diligently in order to make sure that 
we contain continuing inflation under the parameters and the 
agreed target. So I think that is what we might see short term, 
but I do not think that changes our view long term.
    Mr. MARCHANT. Okay. Mr. Hundt?
    Mr. HUNDT. I think in our case we only see our investment 
ramping up in Brazil. Again, the markets we serve--
infrastructure, energy, renewables, and agriculture--we believe 
are at the beginning stage of development. So our investment 
will increase, but really in the near term I would say the next 
five years we see primarily most of our business being 
generated out of manufacturing from the U.S.
    In the future we may do more manufacturing in Brazil, but 
for our focus right now, it is really building out local 
distribution. It is building out the relationships and really 
extending into the markets that I described earlier.
    So it is our top market that we are focused on, and again, 
I think normally for Vermeer, which is a medium size company, 
if we can help companies like ours navigate the opportunity in 
Brazil, much simpler, lower cost, make it more efficient to 
export. I think there are many companies like Vermeer that can 
come along and enjoy tremendous success in Brazil and have just 
a very, very exciting future.
    Chairman NUNES. Thank you, Mr. Marchant.
    Mr. Rangel is leaving, but I did want to announce that 
yesterday was his forth-third birthday. Happy Birthday, Mr. 
Rangel.
    [Laughter and applause.]
    Chairman NUNES. Mr. Young is recognized for five minutes.
    Mr. YOUNG. Well, thank you, Chairman Nunes, Ranking Member 
Rangel, for allowing me to be a guest of this Subcommittee.
    I represent a district in south central Indiana where 
Cummins has a major presence, and Cummins has been involved in 
trade and other economic activities in Brazil since the 1960s 
really, more robustly starting in the 1970s. They manufacture 
there; they distribute; they sell; and they export out of the 
United States into Brazil.
    They are a major beneficiary of the generalized system of 
preferences, which I support and support its extension. And I 
hear in speaking with them that high tariffs remain a concern 
of theirs.
    One of the issues that I do not believe has been addressed 
though as it pertains to them and so many others is the customs

[[Page 62]]

side of things, goods moving in and out of Brazil and the 
efficiencies related to that or lack thereof.
    What sort of progress in terms of modernizing the customs 
system are being made, and how can we make a difference here at 
the federal level in terms of moving that effort forward.
    I see potential practical reforms that could be made. I 
understand there is a ports reform bill that is currently very 
much on the radar, and that holds promise because it allows, as 
I understand it, more private investment to go into Brazil, to 
expand and modernize their port system.
    But I will open this up to any members of the panel that 
want to speak to it. How can we improve the customs system 
there in Brazil?
    Mr. McLARTY. Well, I think you are absolutely right that 
the customs regime is simply not where I think it needs to be, 
and I think it is probably not where the Brazilians would like 
it to be. So I think the trend line is better, but there is 
much more work to be done.
    You are right. The President did introduce a port bill to 
reform that that has passed. I do not believe by the Brazilian 
congress. But there is still work to be done in that area as 
well.
    But I think when you get down to these essential--I will 
not say mundane--but essential blocking and tackling issues, 
all of this goes to making Brazil in my judgment more 
competitive and, therefore, more prosperous, and it presents 
opportunities for U.S. firms.
    I think the private sector, again, through the CEO Forum, 
the U.S.-Brazil Business Council, other private sector 
initiatives can be singularly helpful. I am well aware and have 
had first-hand meetings and dealing with the Cummins people in 
Brazil, and they are highly professional. They have been there 
a long time, highly respected.
    So I think you put your finger on a key important issue.
    Mr. GLUSKI. We have some Cummins equipment in different 
places around the world. I would say both the U.S. and Brazil 
need to modernize their ports, and the U.S. certainly needs to 
do a lot more to improve its infrastructure.
    So as a buyer of heavy equipment really what I care about 
the time that it takes to manufacture it and to get it on my 
facility. I would really recommend that in addition to besides 
everything that Ambassador McLarty said, it is also important 
to think about investment in U.S. ports and facilities to make 
us more competitive, and the same applies to Brazil.
    In the case of Brazil, they have grown rapidly. Their trade 
has grown very rapidly, and in some cases their facilities are 
lagging behind.
    Mr. HUNDT. We, too, are big user of Cummins engines. So we 
are quite familiar with that team, but I would say this is a 
major issue, and it leads to the complexity of doing business 
there, but in our case, our average of the time a machine 
leaves the U.S. to it arrives to our distributors is an average 
time of about four months. So clearly there is capital. There 
is time. There is a lot of just waste in the process.
    So the more efficient we can be, certainly that is a big 
issue, and efficiency there would have a large impact on our 
industry.

