 Excellent. So we're going to get started here. I want to welcome you all and thank you all for coming today for what I think it's a little cooler outside, I was told. So thanks for weathering the cold. But I think it'll be worth your while because today we have a really, really great event. And I think it's a very timely event on what we can expect from Brazilian President Dilma Rousseff's second term. Before I get started though, I just want to set the scene a little bit for the discussion. What's going on in Brazil at the moment, what the current environment is politically and economically. I know this morning there was a pretty big, I guess, resignation of the Minister of Education as if things weren't already complicated enough in Brazil. I think this development is noteworthy and again it makes it a very timely sort of event to have. I'm sure you've all seen or you saw the past weekend's events, the protests that we saw across Brazil. The figures of who participated or the numbers are disputed but the range is something like from 200,000 to 1.5 million people took to the streets across the country to demand change on a series of issues. A lot of the dissatisfaction that was expressed in the protest is related to the President and her workers' party. But that isn't the only issue. The country's economy is in recession despite earlier predictions for growth over 2%. Inflation is the highest it's been in a decade. There's a growing water shortage and some are talking about the potential to implement an energy rationing system and of course there's the ongoing corruption scandal with a state run oil company Petrobras as well. So the progressive party heavily implicated in the scandal and PMDB reportedly less friendly to Dilma's congressional dialogue, the environment in Brazil now I think is very sensitive and very challenging. So all of that is to say that there are some challenges in the President's path. The lackluster economic performance in particular creates a tricky environment for Dilma not just domestically but also internationally. And what can it look like? What can we expect from the short term? There's been a lot of talk about the potential for Brazil to expand its foreign trade as this means boosting the country's economy. Could this be something that could be pursued? And there's also a hope around this prospect because of visits that we've had from different members of the government. We here at CSIS were lucky to host Brazil's Secretary of Foreign Trade yesterday and the dialogues that he had with other, with his counterparts here in the US government. So it sounds like some things are happening there. It sounds like they were able to lay the groundwork for expanding bilateral commercial ties, which I think is important. It's also important to recognize that the dialogues alone are an important gesture of the willingness to expand bilateral trade cooperation for both sides and really sort of normalize this relationship that I think has had some tension and some challenges during the past year. They have the potential to set a new tone and this troubled, I think, bilateral relationship could be entering into a new phase. So we have to keep the broader context in mind, of course, with what's happening in Brazil. Yes, expanded trade with the US has the potential to help revitalize the Brazilian economy and shift focus away from some of the problems at home if that is what the president pursues. But the turmoil has to be taken into account and that's why we have these two, just fine, I was looking for the adjective, the right adjective here, but these really just choice experts to talk about this today, to talk about if this is an opportunity to improve Brazil's economy while drawing the focus away from Brazilian domestic problems or if the unrest is going to stop that from occurring. So to talk about this today we have Hussain Colute that is a scholar and PhD candidate at Harvard University's Weather Head Center for International Affairs prior to starting at Harvard, Hussain worked throughout Brazil's public administration as a senior consultant at the Ministry of Foreign Affairs, as the head of international affairs at the Supreme Court and as the director general of the Department of, or Department for International Legal Cooperation in Brazil's Office of the Prosecutor General. You have, I think, his bio and you can see how truly gifted he is. He's co-authored publications here at CSIS, I'm really happy that he's a senior associate here and he was able to visit us from Cambridge. We also have Joel Augusto de Castroneves, whose reputation I think precedes him. He's head of the Latin America team at Eurasia Group before his current position, Joel worked for 10 years in political risk analysis and advisory for global markets, corporate energy and government clients in the US and in Brazil. He's written extensively. You're likely, whenever you see things about Brazil in the major newspapers, you're likely to see his voice, his quotes, his opinions, which are valued highly and which I value especially. So I'm really happy to have both of you here. Just to remind you, to remind all of you, we're on the record this afternoon. We're webcasting. So whenever we go to questions from the crowd, remember there are thousands and thousands of people watching you right now. So without further ado, I'm going to do this a little differently than in the past. Usually what we do is we allow for our invitees to have sort of an opening statement. I'm sure, I mean, both of these folks have views and have impressions on what's happening in Brazil. I'm going to try to direct the discussion a little bit more and I'm going to try to put some provocative questions and get you guys to give us insight on how you see the situation. I think I'm going to start with Joao. I want to get some views from you and get you to kick this off a little bit. Tell us a little bit more with more depth about the economic challenges that you think Brazil is facing. How bad is it? Where do you see that things might improve? Do you think that the judgments out there are overdone or what would you feel objectively would be the correct assessment of what's happening in Brazil? First and foremost, thanks, Carl, for the invitation and a pleasure to be here. My good friend, Hossain, I think that the obvious thing to say is that it's really bad. I mean, given the headlines that we've seen out of Brazil over the last several weeks or months or some would say a couple of years, the bad news is that it would definitely headed into a very tough, at least 2015. I think it's a very tough year both from a political and economic perspective. Many, many challenges ahead and no easy way out of where Brazil is currently. But the good news, I think, and that's where we look beyond the haze of the near term and all these negative headlines from Brazil, is that there has been a clear change within the government, within President Hossain herself, to implement a course correction. I mean, if you look at her first four years, I mean, let's say that her second term, her second mandate will be the mirror image of her first. What do I mean by this? Her first term in office was basically a government that was very suspicious. It's one of these relationships towards the private sector, kind of strong army in the private sector. There are many examples of