Brazil to Offer Deal on U.S. Imports, Debt

President Jose Sarney visits Washington today with a proposal that could help President Reagan reduce the U.S. foreign trade deficit.

Sarney is scheduled to meet with Reagan today and will address a joint session of Congress on Thursday. What he will say on both occasions, according to close Sarney advisers, is that Brazil, the world’s 10th-ranking economic power, is ready to increase its imports from the United States if the terms of Brazil’s $105-billion foreign debt can be improved.

Brazil has been making payments of $10 billion a year on the debt, and it has sharply reduced imports to be able to make the payments. Imports from the United States have been reduced by half, to $3 billion a year.

Sarney is expected to emphasize that the debt burden can be eased only if U.S. banks and investors take a more optimistic view of investing in Brazil, his aides say.

New Image Sought

The image of Brazil that Sarney wants to convey, they say, is of a strong, youthful nation that can solve its problems with the cooperation of its friends--and that this is in bright contrast with the gloom that darkens the future for Latin America in general.

Rubens Ricupero, Sarney’s foreign policy adviser, told a reporter: “This country is on the road to normality. Brazil has made an orderly transition to democracy after 21 years of military rule, and the Sarney government is overcoming the tensions that arose from political containment, economic recession and social violence.”

The Brazilian economy is booming, with annual growth of 8% for the second year in a row. Employment and real wages are at the highest levels in a decade. Inflation, which raised prices by 235% in 1985, has been slowed to 1% a month by means of price controls.

Sarney, 55, is not an economist. He is a lawyer and a man of letters, a writer of poetry and short stories that evoke childhood memories of Maranhao, the poor, tropical state in northeastern Brazil where he grew up. He went to law school and became a local politician, then governor.

Modern Vision

When Sarney talks about Brazil, he does not recite statistics. He holds out the vision that Brazil, with a population of 135 million, is on the verge of becoming a modern, industrialized country.

“I have a growing conviction that I will be the last president of a Brazil that is underdeveloped, submerged in poverty and searching for its identity,” Sarney said last month in announcing a $100-billion, four-year investment program.

With the economic boom that has followed the restoration of democratic government, public opinion polls show that Sarney has broad popular support. The center-left coalition of political parties that back his government is expected to maintain its congressional majority in national elections in November.

According to longtime American residents here, U.S.-Brazilian relations are better than they have been in a long time, despite some friction over the debt and commercial problems.

‘Greater Self-Confidence’

Gilbert Brown, principal of the American School, who has lived here for 22 years, said, “There seems to be a greater self-confidence, a new feeling that Brazil can compete as an equal with the growth of the economy.”

William Meissner, an American lawyer who has lived here for 15 years and is a partner in a law firm, said, “Sooner or later, Americans will come to think of Brazil as something with its own identity, like China, and not part of a lump called South America.

“As Brazil moves into the big leagues of world trade and investment, I expect there will be greater maturity here in dealing with problems in foreign investment, the debt and trade negotiations.”

Brazil already plays a role as supplier to the U.S. market that is not always apparent to many American consumers.

Frozen Orange Juice

A typical American family might start the day with freeze-dried Brazilian coffee and frozen Brazilian orange juice. The children’s shoes could be Brazilian--shoe exports amount to $1 billion a year. The tablecloths and towels could be from Brazil, and the family car could contain Brazilian steel and parts manufactured here by U.S. auto subsidiaries.

These and other goods add up to $6 billion a year in Brazilian exports to the United States. The figure would be significantly larger if protectionist measures did not restrict imports of Brazilian steel, footwear, textiles, alcohol and other products.

The question of access to the U.S. market has been the subject of many negotiations, but so have the measures adopted by Brazil to protect its own industries. The most controversial of these is a strongly nationalist 1984 law that establishes an eight-year “market reserve” for data processing equipment produced here.

The Reagan Admininstration, responding to congressional pressures, has ordered an investigation of the effects on U.S. exports of Brazil’s restriction on U.S. investments in data processing here, mainly by IBM.

Imports Decision Due

Reagan will receive the report a week after Sarney’s visit, and the White House will have a month to decide whether Brazil’s restrictions should be met with U.S. retaliation limiting imports from Brazil.

Two meetings between U.S. and Brazilian trade officials have failed to resolve the dispute. IBM has applied for permission to undertake a joint venture with a Brazilian partner in a data service center, and this is seen as a key test of Brazil’s policy.

Brazil would find it difficult to achieve its national economic goals without the close cooperation of the United States, which has been Brazil’s principal market since 1870. The $8 billion invested here by U.S. enterprises has had a decisive influence in technology, management and cultural development.

Now Brazil needs fresh capital to continue growing. But more capital has been going out to make debt payments than has been coming in in the form of new loans and investments. Brazilian officials and businessmen see this need for capital, and the related issue of trade expansion, as the essential issues on which U.S.-Brazil relations will turn in the future.