[[Page 63]]

    Mr. MARQUES. Again, I would say that in general 
infrastructure is a major opportunity in Brazil ports, customs, 
and how, again, the private sector is a very important topic on 
our Brazil-U.S. Council with our members. I think there is an 
opportunity to share best practice. There is an opportunity for 
the private sector to invest more in upgrading the 
infrastructure in Brazil, and that will help, you know, the 
business to become more efficient and more competitive.
    Mr. YOUNG. Well, thank you.
    I, for the record, would agree with your assessment of the 
need here. Domestically also investment in our infrastructure, 
I think our inland waterway system, I would add that to the 
mix, our interstate highway system.
    There is a sort of political science issue that sometimes 
creates a challenge, and that is the sequencing of these 
various things. Are we, in fact, going to deal with the largest 
spending programs of government in conjunction with these 
important investments?
    So we will continue to have that dialogue. Thank you very 
much, and, Mr. Marques, perhaps in the future we could engage 
in a dialogue on regulatory reform. That is very important to 
Eli Lilly, which also has a major presence outside our 
district, and I know you have written on this issue.
    I yield back. Thanks so much, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Young.
    Mr. Neal is recognized for five minutes.
    Mr. NEAL. Thank you, Mr. Chairman.
    I thought you did a good job last week with the informal 
get-together that we had. I thought it was very helpful to the 
dialogue, and let me follow up on the questions that have been 
raised.
    Perhaps, Mr. Marques, you could speak a bit about your 
experience in exporting to Brazil and what the hurdles are that 
you have faced. Frequently as we have done trade policy here in 
the more than two decades I have been on the committee, seldom 
do the trade agreements turn out to be as good as the 
supporters say nor as bad as the critics say, and there are a 
number of hurdles that we discover along the way that had not 
been anticipated in terms of implementation. So perhaps you 
could speak specifically to your experience.
    Mr. MARQUES. Thank you, Congressman.
    Our experience in selling to Brazil has been very 
successful. I would say, you know, some of the tariff and the 
hurdle rates are always a challenge, but I will tell you that 
one of the things that is more challenging is to make sure that 
we develop the products that the consumers in Brazil really 
want, and having that deeper understanding sometimes of what 
really is important and relevant for the Brazilian consumer, 
especially the emerging middle class, sometimes it is more 
challenging than the trade agreement.
    So having that consumer insight and understanding the local 
markets and capturing that opportunity sometime require 
investments, R&D, and local talent to really make sure that we 
can develop products that can, you know, meet the Brazilian 
needs.
    Mr. NEAL. Perhaps the other panelists could speak to the 
challenges that they see. I mean this is a very important part 
of the world for America, and your insight is important.

[[Page 64]]

    Mr. HUNDT. Sure, and again, in our case it is the 
complexity of doing business in Brazil, but also the landed 
cost with the tariffs, the duties.
    I think, in summary, if we have a level playing field, we 
as Vermeer and as American manufacturers with innovation, with 
productivity, we are not afraid to compete against anybody as 
long as there is a level playing field. So if that can be 
engaged and clear the path, you know, we are bullish on the 
future of Brazil and anxious to complete and look forward to 
much success in the future.
    Mr. NEAL. Doctor?
    Mr. GLUSKI. We are basically in a non-tradable goods 
sector.
    Mr. NEAL. All right.
    Mr. GLUSKI. But we do obviously import capital goods, and I 
agree with my colleagues.
    Mr. NEAL. Mr. McLarty.
    Mr. McLARTY. Well, I certainly think you have got trade 
agreements and the dynamics surrounding them absolutely correct 
in your assessment of not quite as good or quite as bad.
    Mr. NEAL. I remember being lobbied on some of them.
    Mr. McLARTY. Yes, I think I remember that as well. It is 
good to see you again.
    Mr. NEAL. Nice to see you.
    Mr. McLARTY. No, I think my colleagues have really made the 
right points in terms of just the absolute necessity to 
streamline the ways that we do business. It will lift the 
standard of living in Brazil, and it will lift the standard of 
living in our country as well, and we surely need that in our 
middle class, as you know.
    Mr. NEAL. Could any of you speak to the patents issues as 
it relates to the new Health Regulator? That would be of 
interest to the people of Massachusetts. I can assure you of 
that.
    Mr. MARQUES. Again, it is one of the areas that is a high 
priority for the council working with the private sector, 
making sure that we can progress legislation in Brazil to 
protect intellectual property and protect, you know, discovery 
and innovation. It is something that we are seeing some 
progress with the congress in Brazil, progressing the agenda 
there. We are not where we need to be, but that is one topic 
that we will continue to push pretty aggressively.
    Mr. NEAL. That will be very important, Mr. Chairman, to my 
constituency.
    Thank you.
    Chairman NUNES. Thank you, Mr. Neal.
    I want to thank each of you for your testimony today and to 
help us think through how we can advance in a constructive way 
this bilateral relationship. I look forward to working with Mr. 
Rangel and Mr. Froman when he gets confirmed to try to have 
something prepared. It will be our goal to get something 
prepared before Ms. Rousseff arrives in the United States in 
the fall.
    So I want to thank all four of you for your time and 
presence today. The record will be open until June 26th of 
2013, and I urge all interested parties to submit statements to 
inform the Committee's consideration of the issues discussed 
today.

[[Page 65]]

    This hearing is now adjourned.
    [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
    Questions For The Record
    [Public Submissions for the Record follows:]

                                 


[[Page 66]]



                                Cargill

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    


                                 


[[Page 68]]



                                Braskem
                                
                                
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                                   








                             Amcham Brasil
                             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                                





              Comprehensive Study of Brazilian Wine Market
              
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]