protectionism, local content requirements across the board, many different sectors. And at the same time, a president that was throughout most of her first four years in office, strong politically. But we see now in the second term, I think, and we see more and more, is a president that is much more willing to correct the course, although she's not going to be publicly endorsing this course correction. But at the same time, she will be weaker politically, meaning that her capacity to implement this course correction will diminish over time. But overall, we do think that there are some reasons that, you know, institutionally, we can talk more about this, that Brazil, despite all the chatter, that there are some institutional characteristics in Brazil that kind of channel policymaking towards more moderation, right? Especially, this is important, especially if you compare Brazil with some of our neighbors, where their policy swings go from one extreme to the other. But I would say that, you know, 2015 is the bad news, the hard year, but there are, you know, some elements of a possible recovery down the road. What in particular do you see as being noteworthy in so far as creating the case that some of these hard changes or decisions are being made? In what areas and what in particular? I think the main one, the most obvious one, is macroeconomic management, right? The fact that she chose, she changed her economic team, right? She, I mean, it was a long process from firing her previous minister, Guido Mantega, and appointing Dr. K. Levy, it was a long, long process. But it does underpin the view that, you know, when faced with more difficult political and economic challenges, usually the reaction function of the government tends to be more constructive, even though behind the curve. So appointment of Levy was positive. Levy's first measures in terms of putting the order in the House of fiscal policy have been positive as well, even though there's some, there will be some watering down of all these measures that has been announcing. And I think that, you know, and historically in Brazil, when you have a strong economic minister, economic team in power, usually traditionally the other ministries, the other policies tend to follow suit. So we'll start to see, I think, Levy's fingerprints, if, you know, if he survives the whole mess, fingerprints on other policies as well, trade policies, you know, it's not going to be a paradigm shift from the way things were before from Lula's years and Husev's first four years in terms of, call it what you want, state capitalism or more intervention of the government and economy. But it is, we'll see some incremental, I think, improvements, but it will take time. And the challenge will be that, you know, the president will be much weaker throughout this period, even though she's more willing to make this course correction, I think that her ability to do so will become constrained by, you know, by the fact that it took too long for her to make this decision. Well, Husev, saying with that in mind, what role do you see international politics playing? I mean, I repeat the development from earlier this morning was a pretty severe blow politically. How will this sort of partisan politics impact the president's ability to govern? Well, of course, Carl, first of all, thank you very much for the invitation and I am very happy to chair the floor with my friend, Joan, we know each other from a long, long time. Yeah, it's a very important question, what you're addressing. And I think she's in the middle of a big storm, political storm. Her coalition is melting, simply like that. And she has to re-calibrate her dialogue with her base, with her political base, particularly with the MDB, the strongest party in her coalition. That is not an easy job. The PMDB won a more space in the government. They are not satisfied only to have five ministries which are partially insignificant in terms of importance in Brazil. They are eager to have bigger space and bigger role. She doesn't have an alternative to substitute PMDB by another party. So she have to dialogue with that party and the challenge is how she's going to chair the power because the PT historically doesn't know how to chair power. So that will be her main, main, main challenge. And what we have to look at is around 50% of the Senate is under investigation. And mostly these 50% are from her base. So how is she going to deal with that aspect also? When you look also to the progressive party, as you said in the beginning, 50% of the progressive party are involved in corruption scandal. So it's another party from her base. So I think her governability will be in a, let's say, in a difficult way. But she now has to show if she are a technocrat leading the government or a political leader, want to fix and solve the problem. And with all of these issues and all these problems, I'm going to pick on Hussein before and feel free to come back to it. But with all of these issues, all these problems, you know, is there any time, any interest in dealing with foreign affairs? Is this secondary tertiary? Where does it fit? As we know, just recently, or in the recent past Brazil was trying to play a bigger role on the global stage. Are these aspirations? Are these objectives that the Brazilian government has had in the past simply placed in the back burner? Because of what's happening domestically? Or can we actually expect a sort of second coming of Brazil's interest in the foreign in the foreign sphere? Well, foreign policy hasn't been her main priority in her first mandate. That is clear. But that does mean that she will not act in second mandate. She need to expand the Brazilian export. She, she are obliged to interact with the world if she want to bring more investments to Brazil. She has to participate more effectively in the international order and expand Brazil relation toward Asia, toward the Middle East, and even to solve some problems in Latin America, particularly in South America. So I think the foreign policy will still has certain dimension. I do not believe that will be like third tire in her government. But that will be a challenge. How she gonna balance their turn in the internal problems with the foreign policy? So I believe her desire to expand her foreign policy to different regions in the world. So I believe the trade diplomacy will be the main aspects of her second mandate. And she need that in certain way to recover the economy internally. I agree with Hussain on the trade issue. But before, I'm difficult to see any major overtures, I think, in foreign policy for two reasons. First, I think that first, that there's been a lot of challenges within the foreign ministry in terms of budget. And I think that so this is a moment where the ministry, I think the new ministers model Vita, former ambassador here in the US, I think his main challenge now will be to kind of do some internal house cleaning in that sense and gains more leverage within the government for the ministry. And the second reason is that for a country like Brazil with limited power resources, presidential diplomacy plays a huge role, right? And I think that Lula had that Cardozo had that who said she doesn't have that because she doesn't, you know, she it's not, you know, I don't think she'll change. So that's why I don't think there was going to be major overtures. But I agree