There are no bridges between governments Trump and Lula, says Troyjo, who chaired Bank of Brics

Relations between Brazil and the United States have never been as far away as now. This is the assessment of Marcos Troyjo, former president of the New Development Bank (NDB), Banco do Brics. He talked to the Infomoney This Tuesday (25), in Curitiba (PR), during Smart City Expo, the largest intelligent cities event in the Americas.

“I can’t remember a situation in the last 40 years when governments in Brazil and the United States were so different and had such different views on international issues. There are no bridges between the Trump administration and the Lula administration,” he said.

For the economist, who was once a special secretary of foreign trade and international affairs of the Ministry of Economy (2019-2020) and has an academic trajectory in institutions such as Harvard and Sorbonne, Brazil needs to focus on the basics. “Make beans with rice, that is, set up joint positions to be discussed with Americans.”

During the conversation, Troyjo also showed concern for BRICS, whose bank he presided between July 2020 and March 2023. This is because of the recent entry of new countries, such as Ethiopia and Iran. “With more members, the ability to generate consensus is lost and there is a risk of the bloc to become only a political statements, without concrete advances in strategic areas, such as capital mobilization and projects infrastructure ”.

Check out the full interview below.

InfoMoney: President Donald Trump recently announced his reciprocal tariff policy, which is valid on April 2. In the case of Brazil, there is already the taxation on steel, but there are concerns in the Planalto Palace about the possibility of a linear tax on the entire Brazilian exporting agenda. What would be the practical impacts of this measure for the Brazilian economy? Which sectors can be most affected?

Marcos Troyjo: Brazil is a peculiar country because it is one of the few nations in the world that has commercial surplus with China. And it is also a peculiar country because it is one of the few nations in the world that has a commercial deficit in its relations with the United States. And if you make an assessment of the type of product that is part of our exporting agenda to the United States, you will find more high -value -added machines, equipment and goods.

So, depending on how this measure of fair and reciprocal trade will be implemented by the United States, there may be an important impact on Brazilian exports. However, from what we have seen so far, several sectors will be affected not by measures specifically directed to Brazil, but by measures directed to specific areas of the economy.

Let’s assume, for example, that President Trump will establish a 20% tax policy on the trade of clothing and clothing items. Naturally, all countries that export to the United States will have their exports. This is a similar effect to what happens when you are watching a soccer game in the stands and are, say, at 17th level, watching the match normally. But suddenly someone in the first row is so thrilled that they get up. This forces the person behind to get up too, generating a domino effect in which everyone ends up. That is, everyone continues to see the game the same way as before, only in a position of greater discomfort.

IM: But is there any specific sector that can suffer more?

MT: From what I have seen so far, perhaps the only sector in which there would be an action more clearly directed to Brazil is the sugar and ethanol sector, which is an area in which Brazil has comparative advantages. A tariff decrease for Brazil would not have so much impact. By the way, I understand that if Brazil, the United States and India came into a major deal, we would take an important step for ethanol to become a divglobal and further entered the composition of energy sources that sustain a sustainable vehicle mobility.

Now there is another reading of what may become a fair and reciprocal measure, which is simply to reproduce for the entire economy the average import rate applied by each country. For example, today, on average, a Brazilian product that arrives in the United States is taxed with an import rate of 2%. Already an American product that arrives in Brazil is taxed, on average, by 12%.

If the United States decides to retaliate this way, things will be more difficult for Brazil. Today, approximately 13% of everything we export goes to the United States. There is also the possibility of Brazil to carry out gestures of tariff decrease. However, it is always good to remember that, at this moment, Brazil is part of a customs union with other Mercosur countries. Therefore, any broader and more sustained tariff decrease movement would need to be organized with its block partners.

IM: You recently said in an interview that there is some difficulty in dialogue between Brazil and the United States. What strategies could Brazil adopt to improve this communication with the Trump administration?

MT: I can’t remember a situation in the last 40 years when the governments of Brazil and the United States were so different and had such different views on international issues. There are no bridges between the Trump administration and the Lula administration. Considering the Brazilian business interests and the characteristics of this White House, which is very focused on the private sector, perhaps the best strategy for Brazil, especially for Brazilian exporters, to form alliances with US buyers.

American buyers have a stronger and more influential voice to try to modify the policies that are being implemented in agencies such as the United States Trade Department and the White House commercial representation office.

I believe Americans are overestimating their internal ability to replace foreign supply chains. In this scenario, not only will US consumers pay more for certain products, but also American companies will have to increase their investments (Capex), which may affect the distribution of and, consequently, the performance of these companies on the stock exchange.

Of course, the Brazilian government should make the basics: articulate joint positions to discuss with Americans and seek high level contacts among the authorities. However, from the point of view of effectiveness, I believe that alliances with the usual buyers of Brazil, who depend on these imports in their global value chains, will have more influence on the White House than other actors.

IM: This week, President Trump also said he can tax the countries that buy Oil from Venezuela. Do you think this can somehow shake the relationship between Venezuela and Brazil?

MT: President Trump has a stance that sometimes seems contradictory. The United States, until the end of the Biden Presidency, had been implementing a series of sanctions against Russia. Now President Trump is bringing Russia back to the negotiating table, especially in relation to the conflict in Ukraine. In the case of Venezuela, even during the Biden Presidency, the oil trade with the United States continued flowing, but has now been interrupted. I have the impression that, in the relations between Brazil and Venezuela, there will be more attention to ideological aspects and the advance of leftist guidelines in Latin America than to bilateral trade between Caracas and Brasilia. I believe this will be less relevant to what Washington will observe.

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5 – Recently, the US President said that Brics countries may face 100%rates. Considering economic asymmetries among group members, how do you evaluate the impacts on different members? Would there be room for a coordinated answer?

I understand that President Trump said this in a context related to the idea that the BRICS would be creating their own currency. However, I consider this proposal very far from being made, especially since there is no negotiation on the subject between the two largest economies of the group, China and India.

In addition, the United States consider India a strategic ally. This week, the main authority of the American commercial area is in New Delhi, in negotiations with the Indian government. I believe that for these geopolitical reasons, the Trump administration would be unlikely to implement a 100% rate on Indian exports.

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IM: You were president of Banco do Brics For many years. What is your assessment of the institution’s future after expansion to countries such as Iran and Ethiopia? Can this enlargement be good for the block?

When I was in government and even before, as a university professor, I always understood the BRICS as an elite group of emerging economies, with countries that share common characteristics: large territory, large population, regional leadership and importance in issues beyond the economy, such as collective security.

However, with the expansion to very low per capita income countries, such as Ethiopia, or highly sanctioned, such as Iran, the BRICS risk becoming an anto -agent alliance. With more members, the ability to generate consensus is lost and there is a risk of the block becoming a Forum of Political Declarations, without concrete advances in strategic areas, such as capital mobilization and infrastructure projects.