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Opening Mutually Beneficial Opportunities

23/06/2015 em Brazilian Business
By Steven Bipes, member of AmCham Rio de Janeiro Board Executive Committee and Senior Advisor of the Albright Stonebridge Group
By publication of this article, Brazilian President Dilma Rousseff and U.S. Barack Obama will have met on June 30 in Washington DC, resuming dialogue after the fallout resulting from the Snowden relations postponed the previously planned State visit in late 2013. The joint Brazil-U.S. business community applauds and welcomes the resumption of regular top-level dialogue as a means to open mutually beneficial opportunities.

Both governments have sought the “deliverables” that can be announced as a result of the visit. These were assembled from the group of deliverables “on-deck” since the postponed State visit (e.g. Totalization Agreement), a revisiting of previously negotiated agreements not signed to date (e.g. Open Skies), a list of laudable G2G cooperation initiatives if realizable (e.g. Environment), a list of initiatives with fuzzier scope and action (multilateral and third-country cooperation) and the list of over 120 specific priority asks from the private sector to “debureaucratize” commerce and investment between the two countries.

I do not provide here a full list of the numerous examples which fall into each category but instead focus on the top four asks the Brazil-U.S. business community, including the AmCham RJ, offered to both governments as priority areas for action.

Bilateral Tax Progress
Some debunking is required of the criticism of the 40-year Holy Grail goal of a Brazil-U.S. Bilateral Tax Treaty (BTT). Progress has been made on this front in the past several years since it was decided to break-up and address each of the major constituent technical obstacles: Tax Information Sharing, Transfer Pricing, Tax Mediation, Tax Dispute Resolution, Tax Sparing. While criticism might have been warranted five years ago, in 2013 the first chunk of this iceberg was finally chipped away with passage of the Tax Information Exchange Agreement (TIEA). While the private sector continues to develop proposals for each of the other areas, next in line is Transfer Pricing. Progress was made in 2015 in visits between U.S. and Brazilian authorities in recognizing the degree of non-alignment in their respective transfer pricing definitions. A concrete deliverable following the visit in the tax area, albeit a “process deliverable”, would be the establishment of a standing G2G Working Group to examine Transfer Pricing to deepen this examination with a goal of eventually reaching agreement to adopt a compatible and meaningful definition of transfer pricing based on the same interpretation of the common international OECD standard. As with all such dialogues, formal mechanisms for the private sector to contribute to and receive debriefings from the governments are welcome.

Taking the cue from the two governments which have said that there is a major role for the private sector in driving the bilateral relationship, the AmCham RJ supports the work of its partner organizations in the Brazil-U.S. Business Council (BUSBC) – U.S. Chamber of Commerce, the National Confederation of Industry (CNI) and the AmCham Brazil which have each contracted third-party examinations of the benefits of an eventual trade agreement between Brazil and the United States. Each party expects to consolidate its respective findings and make recommendations to the governments for their consideration later in 2015. The action for the governments now is to prepare to receive this input for due consideration by year’s end with a view to realizing mutually-beneficial gains in the coming years.

Trusted Traveller Program
Together with its partner organizations, the AmCham RJ is a member of the Brazil-U.S. Visa Free Coalition whose goal is to ease travel for Brazilian and U.S. tourists and business people (of every size of business) by realizing the entry of Brazil into the Global Entry and Visa Waiver Programs, reducing U.S. immigration waiting time in the case of the former and eliminating the need to get visas in the case of the latter for visits up to 90 days. The two programs are separate, but generally require increased information exchange between the two governments on would-be travellers.

Global Entry Pilot Project (GEPP)
Similar to the approach in the tax area of first realizing the TIEA before a full BTT, it was decided that realizing a Global Entry Pilot Project (GEPP) would be a productive first step to implementing full unidirectional Global Entry into the U.S., potentially leading to a future similar program in Brazil, all hopefully being done in parallel to ramp-up and ease Brazil’s eventual entry into the Visa Waiver Program. The AmCham RJ understands that while the Brazilian Federal Police, Ministry of Justice and Receita Federal have taken steps to realize the GEPP, the Casa Civil has not to-date made the priority decision to ensure that all of the involved ministries complete the requisite preliminary technical steps to announce the initiation of the GEPP by June 30. Some ministries, including the Ministry of Foreign Relations, have cited both a desire to realize the GEPP while simultaneously stressing some of the complexities, citing difficulties in proceeding pending a clear and unequivocal orientation and mandate from the Casa Civil to do so. It is therefore possible that even the modest goal of realizing the GEPP could fail to make the list of visit deliverables. A clear win in this area would be the priority decision of President Rousseff to realize completion of the necessary GEPP technical steps by all of the requisite Brazilian ministries and agencies, and in return, for the White House to ensure this item stays on the agenda for some progress in 2015.

Visa Waiver Program (VWP)
Roughly five things need to happen for Brazil to enter into the VWP. First, Brazil must comply with the statutory requirements of the VCP legislation which includes, amongst other metrics, having a visa rejection rate less than 3%. Brazil’s rate is currently just above this mark though trending in the right direction. While the possibility exists that this legislative limit could be raised to 10% over the next decade, for the time being, there is little the Brazilian government can do to but to wait. However in parallel, progress with the second, third and forth requirements could proceed. They are the negotiation and signing of bilateral agreements for the two governments to share information on: (1) lost and stolen passports (already substantially complete via Interpol cooperation); (2) convicted criminals, and (3) suspected terrorists. Though potentially polemic on first examination, executive prioritization by Casa Civil to comply with these requirements, as have the governments of 38 other countries, could at a minimum enable the announcement of a timetable to implement VWP. The fifth item that could ease Brazil’s entry into the program would be for the Obama Administration to find a means within the VWP legislation parameters that would allow the Brazilian government time to address potential non-compliances once in the program to address them vs. facing immediate expulsion as has happened with other countries – a particular concern for the Brazilian government.

The gains of announcing such Trusted Traveller Program between Brazil and the U.S. would be both substantive and symbolic. Over the past few years, the business community has successfully advocated for the recognition of Cachaça as a distinct product of Brazil and Tennessee Whisky and Bourbon as distinct products of the United States. While not impactful in broad commercial terms, this success has improved value to these sectors and consumers without detriment to others while simultaneously removing an unnecessary sticking point in the bilateral trade agenda. Removing the (greatly improved) yet still bureaucratic requirement to get a visa to travel to either the Untied States or Brazil will similarly be symbolic of the “Brasil sem Burocracia” that President Rousseff made as a second term goal and of the improved bilateral ties both presidents are seeking to demonstrate in their June 30 meeting. If the governments wish to ensure that their current list of deliverables is sufficiently ambitious, and viewed as such by their respective peoples who yearn for more borderless interaction, exchange, innovation, investment, business, and tourism, here is a candidate whose time is more than ripe.



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