with with Hussain here, which is ironic, because usually presidents in with second mandate, second term presidents, weaker presidents, usually they resort to foreign policy to do a lot of the things that are less constrained by by the domestic constraints that exist. But I think on the trade, the trade front, we may see some good news, even though incremental, I think it's part of that story that I mentioned about the course correction on macroeconomic management, that you know, these imperatives in the economy of trying to correct the course, undo a lot of the things that has have been done in the recent past in terms of policy towards the oil sector towards the dollar that led to protectionism, etc. That, you know, that this will need to put this will put more pressure on Brazil having needing to have a more proactive trade policy in the past Brazil, the fact that Chinese growth and commodities boom kind of concealed for many long, long time, the lack of a proactive trade policy in Brazil, right, because of record high exports, record high exports, but then suddenly China is growing less exports, commodity prices are down. It revealed the fact that Mercosur for the last 20 years hasn't signed any free trade deal. They have actually three free trade deals outside of the region with with Palestine Authority, Egypt and Israel, if I'm mistaken. So this just comes to show how, you know, but you know, nobody was paying attention to this because China was buying everything that Brazil was doing. So I think that will definitely be something that will eventually change. And I already see some signs of that change now, but let's drill deep deeper in that what you hear the Brazilian officials talk about when they talk about trade, they talk about trade facilitation, regulatory convergence, and encouraging bilateral investment, right, but you can't really make a big impact only focusing on those things, right, you have to go a little deeper. So when you look at Brazilian trade diplomacy, what kind of expectations should we really have? And I will rehash, you know, is it the EU free trade agreement? The Pacific Alliance in a convergence, you have free trade agreements with all the countries in South America already, will that expand? And then Mercosur, does Mercosur move from being a customs union to a true trade regime? How do you guys look at that? Well, let's solve the problem step by step, not all together. What I see, Brazil has some clear targets. Okay, we cannot play in all fronts at the same time. And you cannot make all of them as a main priority at the same time. So I think the relation with the United States and a deep approach in the United States, I think that is a big approach in commercial terms, is one of the key aspects of her trade diplomacy. Secondly, the expansion toward Asia, mainly China, India, Japan, and Korea. So that is a second focus. Third focus, she's going to the Middle East this year, probably in the second semester to Saudi Arabia. So that represents ultimately certain trade relations. Of course, the bilateral agreement between Mercosur and the European Union is a very good, very good sign. So I think she has a wide range of areas and alternatives to play a trade international trade role, which is very good. What will be the results? We don't know. But I guess will be better than the last four years. I think in addition to the commodities, the price of commodities and Chinese growth, I think there are other more external factors that will influence a lot on where Brazil goes in terms of trade policy. I think that the Trans-Pacific Partnership initiative led by the US and also the Transatlantic, the TTIP with the European Union, I think that if those two major initiatives, if they go forward, they will eventually, they could eventually relegate Brazil's two main trade priorities over the last two, three decades to near relevance. One, it's the WTO. Because if you do have a TPP and a TTIP, you have a big chunk of the world's economy negotiating at WTO plus levels. And essentially Brazil has put a lot of eggs on the WTO and the Doha round basket. And the second one is the TTIP, it overlaps a lot with Latin America and the Pacific Alliance front. And it does tend to, if it goes forward, I wrote about this before, it tends to recreate the Tordesillas line in the region, instead of Spanish and Portuguese America dividing more open trade countries and more protectionist countries. And it does tend to, Brazil tends to lose multiple fronts here. So there is a big external factor there. But I mean, to your point, yes, I mean, I think that there's a third rail of Brazilian politics that you don't mention free trade. So you're not, but anyway, I think there's some incremental movements with the European Union, particularly that may create a momentum where Brazil now is accepting, at least put on the table, things that they weren't accepting a few years ago like procurement and other issues. And interesting with Brazil-US relations, before it used to be kind of an asymmetric relationship right where the US was the investor in Brazil and wanting to negotiate double tax and double taxation, intellectual property, etc. But now if you look at the amount of Brazilian investments in the US as well, Embraer, other companies, it's rising. So Brazil is starting to see the flip side of the coin of also investing in the US. And I think that this is a long term process of kind of being less opposed to intellectual property issues, protection of investments, and among other and double taxation. And just to sort of close this part of what we're talking about. Can you talk or can either of you talk about some of the challenges you touched a little bit on it, but I just want to go a little bit more on this. What are the challenges domestically that exist in Brazil when dealing with free trade? We know here, you know, here you have and just to sort of put it out there, you have the folks that focus on market access. Yeah. And then you have the folks that take advantage of free trade agreements to talk about environmental and labor standards. Right. And then you have the interest, the interest groups that are aligned with those different things. How does this play in Brazil? I think a quick answer is that, you know, that I tell to a lot of my American friends is that, you know, take a look at the mirror, right? And then a lot of the same dynamics that happen here with Congress, with districts, etc. Same thing in Brazil. You've had historically, I think a very, you know, pro free trade agricultural sector in Brazil, very competitive. But in the end, you look at the industrial sector, not so much, even though there's some incipient signs of change there, right? Because of some of the changes in Brazilian economy. But it's not going to be a consensus. It's not a consensus here. So it shouldn't be a consensus anywhere, I think. But I think, but the problem is that when the lack of consensus just paralyzes everything and you have a country kind of falling back, you know, while other countries in the region like Mexico and Chile and others are signing a lot of free traded agreements. Yeah, I agree with you, Joan, this point is we face internally the same problem as here in US, you also you facing or in other countries. But the key point here when if you want to ask about a free trade agreement between Brazil and US, I will