Leo Drumond/For The Washington Post - Consumers browse products in a Sao Paulo department store Nov. 14. Brazilians are taking more debits to keep consuming goods in the city. The country’s slowdown and the government’s response to it is a growing concern among U.S. officials.
SAO PAULO — When the Brazilian economy began to stall last year, officials in Latin America’s largest country started pulling pages from the playbook of another major developing nation: China.
They hiked tariffs on dozens of industrial products, limited imports of auto parts, and capped how many automobiles could come into the country from Mexico — an indirect slap at the U.S. companies that assemble many vehicles there.
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A large state-funded bank grew larger, steering cheap money to projects that rely on locally made goods and equipment rather than imports. Other rules and tax breaks for local products proliferated under President Dilma Rousseff’s “Bigger Brazil Program.” The latest statistics show continued sluggishness, with Brazil growing at an annual rate of about 2.4 percent, less than the United States.
The country’s slowdown and the government’s response to it is a growing concern among U.S. officials worried that Brazil may be charting an aggressive new course — away from the globalized, open path that the United States has advocated successfully in Mexico, Colombia and some other Latin American nations, and toward the state-guided capitalism that the United States has been battling to change in China. As the world economy struggles for common policies that could bolster a still tentative recovery, the push toward protectionism by an influential developing country is seen in Washington as a step backward.
“These are unhelpful and concerning developments which are contrary to our mutual attempts” to strengthen the world economy, outgoing U.S. Trade Representative Ron Kirk wrote in a strongly worded letter to Brazilian officials that criticized recent tariff hikes as “clearly protectionist.”
Brazilian officials insist the measures are a temporary buffer to help their developing country stay on course in a world where they feel under double-barreled assault from cheap labor in China and cheap money from the U.S. Federal Reserve’s policy of quantitative easing.
“We are only defending ourselves to prevent the disorganization, the deterioration of our industry, and prevent our market, which is strong, from being taken by imported products,” Brazil’s outspoken finance minister, Guido Mantega, said in an interview. Mantega popularized use of the term “currency war” to describe the Federal Reserve’s successive rounds of easing, which he likened to a form of protectionism that forced up the relative value of Brazil’s currency and made its products more expensive relative to imports from the United States and also China.
Brazil’s voice on global economic and trade issues has become an important one, alongside those of China and India, as a nation that is successfully pulling a large population into the middle class. Big and resource-rich, it is now the world’s sixth-largest economy — between Britain and France — with a major presence in world agricultural and energy markets, and home to a few globally competitive companies such as aircraft maker Embraer. The financial center of Sao Paulo has become a staggering megacity of endless sprawl and helicopters hopping over gridlocked streets to skyscraper landing pads.
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