BRASILIA, Nov 20 (Reuters) - Failure by the United States to pay Brazil compensation for cotton subsidies could worsen relations between the two trade partners, an influential Brazilian business group said on Wednesday.
The National Confederation of Industries, known as CNI, said the United States has shown no indication it will continue to pay the $147 million a year in compensation to Brazil. The South American country has already warned it could retaliate by raising tariffs on some U.S. products.
"We are very worried because we know that the Brazilian government will retaliate and that will be negative for all sides," said Diego Bonomo, CNI's executive manager of foreign trade. "This will only complicate relations between the two countries at a time when ties are not in good standing."
Brazil and U.S. relations are at multi-year lows due to allegations that Washington spied on the communications of President Dilma Rousseff. The leftist leader canceled a state visit to Washington in October in protest, which many local business leaders say complicated efforts to open up trade between the continent's two largest economies.
Brazil won a challenge against U.S. cotton subsidies at the World Trade Organization in 2004 that led to an agreement under which Brazil said it would not impose $830 million in sanctions against U.S. products if the United States paid into an assistance fund for Brazilian cotton farmers.
The temporary resolution, under which the United States has paid Brazil $147 million a year since 2010, was supposed to only last until Washington lawmakers wrote a new farm law that would eliminate longstanding U.S. cotton subsidies. The U.S. Congress is more than a year behind schedule in drawing up the legislation.
Washington did not include the subsidy compensation in its proposed budget for the fiscal year that started on Oct. 1 in hopes Congress would approve the farm bill that resolves the subsidy dispute.
Brazil is analyzing retaliation and could act against the United States as early as this month, officials said.
A U.S. Department of Agriculture spokesperson was not immediately available for comment.
(Reporting by Alonso Soto in Brasilia; Additional reporting by Charles Abbott in Washington; Editing by Eric Walsh)
