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89–475 2016

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 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON TRADE 

DEVIN NUNES, California, Chairman 

KEVIN BRADY, Texas 

DAVID G. REICHERT, Washington 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

CHARLES B. RANGEL, New York 

RICHARD E. NEAL, Massachusetts 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 


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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. Andre ́s 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 


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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:] 


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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. 


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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. 


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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/

f 

. 

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 diaVerDate Sep 11 2014 13:39 Jun 27, 2016 Jkt 089475 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\89475.XXX 89475

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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. 


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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 presalt 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 


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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:] 


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Chairman NUNES. Thank you, Mr. McLarty. 

Mr. Gluski, you are now recognized for five minutes. 


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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. 


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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:] 


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f 

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. 


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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. 


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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:] 


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Chairman NUNES. Thank you, Mr. Hundt. 

Mr. Marques. 


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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. 


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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:] 


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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 


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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 


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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 

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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 


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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 


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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 


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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. 


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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 

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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 


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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 


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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] 


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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, 


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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. 


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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. 

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. 


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[The information follows: The Honorable Peter Roskam] 


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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. 


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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 


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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 


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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 alVerDate Sep 11 2014 13:39 Jun 27, 2016 Jkt 089475 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\89475.XXX 89475

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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 


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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. 


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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 BrazilU.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. 


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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. 

This hearing is now adjourned. 

[Whereupon, at 11:30 a.m., the subcommittee was adjourned.] 


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Questions For The Record 

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Comprehensive Study of Brazilian Wine Market 


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Æ 


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