Contents: (1) Background; (2) Political Situation: First Lula Admin.; Oct. 2006 Elections; Second Lula Admin.; (3) Econ. and Social Conditions: Econ. Challenges and Efforts to Boost Growth; Social Indicators; (4) Foreign and Trade Policy; (5) Relations with the U.S.; (6) Issues in U.S.-Brazil Relations: Counternarcotics; Counterterrorism and the Tri-Border Area; Energy Security; Oil; Ethanol and Other Biofuels; Nuclear Energy; Trade Issues; Doha Round of the WTO Talks; WTO Disputes; Generalized System of Preferences; Intellectual Property Rights; Human Rights; Race and Discrimination; Trafficking in Persons for Forced Labor; Goldman Custody Case; HIV/AIDS; Amazon Conservation; Domestic Efforts; Carbon Offsets and Other Internat. Initiatives.