tell you that is not a realistic thing for at least for the Brazilian perspective in the short medium term, because that will affect hugely our industrial sector and we are not prepared to engage effectively in a free trade agreement with the United States. And that also depends on the private sector. So which is the list of products you're going to put on that and in which areas Brazil are competitive and the United States are willing to accept that, for example, in the agricultural sector, we have several demands. But in the other hand, the United States, for example, do not accept all the Brazilian's demands for a free trade agreement in this particular issue. So free trade agreements, I don't think this is the best way to improve relations between countries could be one of the instruments, but not the main instrument. I think Brazil and US particularly have as they have a very fluid commercial relationship. The free trade agreement is a consequence in the future. Could happen? Yes, could not? Yes, will damage your relation? No, you know, so it's something that we should reflect more. I don't think also that United States need a weaker partner. I believe that United States needs a Brazil as a stronger partner and a stronger partner based on the free trade agreement that will destroy the Brazilian industrial infrastructure doesn't help this success of this free trade agreement. And that's how, or I guess that's how one of the challenges would be in the perception having to do with that. Before I get into the issue specific points on foreign affairs, though, the one question that I would sort of pose to you both because for the United States trade is a framework for relationships, right? It goes beyond party. It goes beyond, you know, whoever's in the White House. It's our institutional framework, legal institutional framework for continuity of a relationship with the country. If trade is not that area for to give shape to the US Brazilian relationship, what could it be? Is it is it climate change? Is it ethanol? What is is it energy? What in your view could that be? And I know this is one of those issues where I'm sort of asking you to speculate a little bit. But it's so important for this relationship to be able to define the expectations. No, it's it's hugely important. I fully agree. And I think that if you look at US's relationship with big, the major emerging countries or emerging powers, China, Russia, India, there's always a clear topic in the table, right? I mean, with India is a nuclear issue. And with China, you know, the strategic economic dialogue with Russia, you know, just Cold War to give an example, and the remnants of it. And with Brazil, I think with the BRICS, for example, is the one country where there's no clear access, there's no clear topic agenda, but you touched upon a few like environmental issues. Yes, I mean, there are a lot of areas where they could cooperate and energy. I think the challenges of dealing with energy in the world today. I think, again, could be a topic that could they could build upon. And I wouldn't go straight with trade. I think for Brazil trade, it's not a major I think it's not the framework. I think the framework begins with more kind of broader ideas. I mean, especially when you look at the Mercosul wasn't built on the trade agreement. Mercosul was the trade agreement was actually a result of a nuclear haproshman in the late 70s and so on. But you know, but I do think that it is a relationship in Sika that is seeking a, you know, a label, right? I mean, that goes beyond the well known label benign indifference, right? That has been kind of a, you know, it's, you know, it's a nice catchy phrase, but enough of it, right? So I think it's time to find a new, but I think there's some multilateral issues that are there could be evolved, but I don't know. I don't see any I think the same has the answer. No, I don't have the answer precisely. We have a lot of in common interests with the US. Okay. Of course, we have up and down up and down in certain topics. For example, Brazil had acting the last two decades, three decades in the stabilization of Latin America and part of it in the South America in term of democratic order and in term of human rights affairs. So that has been a very important topic in the bilateral relation between Brazil and the United States. And if you look, for example, to the Venezuela subject today, Brazil is strongly acting in the sense to construct a dialogue or a constructive dialogue between the opposition and the government. Of course, the Brazil perspective on topics different than US perspective for different reasons. But ultimately, Brazil has has strong sharing point of view with the United States in some international aspects like international governance, say that innovation and technology. But of course, I do agree with you all with India and with China, you have a more clear agenda. But for one important reason, the epicenter of the international relation, it's moving toward Asia. And the United States want to play an important role to Asia. That's why makes the things a bit clear. You know, Brazil doesn't touch immediately very strategic and important or key or sensitive issue in the United States agenda like disarmament or nuclear affairs or trade security as or economic security as you have with China or with Russia. So basically, I think in this new decade, we have to find common point strategic point between both countries. And that will be the challenge also for the Brazilian side. And let's focus on that a little bit. So you said that they are less likely to engage in these sort of high profile issues. But that is more of a development of learning from mistakes or is it a change of approach? And what I'm making reference here to is Brazil's attempt. Some years ago, Brazil with Turkey trying to broker a deal on Iran. And it didn't work out so well. Is that a function of learning from that particular situation? Or is it just that they've decided to approach their performance or their role in international affairs in a different way? And I'm going to ask you about that. And I'm going to ask you about other sort of issues that are sort of relevant insofar as defining Brazil's performance as an international actor. Tell me, what do you think about that? Okay, let's go step by step. Because I would say before we get to it's helpful for us to understand. We might not agree on the outcome of the act or where we end up on a particular issue. But I think it's very important to understand why Brazil has the background assumptions or why the United States has the background assumptions on a series of issues. In this case, it's the Iran issue. It could be the Venezuela issue. It could be Russia. But I want to get your sense of the why Brazil feels or wants to act in a particular way with some of these big issues. First of all, Brazil has a new political attitude in the international order. We cannot ignore that at all. Okay. And Brazil is trying to understand its capability to play important roles at the same time to play in important matters. One of the most or the biggest ability of Brazil is the mediation and especially the mediation of conflicts. From 18 United Nations peace building missions we are participating in 10. Most more than they have. We are the largest country who cooperated inside the United Nations on mission of