Brazil, U.S. move to boost cachaca, Tennessee whiskey trade

The U.S. and Brazil plan to boost trade in cachaca, the South American nation's distilled sugar cane liquor used to make caipirinha cocktails, and Tennessee whiskey.

In letters of intent published today, signed by U.S. Trade Representative Ron Kirk and Brazil's Trade Minister Fernando Pimentel, the U.S. pledges to recognize cachaca as a distinctive Brazilian product, and Brazil promises similar recognition for bourbon and Tennessee whiskey.

The accord is one of at least eight agreements ranging from aviation and education to the environment that will be signed on the first day of Brazilian President Dilma Rousseff's two-day visit to the U.S. She will meet with President Barack Obama today and tomorrow with Brazilian students at Harvard University and the Massachusetts Institute of Technology in Boston.

"Cachaca has a Brazilian face," Robson Andrade, head of the National Industry Confederation, told reporters after a meeting of business leaders with Rousseff on Sunday night in Washington. "This recognition of a genuinely Brazilian product shows the value that the American government attaches today to Brazil."

'Very positive'

In an e-mailed statement, Kirk said that "Cachaca and Bourbon and Tennessee Whiskey are among the United States' and Brazil's most unique and well-recognized products. This exchange of letters represents a very positive development for both of our industries, and reflects our Governments' commitment to stronger bilateral trade ties."

The U.S. Alcohol and Tobacco Tax and Trade Bureau will publish notice of the proposed change and solicit comment. If it issues a regulation designating cachaca as a distinctive Brazilian product, Brazil will then recognize the two U.S. whiskeys.

In Brazil, 40,000 distillers make 4,000 different brands of cachaca with total sales of 2 billion reais ($1.1 billion) a year, according to the Brazilian Cachaca Institute's website. The country, which is also the world's largest sugar exporter, sold $17.28 million worth of cachaca to 60 countries last year. The main importers are Germany, Portugal, the U.S. and France.

Brazilian exporters hope the agreement will boost sales of its popular liquor, said Andrade. Since 2000 Brazil has had to label cachaca as Brazilian rum, according to the Trade Ministry.

Brazil's trade balance with the U.S. swung from a $6.4 billion surplus in 2007 to an $8.2 billion deficit last year as the real rallied and economic growth in Brazil spurred demand for imports.

The U.S. Congress allowed an import tariff on Brazilian ethanol to expire last year and renewed the U.S. Generalized System of Preferences that exempts many Brazilian goods from duties.

(Published by Bloomberg - April 9, 2012)