stabilization with 17,000 of soldiers since the canal of Swiss war in the 50s. So Brazil identity and Brazil vocation is built on the construction of consensus and peaceful mediation. Okay. When we go to the Middle East topic, when we start to increase our relation with Iran, it was based on trade affair. We were expanding. We were finding different markets in the international arena. After the collapse of the free trade area of the Americas and after the deadlock with the negotiation with the European Union. So we start to diversify our partners. And the Middle East became as a part. Of course, the nuclear file particularly, the negotiation between Iran and the Western power was locked. And Brazil appears for the Western power as well a trustable mediator neutral and endowed by the capacity to reach consensus. As a actor in the Iranian point of view of Brazil is has been always a fair actor to mediate that. So Brazil, in my opinion, has the carte blanche from both sides. The problem here, I think Brazil negotiated that deal with Turkey based on some mandate. At least, let me say that an official mandate or a gentle agreement between countries to proceed with certain arrangement with the Iranian. I think at the end, the Western power were not expected that Brazil would succeed with Turkey to reach at least a yes from the Iranian side. And then they drop it. That is my perspective. Why we choose the Middle East or why the Iranian nuclear file? I think we did not choose. The nuclear fight choose us to be the mediators. You know, I think building on what Hussain said, you know, I think that there's a learning process between the both sides. Right. I think in Washington and Brazil, I think Washington needs to understand that assertiveness does not translate directly into anti-Americanism. Right. Number one. And for the Brazilian side, if they do want to be a part of these big issues, they need to follow through and explain maybe more clearly. In the case of Iran, I think that Brazil had an experience, similar experience in the 70s, right, of facing sanctions and that experience that did not work. In quite contrary, almost pushed Brazil to have a nuclear bomb. So I think that that Brazil felt that historic experience of, you know, bringing that to the table. Maybe it wasn't voiced correctly. So I think that that's part of, you know, that issues were also with the Brazilian, the Brazilian government and how they framed their long-term goals and how they voiced these goals. But I think that it's, you know, but I think it's a long process of kind of these two countries, Brazil and the US, in learning how to agree to disagree on some of the issues. But again, I think the ingredient that is missing, I think it's actually clear willingness and interest from both sides. Because what Hussain said, I mean, Brazil is not in a strategic area for the US as Asia is. In fact, a lot of people say that not to be in the US's radar is a good thing. So that's important point to highlight. But again, let's remember here. I mean, in 1998, the same year that Brazil ratified the nonproliferation treaty, India exploded nuclear artifacts. And there was a huge outcry here in the US. Secretary of State Madeline Albright saying, India is the example not to follow. Six years later, nuclear agreement between India and the US. And Brazil felt that by this, the US is sending a sign that it's worthy for you not to follow multilateral rules that the US helps establish. So, you know, I would say those are mixed messages. Okay. Okay. Before I sort of open it up to folks, I just want to ask you one question that I think is very timely. We're going to have the Summit of the Americas on the 10th, 11th of April. And it seems to be a very charged summit, potentially, with a block of countries that are supportive of the approach the United States is taking with Venezuela and a group of countries that are not. I'm not going to name them. What role, what role can Brazil play in this neighborhood to make it a more constructive summit? I mean, it's amazing that this would, I mean, just the fact that you had here the whole overture towards Cuba that would make this the summit of the Americas, right? Then for some reason, I don't know, you know, two weeks before, you know, you had the decision to point fingers at Venezuela. I mean, the timing was not ideal, you know, to say the least. But I don't know, maybe there's some, like, someone behind the scenes orchestrating all this. But I think that, you know, I think that there is, it's, the region has been going through a very, a kind of rebalancing moment where Brazil and other countries in the region have kind of ignored the hemisphere, basically the OAS, for example, and kind of focusing more on the region, try to, the Brazil's neighborhood is not even Latin America anymore, because it's South America, right? So I think that there's a, I don't think that necessarily bad. I think that, you know, it's not kind of new institutions against another institution. But so this is kind of just to show that the importance given by a lot of these countries that oppose, you know, some of the U.S. overtures in the region to the hemispheric framework is diminishing, I think, right? With few exceptions. But I don't know, I was kind of frustrated to see, you know, when first the news came out of the kind of falling in relationship between U.S. and Cuba, that that would mean, wow, this is a great, great opportunity for the U.S. to kind of, you know, put everyone on the table in the Americas, the 34, 35 countries in the region to kind of come together. But then, you know, there's always a rock, I think, in the middle. And this time around it's Maduro. And I think that's going to be an interesting factor that will pressure Housseff, I think, in Brazil to make a decision. Because Brazil has also a lot to lose in Venezuela as well. Interests. And I think that the risk is that once again, you had Honduras, Paraguay, Venezuela before. These two countries, Brazil and the U.S., always in different pages. Well, not related to the OAS, I think since the last five decades, the U.S. made from this organization a very perferical organization. And why this organization lost its importance for the majority of the countries. Why Brazil and other that are more focusing on the Celac or in the Unasur space. So to make from the OAS an important organization that ultimately will depend how the United States want to look to the OAS, you know. So this is one point. Could be the conference of the Americas, but could be one more conference with empty framework with nonsense document. And that's it, you know. I don't think particularly that the OAS is the right mechanism to solve autophagistic Venezuelan problem. Now, this is a very important point for two reasons. One reason is the United States conception of leadership is different than the Brazil conception of leadership. Of course, the United States has a lot of resources and leadership in the perception of the United States is more coercive, sanctioned and constraining the power of determined group. So in the Brazilian, we are not endowed with the same elements, but also our diplomacy is more based on the dialogue, insisting on the dialogue, the dialogue, the dialogue, negotiation, negotiation, an exhaustive negotiation until the end. So our perception of leadership and especially in South America, and we know how this sensibility is to deal with certain countries, it's always to keep the dialogue with both sides. We know, of course, several Brazilian officials could not assume that they agree with whatever Maduro is doing. Yeah, of course, they do not agree with what Maduro is doing. But sometimes they cannot say that publicly. And what they do, they act on the and the diplomatic way to try to force Maduro to understand that this is a democratic role and there is democratic responsibility inside of Mercosur or inside of the Unasur also. So Brazil results a way to deal with Venezuelans to keep to play double role with the government and with the opposition and to find a midterm possible midterm that will lead the country for for a reasonable stabilization, you know, and that will depend on different instruments and for Brazil perspective rather than in the United States project. We're going to go over to to folks in the in the audience here if you have questions, if you could just first say who you are and then get your question if we could have the microphone up here. Thank you. I'm Tom Rekford with the Foreign Policy Discussion Group. What about Lula in all of this? Is he waiting in the wings to be called back to rescue Brazil from its terrible problems? Do you expect him to be president again someday? I wrote a note for clients two years ago with its following title, Waiting for Lula, essentially making reference to Beckett's play that, you know, he's never going to come. And and and I think I still see that playing out because it does make sense for him to kind of suggest that he may run again, because that's what gives him power right now, leverage right now. But for X, Y, Z reasons, health, personal reasons, finances and even political instinct Lula, throughout his eight years in office, he accrued a lot of political capital, right? I mean, he kind of was able to for his own his own talents and also he was able in the favorable environment, right that he benefited from. He knows quite well that if he were to come back that he will consume a lot of that political capital, right? So for his legacy, it wouldn't be great. It wouldn't be wonderful. And I mean, it's and it's a healthy debate. There's no savior, right? It's I mean, that it's something that Latin America likes to, you know, for the last 100 years or even more, you know, Boliva and the list goes, Vargas, the list goes on. And, you know, even if Lula were to come back, there's no magic wand that would put Brazil out of it. Of course, he is really a talented politician like. And I so I do think I don't think that there's that person that will come back. I think Brazil's challenges are more it's hard work whoever is in the presidential palace, you know, kind of reading the reading all the everything that's happening with the site in Brazil and the challenge is a government challenge that Hussein referred to, but also the external challenges as well. The Brazil is not in the vacuum, right? What happens around the region here in the US reverberates and I think Brazil needs to respond to that. I mean, like to say that in Brazil, there's a fruit, which is kind of a blueberry, you know, like there's the same Brazil that everything that happens in Brazil is just what you call it only happens in Brazil. Not that's not necessarily true. I mean, a lot of the dilemmas that the government is facing today, you know, of a post commodity boom cycle are being, you know, being now developing other countries like, you know, Mexico, Argentina, Venezuela, the corruption issues that these countries are facing. So I think it's healthy for Brazil to look a little bit outside of the boundaries, words and see what's going on. But I mean, but to answer your question, I don't think Lula, you know, will come back and I don't think he wants to come back to be honest. Yeah, but we're just to complement what you don't want to say. That if you look in the last elections, and if you look at the the number of voters that they voted for the Labour Party or from for the Social Democrat, the difference is in decreasing every election. Yeah. So the last election, the difference was like around three million as a vote. The first election of Dilma in 2010 was like around 12 millions of votes. One Lula won. The difference was 20 millions of votes. So that suggests something that suggests that will be an alternates in power. And I don't think Lula particularly risk to go for an election, the fifth election of the Labour Party already with I not stable scenario. I don't think that he will risk. So all my prediction it's I don't think I agree totally which one he has certain political capital, but he will expand all his political capital in one shot. And I don't think that will be very clever and complimenting what Hussain said. I mean, all the success of those eight years that he was in office in most of in Hussaf's first few years, that formula doesn't work anymore. Right. I mean, it was kind of a you had the cycle of economic cycle that led to a political cycle hyper popularity, a lot of triggered by no credit expansion, both the family, all those social cash transfer programs were huge, successful emergence of a middle class. But now that reached a peak, right, the limit and exhaustion point. So it's a qualitative leap. I think that now for those people, the middle classes, you know, it's not about only goods and credit and money. It's also about the services that makes those goods useful. Right. And that's the big debate now. And actually, the people will not vote for Lula because it's Lula. Well, we have to take into consideration that the political or the political economical model has to change. So or he will come with a new model, different model, or he will fail with the same model. He will not be probably likely elected. Let me go up here up front. I'm Margaret Hayes. Once upon a time, Brazilianista, but I got diverted other issues. Um, João, I think you just mentioned for the first time in the discussion, the word corruption and a number of the news reports are saying that the people on the streets were really protesting corruption and and so forth. Can you talk a bit about what Dilma needs to do and can she do in order to address corruption, not just in Petrobras, but in in government itself, in administration and and so forth. And what does if she does something, what does that do in terms of her support in Congress? That's a multi-billion dollar question. It's it's I do think that she understands that you need to mean tackle corruption. I don't think that I mean, you could you could argue whether she she didn't do anything about it back then. But I don't think I don't I think she's honest, right? I think that she's probably mad mad as hell that she was part of, you know, that you maybe realize how big this the scheme was and she wasn't she was out of the loop and all that. But but no, I think that there's no quick fix. There's no silver bullet to solve this, right? I mean, it's kind of a if you look at Brazil over the last 20 years since all of the days is kind of all here we are back again to the corruption. But I think I see progress at two steps forward from one step back kind of thing. You know, Brazil has had a lot of institutional progress. I mean, it's an independent judiciary, right? I mean, you and which sets Brazil apart from other countries as well. I think that, you know, it is, you know, it does have a lot of dysfunctionality in the politics, but a lot of other democracies also have that have the use of functionality, especially when it comes to campaign financing. Are you saying something? You know, it's we're part of the group. I mean, that's one group that we're part of at least. I mean, not Security Council, not G7. At least the Brazil event. But I know I think that, you know, but it's interesting that there is a but, you know, of course, what's the government's knee jerk reaction when when this happens? Oh, anti-corruption pact or, you know, political reform. I mean, it's always interesting to have this kind of discussion. Of course. But I think for her, I think there's a clear path, a very concrete path. Petrobras, right? Kind of, you know, acknowledge all the wrong doings and, you know, however deep the hole in Petrobras really is and then, you know, come out of it, kind of improving the corporate governance of the company. And, you know, whoever needs to pay the price, pay that price. I think that's that would be a more concrete because anything else beyond that's kind of more abstract, right? But I think it's a challenge that it's going to be hard because, yes, it's going to it creates going to ruffle some feathers between her and her coalition, especially her party, right? Because as investigations go forward, there's a risk that you may start to get closer to the former president, Lula, or people from the previous administration and you'll force her to take a stand on whether to defend Lula or the PT if it comes to that position or distance herself and say, no, I'm not tolerant towards corruption. I would think that if it comes to this situation that she would pick the latter, right? As she has in the past, in the recent past, in the beginning of her first administration when she fired seven ministers in a row, which she appointed, right? She argued that she was an anti, not tolerant to her course, but she appointed those ministers. But but but I do see kind of silver lining to the story, right? I don't think that it's kind of, you know, I do think that there's some good news that will come from from all this. I mean, the fact that on the Mesa Loan scandal, right? That you have people in jail, right? The powerful people that went to jail, actually, that's for Brazil, is really a kind of very important sign. There's a lot of people going to jail now in this case. Well, just a bit common on that. What we have to look over the protests is the how the Brazilian democracy has improved in the last year. And the protests ultimately represent the quality of the democracy and the pressure of the society for changing and pressure for new political model. So this sign is very important. And if we look to the Petrobras case particularly, what is scaring is a number of private companies are involved, not politician, private companies. So that is also a very revealing point, you know? And that is the process of the modernization of the state and the improvement of the quality of democracy and governability. What else? Let me get a microphone up here, please. Ambassador. Thanks, I'm the ambassador of Borbetis, but I'm also Carioca. But you've sort of developed a question that I was going to ask, but I had my hand up before. Can we talk a bit more about Petrobras specifically? I mean, shares have gone from $50 to $5. I don't believe personally. My background is finance, but I never believe in this too big to fail. But if there's ever a company that's too big to fail, it would be Petrobras. I mean, can you give me some comments here, please? No, I mean, you're correct. I mean, Petrobras has always been kind of a very important symbol of Brazil, you know, politics for the last 60 years or so. And I think it does highlight, I mean, there's the story of the excessive complacency, maybe, or even arrogance of those boom years that happened in the Lula's eight years in office that you had essentially a lot of money channeling to Brazil and everyone. So there's no big major problems. I think the major challenge for that government was how to handle a lot of money, right? Kind of how to, in fact, you know, there was bottlenecks for Brazilian growth back then because essentially the money was there. Essentially, you did not have enough people in the government to have oversight of a lot of the investment projects, et cetera. So I'm saying this that, you know, there was a sense of abundance, I think, in the last decade, so to speak, in Brazil and other emerging markets as well. But now that the situation has, but I think that led to a lot of incentives for corruption as well, right? I think that it led to a strengthening of the politicians of Lula and in Brazil and his party for a long, long time. So I think that that strengthening kind of created some, not saying that he is to blame and just a scheme around him, that essentially undermine, you know, use Petrobras as a tool for some personal investment and also for political goals as well. And, you know, when it's happening at the company now, it's, you could say that it's an example of the risks of those policies of some called state capitalism, others called, you know, the national champions policies that, you know, you kind of pick the winners and losers. You select of protectionism here, there, local content, et cetera. I mean, the flip side of that coin is what we're seeing, right? I mean, by creating a reserve market in Brazil for construction companies, you're incentivizing cartel-like operations, for example, right? And, you know, I think what's going to happen now with Petrobras, it's going to be there. It's going to be a rough road ahead. I think, you know, they're going to divest. They're going to be smaller. But the good news is that the resources are there. The reserves are there, right? It's, and that's important. And Petrobras does have, I mean, despite the corruption it's kind of Petrobras does have, you know, a lot of expertise and technology, et cetera. But, you know, you have to play by the rules of the market, I think. That's the, you know, it's, you know, you can't reinvent the wheel. And, but that becomes clear when the wins of the global economy are less favorable, right? Because then you have, you know, that money that was flowing, making everyone happy, it's not there anymore. So you start to reveal all these problems that were there. But it's not too big to, I mean, I mean, it's too big to fail in some sense. Yes. But I mean, if you look at the size that it is now, I think it has failed to a great extent, right? If share prices are now where they were, maybe, I don't know, 20 years ago. So all the pre-salt news and all the changes that came, you know, if you look at the graph, a recent graph that came out in the press, I mean, look, it's amazing how, you know, it lost all that, you know, all that money that they got in the last 10 years. I mean, just, who put that? Let me, we, we have a little bit of time. Two more questions. I think you want to go. Want to stop? The gentleman here with the glasses. Oh, boy, three. OK, three questions. And then we'll get to that. And then we're, and then we're going to go. Hello. I'm one of Kim visiting Johnson of Insights from Korea. You have discussed a little bit about what I would call Brazil's or particularly Lula government's high profile approach to international affairs such as Iran. A question. My question is. What do you think as the domestic legacy of that kind of high profile approach to international affairs? Did it serve for, for example, the public's awareness of international affairs or did it backfire? For what did it serve? Domestically, domestic legacy. Thank you. Let me go with Barbara. Thanks, Barbara. Qachar from the Peterson Institute. I wonder if you could talk a little bit about the implications of fiscal tightening and the external economic headwinds for industrial policy in Brazil. And the gentleman in the back. And I think that's it. Alejandro Sanchez from the Council on Hemisphere Affairs. Two quick questions. Do you think, what do you think it's going to be the mass relationship of the military for a second term? Will she continue to have, will the military continue to have a blank check to buy whatever equipment he wants, either what it is. Swedish warplanes, a nuclear power submarine from France or a brand new carrier that they're trying to fix again. My second question would be, what breaks? That was supposed to be Dilma's pet project. They just had the summit over in Fortaleza last year where they finally agreed on the development bank. Do you think that person Dilma is going to maintain her interest in that particular initiative? Thank you. OK, so let's do, let's go with the international stuff with the military and with the bricks with Hussain. And then we're going to come back to you and I guess the domestic importance of foreign affairs for Hussain and then we'll come back to you with implications of fiscal, the fiscal situation in the industry and industrial questions. Well, about the impact of international politics or international affairs and the domestic things, I think it's really important when we talk about public diplomacy. Of course, Brazil, the Brazilian citizens, today, they look more carefully about Brazil's foreign policy, about Brazil's steps. That's why we are more critique internally about Dilma's foreign policy, for example, towards certain areas. So of course, we have more qualified society, more educated society and more capable society to understand Brazil's move in terms of international politics. What that brings in terms of positive effects? Well, when we look at the activism of Lula's government or his diplomacy activists that brought a lot of investments to Brazil and that reflect directly in the dynamic of the internal economy. Or when Brazil expanded its trades to Middle Eastern area, Africa or Asia, you will see some people, some very small companies in the northeast of Brazil, they will never had access or they never imagined to expose their very smally good things to abroad. Yeah, effectively, I think foreign policy has an impact on internal domestic affairs. About the BRICS importance, I do definitely believe that the BRICS and the National New Bank of Development, it's a key priority for Dilma in terms of foreign policy and that is not Dilma's project, that is Brazil's foreign policy, state's projects, you know. If she has a list of priorities in her foreign policy, yeah, that will be one of the top three topics, yeah. About the military, I didn't get that point. Future arms sales, yeah. Well, in this topics, Brazil is effectively improving its production of armament industries. But our perception in this market is different than the Great's power perception. And I frankly, frankly speaking, I don't know how she will really look or her government look to that subject in the near future. Implications of fiscal policy and their impact on the industrial sector. I think part of it, the question about the defense sector, so there's a related part to it, I think that an environment of fiscal constraint, I think that a lot of the projects that were, you know, Brazil wanted to buy or build military weapons and nuclear propulsion submarines with France, et cetera, et cetera. A lot of those projects will be postponed, right? Given the fiscal constraints number one. And number two, a lot of the Brazil's idea of building a military industrial complex, which in Brazil there's a positive connotation to that expression, given a lot of the major Brazilian players in that this project were the construction companies. The same construction companies who are involved in the Petrobras scandal and many of them will not survive. Those are not too big to fail. And I think that that will be, I mean, the idea of making Brazil a huge, more important player in the arms industry. I mean, it's still gonna be, but it could slow down. Yeah, it's not gonna have the money. And that ties to the story on the fiscal and the industry, industrial policy. I think, you know, the good news here is that the era of national champions of kind of picking winners and losers and having this protectionist here and there, protectionist measures and local content. I think that era has come to a close, right? Because you look at the public banks, BNDS, they don't have, you know, they reach the limit, right? That's the good news. They're not so good news. We're not gonna have a paradigm shift where she's gonna pray. There's not gonna be a Washington consensus 2.0, right? I don't think there's gonna be in the region, right? It's gonna be, but it's in that direction, like a more moderate direction, I mean, but with some, I think, more nuances. But the good news, as I said in the beginning, is that for industrial policy, I mean, industrial policy will always be kind of an important issue in Brazil, a cornerstone of, you know, a lot of important policy overtures in Brazil, and the role of the state, even though it will diminish, it will still continue to be pretty big by other, compared with other countries, right? I mean, Brazil privatized a lot in the past, yes, but look at who bought all of these companies, BNDS, state pension funds, among others, more kind of state players. I think that there will be more, in the direction of more market-friendly policies that will have a positive influence on the industrial sector. I think the good news that we'll see coming from the Petrobras scandal is that they're gonna open up, I think, the pre-salt for more competition, right? I think that they're gonna, it's unavoidable, even before the scandal, for many reasons, but I think the scandal is exacerbated to that need, which, and also in the infrastructure sector, the logistics sector, I think there are also, the government's already signaling that they will offer better terms to work with the private sector and foreign investments, and I think that's where, I mean, tying with the kind of Brazil-U.S. relations, that's where these two countries could build upon these overtures, the need of Brazil, Brazil has been growing through a, because of a consumption-led growth model for quite a long time, and I think now they need to transition to an investment-led growth model. It's the opposite challenge that China has, right? But to grow through investments, this requires credibility. There's no silver bullet that does the trick, and I think that's the main issue that will create opportunities. Not in 2015, this is gonna be a pretty hard year, so kind of, we need to kind of hold our breath and wait until 2016. So you heard it here, put your seatbelt on, tighten it up. So without further ado, thank you so much, thank you Hussain, thank you Joao. Thank you Joao. Thank you.